The Treasury Department and the Internal Revenue Service recently provided tax relief for certain taxpayers affected by the COVID-19 pandemic involved in new markets tax credit transactions.
The taxpayers receiving relief through the new guidance are community development entities (CDEs) and qualified active low-income community businesses (QALICBs) investing and conducting businesses in low-income communities, according to an IRS news release.
Notice 2020-49 provides a CDE or QALICB with relief for certain specified time-sensitive acts that are due to be performed between April 1, 2020, and Dec. 31, 2020, to meet requirements under section 45D of the Internal Revenue Code and its regulations. A CDE or QALICB may perform these acts by Dec. 31, 2020. The additional time is provided for the following time-sensitive acts:
If a CDE is due to invest cash received in a qualified low-income community investment (QLICI) on or after April 1, 2020, and before Dec. 31, 2020, that cash investment is treated as invested in a QLICI to the extent it is invested by Dec. 31, 2020.
If a CDE is due to reinvesting certain amounts of cash or payment in a QLICI on or after April 1, 2020, and before Dec. 31, 2020, the amounts are treated as continuously invested in a QLICI to the extent the amounts are so reinvested by Dec. 31, 2020.
Expanding Amounts for Construction of Real Property
If a QALICB is due to expending the proceeds of capital or equity investment or loan by a CDE for construction of real property on or after April 1, 2020, and before Dec. 31, 2020, such proceeds are treated as a reasonable amount of working capital of the QALICB if so expended by Dec. 31, 2020.
Additional information about tax relief for businesses affected by the COVID-19 pandemic can be found on IRS.gov.
Guidance on employer leave-based donation programs that aid victims of the COVID-19 pandemic
The Internal Revenue Service has also guided employers whose employees forgo sick, vacation, or personal leave because of the COVID-19 pandemic.
Notice 2020-46 provides that cash payments employers make to charitable organizations that provide relief to victims of the COVID-19 pandemic in exchange for sick, vacation or personal leave which their employees forgo will not be treated as compensation. Similarly, the employees will not be treated as receiving the value of the leave as income and cannot claim a deduction for the leave that they donated to their employer, an IRS news release stated.
Employers, however, may deduct these cash payments as a business expense or as a charitable contribution deduction if the employer otherwise meets the respective requirements of either section.
Notice 2020-46 provides further details for employers with leave donation programs.
Additional information about tax relief for those affected by the COVID-19 pandemic can be found on IRS.gov.
Source: Internal Revenue Service