Some significant tax breaks may be available to smaller and medium-sized businesses that aren't available to larger enterprises. Here are three examples you should consider when filing your taxes for 2021 and planning for 2022. 1. QBI Deduction The qualified business income (QBI) deduction was a centerpiece of the Tax Cuts and Jobs Act (TCJA). For 2018 through 2025, the QBI deduction is available to eligible individuals, trusts and estates. But ... more
Tax Laws
Important Tax Figures for 2022
The Internal Revenue Service announced the tax year 2022 annual inflation adjustments for more than 60 tax provisions, including the tax rate schedules and other tax changes. Revenue Procedure 2021-45 provides details about these annual adjustments. The following table provides some important federal tax information for 2022, as compared with 2021. Some of the dollar amounts are unchanged and some changed only slightly due to inflation. * ... more
IRS Extends Temporary Relief for Late-leased Units
Notice 2022-05 released by the Internal Revenue Service (IRS) on January 10, 2022 provided extensions to various compliance deadlines for low-income housing projects claiming credits under Internal Revenue Code (IRC) Section 42. Prior to the release of Notice 2022-05, the IRS had provided temporary relief in its Notice 2021-12. However, due to the ongoing COVID-19 pandemic, the IRS in its Notice 2022-05 is now extending the period for some of the ... more
IRS Notice 2022-05 Extends Compliance Deadlines for LIHTC Projects
In response to the ongoing COVID-19 pandemic, the IRS has issued Notice 2022-05 on January 10, 2022 to extend temporary relief from certain requirements under the Internal Revenue Code (IRC) Section 42 for qualified low-income housing projects. For relief that was provided before this recent IRS notice, please refer to our 1/25/21 blog “IRS Notice 2021-12 Provides LIHTC Relief and Extends Deadlines.” The IRS Notice 2022-05 is now extending ... more
IRS Guidance On Minimum 4% LIHTC Rate
On December 1, 2021, the Internal Revenue Service (IRS) issued guidance on the minimum 4% low-income housing tax credit (LIHTC) rate. Revenue Ruling (Rev Rul) 2021-20 clarifies when the 4% floor applies to projects receiving housing credit allocations or tax-exempt bonds. Revenue Procedure (Rev Proc) 2021-43 provides safe harbors for determining whether an exempt bond that is issued after December 31, 2020, or an allocation of a housing credit ... more
PPP Update: Timing and Tax Effects of PPP Loan Forgiveness
On November 18, 2021, the Internal Revenue Service (IRS) issued a series of three revenue procedures (Rev Proc) to address various tax issues relating to PPP loan forgiveness. Rev Proc 2021-48 addresses the timing of receipt of PPP forgiveness tax-exempt income. Taxpayers may treat amounts that are excluded from gross income (i.e., tax-exempt income) as received or accrued: 1. as eligible expenses associated with the PPP loan are paid or ... more
PPP Update: SBA Drops PPP Loan Necessity Questionnaire
After numerous trade organizations challenged the legality of the U.S. Small Business Administration’s Paycheck Protection Program (PPP) Loan Necessity Questionnaires, the SBA announced this month that it is dropping the requirement for loan necessity review for PPP loans of $2 million or larger. The questionnaires were an additional step to collect supplemental information to evaluate borrowers’ good-faith certifications on PPP loan ... more
IRS Guidance to Change Depreciation Method for RPTOB
On June 17, 2021, the IRS released Revenue Procedure 2021-28 and Revenue Procedure 2021-29 that provide guidance for an electing Real Property Trade or Business (RPTOB) to conform to the use of a depreciation recovery period of 30 years under the Alternative Depreciation System (ADS) for residential rental property placed in service before January 1, 2018. As mentioned in our earlier blog, Consolidated Appropriations Act Changes the ADS ... more
PPP Update: Deductibility of Eligible Expenses on California Returns
California Governor Gavin Newsom signed Assembly Bill 80 (AB 80) on April 29, 2021 to allow certain businesses to deduct their eligible expenses that were paid with forgiven Paycheck Protection Program (PPP) loans. Prior to this new legislation, California did not allow a tax deduction of eligible expenses paid with forgiven PPP loan funds. California did not conform to the federal law that was enacted on December 27, 2020 as part of the ... more
Business Energy Credit Impacted by the Consolidated Appropriations Act
The Consolidated Appropriations Act of 2021 (CAA), signed into law by President Trump on December 27, 2020, included extenders to extend tax provisions related to various energy credits. One of the extended credits is the business energy credit under Internal Revenue Code Section 48(a) for solar property. Credits for solar property are commonly seen in connection with the construction and rehabilitation of low-income housing tax credit (LIHTC) ... more
Consolidated Appropriations Act Changes the ADS Depreciable Life
