Two little-noticed provisions of the recently-passed Coronavirus Aid, Relief, and Economic Security Act of 2020 (the CARES Act) could allow for an unprecedented windfall for President Trump’s business interests—and the business interests of his son-in-law and senior advisor Jared Kushner. 

While most of the coverage of the CARES Act has centered on the multi-billion dollar lending program for small businesses, $1,200 checks for individuals, and a multiple-trillion dollar injection of credit into the financial markets, there are two tax breaks buried deep in the bill which could be  massive giveaways to the Trump Organization and Kushner Companies. And while Democrats in Congress fought to include conflict of interest protections to prevent Trump and his immediate family from getting Federal Reserve loans, those restrictions  do not apply to these tax changes, which directly benefit billionaire real estate magnates.

The first of these tax breaks is a provision that completely changes how companies are allowed to use their financial losses. Previously, under the  2018 Tax Cuts and Jobs Act (TCJA), net operating losses (NOL) were subject to a taxable-income limitation, and could not be carried back to reduce income (and thus to reduce taxes) in a prior tax year. The TCJA eliminated all NOL carryback (two year carryback) and put an 80% cap on the amount NOL can reduce your tax burden in the future. In fact, the restriction on how firms use their net operating losses was one of the few features of the 2018 TCJA that actually raised federal revenues. The CARES Act changes all of that.

The CARES Act provides that a loss arising in a tax year beginning in 2018, 2019, or 2020 can be carried back five years. That is, a company in 2020 could file an amended tax return for a prior year (say, 2015) in which the company claims their 2020 loss against income earned in the prior year. They would then receive a refund of the tax paid on the prior year income that is now offset by the current year loss. The provision also temporarily removes the 80% taxable income limitation to allow an NOL to fully offset income reported to the IRS. Effectively, this change will allow companies that experience a large loss in 2019/2020 to lower their taxes from years where they operated at a profit. 

To understand why this change could be so valuable to Trump, it’s important to understand that some businesses see losses as equally important as revenue, because losses allow them to reduce the overall amount of taxes paid on profits. Trump has a long history of using these tax rules to his advantage—raking in cash while  his businesses lost money on paper. 

Tax law and policy is, admittedly, extremely dry. So let’s use an example. Let’s say the Trump Organization had a banner year in 2015—he was running for President, people started staying at his hotels more, lobbyists began frequenting his properties to buy access, more organizations decided to host events at Trump properties, and so did foreign governments looking to curry favor. Because of this influx of support, let’s say the Trump Organization reported to the IRS a net taxable income of $50 million and were taxed at the prevailing corporate rate of 40%. That means the organization had a tax liability of $20 million in 2015. Fast forward to 2020. Let’s say Trump’s business is in trouble. Trump’s golf resort in Doral is failing. Trump’s D.C. hotel can’t host massive Trump fundraisers, and on top of all of that the virus is limiting travel, which hurts hotels generally. So let’s say the Trump Organization posts a 2020 taxable loss of $50 million. The change to NOL carryback in the CARES Act would allow the President’s business  to amend its 2015 tax return to include the $50 million liability it incurred in 2020—effectively erasing its taxable income from 2015. The IRS would then issue it a refund of any taxes paid on the 2015 income (because, thanks to the CARES Act, it now has no taxable income in 2015). 

This tiny change, buried in the middle of hundreds of pages of legislation, would effectively give the Trump Organization a $20 million windfall in this hypothetical scenario. 

The second of these little-noticed CARES tax breaks temporarily increases the amount of interest businesses are allowed to deduct on their tax returns, by increasing the 30 percent limitation to 50 percent of taxable income (with adjustments) for 2019 and 2020. It also allows businesses, and especially businesses that run on a lot of debt and are highly leveraged—like the Trump and Kushner real estate empires—to substitute their adjusted 2020 taxable income with their income for 2019 when computing this interest expense. This is important because many businesses will not have taxable income in 2020—and thus won’t find the increased interest expense deduction useful–but they will have had taxable income in 2019. 

Once again, complexity is the friend of the well connected. This opaque provision, buried in the bill, is another provision that will almost certainly materially benefit both President Trump and Jared Kushner. 

Here’s another hypothetical scenario to explain how this provision will work. Let’s say that Kushner Companies had a good year in 2019 and had an adjusted taxable income of $10 million. Because they’re a real-estate business, they take out a lot of long-term loans to pay for their many properties, and part of their liabilities for 2019 included paying interest on those loans. 

In normal times, they could use those interest payments to reduce their total taxable income by up to 30% (in this hypothetical, up to $3 million). But, let’s say that for Kushner Companies, 2020 was brutal, so they end up posting a loss, or a negative taxable income—and, consequently, no interest deduction. Because of the CARES Act change, Kushner Companies can now elect to calculate the interest expense deduction for both 2019 and 2020 based on their 2019 taxable income. That means that even if the Kushner companies had a terrible 2020, they will still be able to reduce their taxes the same amount they did in 2019. And if that change wasn’t enough, the CARES Act replaces that 30% cap with a 50% cap on interest deductions, for both 2019 and 2020. So, instead of reducing their tax liability by $3 million in 2019 and 2020, the CARES Act now lets our hypothetical Kushner Companies reduce both years tax liability by $5 million each, assuming their paid at least $5 million in interest. 

This would, in turn, allow them to generate a bigger loss. This is important because it interacts with the other new tax change we described, which would allow them to carry back their newly calculated net operating loss (including the 50% interest expense), all the way back to 2015 to receive a refund for taxes paid in more profitable years. 

It’s a complicated program, but, effectively, this change will function as another tax giveaway to corporations that fluctuate in income—hotels, for instance—and operate at high levels of debt (like many of Trump’s and Kushner’s businesses) where payment on interest is one of their biggest expenses.

Unfortunately, no one knows exactly how much these tax changes will benefit President Trump’s companies because he is the first president in recent American history not to make his tax returns available to the public. What we can say for sure is that the nonpartisan Congressional Budget Office said that these two small tax changes buried in the CARES Act will cost the American people up to $50 billion over ten years. And some chunk of that $50 billion will almost certainly go to paying off the President and the First Son-in-Law.

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