The Coronavirus Aid, Relief, and Economic Security (CARES) Act—Tax Relief for Individuals and Businesses (R46279, Version 7, Updated March 24, 2020)

Summary

Version 7 of Congressional Research Service report R46279, updated March 24, 2020 and coordinated by Molly F. Sherlock, on the tax relief in the CARES Act (S. 3548) while it awaited Senate action. The report summarizes the updated version released on March 22, 2020, after a cloture vote to proceed on it was rejected that day, and Division B of the original Senate bill. Its provisions include a one-time rebate of $1,200 ($2,400 for married joint filers) plus $500 per child, changes to the tax treatment of retirement withdrawals and charitable contributions, a delay of employer payroll taxes, and changes to business income and net operating losses. It notes that two COVID-19 bills had already been enacted and that legislative discussions were ongoing.

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The Coronavirus Aid, Relief, and Economic
Security (CARES) Act—Tax Relief for
Individuals and Businesses

Molly F. Sherlock, Coordinator
Specialist in Public Finance

Margot L. Crandall-Hollick
Acting Section Research Manager

Grant A. Driessen
Analyst in Public Finance

Jane G. Gravelle
Senior Specialist in Economic Policy

Donald J. Marples
Specialist in Public Finance

Updated March 24, 2020

Congressional Research Service
7-....
www.crs.gov
R46279
The Coronavirus Aid, Relief, and Economic Security (CARES) Act—Tax Relief

ongress is considering a number of proposals that seek to mitigate the economic effects of

C the COVID-19 pandemic. One such proposal, the Coronavirus Aid, Relief, and Economic
Security (CARES) Act (S. 3548), was introduced in the Senate on March 19, 2020. On
March 22, 2020, the Senate released an updated version of the CARES Act. A cloture vote on the
motion to proceed on the amended version was rejected on March 22.1
Tax relief for individuals and businesses in the CARES Act includes
 a one-time rebate to taxpayers;
 modification of the tax treatment of certain retirement fund withdrawals and
charitable contributions;
 a delay of employer payroll taxes and taxes paid by certain corporations; and
 a variety of changes to the tax treatment of business income and net operating
losses.
This is the latest in a series of legislative packages addressing the COVID-19 pandemic. Two bills
have already been enacted into law: the Coronavirus Preparedness and Response Supplemental
Appropriations Act, 2020 (P.L. 116-123) and the Families First Coronavirus Response Act (P.L.
116-127).
This report briefly summarizes the major provisions in the updated version of the CARES Act,
released March 22, 2020 (Table 1), as well as Division B of the earlier version of the CARES Act
(S. 3548) (Table 2).2 Links to CRS resources that offer additional information are provided.
Legislative discussions concerning the CARES Act and other stimulus proposals are ongoing.

1 The Senate vote was on an amendment to H.R. 748, which was used as a legislative vehicle for the amended version

of the CARES Act.
2 Other tax-related provisions included in other divisions of the CARES Act, and not discussed in this report, include

changes that would temporarily suspend excise taxes related to aviation; provide a temporary tax exemption for certain
telehealth services; temporarily include certain over-the-counter medical costs as qualified medical expenses for tax
purposes; extend the sequestration on direct spending by one year, to 2030; and temporarily provide advance refunding
of payroll tax credits for sick leave and paid family leave. For more on the sick and family leave payroll tax credits, see
CRS Insight IN11243, Tax Credit for Paid Sick and Family Leave in the Families First Coronavirus Response Act
(H.R. 6201) (Updated), by Molly F. Sherlock.

