President Trump signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act on March 27, 2020, after the bill was approved by voice-vote by the House of Representatives earlier that day. That vote followed unanimous approval by the Senate on March 25, 2020.
The 880-page, $2 trillion Act includes provisions designed to provide economic stimulus in light of the extraordinary circumstances caused by the Coronavirus (COVID-19) pandemic. The funds are intended to provide immediate relief for individuals through direct payments to taxpayers ($290 billion); expanded unemployment insurance ($260 billion); enhanced lending options and grants for businesses and not-for-profit organizations ($887 billion); emergency aid for state and local governments ($150 billion); and assistance for hospitals working to meet public health needs ($127 billion). Highlights of the relief are included below.
Individual Relief
- $1,200 recovery rebates for eligible taxpayers, with additional $500 credits for dependents*
- Payment forbearance is offered for federally-backed home and student loans
- Expanded tax deductions provided for charitable contributions for non-itemizing taxpayers
- 10% early withdrawal penalties are waived on up to $100,000 of distributions from certain defined contribution plans, such as 401(k) plans, 403(b) plans and profit sharing plans
- Required minimum distribution rules are temporarily waived for 2020 with respect to certain defined contribution plans and IRAs
*Visit the IRS Economic Impact Q&A page for details about the direct payments.
Enhanced Unemployment Coverage
- Unemployment insurance payment term is increased by 13 weeks
- An additional $600/week in federal payments are added to the state amounts paid for four months
- Unemployment benefits are expanded to include self-employed individuals and independent contractors
- Eligibility for benefits is extended to those laid off, became ill or needed to care for those who were ill as a result of the coronavirus
Business Relief
- All businesses, regardless of size, are eligible for a 50% refundable payroll tax credit (an Employee Retention Credit or ERC), which is applied toward the first $10,000 of an employee’s qualified wages; the amount of the ERC depends upon the size of the employer, with smaller employers eligible to receive greater benefits
- Additionally, employers can defer payment of their share of the 6.2% Social Security payroll tax tax until January 1, 2021
- Several loan programs have been created and expanded for small businesses and nonprofits with fewer than 500 employees (see related post)
- A lending program is being developed for mid-sized businesses and nonprofits (between 500-10,000 employees) to encourage them to retain their workforce during the pandemic
- An additional fund was created to provide loans and relief to larger companies in hard-hit industries
- The CARES Act also provides assistance to businesses designed to provide critical cash flow and liquidity throughout the health crisis, through the modification of rules related to net operating losses (NOLs), interest expense deductions, alternative minimum tax (AMT) credits and non-corporate loss limitations
The Senate Small Business Committee prepared a CARES Act Guide for Small Business Owners that summarizes the business provisions
Additional Provisions
There are numerous other provisions in the CARES Act, which include enhancements to programs to support the health care system, investments to improve the nation’s preparation for future outbreaks, and relief for educational institutions, governments and other designated industries. Click here for a section-by-section summary of the legislation.
Grossman Yanak & Ford LLP will continue post additional information about specific provisions of the CARES Act as they apply to our clients and contacts. Should you have questions or comments, please contact Bob Grossman or Don Johnston or your GYF Executive at 412-338-9300.
