CARES ACT SUMMARY & GUIDE
Cares Act Update
On April 23, the House voted to pass legislation providing roughly $484 billion in coronavirus relief for small businesses, hospitals and expanded medical testing.
The bill includes:
- $310 billion to replenish the Paycheck Protection Program (PPP) of which $60 billion is earmarked for for community banks and smaller lenders, who tend to cater to underserved businesses
- $60 billion for Economic Injury Disaster Loan (EIDL) program
- $75 billion for hospitals and community health centers
- $25 billion to boost COVID-19 testing, divided between state and federal governments
The Senate has passed a $2 trillion COVID-19 response act bill to aid relief efforts across the American economy. This is the third aid package from Congress and is meant to keep businesses and individuals afloat during an unprecedented freeze on the majority of American life.
The bill includes several elements aimed to help keep people engaged in the economy. That means direct cash for many, plus expanded unemployment benefits and business loan opportunities.
Steps to Take
- The first step for business owners is to review, understand, and complete the Business Recovery and Continuity Guide.
- Call your bank to make an appointment to speak to a banker. This is the best resource and pathway to federal loans.
- Review this summary from the US Chamber of Commerce that details who is eligible for loans, how much you may be eligible for, and repayment and forgiveness options. Independent contractors should read this specific guide from the US Chamber of Commerce.
- All business loans will be administered by the U.S. Small Business Administration. The most comprehensive and updated information on business recovery programs will be located in their Small Business Guide.
On April 8, 2020 the Steamboat Springs Chamber hosted a CARES Act webinar with Tom Sullivan, Vice President of Small Business Policy at the U.S. Chamber of Commerce, to review major provisions, implementations and resources of the CARES Act, followed by Q&A.
*During the webinar, we discussed whether healthcare and retirement benefits were part of “payroll” for the purposes of calculating the maximum about of PPP loan. The calculation should NOT be solely based on line 1 of the W-2 (cash compensation). The Treasury’s guidance says healthcare and retirement benefits are included in the definition of “payroll.” However, the exclusion of compensation in excess of $100,000 applies only to cash compensation, not to non-cash benefits including healthcare & retirement benefits and state and local taxes assessed on the compensation of employees. Read the complete guidelines here.
CARES ACT Guide
Healthcare - What you need to know
- Eliminates Red Tape for employers and individuals: The bill ensures that Americans are able to use all tax-favored health care accounts, like HSAs and FSAs, to buy over-the-counter medicines tax-free without a prescription. In addition, high deductible health care plans with HSAs will now be able to provide coverage pre-deductible for telehealth services.
Unemployment - What you need to know
- Includes $250 billion to expand unemployment benefits: Provides economic relief and much needed support for workers by making a significant investment in unemployment benefits.
- Unemployment benefits for more Americans: Makes sure self-employed and independent contractors, like Uber drivers and gig workers, can receive unemployment during the public health emergency. The bill also includes support to state and local governments and nonprofits so they can pay unemployment to their employees.
- More money for a longer period for more workers: Makes benefits more generous by adding a $600/week across-the-board payment increase through the end of July. In addition, for those who need it, the bill provides an additional 13 weeks of benefits beyond what states typically allow.
- Temporary provisions: The expansion in unemployment benefits expires at the end of 2020 in recognition of the temporary nature of this challenge.
Questions about unemployment? Contact the Colorado Workforce Center at (970) 879-3075.
Small Business - What you need to know
- Forgiveness for Small Business Loans for keeping employees: The bill creates a “Paycheck Protection Program” for small employers, self-employed individuals, and “gig economy” workers, with $350 billion to help prevent workers from losing their jobs and small businesses from going under due to economic losses caused by the COVID-19 pandemic. The “Paycheck Protection Program” would provide 8 weeks of cash-flow assistance through 100 percent federally guaranteed loans to small employers who maintain their payroll during this emergency. If the employer maintains payroll, the portion of the loans used for covered payroll costs, interest on mortgage obligations, rent, and utilities would be forgiven, which would help workers to remain employed and affected small businesses and our economy to recover quickly from this crisis. This proposal would be retroactive to February 15, 2020, to help bring workers who may have already been laid off back onto payrolls.
- Small Business contractors also get protection: Federal agencies would be required to extend contract performance periods and promptly play small business contractors impacted by COVID-19.
- Debt relief: For six months, SBA is required to pay all principal, interest and fees on all existing SBA loan products including 7(a), Community Advantage, 504, and Microloan programs for six months.
- Timely: The bill requires that SBA enact these programs with regulations no later than 15 days after the Act is signed into law.
Questions about loans or small business relief? First, contact your bank. Second, visit the U.S. Small Business Administration.
Tax Information - What you need to know
- Money for American families. This comes in the form of a one-time tax rebate check of $1,200 per individual and $500 per child for those with a valid SSN. There are no earned income or tax liability requirements to receive these rebate checks. The full rebate amount is available for those with incomes at or below $75,000 for individuals, $112,500 for head of household, and $150,000 for married couples.
- Provides another option for employers to keep connected to their employees. Employers of all sizes that face closure orders or suffer economic hardship due to the Coronavirus crisis that continue to pay employees that are furloughed may be eligible for a 50% credit on up to $10,000 of wages paid to those employees. This will help workers keep their jobs, help local businesses ride out this storm, and ensure that furloughed workers have jobs to return to.
- Review the U.S. Chamber of Commerce Guide to the Employee Retention Tax Credit for COVID-19 Impacted Employers
- Delays payroll tax payments for employers: Employers would be able to delay the payment of their 2020 payroll taxes until 2021 and 2022, leading to approximately $300 billion of extra cash flow for businesses.
- Restores supports for businesses suffering losses: The bill also allows businesses to carry back losses from 2018, 2019, and 2020 to the previous 5 years, which will allow businesses access to immediate tax refunds.
- Encourages businesses to invest in improvements: The bill would fix cost recovery for investments in Qualified Improvement Properties, which will allow businesses that made these investments in 2018 and 2019 and receive tax refunds now.
- The details: Eligibility for checks from the IRS will be based on 2018 and 2019 returns, and for Social Security (retirement and disability) and Railroad Retirement beneficiaries, they will use information from the Social Security Administration and Railroad Retirement Board.
If you have specific questions about your business taxes, contact your tax preparer.