March 29, 2020
On Friday, March 27, 2020, Congress enacted and the President signed the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) providing $2 trillion in support to employers, workers, contractors, consumers, banks, the health care industry, and many others. The CARES Act includes a wide array of programs providing loans to meet payroll, forgiving such loans if payroll is maintained, increasing unemployment payments, providing student loan payment protections, delaying employer payroll tax deadlines, providing for certain business tax credits for employment retention, placing holds on certain foreclosures and evictions, and providing flexibility to certain banking rules.
The list of programs is lengthy, but here is a short synopsis of some of the programs contained in the bill. We have not addressed the provisions in the bill relating to health care, health insurance coverage, and education, but have focused solely on provisions impacting businesses, employers, and employees. Consult your lawyer, accountant, or bank for more information.
- Paycheck Protection Program/Loan Forgiveness – Employers can get up to 2.5 times their average monthly salary in a low-interest SBA-backed loan. The loan will be forgiven later this year if the employer maintains payroll and staffing. The fund includes $350 billion and SBA-approved lenders will determine eligibility.
- Emergency EIDL Grants – Under the Economic Injury Disaster Loan Program, the SBA can give immediate grants of up to $10,000 to businesses impacted by the health crisis for things like maintaining payroll or restoring supply chains. Payment waivers also apply even if the underlying loan application is denied.
- Pandemic Unemployment Assistance – This program provides for unemployment assistance to anyone unemployed due to COVID-19, even if not otherwise normally eligible for unemployment, for up to 39 weeks. The CARES Act also provides extended benefits to those whose unemployment assistance has otherwise been exhausted.
- Increase in Unemployment Benefits – Those receiving unemployment compensation will receive weekly payment of $600 more than would normally be paid.
- Recovery Rebates – Taxpayers with income less than $75,000 (or couples earning less than $150,000) annually will receive checks for $1,200 per person. The rebate will be less for those earning higher amounts.
- Retirement Fund Withdrawals – Those impacted by the coronavirus, whether financially or due to illness) are eligible to withdraw up to $100,000 from a retirement fund without penalty.
- Charitable Contributions – Taxpayers may take an above-the-line deduction up to $300 for charitable contributions during 2020. Moreover, the limits on charitable deductions for the year are significantly increased for the year.
- Employer Student Loan Payments – Such payments by employers are excluded from employees’ taxable income in 2020, whether the payments are made to the lender or to the employee-student.
- Employee Retention Credits – Employers who experience a significant decline in revenues will receive a credit against employment taxes in an amount up to 50% of qualified wages up to $10,000 per employee.
- Payroll Tax Delay – Employers may delay the payment of certain 2020 payroll taxes until 2021 and 2022.
- Business Tax Issues – The new law removes certain limitations on recognizing business losses. It also sets a higher threshold on deductibility of business interest expenses. The bill also changes certain depreciation schedules.
- Emergency Family and Sick Leave Caps – The bill sets caps on how much an employer must pay for emergency leave provisions adopted earlier under the Families first Coronavirus Response Act. The 10 weeks of family leave is capped at $200 per day and $10,000 per employee for those taking leave to care for a child whose school or care provider is closed. The two weeks of sick leave under the earlier bill is capped at $511 per day and $5,110 per employee out of work due to the virus.
- Major Business Relief – The CARES Act provides $46 billion for businesses in impacted industries including airlines and those related to national security. These funds will be made available through loans to be secured by collateral, with market interest rates and no more than five-year terms, and loans will be limited to businesses that have incurred losses jeopardizing the continued viability of the business. In addition, the Federal Reserve Bank will oversee a $454 billion economic stabilization fund.
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