- Tax breaks included in the CARES Act let corporations receive $14 billion in refunds, the GAO said.
- Roughly 1,200 firms received refunds worth more than $1 million, according to the Wednesday report.
- The CARES Act won bipartisan support, but Democrats have since slammed the breaks as poorly targeted.
- See more stories on Insider’s business page.
The Internal Revenue Service (IRS) will dole out $14 billion in tax refunds to corporations thanks to controversial provisions included in last year’s CARES Act, the Government Accountability Office (GAO) said Wednesday.
The $2.2 trillion stimulus package signed by President Donald Trump in the early stages of the pandemic included a swath of measures aimed at reducing tax burdens for struggling businesses. Tenets included carrybacks for business losses and refunds linked to the Alternative Minimum Tax.
The IRS has already received more than 41,000 cases from businesses looking to access refunds through either, or both, of the two tax breaks, according to a GAO report. Roughly $14 billion in related refunds were approved by the end of last year. Of that, about $11 billion has already been distributed.
Yet while the tax breaks included in the CARES Act were touted as ways to keep small businesses afloat, many of the companies filing for relief are winning massive refunds. Nearly 3,000 companies filing for refunds received between $100,000 and $999,000, according to the report. And roughly 1,200 firms got refunds worth more than $1 million.
Bloomberg first reported on the tax break.
US tax law allows businesses to use net operating losses from unprofitable years to cancel out future tax bills in a carryover process. The CARES Act widened this provision to allow operating losses to be carried back as far as five years, effectively letting companies hit by the pandemic dodge some tax burdens.
The CARES Act passed in March 2020 on a nearly unanimous basis, but Democrats have since criticized some of its tax breaks for issuing relief to wealthy companies and Americans. Some lawmakers have even called for the measures to be repealed.
Republicans, however, have pointed out that Democrats backed the bill’s passage and that similar policies have been used in past downturns.
The GAO’s report suggests the $14 billion in approved refunds are the tip of the iceberg for CARES-related tax breaks. IRS officials said in late January they received more than 12,000 more applications for carrybacks and credit refunds, but that they aren’t yet sure how many are related to the CARES Act. A backlog of revised tax returns could also add to the total amount refunded to corporations, the GAO said.