Sweeping Stimulus Package Enacted

This afternoon the historic and sweeping Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law, providing unprecedented aid to mitigate the sudden halt imposed on the nation’s economy by the novel coronavirus. 

Many businesses grappling with the ramifications of the pandemic will find critical assistance within the $2.2 trillion of relief structured as loans, grants, enhanced unemployment benefits, refunds and other forms of tax relief.

To help you stay aware of the assistance that may be critical to your operations, we are providing general summaries of certain key portions of the CARES Act. Miller Canfield will continue to monitor for further guidance and clarification to be issued by the various departments and administrations. The summaries below include links to related detail analysis.

$500 Billion in Loan and Loan Guarantees To Facilitate Economic Stabilization

As the largest allocation within the bill, Congress extended $500 billion in assistance to businesses, states, and municipalities to support them with loans and loan guarantees. Passenger air carriers will receive up to $25 billion of that allocation. $17 billion is available for critical national security businesses, and $4 billion is reserved for air cargo carriers. The remaining $454 billion may be used by the Federal Reserve to provide liquidity in the financial system in support of lending to eligible states, municipalities and businesses. This includes the purchase of issuers’ obligations both directly and through secondary markets as well as extending loans or advances.  

Businesses that have not otherwise received adequate economic relief under other provisions of the CARES Act may be eligible for a portion of this $454 billion dollar assistance. Loans and loan guarantees terms include restrictions on listed equity buy-backs, dividends and maintenance of employment levels and, in the case of air carriers and national security businesses, also include restrictions on the compensation of highly paid employees and warrants, equity interests or senior debts instruments designed to provide for reasonable participation in equity appreciation or interest rate premiums. 

$150 Billion for Local Government

The Act provides $150 billion to assist state and local governments with the provision of direct payments to be applied against qualified costs related to the pandemic for which the requesting local government has not currently budgeted.

$130 Billion for Medical

Congress also included $130 billion in relief for the healthcare system, including assistance to address shortages in medication and devices and supplies.

For a more detailed analysis including the process for applying for these loans click here.

For a more detailed analysis of these funds and loans available to states and municipalities click here.  

$349 Billion Paycheck Protection Program

The CARES Act establishes, through the Small Business Administration (SBA), a $349 billion Paycheck Protection Program to expedite and enhance loans of up to $10 million per qualified borrower. The Act broadens the eligibility of those who can apply for the loans, increases the speed for borrowers to access loans, and the flexibility for the SBA to make the loans. To further assist businesses, the program includes provisions for expanded use of the loan proceeds, deferral of initial payments, and forgiveness of certain portions of the loan used for eligible costs.

$10 Billion Economic Injury Disaster Loans

To make Economic Injury Disaster Loans (EIDL) easier for impacted businesses to access, the CARES Act loosens various restrictions. It also provides qualified businesses with an expedited emergency advance of up to $10,000 to be applied by the borrower against certain eligible costs including certain qualified costs of payroll and paid sick leave. The advance will be forgiven even if the qualified applicant is never awarded the EIDL.

$17 Billion SBA Loan Subsidies

In addition, Congress has allocated $17 billion to subsidize certain SBA loans by covering the principal and interest payments for a total of six months. Even those qualified SBA loans issued prior to the enactment of the CARES Act may receive the benefit of this subsidy.

Additional Funds For Coronavirus Education, Training and Small Business Advisement

Qualified small business development centers, women’s business centers, resource partner associations, and minority business centers may be awarded grants for educating, training and advising covered small business employees on how their business can mitigate the impact of this novel coronavirus. These grants come free of requirements for matching funds.

For a more detailed analysis of the Paycheck Protection Programs, EIDL and Loan Subsidies click here.

Tax Relief

Relief and Assistance for Businesses

The CARES Act offers the potential for significant tax relief. That relief comes in a variety of forms, including the revival of the ability to carryback certain net operating losses and clarification and acceleration of AMT refunds. Key provisions of the Act may free up cash flow for those impacted by the pandemic by allowing qualified businesses and individuals to delay tendering certain employer payroll and self-employment taxes. Employers impacted by the pandemic may be eligible for credits against their Social Security tax liability. 

Relief and Assistance for Individuals

Individual taxpayers may also find tax relief as the Act provides expedited refundable tax credits of $1,200 for qualified single filers and $2,400 for qualified joint filers, plus an additional $500 for each qualified child. The assistance begins to phase out at $75,000 for individuals, $150,000 for joint returns and $112,500 for the head of household.

For a more detailed analysis of tax relief and the refundable tax credits, click here.

Revisions to Families First Coronavirus Response Act and Expansion of Unemployment Benefits and Coverage

The CARES Act is Phase III of the federal government’s response to the pandemic. Thus, Congress had the opportunity to revise sections of the Families First legislation enacted in Phase II. Congress has added provisions allowing covered employers to receive an advance of the refundable portion of those tax credits generated by compensation paid pursuant to Emergency Paid Sick Leave and the Emergency Family Medical Leave Expansion Act. Congress also clarified that no employer is required by that law to pay its employees compensation in excess of the caps established on those tax credits. Congress also clarified that no employer is required under Families First to pay those employees on leave compensation in excess of the caps established on those tax credits.

$250 Billion In Extended Unemployment Benefits

For those businesses which are forced to undergo workforce reductions as a result of the pandemic, the CARES Act contains provisions helping states expand who is eligible for unemployment benefits as well as increase those benefits with an additional $600 per week in Federal Pandemic Unemployment Compensation.  

For a more detailed analysis of each of these labor matters click here.

Accessing Retirement Accounts

To provide additional cash to individuals who have suffered qualified impacts of the virus, the Act provides enhanced early access to retirement accounts by way of withdrawals or an enhanced borrowing structure. The CARES Act waives the 10% early withdrawal penalty on qualified coronavirus related early distributions of up to $100,000. As further assistance, the Act then provides favorable tax terms for rolling that same distribution back into the account. Certain individuals may be able to borrow up to $100,000 from their retirement account. It also allows delayed payments for certain loans. 

For a more detailed analysis of such distribution and loans, including guidance to plan administrators click here. 

Assistance for Non-Profits

Some of the assistance and relief created by the CARES Act has been structured to include non-profit organizations.  This includes access to the Paycheck Protection Program, EIDLs (including the $10,000 advance), and the ability to delay payment of employment taxes.   Non-profit organizations may also want to highlight the qualified $300 charitable tax deduction allowed under the CARES Act for tax filers who do not itemize deductions.

For more detailed analysis assistance for non-profits click here.

COVID-19 RESOURCES

Click here to access Miller Canfield's COVID-19 Resource Center.

CORONAVIRUS RESPONSE TEAM

Click here for a directory of the Miller Canfield Coronavirus Response Team.

Resources

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