The Consolidated Appropriations Act, 2021 (CAA), signed into law on December 27, 2020 by President Trump, included provisions that shorten the depreciable life under the Alternative Depreciation System (ADS) for pre-2018 residential real estate for an IRC Sec. 163(j)(7)(A)(ii) electing real property trade or business. For residential real estate placed in service prior to January 1, 2018, the ADS depreciable life was 40 years. CAA changes the ... more
Temporary Relief for Late-leased Units in LIHTC Projects
Notice 2021-12 released by the Internal Revenue Service on January 15, 2021 provided various extensions and modifications to the requirements for low income housing tax credits under Internal Revenue Code (IRC) Section 42. Please refer to our earlier blog, IRS Notice 2021-12 Provides LIHTC Relief and Extends Deadlines. One modification in Notice 2021-12 that will affect the treatment of units that weren’t leased by the end of the first credit ... more
IRS Notice 2021-12 Provides LIHTC Relief and Extends Deadlines
The Internal Revenue Service issued Notice 2021-12 on January 15, 2021 to grant relief and to extend deadlines for various Low-Income Housing Tax Credit requirements. Here is a summary of the relief and extensions. Operational relief for the period from April 1, 2020 to September 30, 2021: Building owners are not required to perform income re-certifications. Owner must resume re-certifications no later than October 1, 2021. State housing ... more
Paycheck Protection Program (PPP), Round 2
On December 27, 2020, the Consolidated Appropriations Act, 2021 (CAA) was signed into law. It contains extensions and expansions of the Paycheck Protection Program (PPP), a program included in the Coronavirus Aid, Relief and Economic Security (CARES) Act that allows eligible employers to obtain forgivable loans for certain payroll and non-payroll purposes. The PPP loan application period had ended on August 8, 2020. CAA now authorizes an ... more
COVID-19 Relief Bill Includes 4% Housing Credit Floor Rate
The passage of the new COVID-19 relief bill (Consolidated Appropriations Act, 2021) by Congress on December 21, 2020, which was signed into law by President Trump on December 27, 2020, includes legislation that amends Internal Revenue Code Section 42. This new bill sets a minimum 4% housing credit rate for new and existing buildings that are not eligible for the 9% housing credit floor rate. The 4% housing credit rate applies to: 1. ... more
COVID-19 Relief Bill Clarifies Deductibility of Expenses Paid with PPP Loans
On December 21, 2020, Congress finally passed a new COVID-19 relief bill (Consolidated Appropriations Act, 2021) which President Trump signed into law on December 27, 2020. The bill includes clarification of the deductibility of certain eligible expenses paid with forgiven Paycheck Protection Program (PPP) loans. The bill now permits taxpayers who receive PPP loan forgiveness to deduct the eligible expenses that were paid with the forgiven PPP ... more
New IRS Guidance: Non-Deductibility of Expenses Paid with PPP Loans
The Paycheck Protection Program (PPP) created under the Coronavirus Aid, Relief, and Economic Security (CARES) Act provides loan funds to small businesses in order to help them pay eligible expenses (payroll costs, mortgage interest, rent, and utilities). These covered loans are to be fully forgiven and not to be treated as income to the loan recipients as long as the loans are used to pay eligible expenses. While it was clear that a ... more
Nonprofit Purchasing Policy Considerations
Nonprofits have a multitude of compliance standards to juggle, and constructing a comprehensive nonprofit purchasing policy is no exception. Maintaining tax-exempt status requires adherence to very specific behaviors, and written policy should be reviewed periodically to ensure your organization meets or exceeds standards. Under the new procurement standards, all NPOs receiving federal awards must have a written procurement policy that outlines ... more
Webinar Round-Up: PPPFA Forgivable Loan Accounting
Partners S. Scott Seamands and Stanley Woo hosted our quarterly virtual affordable housing roundtable, along with our client Mutual Housing of California. We have hosted these quarterly roundtables since the early 1990’s but in the current environment the roundtables have become virtual meetings. This quarter we outlined the issues related to obtaining loan forgiveness and other aspects of the SBA Paycheck Protection Program (PPP). We also ... more
CARES Act Key Tax Provisions for Individuals and Businesses
The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law on March 27, 2020. The CARES Act is a $2 trillion relief package aimed at providing relief to the American economy in combating the effects of the coronavirus pandemic. While the CARES Act is not a tax relief measure, it does include provisions that center on tax relief to individuals and business owners. Following are some of the more noteworthy tax provisions ... more
Changes to Sec. 163(j) that Impacts LIHTC Partnerships under CARES Act
