Whats Next Tony Nitti CPA MST Trump v

What’s Next? Tony Nitti, CPA, MST

Trump v. Biden; What’s At Stake President Trump Joe Biden Individual ordinary rate 37% 39. 6% Corporate 21% 28% Payroll tax 15. 3% up to SS base of $137, 700; 2. 9% after New 12. 4% SS tax after wages over $400, 000, split between ER and EE Top LTCG rate 23. 8% 43. 4% (above $1 M of TI) Top benefit of itemized deductions 37% 28% Section 199 A Wage limitation, but no TI phase-out Phases out for TI > $400, 000 Others Creates new 15% corporate minimum tax when book profits > $100 M 2

Key Dates • 6/30/20 - Deadline to fax Form 1045/1139 from 2018 NOLs (Notice 2020 -26); • 7/15/20 - Postponed due date for returns (Notice 2020 -18, amplified by Notice 2020 -23) • 7/27/20 - Amended return due to carry back or waive carryback for fiscal year NOL for year straddling December 31, 2017. • 9/30/20 - Deadline to amend Form 1065 for BBA partnerships for tax years beginning in 2018 or 2019 (Rev. Proc. 2020 -23) • 9/30/20 - Deadline to provide amended K-1 s to partners by partnerships applying proposed GILTI regulations under § 1. 951 A-5 (Rev. Proc. 2020 -23 and Notice 2019 -46) • 10/15/21 - Amended returns applying guidance on QIP (Rev Proc 2020 -25) • 10/15/21 - Deadline to withdraw election from § 163(j)(7) electing as a real property T/B (Rev Proc 2020 -22) • 12/31/21 - First 50% of ER portion of SS tax due under payroll tax deferral under CARES ACT § 2302 (IRS FAQ) • 12/31/22 - - Second 50% of ER portion of SS tax due under payroll tax deferral under CARES ACT § 2302 (IRS FAQ) 3

Rev. Proc. 2020 -23 BBA Partnership Returns 4

Rev. Proc. 2020 -23 • Beginning January 1, 2018, the TEFRA procedures that once governed audits of partnership tax returns were replaced with the Bipartisan Budget Act (BBA) procedures, unless the partnership elects out of the Centralized Partnership Audit Regime (CPAR). • The criteria to make the CPAR election can be found at I. R. C. § 6221(b). • Partnerships that have not or cannot make that election are referred to as BBA partnerships. • The CARES Act provided a number of provisions friendly to partnerships; most notably, the longawaited technical correction for Qualified Improvement Property (QIP) that makes such property eligible for 100% bonus depreciation. • The QIP change, among others in the CARES Act, is retroactive to 2018. Unfortunately, BBA partnerships are unable to file amended returns; as a result, barring relief, the only way for a BBA partnership could effectuate the positive changes of the CARES Act would be for the partnership to file an administrative adjustment request (AAR) pursuant to I. R. C. § 6227. The AAR would be filed as part of the partnership’s 2020 tax return, and as a result, the partners would not reap the benefits of the changes made by the CARES Act until 2021. 5

Rev. Proc. 2020 -23 • This revenue procedure provides relief to BBA partnerships by allowing them to file an amended return for tax years beginning in 2018 or 2019 before September 30, 2020. • Note- The BBA partnership is still subject to the audit procedures that were established by the BBA (partnership level audit and liability). 6

Rev. Proc. 2020 -23 • Section 3 and 4 of the revenue procedure provides specific instructions regarding the filing of the amended return. The notable items are: • BBA partnerships can amend Form 1065 and associated K-1 s for the taxable years beginning in 2018 and 2019, prior to the issuance of this revenue procedure by September 30, 2020. • The “amended return” box must be checked. • The Form 1065 must clearly indicate it is using this revenue procedure. Write “Filed Pursuant to Rev Proc 2020 -23” at the top of the form 1065, and attach a statement to each K-1 with the same notation. • This can be e-filed or paper-filed. • If a BBA partnership is under examination for taxable years beginning in 2018 or 2019, the partnership should make available a copy to the revenue agent who is working on their case. • If an AAR has already been filed, the partners may use the items as adjusted in the AAR on their returns. • If a partnership is applying the proposed GILTI regulations under § 1. 951 A-5, they may continue to do so for purposes of applying an amended Form 1065. The partnership must provide amended K-1 s consistent with those proposed regulations, and notify the partners before September 30, 2020 under the principles of section 5. 01 of Notice 2019 -46. 7

