On April 10, 2020, the IRS released Revenue Procedure 2020-22 which provides taxpayers with procedural guidance on changes made by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) to the business interest deduction limitation rules in IRC § 163(j) and the fix to the "retail glitch." Revenue Procedure 2020-22 is effective immediately. For more information on the CARES Act and for a continuously updated collection of resources addressing COVID-19, see Legal Update, CARES Act Includes Tax Relief for Businesses and Individuals and Practical Law's Global Coronavirus Toolkit.

For post-2017 years, taxpayers are generally limited in their ability to deduct net business interest to 30% of adjusted taxable income (ATI) for the year under IRC § 163(j). The CARES Act generally relaxes this limitation to 50% of ATI for 2019 and 2020 unless a taxpayer elects not to apply the 50% limitation. For tax years beginning in 2020, taxpayers can elect to determine the limitation based on their 2019 ATI. Partnerships (and their partners) are subject to special rules. Partnerships are still subject to the 30% limitation for 2019 (although the 50% limitation applies in 2020), and a partner allocated excess business interest in 2019 can deduct 50% of that interest in 2020 without regard to the business interest limitation rules. Revenue Procedure 2020-22 provides the time and manner for taxpayers to make the following elections under new IRC § 163(j)(10), including an election:

The Tax Cuts and Jobs Act (TCJA) contained a drafting error that made certain commercial building improvements (known as qualified improvement property or QIP) ineligible for 100% bonus depreciation, and lengthened the depreciation period for the improvements. This error made interior improvements and buildouts more expensive for retailers and restaurants on an after-tax basis. The CARES Act corrects the drafting error, and applies the change retroactively (for improvements placed in service beginning in 2018). Given the fix to the retail glitch, some electing real property or farming businesses may wish to withdraw their previously made elections out of the business interest expense limitation to take advantage of bonus depreciation for QIP. Under Revenue Procedure 2020-22, an electing business that follows the steps outlined in the Revenue Procedure "will be treated as if the election was never made" and therefore will be able to claim bonus depreciation for QIP in 2018, 2019, and 2020. The Revenue Procedure also addresses how to make a late IRC § 163(j)(7) election for 2018, 2019, or 2020.