CARES Act Support and Relief for Small Businesses and Individuals

On Friday, March 27^th, the US Government officially approved the Coronavirus Aid, Relief, and Economic Security (CARES) Act, a $2 trillion stimulus bill.

There are several provisions of the CARES Act that, if the qualifications are met, will help support your business and your employees while the economic dislocation of responding to COVID-19 continues.

Below is a short bullet-point summary.  Also attached (and linked) is a well-crafted 5-page summary from Bank of America (courtesy of Kyle Quinlivan), which includes additional information about qualifications and program specifics, a PowerPoint from the SBA on the Paycheck Protection Program (PPP) (courtesy of Allison Zorich), and a summary table of the PPP by the Economic Innovation Group.  Some of these can be used in conjunction with the SBA’s Economic Injury Disaster Loan (EIDL).

Note – as these programs were just passed and announced, more details about the program and the process for obtaining them will be forth coming over the next week or two.  We will keep you informed as we learn more.  In the meantime, feel free to reach out with any questions.

Individuals

• Rebates for Individuals – eligible taxpayers will receive up to $1,200 ($2,400 for married filing jointly) plus $500 for each qualifying child.
• Tax-favored withdrawals from retirement plans related to COVID-19
• Loans from qualified retirement plans related to COVID-19
• Waiver of Required Minimum Distributions (RMD)
• Temporary relief for federal student loan borrowers
• Employers can pay employees’ student loans

Businesses

• Paycheck Protection Program (PPP)
  • $350 billion loan program for small businesses to help with near-term liquidity and retention of employees
  • Loan made by SBA delegated lenders
  • No personal guaranty or collateral required, no loan fees
  • Up to $10 million in loan amount, tied to a formula (see attached BofA summary and SBA PowerPoint)
  • Up to 10-year loan terms, interest rates below 4%
  • Principal and interest generally deferred for at least six months
  • Proceeds can be used for payroll, mortgage interest, rent, utilities, interest, etc.
  • The PPP loan may be eligible for tax-free loan forgiveness equal to the amount spent during 8-week period after loan origination date
  • Small businesses, sole-proprietors, independent contractors, and other self-employed individuals are eligible – so if you have any subs or 1099 independent contractors, feel free to send this to them
• Employee Retention Tax Credit (ERTC)
  • Credit for the first $10,000 of compensation
  • If using the Paycheck Protection Program (PPP), cannot use ERTC
• Delay of payment of payroll taxes
  • Can delay payment of the 6.2% Social Security taxes (50% due 12/31/21, 50% due 12/31/22).
  • If using the Paycheck Protection Program (PPP), cannot use this feature
• Net operating loss modification – losses from 2018, 2019, and 2020 can be carried back for 5 years
• Increase in limit on business interest expense – increases limit to 50% of taxable income from 30%
• Charitable deduction limitation increased to 25% of taxable income from 10%. Includes ability to deduct charitable contributions of food inventory made in 2020 to 25% of taxable income from 15%.
• Technical correction to Tax Reform of 2017 – fixes issue with 2017 Tax Act which prevented retailers and restaurants from writing-off the cost of certain improvements.