Tax Update (April 28)
JCT Rolls Back Cost of Loss-Limitation Rule
On Wednesday (Apr. 22), the Joint Committee on Taxation (JCT) revised its earlier estimate of how much of the loss limitation rule, included in the CARES Act, will cost. In the initial review, the agency said the provision will cost $170 billion over the next decade. The new estimate places the cost at $135 billion and shows the provision will lose money through 2021, before starting to generate federal funds in later years.
The rule has been criticized by Democrats, including Rep. Lloyd Doggett (D-TX) and Sen. Sheldon Whitehouse (D-RI), who called the provision a “tax break for wealthy businessmen” and raised concerns about the cost.
To view the new JCT estimate, click here.
Treasury/IRS Release Guidance on COVID-19 Travel Disruptions
On Tuesday (Apr. 21), the Treasury Department and the Internal Revenue Service (IRS) issued guidance that provides relief to individuals and businesses affected by travel disruptions caused by the COVID-19 emergency:
- Revenue Procedure 2020-20 provides relief to certain nonresident individuals who only remained in the United States long enough during 2020 to be considered resident aliens under the “Substantial Presence Test” (SPT) or to be ineligible for tax treaty benefits for income from personal services due to COVID-19 Emergency Travel Disruptions.
- Revenue Procedure 2020-27 provides individuals that reasonably expected to become a “qualified individual” for purposes of claiming the foreign earned income exclusion under section 911 but left the foreign jurisdiction during the period described in this revenue procedure will not be impacted.
- Online “Frequently Asked Questions” providing that certain US business activities conducted by a nonresident alien or foreign corporation will not be counted for up to 60 consecutive calendar days in determining whether the individual or entity is engaged in a US trade or business or has a US permanent establishment, but only if those activities would not have been conducted in the United States but for travel disruptions arising from the COVID-19 emergency.
Caygle, Heather & Ferris, Sarah “House Passes relief package after weeks of partisan battles” Politico Pro, 23 Apr. 2020 https://subscriber.politicopro.com/article/2020/04/house-to-pass-484b-coronavirus-aid-package-1919819
Lorenzo, Arron “Morning Tax” Politico Pro, 24 Apr. 2020 https://www.politico.com/newsletters/morning-tax/2020/04/24/debate-over-charitable-deductions-contd-787118