Re: Families First Coronavirus Response Act: Employer Tax Credits

On March 18, 2020, the President signed the Families First Coronavirus Response Act (Coronavirus Response Act) which increases funding for various programs and addresses paid sick and family leave, including tax credits for employers and self-employed persons.

The Coronavirus Response Act requires employers with fewer than 500 employees to provide paid sick leave to employees who are forced to stay home due to quarantining or the care for a family member (qualified sick leave) or to care for a child if the school or place of care is closed (qualified family leave).

Credit for Qualified Sick Leave

In the case of sick leave wages paid by an employer to an employee, the employer may receive a refundable credit against its share of either the OASDI or the RRTA portion (as applicable) of the payroll tax. The credit can be claimed on a quarterly basis, equal to 100 percent of the amount of sick leave wages paid. The amount of the credit is limited to $200 per day per employee. However, the credit increases to $511 per day if the employee is on leave for the following reasons:

• Is subject to a federal, state or local quarantine or isolation order related to COVID-19;

• Has been advised by a health care provider to self-quarantine due to concerns related to COVID-19; or

• Is experiencing symptoms of COVID-19 and seeking a medical diagnosis. The total payroll tax credit is limited to 10 days of wages per employee.

Credit for Qualified Family Leave

A separate refundable payroll tax credit applies for family leave wages paid by an employer under the Coronavirus Response Act. The credit is 100 percent of the amount of qualified family leave wages limited to $200 per day per employee, up to an aggregate of $10,000. Wages, for purposes of both credits, include a portion of health plan expenses properly allocable to the qualified sick and family leave wages. The paid sick and family leave requirements and the related employer tax credits are temporary. They expire on December 31, 2020. The IRS is expected to provide additional guidance on these credits soon. Please call our office to discuss how your business may benefit.

Re: Families First Coronavirus Response Act: Credits for the Self-Employed

On March 18, 2020, the President signed the Families First Coronavirus Response Act (Coronavirus Response Act) which increases funding for various programs and addresses paid sick and family leave, including tax credits for employers and self-employed persons.

The Coronavirus Response Act requires employers with fewer than 500 employees to provide paid sick leave to employees who are forced to stay home due to quarantining or the care for a family member (qualified sick leave) or to care for a child if the school or place of care is closed (qualified family leave).

In the case of sick leave wages paid by an employer to an employee, the employer may receive a refundable credit against its share of either the OASDI or the RRTA portion (as applicable) of the payroll tax. A separate refundable payroll tax credit applies for family leave wages paid by an employer under the Coronavirus Response Act.

Self-employed persons may also benefit from the sick and family leave credits as if they were an employee of an employer (other than himself or herself). For self-employed persons, the credits are allowed against regular taxes.

Credit for Qualified Sick Leave

The limit on sick leave wages is determined by multiplying the number of days the self-employed person is unable to perform services in their trade or business by the lesser of 67% of the taxpayer’s average daily self-employment income, or $200. The number of days is limited to 10 for the tax year. The limits are increased to 100% and $511, respectively if the self-employed person is unable to perform services for the following reasons:

• Is subject to a federal, state or local quarantine or isolation order related to COVID-19;
• Has been advised by a health care provider to self-quarantine due to concerns related to COVID-19; or
• Is experiencing symptoms of COVID-19 and seeking a medical diagnosis.

The amount of the sick leave credit is reduced by any sick leave wages the taxpayer might receive as an employee which exceed $2,000 ($5,110 in the case of any day covered for the three reasons described above).

Credit for Qualified Family Leave

The same calculation is made for family leave wages, with days unable to perform services multiplied by the lesser of 67% of the taxpayer’s average daily self-employment income, or $200. The number of days is limited to 50 for the tax year. The amount of the family leave credit is reduced by any family leave wages in excess of $10,000 that the taxpayer might receive as an employee.

Average Daily Self-Employment Income.

The taxpayer’s average daily self-employment income is defined as the amount of net earnings from self-employment for the tax year divided by 260. These credits expire on December 31, 2020. The IRS is expected to provide additional guidance soon. Please call our office to discuss the details of how these tax benefits may help you through a difficult time.

Plans to Implement Coronavirus Paid Leave and Tax Credits

The U.S. Treasury Department, Internal Revenue Service (IRS), and the U.S. Department of Labor (Labor) announced that small and midsize employers can begin taking advantage of two new refundable payroll tax credits, designed to immediately and fully reimburse them, dollar-for-dollar, for the cost of providing Coronavirus-related leave to their employees. This relief to employees and small and midsize businesses is provided under the Families First Coronavirus Response Act (Coronavirus Response Act), signed by President Trump on March 18, 2020.

