Last night the Senate passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act. It is expected to pass through the House Friday, and then the President will sign the bill into law by the end of the week. Below is a summary of the key provisions to be aware of from both a business and personal standpoint.
BUSINESS PROVISIONS:
Small Business Administration Grant Programs
As a small business, you may qualify for the programs listed below. SBA loan applications are notorious for being a long process, however, recent measures have been put into place to streamline the process during this time. If signed into law, many practices may benefit from the Paycheck Protection Program. Additional information regarding the process can be found on www.sba.gov, your banker may also be able to assist.
1. Paycheck Protection Program
· $349 Billion available for disbursement, available on a first come first serve basis
· Allowable use include payroll, rent, mortgage payments and utility costs
· Eligible for loan forgiveness on amounts spent during the first 8-week period on qualifying costs mentioned above
· An amount is forgiven if a certain number of employees are retained or re-hired within a specified amount of time, otherwise loans will have a maximum maturity of 10 years and an interest rate not to exceed 4%
2. SBA Emergency Economic Injury Disaster Loan and Grant
· $10 Billion available for disbursement
· Allowable use includes small business operating costs
· Allows business that have applied for a disaster loan to get an immediate advance of $10k
3. SBA Existing Loan Expansion
· $17 Billion available
· Additional loan to cover 6 months of payments for business with existing SBA loans
Employee Retention Tax Credits
Provides a refundable payroll tax credit for 50% of wages (up to $10k for each individual) paid to employees if:
· Operations were fully or partially suspended
· Gross receipts declined by more than 50% compared to the same quarter of 2019
Delay of Payroll Tax Payments
Provides that employers can defer payments of the employer share of social security tax (6.2% of wages up to $8537 per employee). 50% would be due by 12/31/21 and the remaining amount by 12/31/22.
INDIVIDUAL PROVISIONS:
Individual Stimulus Payments
Recovery rebate checks paid directly individuals. The amount is based upon your most recent tax return (2018 or 2019) and would result in payments up to the following amounts:
· $1200 for single taxpayers
· $2400 for married filing joint taxpayers
· $500 for each dependent
These are phased out starting at AGI levels of $75k for single filers and $150k for married filing joint filers so many practice owners may not qualify.
Unemployment Insurance Expansion
This section allows for the expansion of unemployment benefits individuals will qualify for. It provides Federal support as follows, meaning that employees who have been laid off or had their hours reduced may qualify for additional unemployment. Specific amounts depend upon how your state chooses to handle this.
· Provides an additional $600 per week payment to each recipient of unemployment insurance up to 4 months
· Provides funding to pay the cost of the first week of unemployment benefits for states that choose to pay recipients as soon as they come unemployed (instead of waiting on week before the individual is eligible to receive benefits)
· Provides an additional 13 weeks of unemployment benefits to help those who remain unemployed weeks after weeks of state unemployment are no longer available
· Provides funding to support “short-time compensation” programs, where employers reduce employee hours instead of laying off works and the employees with reduced hours receive a pro-rated unemployment benefit. This provision would pay 100% of the cost they incur in providing this short-time compensation
· Provides funding to support states which being “short-time compensation” programs. This provision would pay 50% of the costs that a state incurs in providing short-time compensation
Miscellaneous
1. A charitable contribution deduction of $300 for those who do not itemize deductions (and therefore do not normally receive a deduction for charitable contributions)
2. Waiver of the 10% penalty for early withdrawal of retirement funds for distributions up to $100k for coronavirus purposes. The distributions would be subject to take over an expanded 3 year period based upon certain provisions.
3. Provide income tax exclusion for individuals who are receiving up to $5250 in student loan repayment assistance from their employer
This is a fluid process and we will continue to monitor this information as it becomes available. Our thoughts are with you all during this uncertain time!