By SEMA Washington, D.C., Staff
The U.S. Senate passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), H.R. 748, which has been referred to the U.S. House of Representatives for its consideration. The $2.2 trillion package would provide sweeping relief to individuals and companies, including small businesses, and distressed industries. The CARES Act would:
- Provide $349 billion to guarantee private-sector loans through the U.S. Small Business Administration’s (SBA) existing 7(a) loan program for employers with fewer than 500 employees companies. SBA loan amounts under the bill (referred to as Paycheck Protection Program loans) would equal 250% of monthly payroll (capped at $10 million), which can be used to cover payroll, mortgages, rent, and other specified expenses. The bill waives collateral and personal guarantee requirements in addition to borrower and lender fees, defers payments for one year, and caps the interest rate on loans at 4%. Important: The SBA would forgive the portion of the loans used to cover payroll, mortgage interest, rent payments, and the cost of utilities for a period of eight weeks if small businesses retain their employees and payroll levels. Companies looking to apply for 7(a) loans are encouraged to visit Lender Match, a free online referral tool that connects small businesses with participating SBA-approved lenders within 48 hours.
- Provide $17 billion for the SBA to pay all principal, interest and fees on all new and existing SBA loan products including 7(a), Community Advantage, 504, and Microloan programs for six months (does not apply to Paycheck Protection Program loans listed above).
- Provide cash payments of up to $1,200 per individual with an adjusted gross income (AGI) of up to $75,000, $2,400 for married couples filing jointly with an AGI of up to $150,000, and $500 for each child. Cash payments are decreased for individuals and couples with incomes more than those amounts and are completely phased-out for single filers with incomes exceeding $99,000, head of household filers earning more than $136,500 and joint filers earning more than $198,000.
- Help unemployed and furloughed workers by providing an additional $600 per week payment per recipient of unemployment insurance or Pandemic Unemployment Assistance for up to four months.
- Provide $150 billion for hospitals and health care facilities, $150 billion to state and local governments and $500 billion to the U.S. Department of the Treasury to provide collateralized loans and loan guarantees to eligible entities in distressed industries, including airlines, cargo airline businesses and firms deemed critical to national security.
Other provisions benefitting small businesses include:
- Provides employers with a refundable payroll tax credit for 50% of the first $10,000 of compensation, including health benefits, paid by employers to employees during the COVID-19 crisis (for wages paid from March 13, 2020, through December 31, 2020). The credit is available to employers whose operations were fully or partially suspended, due to a COVID-19-related shut-down order, or gross receipts declined by more than 50% when compared to the same quarter in the prior year. For employers with more 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 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.
- Allow employers and self-employed individuals to defer payment of the employer share of the Social Security tax with half of the amount to be paid by December 31, 2021, and the other half by December 31, 2022.
- Modify net operating loss limitations for corporations, allowing any loss for tax years 2018, 2019 or 2020 to be carried back five years. It would modify the loss limitation applicable to pass-through businesses and sole proprietors, so they can utilize excess business losses and access critical cash flow to maintain operations and payroll for their employees.
- Temporarily increase the amount of interest expense businesses can deduct on their tax returns, increasing the 30% limitation to 50% of the taxable income (with adjustments) for 2019 and 2020.
- Allow retailers to deduct the entire cost of renovating their store(s) in a single year instead of having to depreciate those improvements over the 39-year life of the building.
For more information, contact Eric Snyder at erics@sema.org.
For additional information about SBA loans, a 50-state tracking guide on shelter-in-place orders, and other Coronavirus information, visit www.sema.org/coronavirus.