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) amended Section 163(j) to allow many taxpayers to deduct more business interest expense for taxable years beginning in 2019 and 2020 by increasing the limitation from 30% of Adjusted Taxable Income (ATI) to 50% of ATI. For partnerships, the increase to 50% of ATI applies to years beginning in 2020 only, and not to years beginning in 2019. The LIHTC partnership may elect to not ... more
Changes to Filing of Amended Partnership Returns Under Revenue Procedure 2020-23
On April 8, 2020, the IRS issued Revenue Procedure 2020-23 (Rev. Proc. 2020-23), which allows an eligible partnership to file an amended partnership return for taxable years beginning in 2018 and 2019 using Form 1065, U.S. Return of Partnership Income (Form 1065), with the “Amended Return” box checked, and issue an amended Partner’s Share of Income, Deductions, Credits, etc. (Schedule K-1), to each of its partners. Eligible partnerships are only ... more
Expanded Relief for Tax Filing and Payment Due Dates
The IRS has issued a series of notices (Notice 2020-17, Notice 2020-18 (superseded Notice 2020-17), Notice 2020-20, and Notice 2020-23) in an effort to provide administrative relief to those taxpayers affected by COVID-19. Collectively, these notices extend the filing and payment deadlines to July 15, 2020 for various returns and payments. The latest IRS Notice 2020-23 amplifies the earlier notices and greatly expands the July 15, 2020 ... more
Paycheck Protection Program Part II
The Senate passed a bill of nearly $480 billion on Tuesday afternoon to extend funding for the Paycheck Protection Program (PPP), provide additional funding for hospitals, and expand funding for COVID-19 testing. Some $310 billion is earmarked for the PPP, which last week had exhausted all of the program’s initial $349 billion funding in less than two weeks due to overwhelming demand. The bill now goes to the House, which is expected to vote on ... more
Manage Your Partnership Interests: Technical Termination Rules for California
On July 1, 2019, California’s Governor, Gavin Newsom, signed Assembly Bill 91 (A.B. 91) into law. This bill conforms selective tax laws in California to the changes made under the Tax Cuts and Jobs Act of 2017 (TCJA). These changes impacted technical terminations for partnerships as follows: Repeals the partnership technical termination provision to conform to federal income tax law, as amended by the TCJA, applicable for tax years beginning ... more
Tax Reform Impact for Closely-held Businesses
When the 2017 Tax Cuts and Jobs Act (TCJA) went into effect, there were a lot of benefits for businesses and individuals in the area of corporate and personal taxes. Many new deductions were created for S-Corps and owners of pass-through entities. Along with the benefits, there is still a layer of complexity to the new tax laws that many privately held organizations are still working to understand and navigate. To complicate matters, this tax ... more
‘Creative’ Estate Planning Requires Caution with Section 199A Reform
Entrepreneurs and closely held family businesses that have established multiple trusts, or plan to create trusts based on tax reform, should pay attention to certain opportunities and dangers for new tax compliance, especially regarding Section 199A. You have probably heard that a new 20 percent federal income tax deduction is available for Qualified Business Income, applicable to a married couple with taxable income of no more than $315,000 and ... more
LIHTC Partnerships Impacted by Limitations on Business Interest
Due to the changes in the federal tax law resulting from the passage of the 2017 Tax Cuts and Jobs Act, the deduction for business interest can be severely limited for many taxpayers for tax years beginning after December 31, 2017. The interest deduction cannot exceed the sum of: Business interest income for the tax year 30% of the taxpayer’s adjusted taxable income Taxpayer’s floor plan financing interest (applicable to auto ... more
Tax Deferral ‘Opportunity Zones’ Approved for California
As part of the Tax Cuts and Jobs Act of 2017, the Governors of each state spent the first few months of 2018 requesting public comment and nominating certain census tracts as Opportunity Zones. Out of 3,516 census tracts in the state, 879 were designated by the Governor and all were certified by the U.S. Department of the Treasury in April 2018. Video: Understanding Opportunity Zones Within these designated Opportunity Zones, investments made ... more
Important Tax Update for Qualified Transportation Fringe Benefits
by Stanley Woo, CPA Due to the changes in the Federal tax law brought on by the 2017 Tax Cuts and Jobs Act, the transportation fringe benefits provided by an employer to employees are no longer deductible by the employer. This change in the law will impact employers in the for-profit sector and surprisingly, employers in the not-for-profit sector. For non-profit organizations, the transportation fringe benefits provided to employees are now ... more