COVID-Related Tax Relief Act of 2020 Implications When Reevaluating Year-End Valuation Allowance for Deferred Tax Assets

As the calendar year comes to an end, companies are scrambling to finish their year-end tax planning. Assessing valuation allowances for deferred tax assets (DTAs) is complicated and requires a lengthy process to ensure accuracy. This year, valuation allowances have been difficult to evaluate. The global pandemic, the CARES Act, and now the COVID-Related Tax…

Read More

Temporary California Net Operating Loss Suspension Signed into Law

History California has at times either restricted the ability of individuals and corporations to utilize the full carryover amount of net operating losses (“NOLs”) or completely suspended net operating loss deductions for business entities and individuals with business income in response to facing budgetary constraints.  For example, in response to the global mortgage crisis that…

Read More

Determining the Accounting for Loans Under the Payroll Protection Program

The question has arisen regarding how to account for loans received by companies under the Payroll Protection Program (“PPP”) of the CARES Act as there are no accounting standards specific to government assistance received in this form.  In the absence of standards specific to a transaction, Accounting Standards Codification (“ASC”) 105-10-05 directs a company to…

Read More

Treasury Provides Welcome Grace Period and Transition Relief from Repeal of the “338 Approach” to Recognition of Built-in Gains (but the clock is ticking)

On January 14, 2020, the IRS and Treasury provided partial relief from their earlier announcement of the repeal of a highly favorable method of increasing the Section 382 limitation on the use of net operating losses and other tax attributes of a target by an acquiring company. Those rules have been a staple of the…

Read More

Companies Continue to Evaluate APB 23 Benefits After Tax Reform; Impact of COVID-19 Related Repatriations on the Indefinite Reinvestment Assertion

The general comprehensive rule for providing deferred taxes on book-tax basis differences under ASC 740-10 requires companies to record a deferred tax liability (DTL) for any GAAP outside basis in their foreign subsidiaries in excess of their tax basis.  ASC 740-30-25-3 provides a rebuttable presumption that all offshore earnings contributing to the basis difference will…

Read More

IRS Issues Flexible Guidance on QIP, bonus depreciation and other favorable elections under CARES Act

On April 17, 2020, the IRS released Revenue Procedure 2020-25 (the “Rev Proc”), which provides guidance to enable taxpayers to accelerate their cost recovery of qualified improvement property (QIP). This guidance comes in response to Congress’ enactment of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which includes a technical correction to the recovery…

Read More