CARES Act and IRS Notices Provide Additional Tax Savings Opportunities

The CARES Act contains a variety of advantageous tax provisions to aid taxpayers affected by COVID-19. One of the lesser known provisions of the CARES Act is the refund acceleration for Alternative Minimum Tax (AMT) Credits. The Tax Cuts and Jobs Act of 2017 (TJCA) abolished the Corporate AMT and allowed corporate taxpayers to use AMT Credits against regular federal income tax liability. Furthermore, the TCJA allowed AMT Credits to be incrementally refundable between 2018 and 2021. The CARES Act removes the incremental limitation, permitting corporate taxpayers to fully claim any remaining AMT Credits in tax year 2018 or 2019. Taxpayers can choose to file Form 1139 via fax to accelerate the AMT Credit refund for 2018 in lieu of amending the return.

On April 6th, 2020, the IRS published Notice 2020-23 which provides further relief to taxpayers affected by COVID-19. The notice specifies tax returns due between April 1, 2020 and July 14, 2020 are automatically extended to July 15, 2020. This applies to originally filed returns and returns on extension. Furthermore, taxpayers with statute dates expiring between April 1, 2020 through July 14, 2020 will be able to amend returns until July 15, 2020. The statute date is three years from the date the return was filed or two years from the date the tax was paid, whichever is later.

This notice provides additional opportunities for taxpayers to claim tax credits, including the Research and Development Tax Credit (R&D Credit). Taxpayers with a tax year 2016 statute date during this April-to-mid-July window may still be able to amend their 2016 returns to claim the R&D Credit. The R&D Credit can also be claimed on the rest of a taxpayer’s open years to generate further tax savings. Any R&D Credits not utilized on returns can be carried forward up to 20 years.

With the current uncertainty in the economy, it is critical that taxpayers take steps to maximize cash flow through available tax savings. If you have any questions about these provisions or how you can benefit, please reach out to our team at McGuire Sponsel.