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Ey Cares Act

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Last Updated: 02 July 2021

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IRC Section 250 deduction: CARES Act does not amend the taxable income limitation in IRC Section 250, which otherwise reduces the allowable IRC Section 250 deduction when the sum of taxpayer's FDII and GILTI exceed its taxable income for the year. Effectively, IRC Section 250 limitation may result in taxpayers utilizing a 21 % tax attribute against items of income, subject to a lower rate of tax because of the IRC Section 250 deduction. FTC limitation: greater NOL deduction will reduce the taxpayer's FTC limitation under IRC Section 904, whether the NOL source is foreign or domestic. As previously note, taxpayers will generally have greater FTC carryforward coming out of the NOL carryback year. Domestic-source NOL may create, or increase, overall domestic loss account, which may be beneficial in subsequent tax year. ODL account from pre-TCJA tax year would be subject to transition rules included in final FTC regulations. Foreign-source NOL may create, or increase, separate limitation loss or overall foreign loss account, which could be detrimental in subsequent tax year, including in IRC Section 965 transition tax year. Transition rules in TD 9882 would apply to this account when transitioning from pre-TCJA tax year to post-TCJA tax year. Taxpayers should also consider the tax rate differential between pre-TCJA and post-TCJA tax years. Generally, FTCs carry to pre-TCJA years offset income tax at 35 %, while FTCs utilized in post-TCJA year will offset income tax at a maximum 21 % rate. BEAT liability: NOL carryback to the tax year for which IRC Section 59A is effective could create or increase the taxpayer's BEAT liability. Simply state, NOL deductions reduce the taxpayer's regular tax liability, which can create or increase the taxpayer's base erosion minimum tax amount. As a result, taxpayer that is an applicable taxpayer, as defined for BEAT purposes, and that elects to carry back NOL may be subject to BEAT liability depending on its adjusted regular tax liability in the carryback year. This will likely come as a surprise to many taxpayers.

* Please keep in mind that all text is machine-generated, we do not bear any responsibility, and you should always get advice from professionals before taking any actions.

* Please keep in mind that all text is machine-generated, we do not bear any responsibility, and you should always get advice from professionals before taking any actions

NOLs and NOL carrybacks

Under the CARES Act, NOLs arising in tax years beginning after December 31 2017, and before January 1 2021 may be carried back to each of five tax years preceding the Tax Year of such loss. Since the enactment of the Tax Cuts and Jobs Act Of 2017, NOLs generally could not be carried back but could be carried forward indefinitely. Further, TCJA Limited NOL absorption To 80 % Of taxable income. The CARES Act temporarily removes the 80 % limitation, reinstating it for tax years beginning after 2020. Special carryback rules are provided for taxpayers, such as real estate investment trusts and life insurance company. As result of changes under the CARES Act, corporate taxpayers with eligible NOLs may now be able to claim a Refund for Tax returns from prior tax years. As the CARES Act does not modify IRC Section 172, Taxpayer, where advantageous, can still waive carryback and elect to carry NOLs forward to subsequent tax years. Further, in eligible tax years, corporate taxpayers may use NOLs to fully offset taxable income, rather than 80 % of taxable income. Many taxpayers, particularly multinational corporate groups that own control foreign corporations, will need to carefully consider interaction of NOL carryback with other IRC provisions. For example, taxpayers that elect to apply NOL carryback To Tax Year in which IRC Section 965 transition Tax was imposed will generally be precluded from taking its IRC Section 965 inclusion when determining the amount of taxable income that may be offset by NOL carrybacks. The CARES Act does not, however, generally prohibit taxpayers from using NOL from tax year with a lower Corporate Tax rate to offset taxable income that was subject to higher Corporate Tax rate in the earlier tax year. Moreover, before claiming NOL carryback For prior Tax, corporate taxpayers may also want to consider how other tax attributes that were absorbed in the prior year may now be displaced as a result of carryback. Other considerations include the impact on the taxpayer's AMT liability, if any, in the carryback Year. Consolidated Return groups will need to consider computation and availability of consolidated NOLs, allocation of that NOL to departing consolidated Return members and the group's utilization of member's separate Return loss Year NOL. Taxpayers that were party to M & transaction may also need to consider contractual limitations affecting their ability to carry back, or carry over, NOL.

* Please keep in mind that all text is machine-generated, we do not bear any responsibility, and you should always get advice from professionals before taking any actions.

