By THOMAS P. CLEMENT
The Coronavirus Aid, Relief, and Economic Security Act (CARES) signed Friday by President Trump is a stimulus package intended to support the United States economy during the ongoing coronavirus pandemic. It provides, among other things, business loans and tax relief, expansion of unemployment benefits and direct payments to qualifying United States citizens.
This document is intended to highlight key provisions of CARES. In order to avail yourself and your business of all of the potential benefits, you should consult with your tax, accounting, legal, and other advisors in order to determine eligibility for programs and maximization of benefits.
Loans, Loan Guarantees and Investments:
- The Treasury Secretary is permitted to make loans, loan guarantees and investments in an amount not to exceed $500 billion.
- Note that $75 billion is set aside for passenger air carriers, cargo air carriers and businesses critical to maintaining national security.
- The Paycheck Protection Program is the largest loan provision in CARES and is intended to promote the retention of employees by providing funds for short term expenses.
- Available to businesses with fewer than 500 employees and in an amount not to exceed 250% of average monthly payroll.
- Loans are eligible for forgiveness to the extent the money is used for payroll, rent, utilities and mortgage interest obligations. Loan repayments can also be deferred for a period of time.
- The eligible loan period is retroactive to February 15, 2020 through June 30, 2020.
- There are certain prohibitions when taking advantage of these loans. These include prohibitions on stock buybacks and dividends, unless there is already an existing agreement or contract in place, and limits on executive compensation during the term of the loan plus a period of time thereafter.
- The loans will be guaranteed by the Small Business Administration and will likely be issued by most FDIC insured banks. Retailers wishing to take advantage of these loans should be in contact with an appropriate lending institution to inquire about the application process.
Business Tax Relief:
- Employers may now defer 50% of 2020 employer payroll taxes until December 31, 2021, with the remaining 50% due December 31, 2022.
- 50% refundable payroll tax credit for employers who had their business fully or partially suspended.
- Net operating losses from 2018, 2019 and 2020 can be carried back to the previous five years to offset taxable income. This will generate an immediate rebate on taxes already paid.
- Businesses will now be able to deduct 50% of interest expenses from 2019 and 2020 (up from the current 30%).
- Remodeling projects done by retailers and restaurants in 2018 and 2019 can be depreciated more quickly on an amended tax return. Those overpayments will be refunded because the CARES Act corrected a previous tax reform glitch that impacted the depreciation period for improvements.
Recovery Rebates for Individuals:
Individuals with an adjusted gross income of $75,000.00 or less, or $150,000.00 or less for married couples filing jointly, who are not dependents of another taxpayer will receive rebate payments of $1,200 ($2,400 if married). Additionally, individuals eligible for the rebate payments will also receive $500 per dependent child. Eligibility will be determined based upon 2019 returns, if filed, or 2018 returns.
Emergency Unemployment Compensation:
CARES establishes a temporary federal unemployment assistance program through December 31, 2020 to extend the timeframe individuals may receive unemployment payments from 26 weeks to 39 weeks and supplements standard payments by $600.00 per week. It also provides payments to those not traditionally eligible for unemployment benefits, including self-employed individuals, who are unable to work as a direct result of the coronavirus public health emergency.
Specifically, CARES provides that a “covered individual” includes anyone who is able and available to work but is unemployed or partially unemployed. It includes individuals who:
- Have been diagnosed with COVID-19 or is experiencing symptoms and seeking a medical diagnosis;
- Have a member of the individual’s household diagnosed with COVID-19;
- Are providing care for a family member or household member who has been diagnosed with COVID-19;
- Are the primary caregiver for a child or other person in the household who is unable to attend school or another facility as a direct result of COVID-19;
- Are unable to reach the place of employment because of a quarantine imposed as a direct result of COVID-19;
- Are unable to work because a health care provider has advised them to self-quarantine due to COVID-19 concerns;
- Were scheduled to commence employment and do not have a job or are unable to reach the job as a direct result of COVID-19;
- Have become the breadwinner or major support for a household because the head of household has died as a direct result of COVID-19;
- Have had to quit their job as a direct result of COVID-19; or
- Have seen their place of employment close as a direct result of COVID-19.
Applications can be filed either online or by phone. Beginning Sunday, March 29, 2020, the following application process is encouraged:
Online Filing Schedule – Michigan.gov/UIA
- Last names beginning with letters A-L are asked to file claims on Mondays, Wednesday, Fridays.
- Last names beginning with letters M-Z are asked to file claims on Sundays, Tuesdays, or Thursdays.
- Saturdays will be available for anyone to accommodate those who could not file during their allotted window.
Call Center Filing Schedule – 866-500-0017:
- Last names beginning with letters A-L are asked to call on Mondays and Wednesdays between 8 a.m. and 5 p.m.
- Last names beginning with letters M-Z are asked to call on Tuesdays and Thursdays between 8 a.m. and 5 p.m.
- Fridays (8 a.m. and 5 p.m.) will be available for anyone to accommodate those who could not file during their allotted window.
For more information visit Michigan.gov/UIA
CARES is one of the largest stimulus packages in history. It is important to keep in mind that the federal legislation is brand new and eligibility determinations will be a work in progress. You or your authorized representative should work directly with your advisors and the appropriate agencies to explore eligibility and available benefits.