Under the Internal Revenue Code of 1986, as amended, for-profit entities are distinguishable from tax-exempt entities in that they, among other factors, pursue profits, and enjoy unrestricted commercial activities. The COVID-19 lockdowns prevented commercial activity for numerous for-profit small businesses. For the first time in United States history, a distinction was made between "essential" and "nonessential" businesses. Such distinction is historically absent in both legal scholarship and tax law; instead, it is a product of governmental reaction to the COVID-19 pandemic. Via executive order, nonessential businesses were characterized as being trivial to the fabric of society, and thus shuttered, while essential businesses were permitted to remain operational with little, if any, interruption. Essential business’ profits have since amassed from such consolidation. To date, there have been no proposals at the state or federal levels that adequately address the monumental financial and social impact that mandated lockdowns have had on small businesses, which employ approximately 47.5% of the private workforce. This article suggests that restructuring and preserving those businesses most harmed by the pandemic serves an overriding public interest, and radical societal events require radical tax policy initiatives. As such, this Article proposes that nonessential businesses negatively impacted by pandemic closures should be granted temporary tax-exempt status and treated in a similar manner to non-profit organizations throughout their economic recovery period.
Rodney P. Mock and Kathryn Kisska-Schulze,
Saving the Nonessential With Radical Tax Policy,
90 U. Cin. L. Rev.
Available at: https://scholarship.law.uc.edu/uclr/vol90/iss1/5