The Coronavirus Response Act provides paid sick leave and expands family and medical leave for COVID-19 related reasons and creates the refundable paid sick leave credit and the paid childcare leave credit for eligible employers. Eligible employers are businesses and tax-exempt organizations with fewer than 500 employees that are required to provide emergency paid sick leave and emergency paid family and medical leave under the Act. Eligible employers will be able to claim these credits based on qualifying leave they provide between the effective date and Dec. 31, 2020. Equivalent credits are available to self-employed individuals based on similar circumstances.

The Coronavirus Response Act will help the United States combat and defeat COVID-19 by giving all American businesses with fewer than 500 employees the funds to provide employees with paid leave, either for the employee’s own health needs or to care for family members. The new law enables employers to keep their workers on their payrolls, while at the same time ensuring that workers are not forced to choose between their paychecks and the public health measures needed to combat the virus.

Key Takeaways
Paid Sick Leave for Workers
• For COVID-19 related reasons, employees receive up to 80 hours of paid sick leave and expanded paid childcare leave when employees’ children’s schools are closed, or childcare providers are unavailable.

Complete Coverage
• Health insurance costs are also included in the credit.
• Employers face no payroll tax liability.
• Self-employed individuals receive an equivalent credit.

Employers receive 100% reimbursement for paid leave pursuant to the Act.
• An immediate dollar-for-dollar tax offset against payroll taxes is provided
• Reimbursement will be quick and easy to obtain.

Small Business Protection
• Employers with fewer than 50 employees are eligible for an exemption from the requirements to provide leave to care for a child whose school is closed, or childcare is unavailable in cases where the viability of the business is threatened.

Easing Compliance
• Requirements subject to 30-day non-enforcement period for good faith compliance efforts.

Prompt Payment for the Cost of Providing Leave
When employers pay their employees, they are required to withhold from their employees’ paychecks federal income taxes and the employees’ share of Social Security and Medicare taxes. The employers then are required to deposit these federal taxes, along with their share of Social Security and Medicare taxes, with the IRS and file quarterly payroll tax returns (Form 941 series) with the IRS.

Under guidance that will be released this week or next, eligible employers who pay qualifying sick or child care leave will be able to retain an amount of the payroll taxes equal to the amount of qualifying sick and child care leave that they paid, rather than deposit them with the IRS.

The payroll taxes that are available for retention include withheld federal income taxes, the employee share of Social Security and Medicare taxes, and the employer share of Social Security and Medicare taxes with respect to all employees.
If there are not sufficient payroll taxes to cover the cost of qualified sick and child care leave paid, employers will be able file a request for an accelerated payment from the IRS. The IRS expects to process these requests in two weeks or less. The details of this new, expedited procedure will be announced next week

To take immediate advantage of the paid leave credits, businesses can retain and access funds that they would otherwise pay to the IRS in payroll taxes. If those amounts are not enough to cover the cost of paid leave, employers can seek an expedited advance from the IRS by submitting a streamlined claim form. Such guidance and procedures has not been released as yet.

IRS OUTLINES PROCEDURES FOR PAYROLL TAX CREDITS AND RAPID REFUNDS FOR EMPLOYERS MAKING FEDERALLY-MANDATED COVID-19 LEAVE PAYMENTS

The federal government is trying to get much-needed cash into the hands of employers and employees affected by COVID-19 as quickly as possible. To do so, it is utilizing employers’ existing payroll systems to minimize the employers’ cash flow hardship that might otherwise have occurred from having to pay new, mandatory federal paid sick and child care leave to certain employees. Specifically, the IRS has just clarified that employers can subtract the cost of the new mandated paid leave (plus the cost of keeping affected employees’ health care coverage in place during that leave) from any payroll taxes that are otherwise due to the IRS.

IRS Information Release (IR) 2020-57 (March 20, 2020) outlines the system that will promptly reimburse employers for the benefits required under the Act. IR 2020-57 also states that eligible employers are entitled to an additional tax credit based on costs to maintain health insurance coverage for the eligible employee during the mandated federal paid sick and child care leave period.

