Earlier today, the US House of Representatives passed the “Coronavirus Aid, Relief, and Economic Security (CARES) Act. The Senate passed the bill on Wednesday, and President Trump is expected to sign the bill as soon as today. In total, the bill is more than 850 pages long. This message aims to highlight some of its key provisions for businesses, particularly small businesses.
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Small Business “Paycheck Protection Program"
The act creates a new lending program, 100% guaranteed by the Federal government and modeled on the SBA 7(a) program, to help small businesses meet operating needs, especially payroll. Key details:
- Businesses of up to 500 employees are eligible, and businesses in the Accommodations and Food Services Sector are eligible if they have up to 500 employees at each location.
- 501(c)3 nonprofits with fewer than 500 employees, sole proprietors, the self-employed, and independent contractors are also eligible.
- All lenders can provide loans and the SBA’s usual requirement that businesses be unable to obtain credit elsewhere is waived.
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The loans can be for up to 2 ½ months of payroll costs, not to exceed $10 million and excluding compensation paid to individuals above $100,000/year.
- The borrower must certify that the loan will be used to retain workers, maintain payroll, make mortgage or lease payments, and pay utilities, but no personal guarantee or collateral is required.
- Payments of all fees, principal, and interest is deferred for between 6 months and 1 year.
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The portion of the loan equal to payroll costs (subject to the above limit), mortgage interest, rent, and utility payments for eight weeks following the origination of the loan will be forgiven. The loan forgiveness will be proportionally reduced if the borrower reduces employment or salary and wages.
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Other Small Business Administration Programs Changes
- Economic Injury Disaster Loans (EIDL) will now be made solely on credit scores and are available to all nonprofits, including 501(c)6 organizations.
- EIDL Borrowers can receive a $10,000 cash advance that will be forgiven if spent on the same categories as in the Payroll Protection Program, if such obligations cannot be met due to revenue losses.
- All SBA applications will be taken online; they are not setting up in-person recovery centers to maintain social distancing.
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Business Tax Changes for 2020
- A fully refundable 50% credit will apply to the employer’s share of payroll taxes on wages of up to $10,000 per employee.
- Payment of employer payroll taxes due through the end of this year is deferred until December 31, 2021 (50% due) and December 31, 2022 (remaining 50% due).
- Modifications are also made for claiming net operating losses and recovering AMT credits.
- The requirement for any minimum pension contributions due in 2020 are delayed until January 1, 2021 (with interest).
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Changes to Paid Leave Provisions
- Paid FMLA under FFCRA is capped at $200/day and $10,000 total.
- Paid sick leave under FFCRA is capped at $511/day and $5,110 total.
- The sick leave caps drop to $200/day and $2,000 total for sick leave taken to care for a family member or because of a school closure.
- Workers who were laid off after March 1 but then are rehired are eligible for paid FMLA.
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Expanded Unemployment Insurance Programs
- Unemployment insurance is expanded for 13 weeks, with a four-month enhancement of benefits.
- Unemployment insurance eligibility is extended to people who are not regularly eligible for UI, including those who have exhausted benefits.
- Individuals who are able and available to work, but who cannot because of a range of COVID-19-related reasons are eligible for UI.
- The UI provisions do not apply to individuals who can telework with pay or who are getting paid sick or family leave.
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Other Loan Programs and Credit Facilities
The act includes a number of loan programs and credit facilities, including several general and industry-specific programs targeted at businesses with more than 500 employees. Notable authorizations include:
- The Treasury will “endeavor to seek the implementation” of a Middle Market loan facilities for banks to provide loans to businesses and eligible nonprofits with 500-10,000 employees.
- The Federal Reserve is authorized to create a Main Street Lending Facility for small and mid-sized businesses.
The bill includes a number of provisions for individuals – including direct payments of $1,200 ($2,400 for a joint return) plus $500 per child for all people with incomes below $75k (joint return: $150k) and phasing down above that. There are also provisions relating to health insurance, state and local government, and Federal agency appropriations.
This message aims to provide highlights of the bill. We recommend speaking with an attorney or accountant, as appropriate, about the circumstances of your business. The Chamber will continue to monitor developments and will share news and details about how to apply for these programs as we receive them.
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Call with Congressman Don Beyer
Please join us this afternoon at 4:00-5:00 p.m. for a special opportunity to hear Congressman Don Beyer discuss the business implications of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The Arlington Chamber will be presenting this call along with the Alexandria, Falls Church, Northern Virginia, and Mount Vernon-Lee Chambers of Commerce. The Congressman will discuss the details of the legislation and the Federal government’s response to the COVID-19 pandemic, and engage in a Q&A session.
Participation in this call is free for Arlington Chamber members. Spots are limited, so please register soon.
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