Congressional Research Service 1
The Coronavirus Aid, Relief, and Economic Security (CARES) Act—Tax Relief

Table 1. Individual and Business Tax Provisions in the CARES Act,
as Considered on March 22, 2020
Provision Description CRS Resources

Title II, Subtitle B—Rebates and Other Individual Provisions
2020 recovery rebates Credit against 2020 income taxes, but For more, see
for individuals advanced, generally based on information from  CRS Insight IN11255, COVID-19
2019 income tax returns. and Stimulus Payments to
Credit equals $1,200 ($2,400 for married joint Individuals: How Did the 2008
filers). Recovery Rebates Work?, by
Taxpayers eligible for the credit can also Margot L. Crandall-Hollick.
receive $500 for each child eligible for the  CRS Insight IN11247, COVID-19
child tax credit. and Stimulus Payments to
The total credit phases out at a rate of 5% of Individuals: Considerations on Using
adjusted gross income (AGI) above $75,000 Advanced Refundable Credits as
($112,500 for head of household filers, Economic Stimulus, by Margot L.
$150,000 for married joint returns). Crandall-Hollick.
Generally, all individuals must have social  CRS Insight IN11256, COVID-19
security numbers. (Among members of the and Direct Payments to Individuals:
armed forces, only one spouse must have an Historical Precedents, by Gene
SSN). Falk.
Taxpayers must have filed a 2019 return (or  CRS Insight IN11234, Tax Cuts as
filed a 2018 return if they did not file a 2019 Fiscal Stimulus: Comparing a Payroll
return) in order to get a rebate in 2020. (For Tax Cut to a One-Time Tax Rebate,
seniors that did not file a 2019 or 2018 by Molly F. Sherlock and Donald
income tax return, information from their J. Marples.
2019 social security benefit statement can be  CRS Report RS21126, Tax Cuts
used instead.) Otherwise, it can be claimed on and Economic Stimulus: How
a 2020 income tax return. Effective Are the Alternatives?, by
Jane G. Gravelle.
Special rules for use of For retirement plan distributions, the For more on disaster-related special
retirement funds provision provides an exception to the 10% retirement fund access, see
early withdrawal penalty for distributions up  CRS Report R45864, Tax Policy
to $100,000 for coronavirus-related purposes. and Disaster Recovery, by Molly F.
Income from such distributions would be Sherlock and Jennifer Teefy.
recognized over three years, and taxpayers
can recontribute funds to an eligible  CRS In Focus IF11447, COVID-19:
retirement plan within three years without Social Insurance and Other Income-
regard to the year’s contribution cap. Loan Support Options for Those Unable
limits from retirement plans are increased to Work, coordinated by Laura
from $50,000 to $100,000 and repayment Haltzel.
deadline is delayed.
Temporary waiver of Generally, required minimum distribution For background on required minimum
required minimum (RMD) rules required that taxpayers of a distributions, see
distribution rules for certain age withdraw minimum amounts. RMD  CRS In Focus IF11328, Inherited
certain retirement rules typically apply to taxpayers at age 72 or “Stretch” Individual Retirement
plans and accounts (70½ before 2020). This provision would Accounts (IRAs) and the SECURE
waive minimum distribution requirements for Act, by Elizabeth A. Myers.
2020.
Allowance of partial An above-the-line deduction for cash For more on the tax treatment of
above-the-line contributions of up to $300 is made available charitable contributions, see
deduction for for taxpayers not itemizing deductions.  CRS Report R45922, Tax Issues
charitable Relating to Charitable Contributions
contributions and Organizations, by Jane G.

Congressional Research Service 2
The Coronavirus Aid, Relief, and Economic Security (CARES) Act—Tax Relief

Provision Description CRS Resources
Gravelle, Donald J. Marples, and
Molly F. Sherlock.
 CRS In Focus IF11022, The
Charitable Deduction for
Individuals, by Margot L. Crandall-
Hollick and Molly F. Sherlock.
Modification of Income limits apply to both individual and For more on disaster-related changes
limitations on charitable contribution deductions. This in charitable giving limits, see
charitable provision would suspend the 50% of AGI limit  CRS Report R45864, Tax Policy
contributions during on cash contributions for individuals for 2020. and Disaster Recovery, by Molly F.
2020 The corporate deduction limit would be Sherlock and Jennifer Teefy.
increased from 10% of taxable income to 25%
for cash contributions. The limit on the
deduction of food inventory would be For more on the tax treatment of
increased from 15% to 25%. The increased charitable contributions, see
limits do not apply to contributions to private  CRS Report R45922, Tax Issues
foundations and donor-advised funds. Relating to Charitable Contributions
and Organizations, by Jane G.
Gravelle, Donald J. Marples, and
Molly F. Sherlock.
 CRS In Focus IF11022, The
Charitable Deduction for
Individuals, by Margot L. Crandall-
Hollick and Molly F. Sherlock.

