Coronavirus Aid, Relief and Economic Security Act (CARES Act) Guideline

On March 27, the President signed into law the CARES Act, designed to provide financial relief to those impacted by the COVID-19 pandemic. The Act contains both tax and financial relief provisions intended to address the strains placed on individuals and businesses, both large and small, from the coronavirus impact.

Real Estate – Executive Summary

The most prominent tax aspects of the CARES Act as it relates to real estate owners and operators are as follows:

Qualified Improvement Property life fixed to reflect 15 years and now eligible for bonus depreciation.

Most REITs do not take bonus as it doesn’t apply for earnings & profits.
Absent further guidance, entities that elected out of section 163(j) will not be eligible for bonus on QIP.

NOLs from 2018, 2019 and 2020 can be carried back 5 years for corporations (e.g. Taxable REIT Subsidiaries).

This provision will allow corporations to obtain a refund of taxes paid at the 35% tax rate for years prior to 2018.
In addition, the NOL carryforward limitation of 80% is removed for 2019 and 2020. This would apply to 2018 NOLs carried forward.

Forgivable small business loans available for those financially impacted by COVID-19, such as landlords and tenants.
Payroll tax credits to retain employees and enhance cash flows.
Interest expense allowed up to 50% of Adjusted Taxable Income; many real estate companies already elected out of 163(j) as an electing real property trade or business (RPTOB).
Elimination of the $500,000 excess business loss limitation rule for joint tax filers.