Just after midnight this morning, the Senate passed the CARES ACT to provide relief to individuals and businesses. This briefing is focused on the proposed relief to individuals and small businesses. This update is also subject to change as the U.S. House of Representatives is not scheduled to vote on this matter until Friday, March 27, 2020.
- Provides recovery rebates in form of tax credits to prior returns to individuals up to $1,200 ($2,400 in case of eligible individuals filing joint returns).
- Provides a tax credit of $500 per child.
- The amount of credit allowed above is reduced by 5% of so much of the taxpayer’s adjusted gross income as exceeds $150,000 joint returns; $112,500 in case of head of household; and $75,000 for individuals. See the Chart below from the Tax Foundation:
- Provides $350 billion in monies for loans for small businesses. This will be administered through the Small Business Association and its authorized lenders.
- Small businesses can apply for low-interest loans that cover up to two-and-a-half months of payroll expenses, including salaries, sick leave, and other compensation benefits. The maximum loan amount is $10 million. The loans can cover payroll, rent, utilities, or existing debt obligations. Interest rates on these loans can’t exceed 4%.(a)
- If an employer continues to pay workers through June, the amount of the loans that went toward eligible costs would be forgiven. That means they’d essentially be grants to small businesses. Eligible costs for forgiveness include payroll costs for employees earning up to $100,000 annually, rent (b) or mortgage payments, and utilities. The amount forgiven would be scaled back if an employer lays off workers or reduces their pay.
- Employer side of payroll taxes may be deferred, with one-half (½) of the deferred amount due by December 31, 2021 and the other one-half (½) deferred until December 31, 2022. (c)
(a) A loan made under the SBA’s Disaster Loan Program on or after January 31, 2020, may be refinanced as part of a covered loan under this new program as soon as these new loans are made available. The CARES Act specifically allows SBA Disaster Loan recipients with economic injury disaster loans made since January 31, 2020 for purposes other than the permitted loan uses under this program to receive assistance under this program.
(b) Rent has to be obligated under a leasing agreement in force before February 15, 2020.
(c) Current language states that an employer shall not be eligible for deferment of payroll taxes if the employer has loans forgiven from the SBA for wages, rent, etc.