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VIRUS BRIEFING: Tax Questions and the Coronavirus (5)

March 13, 2020, 10:19 PMUpdated: March 16, 2020, 3:02 AM

It’s an uncertain time for companies, tax professionals, and tax agencies across the world as the spread of Covid-19 upends ordinary routines and operations. This is a roundup of the week’s most recent developments in coronavirus-related tax news

Read all of our coronavirus coverage and follow @tax on Twitter for regular updates.

House Takes Action

The House passed a sweeping coronavirus response package (H.R. 6201) in the wee hours of Saturday morning. The package was the result of days of tense negotiations and phone calls between House Speaker Nancy Pelosi (D-Calif.) and Treasury Secretary Steven Mnuchin.

Lawmakers passed the package by a vote of 363-40 after President Donald Trump tweeted his support for the measure. It doesn’t include the payroll tax cut he has called for but it would provide tax cuts to employers to offset the costs of offering emergency sick leave. It would also require insurers and federal health programs to fully cover virus testing.

The package would also provide a refundable credit against self-employment tax. The credit would cover 100% of self-employed individuals’ sick-leave equivalent or 67% if they were taking care of a sick family member or child if their school was closed. (BGOV subscribers can learn more about the bill here.)

The Senate will be in next week and is expected to consider the package. Senate Majority Leader Mitch McConnell (R-Ky.) said in a statement after its House passage that, “I believe the vast majority of Senators in both parties will agree we should act swiftly to secure relief for American workers, families, and small businesses.”

Questions Facing Companies

The impact of the virus will be seen in companies’ financial statements, Nicola White and Amanda Iacone reported. Auditors themselves began preparing for travel and reporting disruptions days ago.

Added CECL Trouble: The outbreak comes at a challenging time for banks, some of which were already struggling to prepare for sweeping changes to how they calculate losses on loans. (One lawmaker said the current expected credit losses standard should be delayed altogether, given the outbreak.)

“You couldn’t have written this drama any worse,” said Stephen Masterson, CEO of SM & Co. LLC, a financial services advisory firm.

Tax Law Hit: Changes in the 2017 tax law, including a restriction on how much companies can carry back in net operating losses, could make companies even more vulnerable. Lydia O’Neal has more.

Industry Perks: The spread of the virus led to a flood of canceled events and trips—a blow to airlines and the hospitality industry. The White House may let airlines keep some of the taxes and fees they collect on tickets.

Special Edition Podcast

In a special episode of Talking Tax, host Siri Bulusu talks with Ash Noah, a managing director at the Association of International Certified Professional Accountants. This is a tough time for companies—it’s like a recession, a war, and 9/11 all in one, Noah said in a special edition of Talking Tax.

Filing Changes Afoot

Extending the April 15 tax filing deadline is one of the ways the government is hoping to provide relief, although the exact details aren’t yet clear.

The American Institute of CPAs called for a six-month filing extension and for penalties to be waived. Late Friday evening the AICPA released a statement saying it was “greatly concerned” that Treasury and the IRS have yet to offer filing relief. Lawmakers have also called for filing deadline flexibility.

Power to IRS: Trump declared a national emergency Friday afternoon, which gives the IRS broader authority to offer penalty abatement or postpone deadlines without penalties accruing. Read more from Ally Versprille.

IRS Acts After Union Push

Late Friday IRS Commissioner Charles Rettig sent an email to employees allowing more people to work remotely and providing more flexibility with leave requests in response to the growing Covid-19 threat.

The agency had faced backlash from the National Treasury Employees Union, which represents agency employees, for failing to take quick enough action to protect workers.

Earlier in the week IRS scaled back employee travel, and the IRS Chief Counsel on Friday OK’d telework for its employees.

Those changes came after the head of the union representing IRS employees said the agency wasn’t doing enough to protect workers.

The agency also announced high-deductible health plans can cover virus costs, following a request for guidance from Blue Cross Blue Shield Association.

Taxpayer Advocate: The Taxpayer Advocate Service, meant to be the voice for taxpayers at the IRS, was involved in helping the agency shape its virus response.

Tax Court Scheduling Changes

The U.S. Tax Court announced it would reschedule hearings or trials as needed, and urged individuals not to come into the building if they felt sick.

The court also canceled a string of upcoming trial sessions in late March:

  • March 16 in Hartford, Conn.; Philadelphia; and San Francisco
  • March 17 in Provo, Utah
  • March 23 in Boston; Los Angeles; Milwaukee, Wis.; Pittsburgh, Pa.; and San Antonio, Texas
  • March 30 in Chicago; Dallas; Detroit; Los Angeles; New York City; and Philadelphia.

Breaks in California

Some states are also beginning to take action. California, which has been particularly hard hit by the virus, has taken action in several areas:

  • Gov. Gavin Newsom on Thursday gave an extra 60 days to sales tax filers and on Friday the Franchise Tax Board announced additional extensions for partnerships and individual filers.
  • Officials warned in early March that the virus would hit the state’s economy especially hard.
  • First quarter tax filings for San Francisco businesses with up to $10 million in gross receipts will be delayed to next February.

News and information from states all over the country is here.

Relief Around the World

Countries took swift action to offer relief to businesses and taxpayers.

  • The EU said the virus can take precedent over state-aid rules.
  • Norway removed its air passenger tax.
  • Mexico is considering delaying tax payments.
  • Germany’s Angela Merkel said the country would do whatever it takes to fight the outbreak.
  • Georgia gave a break to its struggling tourism industry.
  • Indonesia rolled out a stimulus package, and Denmark offered $20 billion in tax breaks.
  • Japan is considering taxes to bolster its economy.
  • Iran announced a series of banking, welfare, and tax relief measures.

Full international news and information on coronavirus is here.

(Updates Iran, Japan, California, and IRS actions. Earlier version updated information on House passage of bill and information on Mexico and the EU under last subhead.)

To contact the reporter on this story: Colleen Murphy in Washington at cmurphy@bloombergtax.com

To contact the editors responsible for this story: Patrick Ambrosio at pambrosio@bloombergtax.com; Rachael Daigle at rdaigle@bloombergtax.com