Breaking down the recently-enacted Coronavirus Aid, Relief, & Economic Security Act

The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act is a $2 trillion stimulus package recently signed by President Trump aimed at shoring up the U.S. economy. At the same time, it navigates the worst of the COVID-19 pandemic. Much of the media attention has been concerned with the individual aid measures to provide an infusion of cash through direct payments and expanded unemployment insurance, small and large businesses in the form of loans, grants, tax deferments, and other measures. Below is a summary of some of the key provisions for owners and managers of businesses to be aware of while navigating the coming weeks.

Small Businesses

• All businesses under 500 employees are eligible for loans from the Small Business Administration. The total loan amount can be up to:

  • Four months of average payroll, mortgage, rent, and debt expenses; or

  • $10,000,000

• The portion of these loans spent on payroll from March 1 to June 30 may be forgiven; less any reductions if the business’ workforce or payroll has been reduced in that time period.

• Temporarily waives fees and guarantees the total amount for all SBA loans.

• Grants deferral of loan repayments for up to a year

• The SBA will also provide grants of up to $10,000 to help pay operating costs in the near term.

Businesses and Corporations

• Corporate tax filings are extended to October 15, 2020

• Up to fifty percent of payroll taxes due can be deferred until January 1, 2021

• Loosened restrictions on a business’s ability to deduct operating losses and interest payments on debt for the tax years of 2019 and 2020

Economic Stabilization Measures

• Creates loan funds of $50 and $8 billion for passenger and cargo domestic air carriers, respectively

  • Airlines are also exempt from excise taxes on fuel for the rest of 2020

• Creates $150 billion loan fund for other businesses not eligible for relief under other provisions of the Act

• Businesses that take these loans are subject to certain conditions.

  • Executive compensation is capped at 2019 levels for two years.

• All money and programs distributed under this section are subject to oversight by an inspector general and reporting requirements by the Treasury.

• Otherwise, qualifying businesses owned by the president, vice president, the cabinet, Congress, or family members are specifically barred from receiving these funds.