Title II, Subtitle C—Business Provisions
Delay of payment of Employers and self-employed individuals For more, see
employer payroll taxes would be able to defer, or postpone, the  CRS Insight IN11260, COVID-19
employer share of the Social Security payroll Economic Stimulus: Business Payroll
tax. Deferred tax liability would be paid in two Tax Cuts, by Molly F. Sherlock
installments: one due by December 31, 2021, and Donald J. Marples.
and the second by December 31, 2022. The
Social Security trust funds would not be
affected.
Modifications for net The provision would allow carrybacks for up For more, see
operating losses to five years for net operating losses (NOLs)  CRS Insight IN11240, COVID-19:
recorded in tax years 2018, 2019, and 2020. Potential Role of Net Operating
NOL carryback capabilities were repealed by Loss (NOL) Carrybacks in
the 2017 tax revision (P.L. 115-97), and were Addressing the Economic Effects, by
previously allowed for up to two years. This Mark P. Keightley.
provision would also temporarily lift the
income limitation applicable to the corporate
income tax treatment of NOLs under current
law.
Modification of This provision allows taxpayers not subject to For more, see
limitation on losses for the corporate income tax that incur NOLs,  CRS Insight IN11240, COVID-19:
taxpayers other than including pass-through businesses and sole Potential Role of Net Operating
corporations proprietorships, to receive the temporary Loss (NOL) Carrybacks in
NOL carryback capabilities provided to Addressing the Economic Effects, by
corporations, as described above. Mark P. Keightley.
Modification of credit The corporate alternative minimum tax (AMT) For more on the corporate AMT
for prior year minimum was repealed by the 2017 tax revision (P.L. before its repeal, see
115-97). Corporations having AMT credits
(for prior year AMT payments) were allowed

Congressional Research Service 3
The Coronavirus Aid, Relief, and Economic Security (CARES) Act—Tax Relief

Provision Description CRS Resources
tax liability of to claim the credits against regular tax liability  CRS In Focus IF10705, Tax
corporations for tax years through 2021. This provision Reform: The Alternative Minimum
makes these credits refundable. Tax, by Donald J. Marples.
Modification of The 2017 tax revision (P.L. 115-97) reduced For more, see
limitation on business the limit on the deduction for net interest  CRS Report R45186, Issues in
interest from 50% to 30% of adjusted taxable income International Corporate Taxation:
(income before taxes, interest deductions, and The 2017 Revision (P.L. 115-97),
depreciation, amortization or depletion by Jane G. Gravelle and Donald J.
deductions). P.L. 115-97 also eliminated the Marples.
rule that restricted net interest deduction
limits to firms with a debt-to-equity ratio
above 1.5. These revisions were adopted, in
part, to reduce profit-shifting by multinational
corporations (by borrowing in the United
States). This provision increases the limit to
50% for 2019 and 2020.
Technical amendments The 2017 tax revision (P.L. 115-97) increased For more, see
regarding qualified the period for deducting the cost of qualified  CRS In Focus IF11187, Qualified
improvement property improvement property (leasehold, restaurant, Improvement Property and the
and retail property improvements) from 15 2017 Tax Revision (P.L. 115-97),
years to 39 years. This change was apparently by Gary Guenther.
a technical error that also prevented these
investments from being expensed immediately
(sometimes referred to as bonus depreciation).
This provision allows these investments to be
expensed.

