Coronavirus Aid, Relief, and Economic Security (CARES) Act
On Friday, March 27, President Trump signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act into law. The Act provides emergency assistance and health care response for individuals, families and businesses affected by the 2020 COVID-19 pandemic. Below are links to the full bill text, section-by-section, and a summary of the emergency appropriations for coronavirus health response and agency operations:
Of note, the OTC reform language from S.2740 that passed the Senate in December was included in the CARES Act. See PCPC’s statement on how this impacts sunscreen regulation below:
Helpful information on provisions in the CARES Act related to small business assistance:
- Coronavirus (COVID-19): Small Business Guidance & Loan Resources
- Paycheck Protection Program FAQs
- Briefing Summary: Funding Streams for Small Businesses
Below is information on business liquidity and tax provisions from the CARES Act:
Small business loans and grants
$350 billion for small business loan and loan guarantees, with the potential for the loan to convert to a grant for proceeds used to maintain payroll and or pay rent/mortgages for the duration of the emergency, and expanded allowable uses. $10 billion is also provided to expand access to SBA’s Emergency Industry Disaster Loans and provides for grants of up to $10,000 per eligible applicant.
Distressed business liquidity
$500 billion is provided via the Treasury Department for loans, loan guarantees, and other investments in distressed businesses, with $25 billion for passenger air carriers, $4 billion for cargo air carriers, $17 billion for national security businesses, and $454 billion for other businesses. Lending conditioned on several factors, including: (1) alternative financing is not reasonably available; (2) loan is secured or made at an interest rate that reflects risk; (3) duration of not more than 5 years; (4) no stock buybacks or dividend payments during the duration of the loan; and (5) borrowers must maintain existing employment levels, to the extent possible.
Business tax relief
Delay of payment of employer payroll taxes
Employers and self-employed can defer payment of the employer share of the Social Security tax. The deferred tax would be paid over the following two years, with half due on 12/31/2021 and half due by 12/31/2022.
Modifications for net operating losses
Losses from 2018, 2019 or 2020 can be carried back five years.
Modification of credit for prior year minimum tax liability of corporations
Accelerates the refundability of corporate AMT credits.
Modification of limitation on business interest
Temporarily increases the amount of interest expense businesses are allowed to deduct to 50 percent of the taxable income for 2019 and 2020.
Technical amendment regarding qualified improvement property
TCJA technical fix to qualified improvement property cost recovery, allowing them to be expensed.
Employee retention tax credit
Refundable tax credit up to for eligible employers for up to 50 percent of employee wages up to $5,000 per employee. Employer’s trade or business must have been fully or partially suspended due to a government order and must have experienced a 50 percent loss in gross receipts in the current calendar quarter versus the prior year calendar quarter.
Small business employee leave tax credits (included in the previously enacted H.R. 6201 (PL 116-127))
H.R. 6201 required small businesses with 500 or fewer employees to provide paid emergency sick leave and family and medical leave for employees. Covered employers must offer 10 days of paid sick leave for COVID-19-related reasons, and they must offer also offer 12 weeks of paid family leave of at least two-thirds of the employee’s wages up to a maximum of $200/day. A new federal tax credit will reimburse employers for 100% of these costs, and businesses with fewer than 50 employees can seek an exemption from the mandate.