* Please keep in mind that all text is machine-generated, we do not bear any responsibility, and you should always get advice from professionals before taking any actions

Business interest deductions

Background: TCJA introduced excess business loss limitation as additional loss limitation for noncorporate taxpayers, such as individuals, trusts and estates. Noncorporate Taxpayers may not deduct more than US 500 000 / US 250 000 of their business losses against non-business Income, such as dividends and interest, subpart F Income and GILTI, to name a few. For partnerships and S corporations, Section 461 applies at partner or shareholder level and considers the taxpayer's allocable share of entity-level items of Income, gains, losses and deductions. Limitations also apply to individual taxpayers that own control foreign corporations with either Global Intangible Low-Taxed Income or subpart F Income. Additionally, adjustments to individuals ' foreign-source Income were necessary to account for suspension of current-year excess business loss when computing foreign Tax credits associated with non-business Income and impact on ODL, SLL and OFL accounts. Temporary changes made by the CARES Act: CARES Act postpone the effective date of Section 461 until tax years beginning after 31 December 2020. Discussion: by suspending the loss limitation in Section 461, CARES Act allows noncorporate Taxpayers to use 100 % of excess business losses arising in Tax years 2018, 2019 and 2020 against other investment income. Similarly, taxpayers may use their excess business losses to offset GILTI and subpart F inclusions in those tax years. In an international context, foreign-source income adjustments are no longer necessary to account for the impact of Section 461 limitation on foreign tax credit. The CARES Act also makes several technical corrections to Section 461 that apply after 2020. Under these corrections, taxpayers do not: Consider NOL deductions under Section 172 and qualify business Income deductions under Section 199A when calculating excess business losses Consider deductions for losses from sale or exchange of capital assets in increasing Section 461 limitation Include items attributable to trade or business of performing services as employee in Section 461 calculation


1. New CFC group election regime

As note, Section 163 applies to the CFC as if it were a domestic corporation and on a CFC-by-CFC basis. 2018 Proposed Regulations allow certain CFCs to make CFC group election and be treated as part of CFC group for purposes of Section 163. Importantly, Final Regulations do not adopt the rules of the old CFC group election. The Treasury instead proposed entirely new Section 163 CFC group election regime as part of the 2020 Proposed Regulations. The new CFC group election is largely based on rules under Treas. Reg. Section 1. 163-5 governing application of single Section 163 limitation to US consolidated group determining the amount of BIE each member can deduct. Accordingly, if a new CFC group election is make, CFC group will compute single Section 163 limitation for groups current specified period. Computation and application of Section 163 group limitation to specified period of CFC group is based on the sum of each CFC group member's BIE, disallow BIE carryforward, BII, and ATI for members tax year ending with or within that specified period of CFC group. Items of CFC group members are translated into the single currency of CFC group, which is either US dollar or the functional currency of most of CFC group members. 2018 Proposed Regulations do not specifically address whether CFC taxable income should be computed on a pre-or post-tax basis for purposes of Section 163. In significant clarification of 2018 proposed Regulations, proposed Regulations would require CFCs TTI to be computed on an after-foreign tax basis. This contrasts with the computation of TTI for domestic corporations, which generally is compute before taxes. Unlike consolidated group rules, intercompany obligations among members of the same CFC group are still generally respected in determining these relevant amounts for each member and CFC group. Anti-abuse provisions would disregard any transaction that is between members of CFC group and enter into with the principal purpose of affecting CFC group Section 163 limitation by increasing or decreasing CFC group ATI under CFC group election.

* Please keep in mind that all text is machine-generated, we do not bear any responsibility, and you should always get advice from professionals before taking any actions.

* Please keep in mind that all text is machine-generated, we do not bear any responsibility, and you should always get advice from professionals before taking any actions

PE transactions and portfolio companies

Give potential depth and severity of pandemic economic impact, Private Equity firms work closely with management teams of their respective portfolio companies, and assess impact and liquidty needs on a case-by-case basis. Overall, Private Equity CFOs say they were seeing write-downs in value of approximately 10 % to 25 % at the end of Q1, however, range varies by sector. In health care and technology sectors, for example, many companies report minimal, or no impact, with some expecting portfolio companies to benefit in this current environment. The same cannot be said for portfolio companies in retail, travel and energy sectors. This crisis is forcing deal teams to recalibrate forecasts, difficult task give uncertainty about when conditions will reach a new normal. Past downturns, such as the 2008 financial crisis, offer some benchmarks, however, CFOs recognize that this is unchartered territory. Most have anticipated challenging Q2 and Q3 2020, with projections heavily impact during that time period. On the other hand, they do expect to see recovery as we get into 2021. In the meantime, most CFOs will continue to conduct detailed scenario planning and spend more time trying to get a better understanding of how future developments will impact valuations of their portfolio companies.

* Please keep in mind that all text is machine-generated, we do not bear any responsibility, and you should always get advice from professionals before taking any actions.