Background Businesses and tax-exempt organizations with fewer than 500 employees that are required to provide emergency paid sick and child care leave through December 31, 2020, under the Families First Coronavirus Response Act (Act) (H.R. 6201), can claim a refundable federal tax credit to recover 100% of those payments. Equivalent credits are available to self-employed individuals based on similar circumstances.

Mechanics of Tax Credit Refunds
Generally, employers are required to withhold federal income, Social Security and Medicare taxes from their employees’ paychecks. Normally, employers must timely remit to the IRS the withheld taxes, along with the employer’s share of Social Security and Medicare taxes. But the IRS will release guidance the week of March 23 allowing employers who pay mandated federal paid sick or child care leave to decrease their federal payroll tax deposit by the cost incurred. The IRS also said that the cost of providing such leave can include the cost of continuing health care coverage during the federally mandated sick and child care leave period.

Source of Tax Credit Refunds Employers can deduct the cost of providing such leave from their total federal tax deposit amount from all employees (not just from those who take the federally mandated leave). Specifically, employers can deduct the cost of providing such leave from: (1) federal income taxes withheld from all employees’ pay; (2) the employees’ share of Social Security and Medicare taxes; and (3) the employer’s share of Social Security and Medicare taxes.
1499 West Palmetto Park Road, Suite 107 ? Boca Raton, FL 33486 (561) 995-0064 www.vcpa.com March 25, 2020
Self-Employed Equivalent tax credits are available to self-employed individuals for federally mandated paid sick and child care leave. But self-employed individuals will deduct their tax credits from their estimated tax payments or can claim a refund on their federal income tax return (i.e., their 2020 Form 1040).

As a result, employers (including self-employed individuals) will have more cash in-hand (by not remitting taxes that are otherwise due) to cover the cost of providing the federal paid sick and child care leave.
Rapid Refunds IR 2020-57 also said that if the payroll tax off-set is not sufficient to cover 100% of those costs, employers can request a refund of their tax credit for any remaining amount. The IRS expects to process such refunds within two weeks.
Examples. Here are two examples from IR 2020-57:

Example 1: If an eligible employer paid $5,000 in federally mandated paid sick or child care leave and is otherwise required to deposit $8,000 in payroll taxes, including taxes withheld from all its employees, the employer could use up to $5,000 of the $8,000 of taxes that it was otherwise going to deposit to make the qualified leave payments. The employer would only be required under the law to deposit the remaining $3,000 on its next regular deposit date.

Example 2: If an eligible employer paid $10,000 in federally mandated paid sick or child care leave and was required to deposit $8,000 in taxes, the employer could use the entire $8,000 of taxes that it was otherwise going to deposit to make qualified leave payments and could file a request for an accelerated refund for the remaining $2,000.

New Small Business Exemption
According to IR 2020-57, small businesses with fewer than 50 employees will be eligible for an exemption from the federally mandated child care leave if complying with those requirements would jeopardize the ability of the business to continue as a going concern. The exemption will be available on the basis of simple and clear criteria, which the U.S. Department of Labor will provide in emergency guidance.

Non-Enforcement Period
IR 2020-57 says that the U.S. Department of Labor will issue a temporary non-enforcement policy that provides a period of time for employers to come into compliance with the Act. For at least the initial 30 days (i.e., through April 20), the Labor Department will not bring any enforcement action against any employer for violating the Act, so long as the employer acted reasonably and in good faith to comply with the Act.

House passes Coronavirus Aid Relief and Economic Security Act (H.R. 748)
The House cleared an economic relief package to be signed by President Trump that will send rebate checks to taxpayers and roll back provisions of the Tax Cuts and Jobs Act.

The House passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act (H.R. 748) by voice vote March 27 despite threats by a lawmaker to hold up the bill.

The Coronavirus Aid, Relief, and Economic Security Act (H.R. 748) was approved by congress by voice vote on March 27, 2020. The bill will be sent to president Trump for his signature who has already said he would sign it.

Listed here are some of the things in the H.R. 748:

Section 1102 and 1106-Paycheck Protection: Forgiveness For Small Business Loans for Keeping Employees-The bill creates a “paycheck protection program” for small employers, self-employed individuals, and “gig economy” workers, with $350 billion to help prevent workers from losing their jobs and small businesses from going under due to economic losses caused by the COVID-19 pandemic. The “Paycheck Protection Program” would provide 8 weeks of cash-flow assistance through 100 percent federally guaranteed loans to small employers who maintain their payroll during this emergency. If the employer maintains payroll, the portion of the loans used for covered payroll costs (employees and certain 1099-MISC workers), interest on mortgage obligations, rent, and utilities would be forgiven, which would help workers to remain employed and affected small businesses and our economy to recover quickly from this crisis. This proposal would be retroactive to February 15, 2020, to help bring workers who may have already been laid off back onto payrolls. Interest rate is not to be greater than 4%.

