The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law on March 27, 2020. Below is a preliminary summary of what the bill contains. Regulations will be coming and will provide much greater detail.
Direct Payments to Individuals:
- Single: $1,200
- Married: $2,400
- Per child under 17: $500
- AGI Threshold:
- Single: 75,000 (fully phased out at 99,000 – $5 for every $100)
- Married: 150,000 (fully phased out at 198,000 – $5 for every $100)
- 3 weeks for direct deposit, 6-8 weeks by mail
- Nontaxable
- Based on 2020 AGI (Adjusted Gross Income), but will be advanced based on 2018 or 2019 tax returns, or SSA-1099/RRB-1099
Retirement
- Withdrawal rules relaxed
- Retirement account loans expanded
- Required minimum distributions waived
Income Tax Law Changes
- $300 above-the-line charitable deductions for those that do not itemize
- 50% charitable contribution cap is also lifted
- *New* Employee Retention Credit
- For businesses that were either ordered to close due to COVID-19 by a government or whose revenues fell by 50% can qualify for this credit
- Over 100 employees:
- Wages are capped at $10,000 per employee
- Credit only applies for employees who can’t provide services due to COVID-19
- 100 or fewer employees
- all wages count towards the credit
- Wages from 3/13/20 – 12/31/20 are included
- Be aware of the impact of aggregation rules
- NOL (net operating loss) cap is lifted and
5-year carryback is established
- NOL technical correction is in here
- NOLs are loosened for pass-throughs too
- Interest deduction cap is loosened from 30% of EBITDA to 50% of EBITDA for taxable years beginning in 2019 and 2020
- QIP (Qualified Improvement Property) technical amendment – back to 15 years!!!
Payroll Taxes
- Employer-side payroll taxes are delayed until the end of 2020
- Employers have until 12/31/21 to pay 50% with remainder due by 12/31/22
Other Taxes
- Temporary exception to the alcohol excise tax for alcohol used to make hand sanitizer
Other
- Menstrual care products are now a deemed “qualified medical expense” for HSA or FSA
- If your employer decided to pay for part of your student loan, it won’t be taxed as income
Student Loan Payments
- Payments on student borrowers are suspended, without penalty, through 9/30/20.
Real ID
- Deadline extended until at least September 2021
Unemployment Benefits
- $600 per week on top of state benefits (which range from $200-$550 depending on the state)
- *would like to add 13 weeks of extended benefits (usually 12 – 28 weeks)
- In addition, the deal calls for a new pandemic unemployment assistance program. It would provide jobless benefits to those who are unemployed, partially unemployed or unable to work because of the virus and don’t qualify for traditional benefits. This includes independent contractors and the self-employed, who typically don’t qualify for such assistance, and to gig economy workers who aren’t eligible in many states. These benefits would mirror what’s available in an individual’s state.
$500 billion lending program
(Congressional oversight commission will monitor how money is spent)
- $25 billion for passenger air carriers
- $4 billion for cargo air carriers
- $17 billion for businesses that work in national security
- $454 billion to provide loans to businesses,
states, and municipalities with these stipulations:
- Businesses may not issue dividends for up to a year after the loan is no longer outstanding
- Must retain 90% of employment levels as of March 24 “to the extent practicable” through September 30
- Loans cannot last longer than 5 years
- There is a specific provision in the program for direct loans to mid-sized business (defined as between 500 and 10,000 employees), as well as non-profit organizations, where no payments will be due for the first 6 months after the loan is issued
- Legislation prohibits federally elected
officials and their immediate relatives from obtaining funds from this program
- Immediate relatives: spouse, child, son-in-law, or daughter-in-law will be barred. The provision applies to anyone with 20% or greater stake in a business.
$1.2 billion to Defense Department
- None to the border wall
- Additional $1 billion for Defense Purchases Act purchases
Airlines & Airports
- $32 billion in grants for wages and
benefits to the decimated airline industry
- Includes $25 billion for passenger airlines
- $4 billion for cargo airlines
- $3 billion for industry contractors (those who handle catering, baggage, ticketing, aircraft cleaning)
- In addition, another $25 billion for passenger airlines and $4 billion for cargo airlines in the form of loans
- Companies that receive the assistance are barred from making furloughs, pay cuts, or stock buybacks, and from issuing dividends to investors, through September. It also institutes limits on executive compensation.
- Airlines may also be required to operate routes they would otherwise like to cancel because of low ridership or profitability. The Transportation Department can require air carriers to continue service on routes, particularly for the “needs of small and remote communities and the need to maintain well-functioning health care and pharmaceutical supply chains, including for medical devices and supplies.”
Hospitals
- $117 billion for hospitals
- $100 billion public health and social emergency
fund to reimburse providers for expenses and lost revenues related to the
coronavirus pandemic
- About $65 billion will go to hospitals, with the rest funneled to doctors nurses, supplies, and others
- Boosts reimbursements by 20% for treating Medicare patients with coronavirus
- Eliminates $8 billion in scheduled payment reductions to hospitals caring for large numbers of uninsured and Medicaid patients, as well as temporarily removing the 2% cut for treating Medicare patients
Contractors and “gig” workers
- Independent contractors and so-called gig workers will be eligible for federal aid (think Uber drivers)
Protections against foreclosures and evictions
- Anyone facing financial hardship from coronavirus shall be given a forbearance on a federally backed mortgage loan of up to 60 days, which can be extended for 4 periods of 30 days each (in other words, up to 6 months)
- Servicers of federally backed mortgage loans may not begin the foreclosure process for 60 days from March 18
- Fees, penalties, additional interest are not allowed to be charged
- For multifamily federal mortgage loans, they are allowed to receive a 30 day forbearance and up to 2 30-day extensions (in other words, up to 3 months)
- Those with federally backed mortgage loans who have tenants would also not be allowed to evict tenants solely for failure to pay rent for a 120-day period, and they may not charge fees or penalties to tenants for failing to pay rent
Food assistance
- $450 million for The Emergency Food Assistance
Program
- Supplies food banks
- $350 million would buy additional food
- $100 million for food distribution on American Indian reservations
Evacuations of Americans
- $324 million for the State Department, as well as money specifically for “evacuation expenses”
- There are 9,300 Americans that have already been repatriated
- Government is tracking 13,500 Americans seeking assistance abroad
Peace Corps, diplomatic programs and refugees
- $88 million for the Peace Corps
- The organization suspended all operations last week and evacuated its volunteers.
- $324 million for diplomatic programs
- $350 million for migration and refugee assistance
- $95 million for USAID operating expenses