Source: CRS analysis of the CARES Act, as considered on March 22, 2020. Cloture on the motion to proceed
was rejected in the Senate.

Congressional Research Service 4
The Coronavirus Aid, Relief, and Economic Security (CARES) Act—Tax Relief

Table 2. Provisions in Division B of the CARES Act (S. 3548),
as Introduced on March 19, 2020
Provision Description CRS Resources

Title I—Rebates and Other Individual Provisions
2020 recovery Credit against 2020 income taxes, but For more, see
rebates for individuals advanced, generally based on 2018 income tax  CRS Insight IN11255, COVID-19
returns. and Stimulus Payments to
Credit equals the greater of Individuals: How Did the 2008
(1) taxpayer’s net income tax liability up to Recovery Rebates Work?, by
$1,200 ($2,400 for married joint filers). Net Margot L. Crandall-Hollick.
income tax liability is income tax liability before  CRS Insight IN11247, COVID-19
the child tax credit and refundable tax credits and Stimulus Payments to
(like the EITC); or Individuals: Considerations on Using
(2) $600 ($1,200 for married joint filers) if the Advanced Refundable Credits as
taxpayer has qualifying income. To have Economic Stimulus, by Margot L.
qualifying income, taxpayer must have either Crandall-Hollick.
(a) at least $2,500 in total of earned income,  CRS Insight IN11256, COVID-19
social security income, or veterans’ benefits, and Direct Payments to Individuals:
or (b) gross income above the taxpayer’s Historical Precedents, by Gene Falk.
standard deduction and $1 of net income tax
 CRS Insight IN11234, Tax Cuts as
liability.
Fiscal Stimulus: Comparing a Payroll
Taxpayers eligible for the credit can also Tax Cut to a One-Time Tax Rebate,
receive $500 for each child eligible for the by Molly F. Sherlock and Donald J.
child credit. Marples.
The total credit phases out at a rate of 5% of  CRS Report RS21126, Tax Cuts
adjusted gross income (AGI) above $75,000 and Economic Stimulus: How
($150,000 for married joint returns). Effective Are the Alternatives?, by
All individuals must have social security Jane G. Gravelle.
numbers.
Taxpayers must have filed a 2018 return (or
file a 2019 return if they did not file a 2018
return) in order to get a rebate in 2020.
Otherwise, it can be claimed on a 2020
income tax return.
Delay of certain Tax filing deadline extended from April 15, For more on IRS administrative relief
deadlines 2020, to July 15, 2020, to align with the for tax filing deadlines following
extended payment deadline.a Allows disasters, see
individuals required to make estimated tax  CRS Report R45864, Tax Policy
payments to postpone such payments until and Disaster Recovery, by Molly F.
October 15, 2020. Sherlock and Jennifer Teefy.
Special rules for use For retirement plan distributions, the For more on disaster-related special
of retirement funds provision provides an exception to the 10% retirement fund access, see
early withdrawal penalty for distributions up  CRS Report R45864, Tax Policy
to $100,000 for coronavirus-related purposes. and Disaster Recovery, by Molly F.
Income from such distributions would be Sherlock and Jennifer Teefy.
recognized over three years, and taxpayers
can recontribute funds to an eligible  CRS In Focus IF11447, COVID-19:
retirement plan within three years without Social Insurance and Other Income-
regard to the year’s contribution cap. Loan Support Options for Those Unable to
limits from retirement plans are increased Work, coordinated by Laura
from $50,000 to $100,000 and repayment Haltzel.
deadline is delayed.

