June 29, 2020

MSCI Asks U.S. Lawmakers To Make Business Tax Credits Temporarily Refundable

Last week, the Metals Service Center Institute (MSCI) and more than 100 business organizations sent a letter to the chairmen and ranking members of the U.S. Senate Finance and U.S. House Ways and Means committees calling for the inclusion of a proposal to make general business tax credits temporarily refundable as a means of providing additional liquidity support in future COVID-19 legislation.

The letter noted that current U.S. law sometimes prevents companies from fully utilizing general business tax credits, which include more than two dozen provisions like the research and development tax credit, the work opportunity tax credit, and renewable energy tax credits.

Since the COVID-19 economic downturn is likely to reduce taxable income, further reducing the utility of these incentives, MSCI and its fellow signers asked that Congress amend Section 38 of the Internal Revenue Code to temporarily make these, and other, credits refundable on an elective basis. The letter explained that doing so would give struggling companies the ability to immediately “access to a source of liquidity that can help provide increased cash flow to support operations, including rehiring workers.”

The letter concluded, “By temporarily giving companies the option to monetize their general business credits, Congress can help ensure that the recovery is as strong as possible.”

In other tax news: last week the Internal Revenue Service issued updated guidance for the Employee Retention Tax Credit (ERTC), the temporary refundable payroll tax credit for eligible employers affected by COVID-19. The updated guidance relates to the tax credit’s governmental order test and can be found here and here.

As a reminder, earlier this month, MSCI sent a letter to members of Congress outlining ways to improve the ERTC. Click here to learn more about that effort.