Last week Congress passed, and the President signed, the Coronavirus Aid, Relief and Economic Security Act (CARES ACT). This legislation is intended to provide economic relief and stabilize at risk individuals, families and businesses. Certain economic relief provisions in the act may require regulatory guidance from federal agencies such as the Department of Labor, Department of Treasury, Department of Health and Human Services and the Internal Revenue Service.
In the meantime, ASTRO staff has highlighted some provisions that be of interest to you. These provisions of interest include, but are not limited to:
The Economic Injury Disaster Loan (EIDL)
EIDL establishes an emergency $10 billon grant fund. Those who apply for an EIDL loan can receive an advance on that loan up to $10,000, which the SBA must distribute within three days. The money may be used to pay for employee sick leave (COVID-19-related), mortgage or rent and other overhead expenses. Applicants would not have to repay the $10,000 grant even if they are denied the loan.
The Paycheck Protection Program (PPP) Loans
The program would provide cash flow assistance through 100% federally guaranteed loans to employers who maintain their payroll during this emergency. Nonprofit organizations and small businesses with fewer than 500 employees are eligible for 100% Small Business Administration (SBA) guarantees on loans made through June 30, 2020. The loans may be used for wages, salaries, health insurance premiums, rent and certain other expenses of the nonprofit or small business. These loans may be forgiven if the nonprofit or small business retains its employees.
Borrowers may apply for PPP loans and other SBA financial assistance, including Economic Injury Disaster Loans (EIDLs), 7(a) loans, 504 loans and microloans and also receive investment capital from Small Business Investment Corporations (SBICs). However, you cannot use your PPP loan for the same purpose as your other SBA loan(s). For example, if you use your PPP to cover payroll for the eight week covered period, you cannot use a different SBA loan product for payroll for those same costs in that period, although you could use it for payroll not during that period or for different workers.
- The PPP loans are only available through outside preferred SBA lenders and guidance has yet to be issued to those banks and lenders. In the meantime, if eligible, you may apply for a EIDL.
SBA Debt Forgiveness and Deferment
The SBA will pay the principal, interest and any associated fees that are currently owed on certain SBA loans for a six month period starting on the next payment due date. Loans that are already on deferment would include an additional six months of payment by the SBA beginning with the next payment.
Federal Tax Rebate
The bill provides for a one-time federal income tax rebate for eligible people in 2020. The rebate amount would be $1,200 for individual tax filers and $2,400 for those filing a joint return. The amount of the rebate will be reduced for single filers making more than $75,000 and joint filers earning in excess of $150,000. In addition, a rebate of $500 is available for each child.
The bill allows for a withdrawal of money from retirement funds (i.e., 401k, etc.) of up to $100,000 in 2020 without paying a penalty if the individual, their spouse or dependent(s) are diagnosed with COVID-19, or experience adverse financial consequences as a result of being quarantined, furloughed, laid off or having work hours reduced due to the coronavirus pandemic.
Federal student loan borrowers would not be required to make a payment through September 30, 2020. During this time, no interest would accumulate on those federal loans. The payment suspension applies only to loans held by the Department of Education, not private loans.
Employers and self-employed individuals can defer payment of the employer share of the Social Security tax until December 31, 2020. The deferred amounts would be paid over the following two years, with half of the amount required to be paid by December 31, 2021, and the other half by December 31, 2022.
The bill includes provisions that would allow carrybacks for up to five years for net operating losses (NOLs) recorded in tax years 2018, 2019 and 2020. NOL carryback capabilities were repealed by the 2017 tax rewrite and were previously allowed for up to two years. This provision would also temporarily lift the income limitation applicable to the corporate income tax treatment of NOLs under current law.
- This provision allows taxpayers not subject to the corporate income tax that incur NOLs, including pass-through businesses and sole proprietorships, to receive the temporary NOL carryback capabilities provided to corporations, as described above.
ASTRO staff will continue to provide updates on the CARES ACT as information becomes available. In the meantime, this guide on the bill may be of use to you.