Cares Act – What You NeeD TO Know

The much anticipated aid package to assist individuals and businesses struggling amidst the COVID-19 pandemic was passed by Congress and approved by the President late Friday night. Among it’s many provisions are small business funding options, payroll tax credits, and, of course, individual stimulus payments. I’ve read the bill (found here) and believe these are the most critical issues for our client base. It is important to note that until processes are in place, most of which the Act dictates in 15 days or less, we don’t have much information on taking advantage of the provisions set forth but knowing that they are available will, hopefully, offer you some peace of mind.

1. Small Business Interruption Loans
   • Available to businesses and most nonprofit organizations (private and public) employing 500 or fewer employees
   • Maximum loan amount = average total monthly payments for payroll, mortgage obligations, rents, and miscellaneous debt obligations X 4
   • Can be used for payroll support, salaries, mortgage and rental payments, utilities and miscellaneous debt obligations incurred before March 1, 2020
   • Easy application process: only considerations are if the business was operation and employing individuals on March 1, 2020
   • No double dipping: those gaining assistance from the SBA disaster funds are not eligible
   • Fee waivers available for application fees
   • LOAN FORGIVENESS
     • Compensation of employees earning over $33,333 during the covered period (March 1, 2020 to June 30, 2020) is disallowed.
     • Qualified sick leave wages covered under the Families First Coronavirus Response Act are not eligible
     • Forgiveness amount is equal to the cost of maintaining payroll during the covered period (March 1 to June 30, 2020)
     • Forgiveness is limited to total payroll cost during the covered period PLUS payments on preexisting debt obligations
     • Forgiveness is reduced if 2020 covered period full time equivalent employees is less than those during the same period of 2019. (Calc: 1-[2020 FTE employees / 2019 FTE employees])
     • Forgiveness further reduced if there is a more than 25% reduction in wages when compared to the most recent full quarter for any employee paid less than $33,333 from March 1 to June 30, 2019 or $100,000 annualized wages in 2019
     • To receive forgiveness, the business must submit payroll records to the lender.
2. Relief for Individuals, Families, and Businesses
   • Amount is equal to the lesser of your income tax liability or $1,200 per individual
   • An additional amount of $500 per qualifying child
   • Amount is subject to phase out by $50 for every $1,000 of excess adjusted gross income as follows:
     • $75,000 for single filers
     • $150,000 for married filers
   • Income Tax filing deadline is moved to July 15, 2020
   • Estimated payments are deferred until October 15, 2020 with ALL estimated amounts up to that point due on that date (original dates are April 15, June 15, September 15)
     • Please be advised that if you are using the October 15 ES date and your total payment is not made you could still be subject to 2020 penalty and interest for failure to pay proper estimated tax
   • Covid-19 retirement plan withdrawals
     • Penalty free withdrawals limited to $100,000 for any calendar year
     • Taxable income resulting from applicable withdrawals ratably included in income over 3 taxable years
     • Amounts may be repaid over a 3 year period
       • repayments do not impact current year contributory amounts
     • Increased loan limits with one year repayment deferrals
   • Up to $300 of charitable contributions deductible for adjusted gross income in 2020 (outside of itemized deductions)
     • Must be made in cash
     • Must be made to an eligible charitable organization
   • Modified charitable contribution limits for itemized filers
3. Business Provisions
   • Delayed payment of payroll taxes
     • Does not apply to employers receiving SBA 7(a) loans discussed in #1 above
     • Only applies to employer paid social security
     • All taxes withheld from wages and salaries, plus employer’s share of Medicare, ***MUST*** be paid by the original due dates
     • Half of the deferred taxes would be due by the end of 2021 with the remainder due by the end of 2022
   • Modified Net Operating Loss rules
     • Temporary lifting of the 80% rule
     • Expanded carryback provisions (5 years)
   • Qualified Improvement Property revision of depreciation method
     • Opens QIP property to 15 year term and allows bonus depreciation (fixes legislative language error from TCJA subjecting property to 39 year SL depreciation)
     • Amendment would be necessary to claim 2018 and 2019 refunds
4. Other expansions
   • No deductible for telehealth services
   • Menstrual care products now an allowable medical expense (including for HSAs and MSAs)
   • Educational assistance expansions plus 3 month student loan payment relief
5. Labor Provisions
   • Lifted the $200/day and $10,000 aggregate employer paid sick leave limit
   • Increased limits to $511/day and $5,110 per employee aggregate when the employee is taking leave due to active C-19 illness
   • Limit is $200/day or $2,000 employee aggregate for family reasons (children at home, etc)
   • Payroll credit for paid sick leave under Families First Act (no penalties)

Over the coming days and weeks, we will start receiving procedures from governing bodies on how to enact new provisions. We’ll keep you up to date as we learn more. Stay safe and healthy!