CARES Act - Business Highlights

As many of you have heard, there has been a significant amount of legislation in process over the last many days. The final result, know as the Coronavirus Aid, Relief, and Economic Security Act (CARES Act for short), was passed by the Senate late Wednesday night. Today, the House of Representatives passed it as well and sent it to the President, who signed it this evening. This was an enormous piece of legislation with an estimated cost of $2.2 Trillion. At 880 pages long, there is plenty we’re still learning, and still a lot of guidance that the government needs to provide. However, we’ve identified a number of items that will be important to many of our business and self-employed clients. We wanted to let you know about these as soon as we could, and we’ll soon share a separate update geared toward items affecting individuals.

• Small Business Loans Loans

  • The Federal government increased limits for and availability of SBA loans in order to help businesses meet payroll, rent, interest, utilities & other obligations. If the funds were used for the stated purposes, portions of the loans may be eligible for forgiveness.

• Unemployment Benefits for Workers

  • The Federal government will pay $600 per week on top of state unemployment benefits, for up to 16 weeks.

  • Workers traditionally not eligible for unemployment benefits (such as gig workers and self-employed individuals) are eligible to claim unemployment benefits.

• Technical corrections of items in the Tax Cuts and Jobs Act of 2017

  • Corrected the error that removed Qualified Improvement Property as 15 year property (retroactive to 2018).

  • Corrected an issue that required certain businesses to cap their NOLs in 2017 instead of 2018 forward as intended.

• Charitable Contributions

  • Raised the limit on charitable contributions deductible by a corporation from 10% to 25%

  • Raised the limit on the deduction for contributions of food inventory from 15% to 25%

• Payroll Tax Credit

  • A 50% refundable payroll tax credit will be available to offset the employer's share of Social Security taxes up to $10,000 of qualified wages per employee. If an organization has more than 100 full-time employees, qualified wages are those paid when employees are not providing services related to the COVID-19 outbreak. For eligible employers with fewer than 100 full-time employees, all employee wages qualify for the credit.

  • This credit is not available if an organization has received an SBA loan as described at the beginning.

• Payroll Tax Payment Delays

  • 2020 payroll taxes are not due at their normal times this year. Instead, they will be due (interest free) as follows:

    • 50% by December 31, 2021

    • 50% by December 31, 2022

• Net Operating Losses (NOLs)

  • NOLs arising in tax years beginning in 2018, 2019, or 2020 may be carried back five years

• Interest Expense Deduction Increased

  • Interest expense deductible by a corporation was raised from 30% of taxable income to 50% of taxable income for 2019 & 2020.

• Student Loans

  • Employers may deduct up to $5,250 a year in combined tuition and textbook assistance and student loan repayment assistance. This is tax deductible to the employer but not reportable as income by the employee.

Of course, this is not a comprehensive list of items that may affect your particular set of circumstances. If you have questions regarding how these or any other items affect your business, or if you are contemplating options for the best path forward in light of the current economic outlook, please contact us and we will help you understand the pros and cons of the options available.