Congressional Research Service 5
The Coronavirus Aid, Relief, and Economic Security (CARES) Act—Tax Relief

Provision Description CRS Resources

Allowance of partial An above-the-line deduction for cash For more on the tax treatment of
above-the-line contributions of up to $300 is made available charitable contributions, see
deduction for for taxpayers not itemizing deductions.  CRS Report R45922, Tax Issues
charitable Relating to Charitable Contributions
contributions and Organizations, by Jane G.
Gravelle, Donald J. Marples, and
Molly F. Sherlock.
 CRS In Focus IF11022, The
Charitable Deduction for Individuals,
by Margot L. Crandall-Hollick and
Molly F. Sherlock.
Modification of Income limits apply to both individual and For more on disaster-related changes
limitations on charitable contribution deductions. This in charitable giving limits, see
charitable provision would suspend the 50% of AGI limit  CRS Report R45864, Tax Policy
contributions during on cash contributions for individuals for 2020. and Disaster Recovery, by Molly F.
2020 The corporate deduction limit would be Sherlock and Jennifer Teefy.
increased from 10% of taxable income to 25%
for cash contributions. The limit on the
deduction of food inventory would be For more on the tax treatment of
increased from 15% to 25%. The increased charitable contributions, see
limits do not apply to contributions to private  CRS Report R45922, Tax Issues
foundations and donor-advised funds. Relating to Charitable Contributions
and Organizations, by Jane G.
Gravelle, Donald J. Marples, and
Molly F. Sherlock.
 CRS In Focus IF11022, The
Charitable Deduction for Individuals,
by Margot L. Crandall-Hollick and
Molly F. Sherlock.
Title II—Business Provisions
Delay of estimated Corporations would be allowed to postpone
tax payments for estimated tax payments to October 15, 2020.
corporations
Delay of payment of Employers and self-employed individuals would For more, see
employer payroll be able to defer, or postpone, the employer  CRS Insight IN11260, COVID-19
taxes share of the Social Security payroll tax. Economic Stimulus: Business Payroll
Deferred tax liability would be paid in two Tax Cuts, by Molly F. Sherlock and
installments: one due by December 31, 2021, Donald J. Marples.
and the second by December 31, 2022. The
Social Security trust funds would not be
affected.
Modifications for net The provision would allow carrybacks for up For more, see
operating losses to five years for net operating losses (NOLs)  CRS Insight IN11240, COVID-19:
recorded in tax years 2018, 2019, and 2020. Potential Role of Net Operating Loss
NOL carryback capabilities were repealed by (NOL) Carrybacks in Addressing the
the 2017 tax revision (P.L. 115-97), and were Economic Effects, by Mark P.
previously allowed for up to two years. This Keightley.
provision would also temporarily lift the
income limitation applicable to the corporate
income tax treatment of NOLs under current
law.
Modification of This provision allows taxpayers not subject to For more, see
limitation on losses the corporate income tax that incur NOLs,
including pass-through businesses and sole

Congressional Research Service 6
The Coronavirus Aid, Relief, and Economic Security (CARES) Act—Tax Relief

