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Breakdown of "Cares Act"

Impact on Businesses

Employee Retention Credit

  • Employers who experience business disruptions as a result of COVID-19 related shut-downs are eligible for a refundable payroll tax credit of 50% of qualified wages paid (up to $10,000 per employee per quarter) during the period of March 12 through December 31, 2020. The employee retention credit is also available to businesses that experience a significant decline in gross receipts, defined as a 50% or greater decrease in gross receipts versus the same quarter in prior years.
  • For businesses with more than 100 employees, the credit applies only to employees who are retained but not working. For businesses with fewer than 100 employees, the credit applies to all employees.


Business Loan Programs

SBA 7(a) Loan Program Expansion

The loan programs below all fall under the Federal 7(a) loan program administered by the SBA.  The PPP, SBA Express, and EIDL Loans would give private banking institutions the ability to loan directly to businesses. This side-steps the current process to provide funding to businesses more quickly.

Delegated authority is the ability for lenders to make determinations on borrower eligibility and creditworthiness without going through all of SBA’s channel. The Act provides it to all current 7(a) lenders who make these loans to small businesses. It also gives that same authority to lenders who join the program and make these loans. For eligibility purposes, the Act requires lenders to determine whether a business was operational on February 15, 2020 and had employees for whom it paid salaries and payroll taxes, or a paid independent contractor. Rather than determining repayment ability which is not possible during this crisis.

Paycheck Protection Program (PPP)

  • The bill includes $350 billion for the Paycheck Protection Program – this is designed to help small businesses (with fewer than 500 employees, generally), including sole proprietors and other self-employed individuals.
  • The maximum loan amount is $10 million, and allowable loan uses include payroll, insurance premiums, mortgage, rent and utility payments from February 15 to June 30.
  • Small businesses may take out loans up to $10 million (based on a formula associated to payroll costs) and applies to employees making up to $100,000/year.
  • Loans may be forgiven if a firm uses the loan for payroll, interest payments on mortgages, rent, and utilities; it would be reduced proportionally by any reduction in employees retained compared to the prior year and a 25 percent or greater reduction in employee compensation.


SBA Express Loan – Repayable Loan

The SBA Express Loan Program provides an accelerated turnaround time for SBA to review loans. These loans are a simple way to receive expedited, amortized government-guaranteed financing for small businesses. Entrepreneurs can be granted up to $350,000 of capital, in the form of either a term loan or line of credit. Once received, this capital may be used for various business purposes.

The Act increases the maximum loan for an SBA Express loan from $350,000 to $1 million through December 31, 2020.

The true value of an SBA Express loan lies not only in the remarkably fast turnaround time for an approval, but also in the willingness of lenders to advance funds. The interest rate is negotiated but cannot exceed the SBA maximum.

Emergency Economic Injury Disaster Loans (EIDL) – Repayable Loan

The Act expands eligibility for access to Economic Injury Disaster Loans (EIDL) to include Tribal businesses, cooperatives, and ESOPs with fewer than 500 employees or any individual operating as a sole proprietor or an independent contractor during the covered period (January 31, 2020 to December 31, 2020). Private nonprofits are also eligible for both grants and EIDLs.

  • Waiver of Personal Guarantees & Other Eligibility Requirements
    • The Act requires that for any SBA EIDL loans made in response to COVID-19 before December 31, 2020, the SBA shall waive the following: any personal guarantee on advances and loans below $200,000; the requirement that an business must be operating for a 1-year period before the disaster; and the credit elsewhere requirement.
    • During the covered period, the Act allows SBA to approve and offer EIDL loans based solely on an applicant’s credit score or use an alternative appropriate alternative method for determining applicant’s ability to repay.
  • Emergency Grant Payment Distributions
    • Establishes an Emergency Grant to allow an eligible entity who has applied for an EIDL loan due to COVID-19 to request an advance on that loan, of not more than $10,000, which the SBA must distribute within three days.
    • Applicants shall not be required to repay advance payments, even if subsequently denied for an EIDL loan. In advance of disbursing the advance payment, the SBA must verify that the entity is an eligible applicant for an EIDL loan.
    • This approval shall take the form of a certification under penalty of perjury by the applicant that they are eligible. Advance payment may be used for providing paid sick leave to employees, maintaining payroll, meeting increased costs to obtain materials, making rent or mortgage payments, and repaying obligations that cannot be met due to revenue losses.
    • Further, the Act requires that an advance payment be considered when determining loan forgiveness, if the applicant transfers into a loan made under SBA’s Paycheck Protection Program.


