Summary of various provisions from the CARES Act and related tax measures

In response to the COVID-19 pandemic, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and related tax relief measures were enacted in March 2020. These measures include various provisions that may be of interest to individuals and small business employers—certain of which are summarized for your reference below.

Your First Manhattan Portfolio Manager is available to answer your questions and help in any other way, including by coordinating with your independent tax advisor who can help you determine how these measures may apply to your specific situation.

FOR INDIVIDUALS:

• Temporary Waiver of Required Minimum Distributions: Required minimum distributions (RMDs) from defined contribution plans and individual retirement accounts (IRAs) have been waived for the 2020 tax year. For certain individuals whose RMDs otherwise would have commenced in 2020, the commencement may be delayed until 2021. In addition, any RMD distributed during the period from February 1 through May 15, 2020, can be returned to the defined benefit plan or individual retirement account via an indirect rollover by August 31, 2020. Any RMD distributed in January 2020 or after May 15, 2020, remains subject to the standard 60-day rollover window.
• Extended Deadline for Filing 2019 Income Tax Returns and Making IRA and Defined Savings Account Contributions: The Treasury Department has extended various deadlines for tax year 2019 to July 15, 2020, including for filing income tax returns and certain contributions to Traditional IRAs, Roth IRAs, Health Savings Accounts, Archer Medical Savings Accounts, and Coverdell Education Savings Accounts.
• Retirement Plan Relief: The CARES Act temporarily waives the 10% penalty associated with early withdrawals from retirement accounts of up to $100,000 in 2020 for various individuals affected by the COVID-19 pandemic. Certain COVID-19-related hardship withdrawals may be returned to the respective retirement plan within the subsequent three-year period.
• Employee Retention Credit: Eligible employers whose businesses have closed or otherwise suffered due to COVID-19 may qualify for a refundable payroll tax credit of up to 50% of qualified wages paid from March 13 through December 31, 2020. Eligible employers with 100 or fewer full-time employees may qualify for enhanced benefits under the employee retention credit provision. The credit is limited to employment taxes on wages paid and reduced by other payroll credits, including those affected by the Families First Coronavirus Response Act.
• Deferral of Employer Payroll Taxes: The CARES Act allows for deferral of the employer share of Social Security taxes owed in 2020 (including the share owned by self-employed individuals), with the deferred amount to be paid over the subsequent two years. Payroll taxes incurred from March 27 through December 31, 2020, are eligible for the deferral.
• Charitable Contributions: The CARES Act increases the 10% limitation for corporations to 25% of taxable income.

FOR SMALL BUSINESS EMPLOYERS:

• Employee Retention Credit: Eligible employers whose businesses have closed or otherwise suffered due to COVID-19 may qualify for a refundable payroll tax credit of up to 50% of qualified wages paid from March 13 through December 31, 2020. Eligible employers with 100 or fewer full-time employees may qualify for enhanced benefits under the employee retention credit provision. The credit is limited to employment taxes on wages paid and reduced by other payroll credits, including those affected by the Families First Coronavirus Response Act.
• Deferral of Employer Payroll Taxes: The CARES Act allows for deferral of the employer share of Social Security taxes owed in 2020 (including the share owned by self-employed individuals), with the deferred amount to be paid over the subsequent two years. Payroll taxes incurred from March 27 through December 31, 2020, are eligible for the deferral.

OTHER

• Charitable Contributions: The CARES Act increases the 10% limitation for corporations to 25% of taxable income.