Summary Of Coronavirus Aid, Relief, And Economic Security Act (“cares”)
Paycheck Protection Program – Applies to Businesses with Under 500 Employees
- Provides $349 billion in funding for loans, which can be forgiven
- Covers the period February 15, 2020 through June 30, 2020
- Loans will cover:
- (i) payroll costs
- (ii) continuation of health care benefits
- (iii) employee compensation (excluding that portion of compensation in excess of $100K for any individual employee)
- (iv) mortgage interest obligations
- (v) rent
- (vi) utilities and
- (vii) interest on debt incurred before the covered period.
- Loan amount will equal 2.5 x the average total monthly payroll costs, up to $10 million.
- The interest rate may not to exceed 4%.
- No personal guaranty required
- No collateral required
- For eligibility purposes, requires lenders to determine whether a business was operational on February 15, 2020, and had employees for whom it paid salaries and payroll taxes, or a paid
- independent contractor
- All or a portion of the loan may be forgivable and debt service payments may be deferred for up to 1 year.
- Borrowers shall be eligible for loan forgiveness equal to the amount spent by the borrower during an 8-week period after the origination on:
- (i) rent
- (ii) payroll costs for workers (excluding that portion of compensation in excess of $100K for any individual employee) including group healthcare expenses
- (iii) interest on a mortgage
- (iv) utility payments
- The amount forgiven may not exceed the principal of the loan.
- The amount forgiven will be reduced proportionally by any reduction in employees
- If an employer re-hires workers previously laid off, employer will not be penalized for having a reduced payroll at the beginning of the period.
Emergency Economic Injury Disaster Loans (“EIDLs”)
- For the period between January 31, 2020 and December 31, 2020
- EIDL eligibility is greatly expanded to include any business with not more than 500 employees operating under a sole proprietorship or as an independent contractor
- EIDLs may be approved solely on the bases of an applicant’s credit score or by use of alternative methods to gauge the applicant’s ability to repay.
- Applicants may request an advance of up to $10,000 within three days after the Administrator receives the application, subject to verification that the entity is eligible under this program,
- which can be used for any purpose under §7(b)(2) of the Small Business Act and is not subject to repayment, even if the loan request is ultimately denied.
- The requirement of personal guarantees for loans up to $200,000 is waived
- The requirement that the applicant must be in business for a year is waived, but the business must be in operation on January 31, 2020)
- The credit elsewhere test is waived.
- This loan can be in addition to the Paycheck Protection Program
Deferment of Existing SBA Loan Payments
- Covers loans made by the SBA under
- The SBA Business Loan Program (including the Community Advantage Pilot Program, but excluding the new payroll loan program established under Section 1102); or
- Title V of the Small Business Investment Act; or
- SBA Administrator will make the loan payments for borrowers, including principal, interest and any associated fees, owed in a regular servicing status, for:
- Loans made before this bill was enacted not on deferment for the six-month period beginning when the next payment is due
- For loans made before this bill was enacted that are on deferment, for the 6-month period beginning with the next payment due after deferment
- For loans made within 6 months of enactment of this bill, for 6 months after the first payment is due
- Delay of Payment of Employer Payroll Taxes
- Employers responsible for paying 6.2% Social Security Tax on employee wages will be allowed to defer paying their share.
- Half of deferred amount will be due December 31, 2021, balance due December 31, 2022
- Additional Tax Benefits for Businesses
- Modification of Net Operating Losses eliminated 80% limitation and allowing carry back for five years (allows for filing of amended returns for prior years)
- Modification of the limitation on losses for Non-Corporate Taxpayers, such as individuals, estate and trusts. May allow non-corporate taxpayers to deduct all excess business losses through the end of the 2020 tax year.
- Acceleration of Refundable Alternative Minimum Tax Credits to tax years 2018-2019
- Employer Student Loan Payments
- Employers can provide student loan repayment benefit to employees on a tax-free basis, up to $5,250 annually to each employee.
- Applied to payments made after enactment date and before January 1, 2021.
