Congress should consider another tax overhaul to help struggling manufacturers and retailers through the economic downturn caused by the coronavirus pandemic, according to two interest groups.
The National Association of Manufacturers in an April 18 letter called for legislation that would make income from loan modifications, forgiveness, or cancellations exempt from tax. It also said lawmakers should reduce the current rate of the base erosion and antiabuse tax that was added to the code by the Tax Cuts and Jobs Act.
The Retail Industry Leaders Association (RILA) made similar requests in an April 16 letter to House and Senate leaders to improve on existing tax breaks and temporary tax provisions enacted as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act (P.L. 116-136), which was signed into law March 27.
RILA, which represents some of the largest retailers in the country, said that retail sales dropped 8.7 percent over the past month — the largest drop ever recorded.
Both groups recommended expanding and improving on the CARES Act’s net operating loss carryback changes. The CARES Act allows companies to take advantage of NOLs for prior years, and it tweaked the business interest deduction limitation to provide much-needed liquidity.
RILA said that the five-year carryback period for NOLs should be extended to 10 years to help keep companies solvent.
The groups also recommended improving the employee retention credit by broadly interpreting the terms “eligible employer” and “qualified wages” and by increasing the maximum wages allowed for the credit to $20,000 per quarter. The credit is currently capped at $10,000 per quarter.
RILA also urged Treasury to use its authority to allow companies to deduct in 2020 the employer share of Social Security taxes deferred until 2021 and 2022. Both groups want the IRS to further delay all scheduled federal tax payments during the crisis, with RILA suggesting December 15 as an appropriate payment deadline.
RILA further suggested making the work opportunity tax credit permanent and creating an additional tax credit for stores that are installing barriers and other safety measures to help customers keep their distance.
The CARES Act also created the Paycheck Protection Program (PPP), which provides loans to small businesses that will be forgiven on a tax-free basis if several requirements are met. Congress initially allocated nearly $350 billion to PPP loans, but those funds quickly dried up. The Senate on April 21 passed legislation to replenish the program's funding, and the House is expected to take that bill up by the end of the week.
NAM weighed in on changes it would like to see to the PPP, calling for clearer guidelines on eligibility for loans, as well as on what’s required for forgiveness — an issue practitioners have frequently highlighted as uncertain.