Rev. Proc. 2020 -22 Business Interest Elections under § 163(j)(7), Using 2019 ATI in 2020, and Partnership and/or Partner Electing Out of 50% ATI 8

Rev. Proc. 2020 -22 Business Interest Expense Election • Rev. Proc. 2020 -22 deals with: § Making a late § 163(j)(7) election for a real property trade or business, § Withdrawing a § 163(j)(7) election for a real property trade or business, and § Making an election under § 163(j)(10) to use the 2019 ATI for 2020 rather than using the 2020 ATI to calculate the deduction for business interest, as well as § A special provision which allows a partner to elect out of the partnership’s treatment of business interest under§ 163(j) in 2019. 9

Rev. Proc. 2020 -22 Business Interest Expense Election • One of the reasons that a real property trade or business might be interested in withdrawing an election under § 163(j)(7) is that if it did not elect out, the real property trade or business is limited to calculating depreciation on its assets over the class life of the property (see § 168(g)(8)). § Section 168(k)(9) specifically provides that bonus depreciation is not available to a real property trade or business which has elected out of the business interest expense treatment under § 163(j)(7). § Since QIP is now eligible for bonus depreciation, a real property trade or business that previously elected out of § 163(j) might now wish to withdraw the election in order to take bonus depreciation on QIP property. 10

Rev. Proc. 2020 -22 Business Interest Expense Election • Making a late § 163(j)(7) election. § Time for making a late § 163(j)(7) election. § A taxpayer may make the § 163(j)(7) election for a 2018, 2019, or 2020 taxable year by filing an amended Federal income tax return, amended Form 1065, or AAR, as applicable. 11

Rev. Proc. 2020 -22 Business Interest Expense Election § Time for making a late § 163(j)(7) election. § Except as provided in Rev. Proc. 2020 -23, regarding the time to file an amended return by a partnership subject to the centralized partnership audit regime enacted as part of the Bipartisan Budget Act of 2015 (BBA partnership) for 2018 and 2019 taxable years, the amended Federal income tax return or amended Form 1065 must be filed on or before October 15, 2021, but in no event later than the applicable period of limitations on assessment for the taxable year for which the amended return is being filed. § In the case of a BBA partnership that chooses not to file an amended Form 1065 as permitted under Rev. Proc. 2020 -23, the BBA partnership may make a late§ 163(j)(7) election by filing an AAR on or before October 15, 2021, but in no event later than the applicable period of limitations on making adjustments under § 6235 for the reviewed year (see Reg. § 301. 6241 -1(a)(8)). 12

Rev. Proc. 2020 -22 Business Interest Expense Election § Manner of making a late § 163(j)(7) election. A taxpayer must make the election on a timely filed amended Federal income tax return, amended Form 1065, or an AAR, as applicable, with the election statement in accordance with the rules and procedures contained in Prop. Reg. § 1. 163(j)-9. § The amended Federal income tax return, amended Form 1065, or AAR, as applicable, must include the adjustment to taxable income for the late § 163(j)(7) election and any collateral adjustments to taxable income or to tax liability. 13

Rev. Proc. 2020 -22 Business Interest Expense Election § Manner of making a late § 163(j)(7) election. § Such collateral adjustments also must be made on amended Federal income tax returns, amended Forms 1065, or AARs, as applicable, for any affected succeeding taxable year. § An example of such collateral adjustments is the amount of depreciation allowed or allowable in the applicable taxable year for the property to which the late election applies. § The taxpayer is subject to all of the other rules and requirements in § 163(j). 14

