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Bonus Depreciation • Stranded Employees • Loan Forgiveness

May 24, 2020, 2:01 PM

This is a weekend roundup of Bloomberg Tax Insights, which are written by practitioners, featuring expert analysis on current issues in tax practice and policy. The articles featured here represent just a handful of the many Insights published each week. For a full archive of articles, browse by jurisdiction at Daily Tax Report, Daily Tax Report: State, and Daily Tax Report: International.

This week we look at bonus depreciation; stranded employee guidance; Paycheck Protection Program loan forgiveness; global indirect taxes; capital gains tax; digital taxes and the environment; net operating losses; the latest on the CARES Act; offtake agreements; automated reconciliation; the pandemic’s impact on audits and tax; and Covid-19 tax measures in India, Brazil, and the Persian Gulf. We’ll hear from:

  • Ellen McElroy and Michael Resnick of Eversheds Sutherland on capturing missed bonus depreciation
  • Covington & Burling attorneys on guidance for international travelers stranded in the U.S. and their employers
  • Juan F. Vasquez Jr., Jaime Vasquez, and Victor J. Viser of Chamberlain Hrdlicka on the problems with PPP loan forgiveness
  • Philippe Stephanny and Elia Galli of KPMG on managing indirect taxes during the pandemic
  • Chris Sanchirico of the University of Pennsylvania Carey Law School on misconceptions about capital gains tax
  • Jeff VanderWolk of Squire Patton Boggs on why higher digital services taxes are bad environmental policy
  • Timothy Evans of Mazars on amending returns to claim excess business losses
  • Paul Miller of Miller & Co. on the second wave of relief funding
  • Danny Baker and Clodagh Swennumson of Fiserv on automation of accounting and reconciliation processes
  • Simon Bittlestone of Metapraxis on the impact of Covid-19 on the ability of smaller firms to compete with the Big Four
  • Vidushi Gupta of the Vidhi Center for Legal Policy on the use of tax policy to revive the Indian economy
  • Ricardo Maitto of TozziniFreire Advogados on tax-related opportunities in the Brazilian Covid-19 measures
  • Rajeev Agarwal on the response to the Covid-19 pandemic by the member states of the Gulf Cooperation Council
Customers in a restaurant on Bourbon Street in New Orleans as Louisiana moves into phase 1 of reopening.
Photographer: Bryan Tarnowski/Bloomberg

The IRS recently released guidance on how to take advantage of CARES Act corrections to an error in the 2017 tax law bonus depreciation provisions. Ellen McElroy and Michael Resnick of Eversheds Sutherland provide an overview of the law and outline some recommendations on how to claim the deduction for qualified improvement property. Read: Questions About How to Capture Missed Bonus Depreciation?

Many international travelers have found themselves unable to leave the U.S. due to Covid-19 travel restrictions. Covington & Burling attorneys evaluate recent guidance released by the Treasury Department and the IRS to help those who can only phone home—and their companies. Read: Accidental Residents, Impermanent Establishments—Help for Those Who Can Only Phone Home

The Paycheck Protection Program (PPP) was created to help keep small businesses afloat and their employees paid while they weather the pandemic. Instead, these businesses have encountered multiple rule changes and conflicting information. Juan F. Vasquez Jr., Jaime Vasquez, and Victor J. Viser of Chamberlain Hrdlicka highlight the challenges and explain the problems encountered with the PPP loan forgiveness application. Read: Tax Issues Associated With Paycheck Protection Program Loan Forgiveness Process

In reaction to Covid-19, countries are adopting special measures to ease the burden of value-added tax on businesses. Philippe Stephanny and Elia Galli of KPMG explain how multinational enterprises may be able to leverage existing VAT rules to their advantage and perhaps improve cash flow. Read: Managing Global Indirect Taxes During Covid-19—An Overview of Savings Opportunities and Unintended Consequences

Who and what to tax is a perennial policy issue. President Donald Trump recently brought the subject of taxing capital gains back to the forefront after a tweeted reference to the possibility of eliminating all taxes on capital gains. Professor Chris Sanchirico of the University of Pennsylvania Carey Law School outlines four misconceptions about capital gains tax. Read: The Mythematics of Capital Gains Taxation—4 Misconceptions

France’s finance minister has again called for higher taxes on digital services companies. Jeff VanderWolk of Squire Patton Boggs says this is both bad environmental policy and bad tax policy. Read: Taxing Digital Services More Heavily Is Bad Environmental Policy (and Bad Tax Policy)

Congress passed Covid-19 relief legislation in March that included a temporary repeal of the business loss limitations enacted in the 2017 tax law. Timothy Evans of Mazars explains how that provision works and what taxpayers need to know to make an informed decision about using it. Read: Temporary Repeal of Excess Business Loss Limitation Triggers Need to Amend Returns

The federal government has rolled out another round of stimulus money with $310 billion allocated to the Paycheck Protection Program. Paul Miller of Miller & Co. tells how the funds were distributed in the last round and suggests what steps small business owners should take to access funds if they missed out in the first round and alternative funding sources. Read: More Stimulus Money on the Way

