The Coronavirus Aid, Relief, and Economic Security Act (P.L. 116-136, also known as the CARES Act), enacted in March 2020, includes income tax benefits intended to improve the cash flow of taxpayers burdened by the economic consequences of the COVID-19 pandemic. We focus in this article on the loosening of limitations on the use of net operating loss (NOL) carryovers and carrybacks by corporate and non-corporate taxpayers and of “excess business losses” by non-corporate taxpayers, including shareholders in S corporations and owners of equity interests in entities treated as partnerships for tax purposes.

Other income tax changes made by the CARES Act, but not discussed below, include amelioration of limitations on the deductibility of interest under Internal Revenue Code (Code) §163(j), reclassification of certain leasehold improvements for depreciation purposes to permit more rapid cost recovery through deductions for depreciation (effectively fixing an unintended glitch created by tax legislation in 2017), and acceleration of tax credits for certain prior year minimum tax obligations imposed on corporations.

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