Rev. Proc. 2020 -22 Business Interest Expense Election § Late § 163(j)(7) election statement contents. The election statement must be titled, “Revenue Procedure 2020 -22 Late § 163(j)(7) Election. ” The election statement must contain: § The taxpayer’s name; § The taxpayer’s address; § The taxpayer’s social security number (SSN) or employer identification number (EIN); § A description of the taxpayer’s electing trade or business, including the principal business activity code; and § A statement that the taxpayer is making an election under § 163(j)(7)(B) or 163(j)(7)(C), as applicable. 15

Rev. Proc. 2020 -22 Business Interest Expense Election § Depreciation. A taxpayer that is making a § 163(j)(7) election must determine its depreciation on the amended Federal income tax returns, amended Forms 1065, or AARs, as applicable, for the property that is affected by the late election using the alternative depreciation system of § 168(g), pursuant to § 168(g)(1)(F) or (G). See also § 163(j)(11). § Rev. Proc. 2019 -8 explains how to change to the alternative depreciation system for existing property that is affected by the late election. 16

Rev. Proc. 2020 -22 Business Interest Expense Election • Opportunity to Withdraw a § 163(j)(7) Election. § A taxpayer will be treated as if the § 163(j)(7) election was never made if the taxpayer withdraws the election. § Time and manner for withdrawing a § 163(j)(7) election. A taxpayer that wishes to withdraw an election for a 2018, 2019, or 2020 taxable year must timely file an amended Federal income tax return, amended Form 1065, or AAR, as applicable, for the taxable year in which the election was made, with an election withdrawal statement. § Except as provided in Rev. Proc. 2020 -23, the amended Federal income tax return or amended Form 1065 must be filed on or before October 15, 2021, but in no event later than the applicable period of limitations on assessment for the taxable year for which the amended return is being filed. 17

Rev. Proc. 2020 -22 Business Interest Expense Election § Time and manner for withdrawing a § 163(j)(7) election. § In the case of a BBA partnership that chooses not to file an amended Form 1065 as permitted under Rev. Proc. 2020 -23, the BBA partnership may withdraw the § 163(j)(7) election by filing an AAR on or before October 15, 2021, but in no event later than the applicable period of limitations on making adjustments under § 6235 under Prop. Reg. § 301. 6241 -1(a)(8). § The amended Federal income tax return, amended Form 1065, or AAR, as applicable, must include the adjustment to taxable income for the withdrawn § 163(j)(7) election and any collateral adjustments to taxable income or to tax liability, including any adjustments under § 481. 18

Rev. Proc. 2020 -22 Business Interest Expense Election § Time and manner for withdrawing a § 163(j)(7) election. § A taxpayer also must file amended Federal income tax returns, amended Forms 1065, or AARs, as applicable, including such collateral adjustments, for any affected succeeding taxable years. § An example of such collateral adjustments is the amount of depreciation allowed or allowable in the applicable taxable year for the property to which the withdrawn election applies. 19

Rev. Proc. 2020 -22 Business Interest Expense Election • Section 163(j)(7) election withdrawal statement contents. The election withdrawal statement should be titled, “Revenue Procedure 2020 -22 § 163(j)(7) Election Withdrawal. ” The election withdrawal statement must contain the taxpayer’s name, address, and SSN or EIN, and must state that, pursuant to Rev. Proc. 2020 -22, the taxpayer is withdrawing its election under § 163(j)(7)(B) or 163(j)(7)(C). 20

Rev. Proc. 2020 -22 Business Interest Expense Election § Depreciation. A taxpayer that is withdrawing a prior § 163(j)(7) election must determine its depreciation for the property that is affected by the withdrawn election in accordance with § 168 on the amended Federal income tax returns, amended Forms 1065, or AARs, as applicable. 21