In general, the maximum amount of the loan is the lessor of:Multiplying the average monthly payroll cost incurred during the 1-year period before the date of the loan by 2.5, or $10,000,000. Example-If you paid $1,200,000 in total payroll costs for the prior year, then your average would be $100,000. Multiply this monthly average by 2.5 and your total loan amount would be $250,000.

The bill provides that the borrower shall be eligible for loan forgiveness equal to the amount spent by the borrower during an 8-week period after the origination date of the loan for payroll support (including paid sick, medical, or family leave, and costs related to the continuation of group health care benefits during those periods of leave) employee salaries, mortgage payments, rent, utilities and any other debt obligation that were incurred before February 15, 2020. Payroll costs do not include payroll where a payroll tax credit was received due to the qualified sick leave or family leave which was provided under Families First Coronavirus Response Act. Eligible payroll costs also do not include compensation above $100,000 in wages.

The amount forgiven will be reduced proportionally by any reduction in employees retained compared to the prior year and reduced by the reduction in pay of any employee beyond 25 percent of their prior year compensation. To encourage employers to rehire any employees who have already been laid off due to the COVID-19 crisis, borrowers that re-hire workers previously laid off will not be penalized for having a reduced payroll at the beginning of the period. Also, the bill allows forgiveness for additional wages paid to tipped workers.

Section 2301. Employee Retention Credit-An employee retention tax credit is one of the few new additions to the legislation. The credit would be available to businesses that have had to fully or partially suspend operations as the result of a government order or have seen their gross receipts decline by more than 50 percent compared with this quarter last year. The credit is aimed at encouraging businesses to keep employees on their payrolls and would fully cover 50 percent of the wages paid by an employer during the shutdown, up to $10,000 per employee.

Example: You have ten employees who each make $2000 a month. To keep the example simple, suppose that healthcare benefits run $500 a month per employee. In total, then, each employee costs $2500 a month and over the next four months, the employer would spend $10,000 on each employee.

The Section 2301 “employee retention credit” gives you, the employer, a $5,000 tax credit. That’s per employee. With ten employees, then, you $50,000 in tax credits. The tax credit is what’s called a “refundable tax credit.” That means you get the credit regardless of whether you’ve pay taxes.

Example: Your business generates no taxable income due to the COVID-19 crisis. As a result, you pay no income taxes. You still get a $50,000 “tax refund.”

Section 2113. Enhanced Benefits under the Unemployment Insurance Act-This section provides an additional $600 per week payment to each recipient of unemployment insurance or Pandemic Unemployment Assistance for up to four months.

Section 2201 and 2020 recovery rebates for individuals-All U.S. residents with adjusted gross income up to $75,000 ($150,000 married), who are not a dependent of another taxpayer and have a work eligible social security number, are eligible for the full $1,200 ($2,400 married) rebate. In addition, they are eligible for an additional $500 per child. This is true even for those who have no income, as well as those whose income comes entirely from non-taxable means-tested benefit programs, such as SSI benefits.

For most Americans, no action on their part will be required in order to receive a rebate check as IRS will use a taxpayer’s 2019 tax return if filed, or in the alternative their 2018 return. This includes many low-income individuals who file a tax return in order to take advantage of the refundable Earned Income Tax Credit and Child Tax Credit. The rebate amount is reduced by $5 for each $100 that a taxpayer’s income exceeds the phase-out threshold. The amount is completely phased-out for single filers with incomes exceeding $99,000, $146,500 for head of household filers with one child, and $198,000 for joint filers with no children.

Section 2203. Temporary waiver of required minimum distribution rules for certain retirement plans and accounts-The provision waives the required minimum distribution rules for certain defined contribution plans and IRAs for calendar year 2020. This provision provides relief to individuals who would otherwise be required to withdraw funds from such retirement accounts during the economic slowdown due to COVID-19.

Section 2303-Modifications for net operating losses-The provision provides that an NOL arising in a tax year beginning in 2018, 2019, or 2020 can be carried back five years. The provision also temporarily removes the taxable income limitation to allow an NOL to fully offset income. These changes will allow companies to utilize losses and amend prior year returns, which will provide critical cash flow and liquidity during the COVID-19 emergency.

