Business/Mgmt & Tax Concepts

Highlights from the Coronavirus Stimulus Package

March 30, 2020

The United States Congress and President Trump have passed the CARES (Coronavirus Aid, Relief and Economic Stimulus) Act, a $2 trillion stimulus package. Below are our key takeaways from the legislation.

Title I: Small Business Act

  • Increases government guarantee of loans under the Small Business Act to 100% through the end of 2020
  • Increases maximum loan amount to $10 million through the end of 2020
  • Loans can be used for payroll support, paid sick & medical leave for employees, insurance premiums, and overhead costs
  • Allows lenders to make their own determinations regarding a business’s eligibility for loans, rather than requiring lenders to seek approval through official channels

Title II: Assistance for American Workers, Families and Businesses

  • Pandemic Unemployment Assistance (PUA) program extends unemployment benefits ($600 per week for up to 4 months) to those not typically eligible, including self-employed workers, independent contractors, and those with limited work history, who are unable to work due to the outbreak.
  • Extends traditional timeframe for unemployment benefits by 13 weeks (through end of 2020)
  • Direct cash payments of $1,200 for all U.S. residents whose AGI is $75K or less. For married couples, the payment is $2,400 with an income threshold of $150K. Additional payments of $500 per child.
  • Waives 10% early distribution penalty (for withdrawals of up to $100K for coronavirus-related purposes) for qualified retirement accounts
  • Certain employers are eligible for a refundable payroll tax credit in the amount of 50% of wages paid to employees during COVID-19 outbreak. Criteria include:
    • Operations fully or partially suspended due to COVID-19 outbreak; OR
    • Gross receipts declined by more than 50% for the quarter, year-over-year
  • Previously, NOLs could only be carried forward, not backward, and could shield up to 80% of taxable income. With the CARES Act, NOLs generated in 2018, 2019, and 2020 can be carried back, up to 5 years, and can shield 100% of taxable income in tax years before 2021.
  • Business interest deduction limitations temporarily made more favorable
  • Businesses can defer payment of their 2020 employer payroll taxes, with half the payment now due 12/31/2021 and the other half due 12/31/2022
  • Technical correction to the TCJA allows for a 15-year recovery period for Qualified Improvement Property (QIP), which is now eligible for bonus depreciation.

Title III: Supporting America’s Health Care System in the Fight Against Coronavirus

  • $1.32 billion in additional funding for community health centers
  • Employers’ leave payments are capped at $200 per day and $10,000 total per employee
  • Employers’ sick leave payments are capped at $511 per day and $5,100 total (if an employee is sick) or $200 per day and $2,000 total (if an employee is caring for a sick or quarantined child)
  • All testing for COVID-19 is covered in full by private health insurance companies
  • Federal student loan payments (interest and principal) are deferred for 6 months (through September 30, 2020) without penalty

Title IV: Economic Stabilization and Assistance to Severely Distressed Sectors of the United States Economy

  • $17 billion in direct lending for businesses involved in national security
  • $454 billion for the Federal Reserve to issue loans, loan guarantees, and investments for eligible businesses

Title V: Coronavirus Relief Fund

  • $150 billion in funding for states, territories, and tribal governments to cover coronavirus-related expenses, issued proportionally based on population

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