Rev. Proc. 2020 -22 Business Interest Expense Election • Election out of the 50% ATI limitation. § Except as otherwise provided, a taxpayer may elect under § 163(j)(10)(A)(iii) not to apply the 50% ATI limitation for a 2019 or 2020 taxable year. A partnership can make this election only for a 2020 taxable year because partnerships cannot use the 50% ATI limitation for a 2019 taxable year. § Time and manner of making the election. A taxpayer permitted to make the election makes the election not to apply the 50% ATI limitation for a 2019 or 2020 taxable year by timely filing a Federal income tax return or Form 1065, including extensions, an amended Federal income tax return, amended Form 1065, or AAR, as applicable, using the 30% ATI limitation. No formal statement is required to make the election. 22

Rev. Proc. 2020 -22 Business Interest Expense Election • Election out of the 50% ATI limitation. § Consent granted to revoke the election. If a taxpayer made the election not to apply the 50% ATI limitation, for a 2019 or 2020 taxable year, and the taxpayer wishes to revoke that election for such taxable year, the Commissioner grants the taxpayer consent to revoke that election, provided the taxpayer timely files an amended Federal income tax return, amended Form 1065, or AAR, as applicable, for the applicable tax year, using the 50% ATI limitation. 23

Rev. Proc. 2020 -22 Business Interest Expense Election • Election out of the 50% ATI limitation. § Annual election; who makes the election. The election must be made for each taxable year. § For a consolidated group, the election is made by the agent for a consolidated group, within the meaning of Reg. § 1. 1502 -77, on behalf of members of the consolidated group. § For partnerships, the election is made by the partnership, but only for a 2020 taxable year. 24

Rev. Proc. 2020 -22 Business Interest Expense Election • Election to use 2019 ATI in 2020 taxable year. § Under § 163(j)(10)(B), a taxpayer may elect to use the taxpayer’s ATI for the last taxable year beginning in 2019 (that is, the taxpayer’s 2019 ATI) as the ATI for any taxable year beginning in 2020, subject to modifications for short taxable years. 25

Rev. Proc. 2020 -22 Business Interest Expense Election • Election to use 2019 ATI in 2020 taxable year. § Time and manner of making or revoking the election. A taxpayer makes an election for a 2020 taxable year by timely filing a Federal income tax return or Form 1065, including extensions, an amended Federal income tax return, amended Form 1065, or AAR, as applicable, using the taxpayer’s 2019 ATI. § A taxpayer revokes an election for a 2020 taxable year by timely filing an amended Federal income tax return, amended Form 1065, or AAR by a BBA partnership, as applicable, not using the taxpayer’s 2019 ATI. § No formal statement is required to make or revoke the election. 26

Rev. Proc. 2020 -22 Business Interest Expense Election • Election to use 2019 ATI in 2020 taxable year. § Who makes the election. § For a consolidated group, the election is made by the agent for a consolidated group, within the meaning of Reg. § 1. 1502 -77, on behalf of itself and members of the group. § For partnerships, the election is made by the partnership. § Short taxable year. If an election is made for a 2020 taxable year that is a short taxable year, the ATI for the taxpayer’s applicable taxable year beginning in 2020 is equal to the amount that bears the same ratio to such ATI as the number of months in the short taxable years bears to 12. 27

Rev. Proc. 2020 -22 Business Interest Expense Election • Election out of the 50% Excess Business Interest Expense (EBIE) rule. § Under § 163(j)(10)(A)(ii)(II), a partner may elect out of the 50% EBIE rule. § Time and manner of making or revoking the election. A partner makes the election by timely filing a Federal income tax return or Form 1065, including extensions, an amended Federal income tax return, an amended Form 1065, or an AAR, as applicable, for the partner’s first taxable year beginning in 2020, by not applying the 50% EBIE rule in determining the § 163(j) limitation. § A partner revokes the election by timely filing an amended Federal income tax return, amended Form 1065, or AAR, as applicable, for the partner’s first taxable year beginning in 2020, by applying the 50% EBIE rule in determining the § 163(j) limitation. 28