* Please keep in mind that all text is machine-generated, we do not bear any responsibility, and you should always get advice from professionals before taking any actions

Survey results

T he world is moving fast. If organizations want to stay ahead of the curve, their operations need to be agile and predictive, and they must pick the right time to engage with both the right talent and the right new technologies to gain a competitive edge. However, there are a lot of technologies out there and a lot of business processes, all in a state of continuous evolution. Separating signal from noise-and picking the right strategy-can be a real challenge. Even when organizations choose strategy, other factors can stand in the way of effective implementation. Understanding how to ask the right questions, who to ask and where to find answers, is critical in making any strategy work. Digital transformation is a vital component of any modern business strategy. Old software, platforms and processes have become unfit for modern needs. In their place, new software, new platforms and new processes need to be developed and efficiently implement. However, transformation is often driven by technologists and IT teams, rather than people who they will actually impact-such as those on the office floor. This can make communicating business value and enacting effective change fraught process. Most sophisticated, expensive artificial intelligence in the world can quickly become ineffective if implemented without input from people who would actually be using IT, and whether or not they think IT would actually improve processes. But getting right people talking and identifying actual problems that need to be solve, can be harder than IT look. One Tier 1 financial client came to EY with this problem. IT has faced challenges in implementing technological transformations in the past, and so recognize the need for creating the kind of collaborative spaces in which critical questions could be ask-and strategies shape-before IT starts building technology into its operations. The question the client asked was crucial but broad: rather than making incremental improvements, how do we think differently about how finance functions support business? In particular, IT was looking at how to improve operations across eight distinct Finance processes, from financial accounting to book closing, by applying technology in ways which would work to deliver real value. In wavespace we help clients curate talent and technology, bringing them together in collaboration. They are prove to energize and align teams to create meaningful outcomes, faster. Clients can engage with wavespace locations around the world, be host in temporary pop-up wavespaces, or have wavespace installed in their premises-all are designed to help clients interact with ideas, technology and each other, in ways that can lead them to decisions and creativity that will help them thrive in transformative age. The Clients also identify potential roadblocks. Through dialog with respective stakeholders, they find that if they had focused entirely on technology but neglected the process side of equation, desired results would not be deliver.

* Please keep in mind that all text is machine-generated, we do not bear any responsibility, and you should always get advice from professionals before taking any actions.

* Please keep in mind that all text is machine-generated, we do not bear any responsibility, and you should always get advice from professionals before taking any actions

Paycheck Protection Program

Industry Leader Ernst & Young LLP has developed the Paycheck Protection Program loan Forgiveness Platform to address complex challenges banks face and bring certainty to their small business clients. The Integration of EY industry experience and knowledge with Microsoft technologies delivers an open and flexible solution to address the complexity of loan Forgiveness while optimizing deployment, quickening speed to market, reducing fraud and addressing evolving regulatory guidance development and delivery of Platform enables swift support for CARES Act goal of restarting economic engines and give stronger confidence to both banks and small businesses EY US has develop Paycheck Protection Program loan Forgiveness Platform build on Microsoft Technology, so that banks at this critical juncture in US economic recovery can efficiently meet increasing demands across end-to-end lending process require by unique provisions outline under CARES Act. As lenders face record demand surrounding Forgiveness requests under the CARES Act, EY has developed an intuitive and educational Platform using Microsoft Azure and Power Platform supporting both banks and borrowers as they navigate through lending journey. For banks, this means confidence in delivering an end-to-end loan forgiveness process in an efficient manner. For borrowers, this entail elevated Digital user experience allowing for monitoring of their loan forgiveness status and self-service submission of documentation during the coverage period in order to efficiently manage their portfolio of loans. EYs creation of a Platform for both lenders and borrowers combines its small business banking experience, Tax and payroll knowledge, Data insights, and capabilities across its Digital, Technology, Data & Analytics, Tax, and Risk practices with Microsoft technologies. This Platform leverage Microsoft Power Apps to integrate business critical processes in line with CARES Act and enhances speed to market and lowers delivery costs. By understanding demand on lenders and processing capabilities need, EY can change and reconfigure features more efficiently as CARES Act guidance evolves. Peter Davis, EY Americas Financial Services Advisory Leader, say: We have been working diligently with our clients since SBA PPP was establish. EYs ability to bring our deep understanding of small business lending and tax and payroll requirements to develop solution that seamlessly reflect SBA loan Forgiveness guidance is an extraordinary opportunity to support execution of this important Program. EYs new Platform can provide unparalleled and effective use of Technology, enabling lenders to deliver loan forgiveness experience that meets high standards their small business customers have come to expect. EY Americas Financial Services Tax Leader, Shawn Smith further elaborates: in these uncertain times, it is critical that both borrowers and lenders have clarity and certainty around obtaining access to funds and qualifying those funds for Forgiveness. By teaming our market leading small business lending and Tax capabilities with Microsoft technologies, we are able to bring Tax and payroll knowledge through digitally improved customer experience. Bill Borden, Corporate Vice President, Worldwide Financial Services at Microsoft, say: were pleased to support EY as it helps combat the challenges of COVID-19 crisis within the Financial Services industry.

* Please keep in mind that all text is machine-generated, we do not bear any responsibility, and you should always get advice from professionals before taking any actions.

* Please keep in mind that all text is machine-generated, we do not bear any responsibility, and you should always get advice from professionals before taking any actions

Sources

* Please keep in mind that all text is machine-generated, we do not bear any responsibility, and you should always get advice from professionals before taking any actions.

* Please keep in mind that all text is machine-generated, we do not bear any responsibility, and you should always get advice from professionals before taking any actions

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