Coronavirus Aid, Relief, and Economic Security (CARES) Act FAQ

The Coronavirus Aid, Relief, and Economic Security (CARES) Act, signed into law on March 27, 2020, responds to the COVID-19 (coronavirus disease 2019) outbreak and its impact on the economy, public health, state and local governments, individuals, and businesses.

This stimulus bill includes tax provisions for businesses and individuals, provisions impacting employment and labor laws, provisions related to the small business administration, and provisions related to debtors.

Contact your accountant, tax professional or legal advisor for more information.

The details of the bill are available on the U.S. Congress website: https://www.congress.gov/bill/116th-congress/house-bill/748

The CARES Act provides for $349 billion to be used to guarantee loans to small businesses and other entities that have 500 employees or less. The primary purpose is to help organizations keep their employees on the payroll between now and the end of June 2020. Hence, the name of the program: Paycheck Protection Program (PPP). This loan program will be administered by the Small Business Administration (SBA). Specific requirements associated with typical SBA loans, such as guarantees, collateral, and a “credit available elsewhere” underwriting, have been relaxed or eliminated. A borrower under a covered loan can have a portion of the principal of the loan forgiven in an amount equal to payroll costs, mortgage interest, rent, or utility costs during the eight-week period following the origination of the loan.

As part of the tax provisions for businesses, a refundable payroll tax credit for 50 percent of wages paid by employers to employees during the COVID-19 crisis is available to employers whose operations were fully or partially suspended due to a COVID-19-related shutdown order or whose gross receipts declined by more than 50 percent when compared to the same quarter in the prior year.

In addition to other benefits for businesses, employers and self-employed individuals can defer payment of the employer share of the Social Security tax they otherwise are responsible for paying to the federal government concerning their employees.

A portion of the money allocated to loans, loan guarantees and investments is reserved for employers with between 500 and 10,000 employees, available IF the employers fulfill several employment obligations.

The CARES Act provides for $349 million to be used to guarantee loans to small businesses with less than 500 employees (including sole proprietorships, independent contractors and self-employed persons), private non-profit organizations or 501(c)(19) veterans organizations affected by coronavirus/COVID-19. The main purpose is to help organizations keep their employees on the payroll between now and the end of June 2020. Hence, the name of the program: Paycheck Protection Program (PPP). This loan program will be administered by the Small Business Administration (SBA).

The CARES Act includes enhanced unemployment benefits to provide payment to those not traditionally eligible for unemployment benefits who cannot work as a direct result of the coronavirus public health emergency.

The bill also extends the duration of traditional unemployment insurance by 13 weeks. The one-week waiting period is also suspended under CARES.

In addition to other benefits, the enhanced unemployment benefits pay 100 percent of the employer’s costs of providing short-time compensation through Dec. 31, 2020, where employers reduce employee hours instead of laying off workers, and the employees with reduced hours receive a pro-rated unemployment benefit.

While April 3, 2020, is the general start date for businesses with up to 500 employees to apply for a forgivable Paycheck Protection Program loan, independent contractors and self-employed individuals can apply for the forgivable loans starting April 10.

You can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. You should consult with your local lender as to whether it is participating in the program.

More information is available here: https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program-ppp