Rev. Proc. 2020 -24 Guidance on NOLs 29

IR 2020 -67 • On April 9, 2020, the IRS issued guidance providing tax relief under the CARES Act for taxpayers with net operating losses. • COVID relief for taxpayers claiming NOLs. § Rev. Proc. 2020 -24 provides guidance to taxpayers with net operating losses that are carried back under the CARES Act by providing procedures for: § Waiving the carryback period in the case of a net operating loss arising in a taxable year beginning after Dec. 31, 2017, and before Jan. 1, 2021, … 30

IR 2020 -67 • COVID relief for taxpayers claiming NOLs. § Rev. Proc. 2020 -24 continued § Disregarding certain amounts of foreign income subject to transition tax that would normally have been included as income during the five-year carryback period, and § Waiving a carryback period, reducing a carryback period, or revoking an election to waive a carryback period for a taxable year that began before Jan. 1, 2018, and ended after Dec. 31, 2017. § Fixing the glitch for a fiscal year C corporation with an NOL in 2018. 31

IR 2020 -67 • Six-month extension of time for filing NOL forms. § In Notice 2020 -26, the IRS grants a six-month extension of time to file Form 1045 or Form 1139, as applicable, with respect to the carryback of a net operating loss that arose in any taxable year that began during calendar year 2018 and that ended on or before June 30, 2019. Individuals, trusts, and estates would file Form 1045, and corporations would file Form 1139. 32

Rev. Proc. 2020 -24 NOLs • Rev. Proc. 2020 -24 provides guidance as to how to carry back an NOL for five years where the NOL is incurred for taxable years beginning in 2018, 2019, or 2020, unless the taxpayer elects to waive the carryback period. • Rev. Proc. 2020 -24 also describes how taxpayers with NOLs arising in taxable years 2018, 2019, or 2020 can elect to either waive the carryback period for those losses entirely or to exclude from the carryback period for those losses any years in which the taxpayer has an inclusion in income as a result of § 965(a). • Finally, Rev. Proc. 2020 -24 provides guidance regarding an NOL that arose in a period that began before January 1, 2018, and ended after December 31, 2017. 33

Rev. Proc. 2020 -24 NOLs • Elections to waive carryback under § 172(b)(3) for NOLs arising in taxable years beginning in 2018 or 2019. § A taxpayer may elect under § 172(b)(3) to waive the carryback period for an NOL arising in a taxable year beginning in 2018 or 2019. Such an election must be made no later than the due date, including extensions, for filing the taxpayer’s Federal income tax return for the first taxable year ending after March 27, 2020. § A taxpayer must make an election by attaching to its Federal income tax return filed for the first taxable year ending after March 27, 2020, a separate statement for each of taxable years 2018 or 2019 for which the taxpayer intends to make the election. The election statement must state that the taxpayer is electing to apply § 172(b)(3) under Rev. Proc. 2020 -24 and the taxable year for which the statement applies. § Once made, the election is irrevocable. 34

Rev. Proc. 2020 -24 NOLs • Applications under § 6411(a). A taxpayer may make an application under § 6411(a) for an NOL arising in a taxable year that began before January 1, 2018, and ended after December 31, 2017, by filing the application no later than the deadline described below. § NOLs arising in a taxable year beginning before January 1, 2018, and ending after December 31, 2017. Taxpayers with an NOL arising in a taxable year that began before January 1, 2018, and ended after December 31, 2017, who make an application under § 6411(a) on either Form 1045 or Form 1139 with respect to a carryback of such NOL will be treated as having timely filed if the application is filed no later than July 27, 2020. 35

Rev. Proc. 2020 -24 NOLs • Applications under § 6411(a) – Deadline. § Similarly, elections for such taxable years with an NOL to waive any carryback period, to reduce any carryback period, or to revoke any election made under § 172(b) to waive any carryback period will be treated as timely filed if filed no later than July 27, 2020. § A taxpayer may file such elections where the taxpayer files its Federal income tax return by attaching the statement required to make the election, with “Filed pursuant to Rev. Proc. 2020 -24” at the top, to an amended return, Form 1045, or Form 1139 containing only the taxpayer’s name, address, and taxpayer identification number. The statement required to make the election must indicate the section under which the election is being made and shall set forth information to identify the election, the period for which it applies, and the taxpayer’s basis and entitlement to make the election. 36