Provision Description CRS Resources
for taxpayers other proprietorships, to receive the temporary  CRS Insight IN11240, COVID-19:
than corporations NOL carryback capabilities provided to Potential Role of Net Operating Loss
corporations, as described above. (NOL) Carrybacks in Addressing the
Economic Effects, by Mark P.
Keightley.
Modification of credit The corporate alternative minimum tax (AMT) For more on the corporate AMT
for prior year was repealed by the 2017 tax revision (P.L. before its repeal, see
minimum tax liability 115-97). Corporations having AMT credits  CRS In Focus IF10705, Tax
of corporations (for prior year AMT payments) were allowed Reform: The Alternative Minimum
to claim the credits against regular tax liability Tax, by Donald J. Marples.
for tax years through 2021. This provision
makes these credits refundable.
Modification of The 2017 tax revision (P.L. 115-97) reduced For more, see
limitation on business the limit on the deduction for net interest  CRS Report R45186, Issues in
interest from 50% to 30% of adjusted taxable income International Corporate Taxation:
(income before taxes, interest deductions, and The 2017 Revision (P.L. 115-97), by
depreciation, amortization or depletion Jane G. Gravelle and Donald J.
deductions). P.L. 115-97 also eliminated the Marples.
rule that restricted net interest deduction
limits to firms with a debt-to-equity ratio
above 1.5. These revisions were adopted, in
part, to reduce profit-shifting by multinational
corporations (by borrowing in the United
States). This provision increases the limit to
50% for 2019 and 2020.
Technical The 2017 tax revision (P.L. 115-97) increased For more, see
amendments the period for deducting the cost of qualified  CRS In Focus IF11187, Qualified
regarding qualified improvement property (leasehold, restaurant, Improvement Property and the 2017
improvement and retail property improvements) from 15 Tax Revision (P.L. 115-97), by Gary
property years to 39 years. This change was apparently Guenther.
a technical error that also prevented these
investments from being expensed immediately
(sometimes referred to as bonus depreciation).
This provision allows these investments to be
expensed.
Installments not to As part of the transition to a new international For more, see
prevent credit or tax regime under the 2017 tax revision (P.L.  CRS Report R45186, Issues in
refund of 115-97), firms were required to pay taxes on International Corporate Taxation:
overpayments or their prior untaxed foreign earnings (the The 2017 Revision (P.L. 115-97), by
increase estimated repatriation tax). Firms could elect to pay Jane G. Gravelle and Donald J.
taxes these taxes in eight annual installments. Due Marples.
to what was apparently a technical error, firms
that overpaid their regular taxes in 2017 could
not receive a refund if they owed taxes on
repatriations. This provision allows firms to
receive refunds for 2017.

Congressional Research Service 7
The Coronavirus Aid, Relief, and Economic Security (CARES) Act—Tax Relief

Restoration of The 2017 tax revision (P.L. 115-97) treats For more, see
limitation on stock owned by a foreign person as  CRS Report R45186, Issues in
downward attribution attributable to a U.S. entity owned by the International Corporate Taxation:
of stock ownership in foreign person (“downward attribution”). As a The 2017 Revision (P.L. 115-97), by
applying constructive result, stock owned by a foreign person may Jane G. Gravelle and Donald J.
ownership rules generally be attributed to (1) a U.S. Marples.
corporation, 10% of the value of the stock of
which is owned, directly or indirectly, by the
foreign person; (2) a U.S. partnership in which
the foreign person is a partner; and (3) certain
U.S. trusts if the foreign person is a beneficiary
or, in certain circumstances, a grantor or a
substantial owner. Downward attribution rules
can result in additional tax to the U.S. entity
under rules taxing certain income of
controlled foreign corporations. This provision
limits the application of the downward
application rules to a U.S. corporation owning,
directly or indirectly, 50% of the value of
stock.

Source: CRS analysis of the CARES Act (S. 3548, as Introduced).
a. In guidance released on March 18, 2020, the U.S. Department of the Treasury announced that the tax
payment deadline had been extended from April 15, 2020, to July 15, 2020. This guidance did not extend
the April 15, 2020, filing deadline. See the U.S. Department of the Treasury’s March 18, 2020, press release,
“Treasury and IRS Issue Guidance on Deferring Tax Payments Due to COVID-19 Outbreak,” at
https://home.treasury.gov/news/press-releases/sm948. Subsequently, the Treasury announced via tweet that
the tax filing deadline would also be moved to July 15, 2020.

Author Contact Information

Molly F. Sherlock, Coordinator Jane G. Gravelle
Specialist in Public Finance Senior Specialist in Economic Policy
-redacted-@crs.loc.gov , 7-.... -redacted-@crs.loc.gov, 7-....
Margot L. Crandall-Hollick Donald J. Marples
Acting Section Research Manager Specialist in Public Finance
-redacted-@crs.loc.gov , 7-.... -redacted-@crs.loc.gov, 7-....
Grant A. Driessen
Analyst in Public Finance
-redacted-@crs.loc.gov, 7-....

Congressional Research Service R46279 · VERSION 7 · UPDATED 8
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