CARES ACT TAX SUSPENSIONS
April 6, 2020
The Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was signed into law by President Trump on March 27, 2020, includes a number of tax-related provisions, as follows:
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Air Transportation Excise Tax Suspension
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Beginning on the date of the enactment of the CARES Act (March 27, 2020) through January 1, 2021, the 7.5% (passenger ticket) tax on amounts paid for commercial air transportation is suspended.
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All applicable domestic segment fees ($4.30) are also subject to the suspension.
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Suspension also includes the U.S. international arrival and departure tax ($18.90).
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In addition, the 6.25-percent tax on air transportation of property is suspended from the date of enactment through January 1, 2021.
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The excise tax on aviation kerosene used in commercial aviation (generally 4.3 cents/gallon) is also suspended from the date of enactment through January 1, 2021. This suspension does not include the 0.1 cent/gallon Leaking Underground Storage Tank Trust Fund tax.
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Other Tax Provisions
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Delay of payment of employer payroll taxes – This provision allows employers and self-employed individuals to defer payment of the employer share of the Social Security tax they otherwise are responsible for paying to the federal government with respect to their employees from the date of the enactment of the CARES Act until December 31, 2020. Employers generally are responsible for paying a 6.2-percent Social Security tax on employee wages. This provision requires that the deferred employment tax be paid over the following two years, with half of the amount required to be paid by December 31, 2021 and the other half by December 31, 2022.
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Employee retention credit for employers subject to closure due to COVID-19 – This provision provides a refundable payroll tax credit for 50 percent of wages paid by employers to employees during the COVID-19 crisis. The credit is available to employers whose (1) operations were fully or partially suspended due to a COVID-19-related shutdown order, or (2) gross receipts declined by more than 50 percent when compared to the same quarter in the prior year. The credit is based on qualified wages paid to the employee.
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For employers with greater than 100 full-time employees, qualified wages are wages paid to employees when they are not providing services due to the COVID-19-related circumstances described above. For eligible employers with 100 or fewer full-time employees, all employee wages qualify for the credit, whether the employer is open for business or subject to a shut-down order. The credit is provided for the first $10,000 of compensation, including health benefits, paid to an eligible employee. The credit is provided for wages paid or incurred from March 13, 2020 through December 31, 2020.
If you have any questions, please contact Evelyn Sahr (esahr@eckertseamans.com or 202-659-6622); Drew Derco (dderco@eckertseamans.com or 202-659-6665), or Andy Orr (aorr@eckertsemans.com or 202-659-6625).
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