Rev. Proc. 2020 -24 NOLs • Applications under § 6411(a). § NOLs arising in taxable years beginning after December 31, 2017. Taxpayers with NOLs arising in taxable years beginning after December 31, 2017, may consult Notice 2020 -26 for procedures on how to file applications under § 6411(a) for taxable years that may otherwise be outside of the period for filing such applications. 37

Notice 2020 -26 Extension of Time to File Refund Claim and Using MTC C. F. in 2018 38

Notice 2020 -26 Refund Claim • Notice 2020 -26 provides relief for certain taxpayers to allow them to take advantage of amendments made to the net operating loss (NOL) provisions set forth in § 172 by Sec. 2303 of the CARES Act. § Specifically, Notice 2020 -26 extends the deadline for filing an application for a tentative carryback adjustment under § 6411 with respect to the carryback of an NOL that arose in any taxable year that began during calendar year 2018 and that ended on or before June 30, 2019. 39

Notice 2020 -26 Refund Claim § Notice 2020 -26 deals with the following two situations: § Where a taxpayer has an NOL that arose in a taxable year that began in 2018 and that ended before June 30, 2019; § Where a C corporation makes an election to receive 100% of its MTC carryforward in its taxable year beginning in 2018. 40

Notice 2020 -26 Refund Claim • Extension of Time to File. § The Department of the Treasury and the IRS grant a six-month extension of time to file Form 1045 or Form 1139, as applicable, to taxpayers that have an NOL that arose in a taxable year that began during calendar year 2018 and that ended on or before June 30, 2019. This extension of time is limited to requesting a tentative refund to carry back an NOL and does not extend the time to carry back any other item. 41

Notice 2020 -26 Refund Claim • Extension of Time to File. § For example, in the case of an NOL that arose in a taxable year ending on December 31, 2018, a taxpayer normally would have until December 31, 2019, to file the Form 1045 or Form 1139, as applicable, but due to this relief, will now have until June 30, 2020, to file the Form 1045 or Form 1139, as applicable. § For this same taxpayer, if the taxpayer is a corporation, the deadline to claim a minimum tax credit described in § 53(e)(5) is December 30, 2020, but in order to file one application for a tentative refund and claim both the NOL carryback and the minimum tax credit at the same time, the taxpayer must do so by the earlier of the two deadlines. 42

Notice 2020 -26 Refund Claim • Extension of Time to File. § To take advantage of the extension of time for requesting a tentative refund based on an NOL carryback, the taxpayer must perform the following actions: § File the applicable form no later than 18 months after the close of the taxable year in which the NOL arose (that is, no later than June 30, 2020, for a taxable year ending December 31, 2018); and § Include on the top of the applicable form “Notice 2020 -26, Extension of Time to File Application for Tentative Carryback Adjustment. ” 43

Notice 2020 -26 Refund Claim Fax # 844 -249 -6327 44

Rev. Proc. 2020 -25 Options for QIP 45

Rev. Proc. 2020 -25 Options for QIP • Bonus Depreciation. Rev. Proc. 2020 -25 allows a taxpayer to change its depreciation under § 168 for qualified improvement property placed in service by the taxpayer after December 31, 2017, in its tax year ending in 2018, 2019, or 2020. • Rev. Proc. 2020 -25 provides that a taxpayer changing the depreciation of qualified improvement property to the depreciation method, recovery period, and convention required by statutory amendments made by the CARES Act is changing from an impermissible method of accounting to a permissible method of accounting. § Similarly, a change from not claiming to claiming the additional first-year depreciation deduction under § 168(k) for qualified improvement property that is within the scope of Rev. Proc. 2020 -25 and is eligible for the additional first-year depreciation deduction is a change from an impermissible method of accounting to a permissible method of accounting. 46