Automation is key to navigating the new normal of Covid-19. Even for those who have already automated the reconciliation process, more can be done. Danny Baker and Clodagh Swennumson of Fiserv show how automation can provide benefits for accounting and reconciliation processes, including improving accuracy, which helps lower compliance and reputational risks. Read: Navigating the ‘New Normal’ to Drive an Efficient Financial Close

Simon Bittlestone of Metapraxis discusses the impact of Covid-19 on smaller firms’ abilities to compete with the “Big Four” and what the solution to the audit problem is. Read: Not a “Get Out of Jail Free Card"—Covid-19 Impact on Audit and Tax

Vidushi Gupta of the Vidhi Center for Legal Policy explores the use of tax policy to restart, rebuild, and revive the Indian economy in the post Covid-19 era. Read: Taxation as a Tool to Rebuild India in the Aftermath of Covid-19

Ricardo Maitto of TozziniFreire Advogados summarizes the legal measures that have been adopted by the Brazilian government in response to Covid-19, and discusses the tax-related opportunities that companies can explore to manage cash flow during the crisis. Read: Brazil—Corporate Tax-Related Initiatives in Response to Covid-19

Rajeev Agarwal considers the response to the Covid-19 pandemic by the governments of the member states of the Gulf Cooperation Council. Read: Tax Policy Response to Covid-19 in GCC Countries

From the Archive

What to do about those stranded employees—and the tax consequences? Bloomberg Tax contributors have been finding answers to that question since the pandemic began.

Travel restrictions and closed business sites may cause directors and employees to perform services in unintended jurisdictions, whether those jurisdictions be other countries or other U.S. states. Ropes & Gray attorneys walked through practical steps to consider and considerations to avoid jurisdictional issues and potential risks of increased tax exposure.

Many employees are now unexpectedly working exclusively from home offices, and it is unclear if or when a full reversion to “normal” pre-crisis working arrangements will occur. Brad Clements and Jeff VanderWolk of Squire Patton Boggs looked at issues raised by the OECD’s recent Model Tax Treaty guidance addressing tax issues arising from travel restrictions and stay-at-home orders.

Beyond Tax

What’s happening outside the world of tax?

The use of videoconferencing on Zoom and other platforms is skyrocketing during the pandemic, but the legal profession must keep in mind the accompanying risks to the privacy of client data and attorney-client privilege, Jenner & Block attorneys write. They examine common videoconferencing practices and pitfalls that could lead to waivers of attorney-client privilege. Read: Zooming and Attorney-Client Privilege

Leaders of law firm committees are facing difficult decisions and tough downsizing planning in the economic downturn. Legal consultant Hugh A. Simons offers guidance on how to conduct the tough discussions, implement plans, and keep account of results in a humane, intelligent, and steadfast way. Read: Leading Law Firm Committees Through Downsizing

Two former chief justices of the Arizona Supreme Court voice support for the ABA’s recommendation that states temporarily license law school graduates to work under the supervision of licensed attorneys until they can take and pass the bar exam in their state. This solution, they say, balances concern for recent graduates with the need for public protection. Read: Covid-19 and Bar Exams—ABA’s Proposal Strikes a Needed Balance

Organizations need a cohesive approach to privacy compliance where legal teams and other C-suite executives work together, Tapad’s Laura Koulet explains. She provides three key features necessary to implement a successful, fully integrated privacy program. Read: Integrate Your Product, Legal Teams to Bridge Privacy Gaps

State attorneys general are fighting myriad fraud schemes developing out of the pandemic, like price gouging, illegal debt-collection practices, and illegal evictions. Troutman Sanders attorneys say it shouldn’t be a surprise to see state attorneys general turn to outside counsel for additional assistance. Read: State Attorneys General Can Deputize Attorneys to Fight Covid-19 Fraud

Exclusive Content for Bloomberg Tax Subscribers

(*Note: Your Bloomberg Tax login will be required to read the following content.)

The world does not need another article on the tax issues of one who sells a right to receive payment in the future. But what about the person who buys the right to receive either a single lump-sum payment or a stream of payments in the future? Some fact patterns, such as the “factor” who buys (or, perhaps, lends against) a vendor’s accounts receivable, have been explored. A start has been made on analyzing the tax issues of litigation finance. But other areas are unknown territory.

Matthew Schermer Blum of Ernst & Young explores three fact patterns that he sees regularly in practice: (1) the secondary market purchase of a liquidated claim to payment; (2) a purchase of a disputed or unliquidated claim to payment; and (3) the sale of a future stream of hoped-for payments, such as a percentage of royalties from intellectual property or a percentage of sales from property using the IP.

Bloomberg Tax Insights articles are written by experienced practitioners, academics, and policy experts discussing developments and current issues in taxation. To contribute, please contact Erin McManus at emcmanus@bloombergtax.com.

To contact the reporter on this story: Erin McManus in Washington at emcmanus@bloombergtax.com

To contact the editors responsible for this story: Meg Shreve at mshreve@bloombergtax.com; Kathy Larsen at klarsen@bloombergtax.com

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