My Ozarks Online My Ozarks Online Logo

Do you know all the provisions of the new 2 trillion dollar Cares Act……if you don’t please read and share

Share

CARES Act: Key Provisions

Small Business Administration Loan Program:

  • Loan size of up to 250 percent of average monthly payroll up to $10 million
  • Eligibility restricted to small businesses, nonprofits and veteran organizations with 500 or fewer employees, self-employed and “gig economy” individuals, as well as other specific industry sectors
  • Forgivable where used for payroll, payroll related costs (continuation of benefits, separation, furlough assistance, employee leave, mortgage interest payments, rent, utilities) with some individual caps
  • To the extent the loan is used for non-forgivable purposes (i.e. a mortgage principle payment), payments on the loan would be deferred at least six months and possibly longer at the direction of the lender
  • The amount of the loan forgiven will be reduced proportionally by any reduction in employees retained compared to the prior year and reduced by the reduction in any pay of any employee beyond 25 percent of their prior year compensation
  • Loans available immediately through existing SBA-certified lenders (banks, credit unions, etc.); SBA required to streamline process to bring additional lenders into program

Corporate Tax Changes:

  • Allows employers to defer payroll taxes incurred through the end of 2020
    • Half of the deferred amount must be repaid by December 2021
    • Half of the deferred amount must be repaid by December 2022
  • Full Net Operating Loss (NOL) carryback
    • Five-year carryback of NOLs from 2018, 2019 and 2020 to offset previous income
    • Removes taxable income limitations to allow NOL to fully offset income in 2020
  • Increase in interest deductibility in 2019 and 2020 to 50 percent of adjusted taxable income instead of current 30 percent

Treasury Loans for “Distressed Industries”:

  • $454 billion pool
  • Designed to target entities that might not otherwise be able to secure lending, either directly or by purchasing assets from lenders
  • Treasury authorized broad discretion to issue loans to businesses of any size subject to the following:
    • cannot be used for buyback of shares;
    • freeze on executive compensation and termination packages;
    • USG will benefit from gain — and is not exposed to losses — in equity value;
    • 5-year or less repayment term;
    • employment levels should be maintained at current or pre-COVID 19 levels to “extent practicable”

Treasury Loans for Mid-Sized Businesses

  • As part of the Treasury’s distressed lending program, they are being asked to implement a program that provides financing to banks and other lenders that make direct loans to eligible businesses including, to the extent practicable, non-profit organizations with between 5,000 and 10,000 employees
  • Such loans shall be subject to an annualized rate that is not higher than 2 percent per annum.
  • For first six months after loan is made, the secretary of the U.S. Department of Treasury may determine no principal or interest shall be due or payable.
  • Any eligible business shall make a good-faith certification that:
    • Uncertainty of economic conditions makes loan necessary to support ongoing operations
    • Funds it receives will be used to retain at least 90 percent of workforce until Sep. 30, 2020
    • Recipient intends to restore not less than 90 percent of the workforce that existed as of Feb. 1, 2020 and to restore all compensation and benefits to workers no later than four months after termination of public health emergency
    • Recipient is an entity or business that is domiciled in the US with significant operations and employees located in the US
    • Recipient is created or organized in the US or under the laws of the US and has significant operations in the US or a majority of its employees based in US
    • Recipient will not outsource or offshore jobs for the term of the loan and two other years after completing repayment
    • Recipient will not abrogate existing collective bargaining agreements for the term of the loan and two years after completing payment
    • Recipient will remain neutral in any union organizing effort for the term of the loan

Unemployment Insurance/Compensation

  • Enhanced UI payments to impacted individuals
  • Includes an additional $600 per week for every person applying for unemployment benefits, over and above their normal state benefits
  • Treasury provides backstop to the states to fund such increases
  • Traditional rules pertaining to seeking work don’t apply due to COVID-19
  • One-week waiting periods waived

Employee Retention Credit

  • Employer payroll tax credit for 50 percent of wages paid after March 12, 2020 and before January 1, 2021 by employers severely impacted by the crisis
  • The credit is available to employers whose
    • operations were fully or partially suspended, due to a COVID-19-related shutdown order, or
    • (2) gross receipts declined by more than 50 percent when compared to the same quarter in the prior year
  • For employers with greater than 100 full-time employees, qualified wages are wages paid to employees when they are not providing services due to the COVID-19-related circumstances described above
  • For eligible employers with 100 or fewer full-time employees, all employee wages qualify for the credit, whether the employer is open for business or subject to a shut-down order
  • The credit is provided for the first $10,000 of compensation, including health benefits, paid to an eligible employee
  • This tax credit cannot be claimed if an employer is also claiming loans from the SBA 7(a) program

 

Related Content