Rev. Proc. 2020 -25 Options for QIP § A taxpayer may change from the impermissible method of determining depreciation to the permissible method by filing a Form 3115, “Application for Change in Accounting Method, ” an amended income tax return, or an administrative adjustment request. (If the taxpayer files a Form 3115, the method change is DCN 244 and qualifies for automatic consent. There is no fee charged. ) 47

Rev. Proc. 2020 -25 Options for QIP • Rev. Proc. 2020 -25 also generally allows a taxpayer to make a late election, or to revoke or withdraw an election under § 168(g)(7), (k)(5), (k)(7), or (k)(10) for the taxpayer’s 2018, 2019, or 2020 tax year, by filing either: § An amended federal income tax return or amended Form 1065, “U. S. Return of Partnership Income, ” for the placed-in-service year of the property on or before October 15, 2021, but not later than the applicable period of limitations on assessment for the tax year for which the amended return is being filed; or § A Form 3115 with the taxpayer’s timely filed original federal income tax return or Form 1065 for the taxpayer’s first or second tax year succeeding the tax year in which the taxpayer placed the property in service, or that is filed on or after April 17, 2020, and on or before October 15, 2021. This method change also qualifies for the automatic consent procedures and is designated as a DCN 245. 48

Rev. Proc. 2020 -25 Options for QIP • Making a late election or revoking an election in accordance with Rev. Proc. 2020 -25 is treated as a change in method of accounting for a limited period of time to which §§ 446(e) and 481 and the corresponding regulations apply. A taxpayer wanting to make a late election or revoke an election must use the automatic change procedures in Rev. Proc. 2015 -13 or its successor. (See Rev. Proc. 2019 -43 and Rev. Proc. 2019 -33. ) 49

Rev. Proc. 2020 -25 Options for QIP • Rev. Proc. 2020 -25 also modifies Rev. Proc. 2015 -56, the Remodel-Refresh Safe Harbor, which allows a qualified taxpayer to treat a capital expenditure as QIP for property placed in service after December 31, 2017. Prior to the TCJA, the capital expenditure qualified as qualified restaurant property. Rev. Proc. 2020 -25 also reinforces the provision that any capital expenditure which does not qualify as QIP is then characterized as nonresidential real property. 50

Payroll Tax Deferrals Under the CARES Act 51

Payroll Tax Deferrals • Section 2302 of the CARES Act allows employers to defer payment of the 6. 2% employer-portion of the Social Security tax. • The period includes all taxes required to be deposited from March 27, 2020 to December 31, 2020. • This deferral is automatic and no election is required to be made. • The deferred Social Security taxes are due in two installments- 50% due on or before December 31, 2021, and the remaining amount due on or before December 31, 2022. 52

Payroll Tax Deferrals • Reporting of the deferral will occur on Form 941 for the Quarters 2 -4. • Draft instructions for Form 941 Quarters 2 -4 were released on June 3, 2020. • Self-employed individuals may also take part in the deferral. • The deferral period for self-employed individuals is the same as for Form 941 filers, March 27, 2020 to December 31, 2020. • They may reduce their 1040 -ES quarterly payments by an amount equal to 50% of the Social Security tax on net earnings from self-employment income. • Payment of the deferred portion of the self-employment taxes also occurs in 2021 and 2022. 53

Payroll Tax Deferrals • Deferral used in conjunction with PPP Loan: • Employers who have received a Paycheck Protection Program (PPP) loan and had amounts forgiven as provided in Section 1102 of the CARES Act, may now defer the 6. 2 % of the employer’s portion of the Social Security Tax. This was not permitted until two weeks ago. 54

Payroll Tax Deferrals • Deferral used in conjunction with Families First Coronavirus Relief Act and Employee Retention Credit: • The employer determines first the amount of the deferral of the Social Security taxes before taking into consideration amounts for the paid leave credit and the employee retention credit, advance payments, or any refunds with respect to these credits. 55