Section 2307. Technical amendment regarding qualified improvement property-This provision enables businesses, especially in the hospitality industry, to write off immediately costs associated with

Section 2306. Modification of limitation on business interest-The provision temporarily increases the amount of interest expense businesses can deduct on their tax returns, by increasing the 30-percent limitation to 50 percent of taxable income (with adjustments) for 2019 and 2020. As businesses look to weather the storm of the current crisis, this provision will allow them to increase liquidity with a reduced cost of capital, so that they are able to continue operations and keep employees on payroll.

Other Items:
The bill would also permit both itemizers and non-itemizers to deduct up to $300 of cash contributions to charity in 2020, according to a section-by-section summary of the bill. The objective is to encourage greater charitable giving during the pandemic.

The bill adds a provision that waives the 10-percent early withdrawal penalty for distributions up to $100,000 from qualified retirement accounts for coronavirus-related purposes made on or after January 1, 2020. In addition, income attributable to such distributions would be subject to tax over three years, and the taxpayer may recontribute the funds to an eligible retirement plan within three years without regard to that year’s cap on contributions. Further, the provision provides flexibility for loans from certain retirement plans for coronavirus-related relief. A coronavirus-related distribution is a one made to an individual: (1) who is diagnosed with COVID-19, (2) whose spouse or dependent is diagnosed with COVID-19, or (3) who experiences adverse financial consequences as a result of being quarantined, furloughed, laid off, having work hours reduced, being unable to work due to lack of child care due to COVID-19, closing or reducing hours of a business owned or operated by the individual due to COVID-19, or other factors as determined by the Treasury Secretary.

What’s in the Senate Bill-Not Law as of 3/26/2020

The Coronavirus Aid, Relief, and Economic Security Act (H.R. 748) had overwhelming support after almost a week of negotiations. Lawmakers announced a deal in the morning of March 25 and it was passed by the Senate later in the day. The bill now heads to the House, where it may encounter problems after some progressive Democrats criticized it. House Majority Leader Steny H. Hoyer, D-Md., said in a statement that he expects to hold a voice vote on the issue that will allow most members to stay in their districts.

Listed here are some of the things in the Senate Bill:

Section 1102 and 1106-Paycheck Protection: Forgiveness For Small Business Loans for Keeping Employees-The bill creates a “paycheck protection program” for small employers, self-employed individuals, and “gig economy” workers, with $350 billion to help prevent workers from losing their jobs and small businesses from going under due to economic losses caused by the COVID-19 pandemic. The “Paycheck Protection Program” would provide 8 weeks of cash-flow assistance through 100 percent federally guaranteed loans to small employers who maintain their payroll during this emergency. If the employer maintains payroll, the portion of the loans used for covered payroll costs, interest on mortgage obligations, rent, and utilities would be forgiven, which would help workers to remain employed and affected small businesses and our economy to recover quickly from this crisis. This proposal would be retroactive to February 15, 2020, to help bring workers who may have already been laid off back onto payrolls. Interest rate is not to be greater than 4%.

In general, the maximum amount of the loan is the lessor of:

• Multiplying the average monthly payroll cost incurred during the 1-year period before the date of the loan by 2.5, or $10,000,000. Example-If you paid $1,200,000 in total payroll costs for the prior year, then your average would be $100,000. Multiply this monthly average by 2.5 and your total loan amount would be $250,000.

The bill provides that the borrower shall be eligible for loan forgiveness equal to the amount spent by the borrower during an 8-week period after the origination date of the loan for payroll support (including paid sick, medical, or family leave, and costs related to the continuation of group health care benefits during those periods of leave) employee salaries, mortgage payments, rent, utilities and any other debt obligation that were incurred before February 15, 2020. Payroll costs do not include payroll where a payroll tax credit was received due to the qualified sick leave or family leave which was provided under Families First Coronavirus Response Act. Eligible payroll costs also do not include compensation above $100,000 in wages.

The amount forgiven will be reduced proportionally by any reduction in employees retained compared to the prior year and reduced by the reduction in pay of any employee beyond 25 percent of their prior year compensation. To encourage employers to rehire any employees who have already been laid off due to the COVID-19 crisis, borrowers that re-hire workers previously laid off will not be penalized for having a reduced payroll at the beginning of the period. Also, the bill allows forgiveness for additional wages paid to tipped workers.

