Overview of the Coronavirus Aid, Relief and Economic Security (CARES) Act.
It should be noted, these are provided as at-a-glance program highlights, only. Please contact your attorney, business manager, accountant, bank, etc. for additional and detailed information if you wish to know more about these programs.
Paycheck Protection Program (PPP) – amendment to the Small Business Action 7(a) loan program
The PPP is a loan program designed to provide a direct incentive for small businesses to keep their workers on payroll.
The Small Business Association (SBA) will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities. Forgiveness amounts shall not be reduced if, by June 30th, 2020, the borrower eliminates the reduction in employees or reduction in wages of more than 25% as a result of the COVID-19 pandemic.
- $350 billion loan program for businesses, self-employed, independent contractors, 501 (c)(3) non-profit organizations and other certain types of entities with no more than 500 people.
- Loans available through any existing SBA 7(a) lender or any federally insured depository institution, federally insured credit union, and enrolled in the program. Employers can check with their lender to see if they will be participating in the PPP under the SBA or check the SBA’s list of 100 most active lenders.
- Due to likely high subscription, at least 75% of the forgiven amount must have been used for payroll.
- There is no need to demonstrate economic injury in order to qualify for these loans, however, PPP loans are largely incompatible with several other COVID-19 relief programs.
- Lenders may begin processing loan applications as soon as April, 3, 2020, for small business and April 10th, 2020, for independent contractors and self-employed with an estimated three-week dispersal rate. Funds will be distributed on a first-come, first-served basis.
Useful links:
PPP General Information:
PPP Infographic:
SBA Top 100 List of Lenders:
https://www.sba.gov/article/2020/mar/02/100-most-active-sba-7a-lenders
Sample PPP Application:
SBA Economic Injury Disaster Loan (EIDL) Program
The EIDL program provides assistance to businesses, renters, and homeowners located in regions affected by declared disasters, including entities that have suffered substantial economic injury caused by the COVID-19 pandemic.
- Loans of up to $2 million are available in disaster zones but may vary by state.
- Aid is available to businesses, self-employed, independent contractors, tax exempt, private non-profit 501 (c), (d), or (e) and other certain types of entities with no more than 500 people.
- Eligible applicants for an EIDL may be eligible for a $10,000 emergency grant within three days of application through Dec. 31, 2020. There is no obligation to repay the grant, however, if applicants receive a PPP loan, the $10,000 grant will be subtracted from the forgiveness amount. The CARES Act prohibits borrowers from taking on two loans for the same purpose.
- EIDLs are not forgivable.
Useful links:
EIDL General Information:
https://www.sba.gov/page/disaster-loan-applications
EIDL Inforgraphic:
https://www.uschamber.com/sites/default/files/uscc_covid19_sb-economic-injury-disaster-loans.pdf
EIDL Application:
https://covid19relief.sba.gov/#/
Employee Retention Credit
The Employee Retention Credit is designed to encourage business to keep employees on payroll. The refundable tax credit is 50% of up to $10,000 in wages paid by an eligible employer whose business has been financially impacted by the COVID-19 Pandemic.
- The credit is available to all employers regardless of size, including tax-exempt organizations, however, small businesses who take small business are not eligible to receive the tax credit.
- To qualify for the tax credit, employer’s must be fully or partially suspended by government order to the COVID-19 pandemic and the employer’s gross receipts must be below 50% of the comparable quarter in 2019. Once an employer’s gross receipts go above 80% of a comparable quarter in 2019, they no longer qualify after the end of that quarter.
- For employers with less than 100 employees on average in 2019, the tax credit shall be based on wages paid to all employees, regardless if they worked or not. If the employees worked full-time and were paid full-time work, the employer still receives credit.
- For employers with more than 100 employees on average in 2019, the tax credit is allowed only for wages paid to employees who did not work during the calendar quarter.
Useful links:
Internal Revenue Service News Release:
* To find out more information, please contact your accountant.
Payroll Tax Deferral
This tax incentive allows employers of all sizes, including self-employed individuals, to delay payroll tax through the end of 2020, which can then be paid over the next two years.
- 50% of the deferred tax payments shall be paid by the end of 2021 and the remainder paid by the end of 2022.
- The Payroll Tax Deferral incentive does not apply to businesses or individuals that take advantage of a PPP loan.
Useful links:
Article from U.S. Chamber of Commerce
https://www.uschamber.com/co/start/strategy/cares-act-small-business-guide
* To find out more information, please contact your accountant.
Large Firm Support Loans
The CARES Act authorized $500 billion for the Treasury to make loans, loan guarantees and other investments in support of eligible midsize businesses of between 500 and 10,000 employees.
- Loans for midsize businesses are not to have an annualized interest rate of higher than 2% and for the first six months, no principal or interest is due and payable.
- The funds shall be used to retain 90% of the employer’s workforce that existed as of February 1, 2020, and to restore all compensation and benefits to the workers no later than four months after the termination of the public health emergency.
- Applicants shall prove that due to the uncertain economic conditions created by the COVID-19 pandemic make the loan necessary to support ongoing operations.
- The employer shall not outsource or offshore jobs until at least 2 years after the loan is repaid.
- These loans are not forgivable.
More information to come on Large Firm Support Loans.
Useful links:
Online Resource:
https://www.vorys.com/publications-2559.html
For more information, please visit the AIA CA website at https://aiacalifornia.org/covid-19-resources/ .
