Breaking News: President Trump has signed the $2 trillion stimulus package, the CARES Act into law. The new law provides emergency relief to workers, families, small businesses and distressed industries. The Coronavirus Aid, Relief and Economic Security Act (“CARES Act”)
Provisions in the CARE Act that may help Michigan's oil and Gas Industry. (These provisions were advocated by IPAA on behalf of the nation's independent oil and natural gas producers).
Net Operating Losses - The bill allows for a 5 year carry back. The effective date for this change means the change applies to tax years 2018, 2019, and 2020.
- The bill also made changes so that privately held companies could more effectively utilize this tax treatment.
Interest Deductibility - the cap was raised from allowing 30% of interest payments to be deducted in the year in which they occurred to 50%. The effective date for this change means it applies to both 2019 and 2020.
Small Business Loans - Raised the loan cap from $2 million to $10 million. Cap based on company revenues. The final bill appropriates $367 billion for this program. Proceeds secured through these loans which are used for payroll, group health, and other covered expenses will be considered grant money and the borrower will not be required to pay those expenditures back. Additionally, those funds will not be considered revenue for tax purposes.
- Applies to smaller companies – either 500 employees or the SBA definitions using NAICS codes.
- Currently, the SBA employee and revenue limits for our industry are:
-1,250 employees for oil production
-1,250 employees for natural gas production
-1,000 employees for drilling operations
-$41.5 million gross revenue for support activities for oil and gas extraction
Treasury Exchange Stabilization Fund
According to a summary from the House Ways & Means Committee, the bill provides for $425 billion for loans, loan guarantees, and investments in support of facilities established by the Fed under 13(3) authority for purpose of providing liquidity to businesses, states, or municipalities through purchasing obligations or other interests directly from issuers of such obligations or other interests.