On Friday, March 27, the President signed into law the Coronavirus Aid, Relief and Economic Security (CARES) Act. The components of the Act that help businesses are a part of a multi-faceted stimulus bill to assist businesses and individuals with the economic challenged caused by the Coronavirus. An excellent overview of the Act has been prepared by the Cline Williams law firm of Omaha, NE. So I would like to express my appreciation for their legal alert I received with the overview.
Some highlights of the CARES Act:
Small Business Assistance
- SBA Loans obtained under the Act may be used for payroll—including paid sick, medical, or family leave, continuation of health care benefits, interest payments on mortgage obligations, rent, utilities, interest on pre-existing debt obligations and certain other expenses and obligations for the remainder of 2020.
- Loans under the Act must be made on or before June 30, 2020.
- There will be no prepayment penalty on payments made before year end.
- Loan administrators are to collect little or no fees.
- Payments owed under loans may be deferred in almost all circumstances for up to 1 year.
- Loans administered under the Act may qualify for partial or full forgiveness.
- Maximum loan amount is the lesser of (1) $10 million or (2) 2.5 times the average monthly payroll cost during the year prior to the loan.
- Generally, qualifying employers must have 500 or less employees and cannot have already received assistance under section 7(b)(2) of the Small Business Act for payroll expenses related to COVID-19; the Act specifically includes self-employed, sole proprietors, and independent contractors
- Includes Emergency Economic Injury Disaster Loan (“EDIL”) grants up to $10,000 for payroll, sick leave, and other expenses and obligations. For businesses who receive an Emergency EIDL grant and later receive a Section 7(a) loan, the amount of loan forgiveness is reduced by the amount of the Emergency EIDL grant.
Small businesses who wish to apply for these loans can start here or I encourage you to reach out to your existing banker. Eligible entities are those with less than 500 employees, including the following: small businesses, 501(c)(3) nonprofit organizations, veterans organizations, certain tribal business concerns, eligible self-employed individuals, independent contractors, sole proprietorships and businesses in the accommodation and food services industry that have less than 500 employees per physical location.
For the purposes of determining the 500 employee threshold, applicants should include full time, part-time and other basis employees. General SBA affiliations apply except such rules are waived with respect to businesses in the accommodation and food services industry, franchises assigned a franchise identifier code and businesses licensed under Section 301 of the Small Business Investment Act.
Business Tax Assistance
- Delay of estimated tax payments for corporations to October 15, 2020.
- Delay all or a portion of payroll taxes until December 31, 2021 or 2022 depending on the circumstances.
Items for Employers
- The Act amends the Families First Coronavirus Response Act (“FFCRA”) to: (a) expand eligibility for paid leave for certain rehired employees and (b) aid private employers in meeting their paid leave requirements under the FFCRA by providing advances of FFCRA payroll credits. Further instructions and forms are expected from the Department of Labor on the credits.
- The Act creates a new “employee retention tax credit,” under which eligible employers may receive a refundable payroll tax credit for certain wages paid by employers during the COVID-19 crisis (subject to caps per employee and time restraints). See Section 2301. The tax credit is limited to those employers (a) whose operations were fully or partially suspended because of a governmental order “limiting commerce, travel, or group meetings” due to COVID-19; or (b) whose quarterly gross receipts have declined by more than 50% when compared to the same quarter in the previous year. Employers who receive loans under the Paycheck Protection Program (Section 1102) are not eligible for this credit.
- The Act creates the Pandemic Unemployment Assistance program, which runs through December 31, 2020 and substantially expands available unemployment benefits for employees who have been laid off or furloughed.
Please also see assistance available through the State of Iowa in my prior posts on this blog.
For assistance I recommend you reach out to your existing banker, tax / accounting adviser or your business attorney.