Payroll Tax Deferral

  • Employers can defer payment of the employer portion of social security for the remainder of 2020. Deferred amounts will need to be paid in two installments, with 50% due in 2021 and the remainder 50% due in 2022.





Impact on Individuals

Recovery Checks for Individuals

  • Single filers will receive rebates of up to $1,200 and joint filers will receive up to $2,400 (+ an additional $500 per child). These rebates are subject to phase-outs beginning at $75,000 / $150,000 adjusted gross income (AGI) for single filers / joint filers. The amount is completely phased-out at the following thresholds:
    • Single taxpayers with incomes exceeding $99,000
    • Head of household filers with one child at $146,500
    • Joint filers earning more than $198,000
  • The IRS will base these amounts on the taxpayer’s 2019 tax return if filed, or in the alternative their 2018 return.


Retirement Plans

  • Individuals who make certain coronavirus-related withdrawals from qualified retirement plans up to $100,000 will have their 10% early withdrawal penalty waived.
  • Withdrawn amounts are taxable over three years, but taxpayers can recontribute those funds within the three-year period without affecting retirement account caps.
  • Which accounts are eligible? Individual retirement accounts (IRAs), 401Ks and other qualified trusts, certain deferred compensation plans, and qualified annuities.
  • The bill also waives required minimum distribution rules for certain retirement plans in calendar year 2020. This can be a substantial source of tax savings for those who do not need to live on their RMDs in 2020.



  • Unemployment insurance has been expanded to include an additional $600 per week, per recipient for up to four months. The Act extends benefits to self-employed workers, independent contractors, and those with limited work history. The federal government has asked states to remove any waiting period on receiving benefits. In doing so, the federal government will fully fund the first week’s payment. The federal government will also fund an additional 13 weeks (through December 31, 2020) of unemployment benefits after state benefits have ended.


Student Loans

  • Employees whose employers make student loan repayment contributions on their behalf are excluded from taxable income – employers may contribute up to $5,250 annually toward student loans, and the payments would be excluded from the employee’s income.
  • This applies only to contributions made prior to January 1, 2021.


Charitable Deductions

  • For taxpayers who take the standard deduction, the Act provides for a partial above-the-line deduction, not to exceed $300, for cash contributions made to a 501(c)(3) public charity. This does not apply to non-cash contributions and excludes cash contributions made to donor-advised funds.
  • For those that do itemize their deductions, the Act suspends the 60% AGI limitation on cash contributions for 2020. Again, this excludes cash contributions made to donor-advised funds.


Health Care / Health Provision

  • The Act includes provision that cover COVID-19 testing, addresses shortages of needed drugs and medical supplies, increases support for health care workers, and increases funding for telehealth services.
  • The Act increases funding for Medicare and Medicaid, expands Medicare and Medicaid coverage COVID-19 patients, and postpones scheduled Medicare/Medicaid cuts.


Economic Stabilization

  • The Act establishes the Economic Stabilization Fund to provide $500 billion in direct loans, loan guarantees, and other investments to eligible businesses. Of this amount, certain industries have been allocated specific amounts: Passenger Airlines $25 billion, Cargo Airlines $4 billion, and businesses crucial to national security $17 billion.
  • Businesses receiving funds are prohibited from buying back stock for the duration of the loan plus one year. They are prohibited from paying a dividend on common stock for the duration of the loan plus one year. Total compensation of highly paid workers is limited for the term of the loan plus one year. They must also retain at least 90% of their employment level as of March 24th.
  • An additional $150 billion has been earmarked for a Coronavirus Relief Fund for state and city governments to cover expenses related to the coronavirus public health emergency. The funds are to be allocated by population proportions. The minimum amount for each state is $1.25 billion.

This legislation is likely the beginning of the attempts of Congress to support the US economy during this crisis. We expect to hear from commercial banks in the coming days on how to navigate the various loan provisions of this legislation. At the same time, most states have enacted their own relief packages to combat the economic crisis on a local level. While the federal programs have larger dollars involved, they also have more businesses chasing those dollars.