On March 27, the U.S. House approved the Coronavirus, Aid, Relief, and Economic Security (CARES) Act. This measure had been passed unanimously by the U.S. Senate the prior day. President Trump signed the legislation late Friday afternoon.
The $2.2 trillion, 800-page stimulus package will provide additional support to businesses of all size, provide direct payments to individual taxpayers, enhance benefits to individuals out of work, add financial resources to state and local governments, and assist hospitals with funding.
To help our members make sense of this extensive legislation, GCP's Advocacy Team has created the following summary (download a copy):
* updated April 3, 2020
Small Business Support: Paycheck Protection Program
- $349B program to provide government guarantee on loans.Built on existing Small Business Administration (SBA) 7(a) program but with an enhanced 100% government guarantee.
- Eligibility includes:1) Business with 500 or less employees or otherwise meeting SBA definitions, 2) Self-employed individuals, independent contractors, sole proprietors, freelance and gig economy workers 3) Specific nonprofit orgs.
- Loans of no more than $10M – capped at 250% of employer’s monthly payroll, which includes salary and benefits.Qualifying period expires on 6/30/20.
- Waives lender requirement to determine repayment ability.Waives related fees.
- Allowable uses included payroll support (salary, leave, insurance) mortgage, rent, and utility payments.
- Loans will be available through existing SBA-certified lenders.These include existing banks and lenders.
- Loans are forgivable for funds spent during 8-week period after origination in the amount equal to payroll, mortgage interest, lease, and utility.The amount forgiven will be reduced proportionally by any reduction in employees retained compared to the prior year and reduced by the reduction in pay of any employee beyond 25 percent of their prior year compensation. Formula excludes compensation over $100K annually.
Small Business Support: Economic Injury Disaster Loan (EIDL) Program
- Expands eligibility for the existing EIDL program to sole proprietor /independent contractors, etc.
- EIDL’s that are smaller than $200,000 can be approved without a personal guarantee
- Borrowers can receive a $10,000 emergency grant cash advance that can be forgiven if spent on qualifying expenditures. To be eligible for the cash advance, businesses need to complete the new application that launched March 30 even if they have already completed a prior version or if the business was declined for a loan.
General Business Provisions and Tax Support
- $500B in loans and other funds for corporations in impacted industries. Companies must repay these loans to the government and will be subject to restrictions on executive compensation. The Act provides $25 billion in funds to support the airline industry.
Creation of a targeted Middle Market program for businesses between 500 and 10,000 employees. Criteria:
- Recipient must retain 90% of workforce through 9/20/20.
- No outsourcing /off shoring for the term of the loan and two years after completing loan repayment
- Recipient will be neutral to collective bargaining.
- Loans are not eligible for forgiveness.
- CARES Act does not set a maximum loan amount
- Delay of employer payroll taxes due at year end until 2021 (and later).
- Provides a refundable payroll tax credit for 50% of wages paid by employer whose 1) operations were fully or partially suspended due to coronavirus or gross receipts declines by more than 50% compared to same quarter in 2019.
- Extends net operating loss (NOL) carry back to 5 years (includes pass-through orgs) and other limits.
- Temporarily increases the amount of interest expense businesses can deduct from 30% to 50%.
- Modifies the Families First Coronavirus Response Act to cap paid sick leave at $511 per day and $5,110 in aggregate (less if caring for someone else or due to school closure).
- Federal Medical Leave Act requirements under the prior law are capped at $200 per day and $10K in aggregate.
- Checks from the U.S. Treasury for up to $1,200 per person and $500 per child will be issued for taxpayers – with a phase out beginning at $75K.
- Provides an additional $600 per week fully funded by the federal government (through July 31) to certain employees receiving unemployment insurance (UI) benefits.
- Expands UI coverage to include self-employed workers, contractors, and furloughed workers
- Makes available 13 more weeks of UI benefits on top of the 26 weeks provided by state law.
- Provides funding to support “short-time compensation” programs, where employers reduce employee hours instead of laying off employees.Essentially a partial unemployment benefit. Federal government will fully fund a state’s creation of this program. Employers must pay to the state 50% the amount of short-time compensation paid by the state to the employee.
- Waives early withdrawal penalties for retirement distributions for 2020.
- Defers student loan principal and interest through 9/30/20 without penalty and suspends forced collection.
- Modifies charitable deduction limits for 2020.
- Enables companies to pay student loan for employee tax-free up-to $5,250 annually.
Minority Business Support
- $10M for the Minority Business Development Agency within the Department of Commerce for minority business centers and minority chambers – temporarily waives matching requirements.
Healthcare System & Related Support
- Provides $100B for healthcare providers for coronavirus related expenses and lost revenue.
- $4.3B for the Centers for Disease Control and Prevention for coronavirus related issues.
- Requires health insurance plans to reimburse for coronavirus testing.
- Delays planned reductions in Disproportionate Share hospital payments.
- Medical product provisions (drug/device supply chain and shortages, medial supply stockpiles, liability).
- Promotes the use of telehealth technologies.
- Prohibits foreclosure on all federally backed mortgage loans for a 60-day period.
- Enables forbearance for borrowers impacted by coronavirus.
- Landlords are prohibited (120 days) from initiating legal action to evict if related mortgage is federally backed.
- Provides $150B to States for expenditures incurred due to the public health emergency with respect to coronavirus in the face of revenue declines, allocated by population proportions, with a minimum of $1.25B for states with relatively small populations.
- Provides flexibility to states to use federal workforce funds to respond to coronavirus needs.
Miscellaneous/Noteworthy Appropriations (Partial List)
*Information compiled from: 1) CARES Act As-Passed, 2) Appropriations Summary, 3) Section-by-Section Summary, U.S. Chamber Summary, National Small Business Association Fact Sheet and additional sources. Will be updated with additional information/examination. The information provided in this summary does not constitute legal or tax advice and is meant for general informational purposes only.