Long- Awaited Federal Legislation Passes Senate
The U.S. Senate passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, yesterday. CARES is awaiting U.S. House approval which is expected tomorrow (3/27/20)
A key intent of this legislation is to help businesses stay open and keep their employees working. There is extensive support for a wide variety of industries.
The entire bill as written can be found here. Hats off to the U.S. Chamber of Commerce who provided a summary of this complex legislation. Click Here for their review of specific support measures for our business community.
CARES ACT highlights for Members
New Loan Program: Small Business “Paycheck Protection Program”
New $349 billion lending program, modeled on existing SBA 7(a) program, with 100% government guarantee (as opposed to 75% guarantee for 7(a) loans).
- Small businesses as defined by SBA size standards (generally up to 500 employees, but up to 1,500 employees depending on the sector and certain sectors are based on revenue)
- Businesses in the Accommodation and Food Services Sector (NAICS Code 72) are eligible with up to 500 employees at each location
- 501 (c)(3) non-profits with fewer than 500 employees
- Sole proprietors, the self-employed, and independent contractors
As we understand these loans will be disbursed through local banks. As currently written, these will be 10- year loans at 4% interest and 8-weeks of payroll will be forgiven as part of this program.
Expansion of SBA Disaster Loans
As we mentioned in prior briefs, Small Business Association Disaster Loans are available. This program will be expanded under the CARES Act infusing $562 million for the Small Business Administration (SBA) to provide additional funding for administrative expenses and program subsidy for the SBA’s Disaster Loans Program.
Here are some proposed additions to expedite access to these funds:
- Loans can be made based solely on credit scores
- Loans available to all non-profits, including 501(c )(6)s
- Loans below $200,000 can be approved without a personal guarantee
- Borrowers can receive $10,000 cash advances that are forgiven if spent on paid leave, maintaining payroll, increased costs due to supply chain disruption, mortgage or lease payments, or repaying obligations that cannot be met due to revenue losses
As we understand, businesses can have both loan types if proceeds will be used for different expenses.
Business Tax Provisions through the CARES Act:
- Employee retention credit for employers subject to closure due to COVID-19 (permits fully refundable 50% tax credit applicable to the employer’s share of payroll taxes on wages up to $10,000 per employee; widely available with special rules for small employers.
- Delay of payment of employer payroll taxes (defer payment of the employer share of the Social Security tax due between now and January 1, 2021 to December 31, 2021 (50% due) and December 31, 2020 (remaining due)
- Modifications for net operating losses (for 2018, 2019, 2020, loss can be carried back 5 years, temporarily suspends 80% limitation; extends to pass-throughs, sole proprietors)
- Modification of limitation on business interest (for 2019, 2020, increases 30% limitation to 50%)
Stay tuned for daily updates and do not hesitate to reach out for additional details or resources about the information provided in today’s brief.
Reba Osborne, Director of Government Affairs