Below is a summary of some of the highlights of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the $2.2 trillion relief package passed this week by Congress. The summary has been provided by Chamber of Commerce Executives of Ohio (CCEO) and the U.S. Chamber.
Among key provisions in the bill are:
Small Business “Paycheck Protection Program:”
•New $349 billion lending program with 100% government guarantee (as opposed to 75% guarantee for 7(a) loans).
•Eligibility: Small businesses as defined by SBA size standards (generally up to 500 employees, but up to 1,500 employees depending on the sector and certain sectors are based on revenue). Businesses in the Accommodation and Food Services Sector (NAICS Code 72) are eligible with up to 500 employees at each location. o501 ©(3) non-profits with fewer than 500 employees. Sole proprietors, the self-employed, and independent contractors.
•Maximum loans: Generally, monthly payroll costs for 2 ½ months, not to exceed $10 million. Payroll costs exclude compensation paid to individuals, including the self-employed, above $100,000 a year.
•Requirements: The employer certifies loan will be used to retain workers, maintain payroll, make mortgage or lease payments, and pay utilities.
•Loan Forgiveness: The borrower shall have a portion of their loan forgiven in the amount equal to their payroll costs (not including costs for compensation above $100,000 annually), interest payments on mortgages, rent payments and utility payments between Feb. 15 and June 30, 2020. Loan forgiveness will be reduced if the borrower reduces employment by a ratio similar to their reduction in employment or if borrower reduces salaries and wages by more than 25%.
Business Tax Provisions:
•Employee retention credit for employers subject to closure due to COVID-19 (permits fully refundable 50% tax credit applicable to the employer’s share of payroll taxes on wages up to $10,000 per employee; widely available with special rules for small employers).
•Delay of payment of employer payroll taxes.
•Modifications for net operating losses.
•Accelerates ability of companies to recover AMT credits.
•Modification of limitation on business interest (for 2019, 2020, increases 30% limitation to 50%).
•Temporary exception from excise tax for alcohol used to produce hand sanitizer (for 2020).
Payments & Relief for Individuals:
•Direct payments to taxpayers equal to $1,200 per individual ($2,400 joint return) plus $500 per child. Phased out for incomes above $75,000 ($150,000 joint).
•Penalty-free COVID-19-related distributions up to $100,000 and loan amount increases and modifications to individuals from tax-favored retirement plans.
•Waiver of required minimum distributions from retirement plans and IRAs for 2020.
•Tax exclusion for people who are receiving student loan repayment from their employer.
•Extend unemployment insurance by 13 weeks and include a four-month enhancement of benefits.
•Unemployment compensation is available for those not eligible for regular UI, including those who may have exhausted benefits.
•An individual must provide certification that he or she is able and available to work, but is unemployed or underemployed due to coronavirus diagnosis or presentation of symptoms and seeking medical attention; a household member with coronavirus diagnosis; caring fora family member who has been diagnosed; school or daycare closures and the individual is the primary child caregiver; workplace lock-down; advice from a health care provider to self-quarantine; the individual was about to start a job that is no longer available because of coronavirus; the individual is now the breadwinner of a household because someone has died from coronavirus; the individual had to quit because of a circumstance resulting from coronavirus; the individual’s place of work is closed because of coronavirus.
•These provisions do not apply to an individual who can telework with pay.
•These provisions do not cover someone getting paid sick or paid family leave.
•The unemployment provisions run from Jan. 27-Dec. 31.
•Receipt of assistance under the unemployment provisions shall not exceed 39 weeks unless otherwise extended.
•No one week waiting period.
•The federal government will pick up 100% of the cost.
•Upon agreement between a state, an additional $600 per worker per week unemployment compensation payment is available. This compensation is 100% covered by the federal government. The additional payment sunsets on July 31. The federal government will pick up the cost for any states that waive the one-week waiting period. This sunsets on Dec. 31.
State and local aid:
•Provides $150 billion to states and local government based on each state’s population for the purpose of funding unforeseen expenses related to COVID-19.