Section 2113. Enhanced Benefits under the Unemployment Insurance Act-This section provides an additional $600 per week payment to each recipient of unemployment insurance or Pandemic Unemployment Assistance for up to four months.

Section 2201 and 2020 recovery rebates for individuals-All U.S. residents with adjusted gross income up to $75,000 ($150,000 married), who are not a dependent of another taxpayer and have a work eligible social security number, are eligible for the full $1,200 ($2,400 married) rebate. In addition, they are eligible for an additional $500 per child. This is true even for those who have no income, as well as those whose income comes entirely from non-taxable means-tested benefit programs, such as SSI benefits.

For most Americans, no action on their part will be required in order to receive a rebate check as IRS will use a taxpayer’s 2019 tax return if filed, or in the alternative their 2018 return. This includes many low-income individuals who file a tax return in order to take advantage of the refundable Earned Income Tax Credit and Child Tax Credit. The rebate amount is reduced by $5 for each $100 that a taxpayer’s income exceeds the phase-out threshold. The amount is completely phased-out for single filers with incomes exceeding $99,000, $146,500 for head of household filers with one child, and $198,000 for joint filers with no children.

Section 2203. Temporary waiver of required minimum distribution rules for certain retirement plans and accounts-The provision waives the required minimum distribution rules for certain defined contribution plans and IRAs for calendar year 2020. This provision provides relief to individuals who would otherwise be required to withdraw funds from such retirement accounts during the economic slowdown due to COVID-19.

Section 2301. Employee Retention Credit-An employee retention tax credit is one of the few new additions to the legislation. The credit would be available to businesses that have had to fully or partially suspend operations as the result of a government order or have seen their gross receipts decline by more than 50 percent compared with this quarter last year. The credit is aimed at encouraging businesses to keep employees on their payrolls and would fully cover 50 percent of the wages paid by an employer during the shutdown, up to $10,000 per employee.

Example: You have ten employees who each make $2000 a month. To keep the example simple, suppose that healthcare benefits run $500 a month per employee. In total, then, each employee costs $2500 a month and over the next four months, the employer would spend $10,000 on each employee.

The Section 2301 “employee retention credit” gives you, the employer, a $5,000 tax credit. That’s per employee. With ten employees, then, you $50,000 in tax credits. The tax credit is what’s called a “refundable tax credit.” That means you get the credit regardless of whether you’ve pay taxes.

Example: Your business generates no taxable income due to the COVID-19 crisis. As a result, you pay no income taxes. You still get a $50,000 “tax refund.”

Section 2303-Modifications for net operating losses-The provision provides that an NOL arising in a tax year beginning in 2018, 2019, or 2020 can be carried back five years. The provision also temporarily removes the taxable income limitation to allow an NOL to fully offset income. These changes will allow companies to utilize losses and amend prior year returns, which will provide critical cash flow and liquidity during the COVID-19 emergency.

Section 2307. Technical amendment regarding qualified improvement property-This provision enables businesses, especially in the hospitality industry, to write off immediately costs associated with

Section 2306. Modification of limitation on business interest-The provision temporarily increases the amount of interest expense businesses can deduct on their tax returns, by increasing the 30-percent limitation to 50 percent of taxable income (with adjustments) for 2019 and 2020. As businesses look to weather the storm of the current crisis, this provision will allow them to increase liquidity with a reduced cost of capital, so that they are able to continue operations and keep employees on payroll.

Other Items:

The bill would also permit both itemizers and non-itemizers to deduct up to $300 of cash contributions to charity in 2020, according to a section-by-section summary of the bill. The objective is to encourage greater charitable giving during the pandemic.

The bill adds a provision that waives the 10-percent early withdrawal penalty for distributions up to $100,000 from qualified retirement accounts for coronavirus-related purposes made on or after January 1, 2020. In addition, income attributable to such distributions would be subject to tax over three years, and the taxpayer may recontribute the funds to an eligible retirement plan within three years without regard to that year’s cap on contributions. Further, the provision provides flexibility for loans from certain retirement plans for coronavirus-related relief. A coronavirus-related distribution is a one made to an individual: (1) who is diagnosed with COVID-19, (2) whose spouse or dependent is diagnosed with COVID-19, or (3) who experiences adverse financial consequences as a result of being quarantined, furloughed, laid off, having work hours reduced, being unable to work due to lack of child care due to COVID-19, closing or reducing hours of a business owned or operated by the individual due to COVID-19, or other factors as determined by the Treasury Secretary.