Today Congress completed action on the Coronavirus Aid, Relief and Economic Security (CARES) Act. It is noted as the largest single relief package in American history totaling $2 trillion in economic stimulus.
The CARES Act is the third round of emergency legislation Congress has approved to help provide action and relief surrounding the COVID-19 pandemic, including supporting industries and small businesses, providing cash to Americans, and preventing unemployment. The President is expected to sign the bill immediately.
While not an exhaustive list and not all the specifics of each program are included, below are select key provisions:
Paycheck Protection Program
This program provides $350 billion for eight weeks of assistance to small employers maintaining their payroll during the pandemic. For qualifying employers, a portion of the loan covering payroll, mortgages, rent, and utilities may be forgiven. This program is available for small businesses and employers with less than 500 employees who meet other Small Business Administration requirements.
Emergency EIDL Grants
Eligibility for Economic Injury Disaster Loans (EIDL) grants for sole proprietors, independent contractors and more suffering economically due to the COVID-19 outbreak are included in this Act. Businesses applying for an emergency EIDL grant could receive $10,000 within three days to maintain payroll, provide sick leave, and more.
Small Business Debt Relief
Under this $17 billion provision, the Small Business Administration may pay interest, principal, and fees on existing SBA loans for six months to help provide relief to businesses.
Unemployment Benefit Increase
Unemployment benefits will be significantly bolstered for 4 months by increasing payments and extending benefits to those who typically do not qualify, such as gig economy workers, furloughed employees, and freelancers. This bill would increase the maximum unemployment benefit that a state gives to a person by $600 per week. It also provides an additional 13 weeks of benefits to those who are unemployed after state unemployment benefits are no longer available.
Employee Retention Program
The CARES Act provides a refundable payroll tax credit for 50% of wages paid by employers to employees during the COVID-19 emergency. This credit is only available to those employers who had to partially or fully suspend their operations or their gross receipts declined by more than 50% when compared to the same quarter the year before. For employers with more than 100 employees, the qualified wages are wages paid to the employees when they are not providing services related to COVID-19. For employers with fewer than 100 employees, all wages qualify for the credit, whether the employer is open for business or under a shut-down order.
Delayed Payment Of Employer Payroll Taxes
A portion of the bill allows for employers or self-employed individuals to defer payments of the employer share of their Social Security tax. The deferred tax must be paid over the next two years, with half of the amount being paid by December 31, 2021. The other half must be paid by December 31, 2022.
Paid Leave For Rehired Employees
An employee that was laid off on March 1, 2020 or later would now have access to the new federal paid family and medical leave programs if they are rehired by the employer. The employee would have had to have worked for at least 30 days before being laid off.
Cash Payments To Individuals
People making up to $75,000 a year are expected to receive checks for $1,200. Couples making up to $150,000 would receive $2,400 with an additional $500 per child. The payments would decrease for those making more than $75,000 with an income cap of $99,000 per individual or $198,000 for couples.
Modifications Of Net Operating Losses
A provision relaxes the limitations on a company’s use of losses. A net operating loss beginning in 2018, 2019, or 2020 can be carried back five years. This section also removes the taxable income limitation to allow a full offset of income temporarily.
Modification Of Limitation On Business Interest
A section of the bill temporarily increases the amount of interest expense that businesses are allowed to deduct on tax returns, with an increase from 30% to 50% of taxable income for 2019 and 2020.
As more information and guidance on the CARES Act is released, we will continue to update our members regarding how it affects you. In the meantime, please let us know if you have any questions.