On March 27, 2020, President Trump signed into law a relief package developed by lawmakers in response to the global economic crisis created by the coronavirus pandemic. The Coronavirus Aid, Relief, and Economic Security Act (HR 748), also known as the CARES Act, is estimated to be more than $2 trillion in stimulus to protect workers and businesses.
Below are some highlights of the CARES Act:
All Businesses
- Federal Employee Retention Credit
- Refundable employment tax credit against employer quarterly social security tax on employee wages paid during COVID-19-related business downturn.
- Available to employers whose operations were fully or partially suspended due to a COVID-19-related shut-down order OR gross receipts declined by more than 50% compared to prior year quarter.
- 50% employment tax credit on up to $10,000/wages per employee.
- “Qualified Wages”:
- Business >100 employees: Wages paid while an employee was not providing services.
- Business <100 employees: Wages paid while an employee was or was not providing services.
- Four Relief Provisions for all Qualifying Businesses
- Net operating loss (NOL) carryback fix from the Tax Cuts and Jobs Act (TCJA) of 2017.
- Five-year NOL carryback provision.
- Deferral of 80% income limitation on post-2017 NOLs to 2021.
- Immediate Alternative Minimum Tax (AMT) credit refunds.
Small Businesses
In addition to the grants and loans available to small businesses (500 or less employees), there are changes to rules for expenses and deductions, which will assist them in retaining employees on the payroll and keep their business open.
- Forgivable Loans: $350 billion for the Small Business Administration (SBA) to provide loans of up to $10 million per business. The loans can be used to cover payroll or pay for rent, mortgage as well as provide for existing debt to be forgiven, provided workers stay employed through the end of June. Please note that the amount forgiven is lowered by reductions in full-time employment and in situations where total salaries and wages fall by more than 25% from the applicable prior period, but this can be mitigated by rehiring employees.
- Relief for Existing Loans: $17 billion to cover six months of payments for small businesses already using SBA loans.
- Emergency Grants: $10 billion in grants (up to $10,000) to provide emergency funds to cover immediate operating costs for small businesses.
Large Businesses
An estimated $500 billion in loans and other money has been allocated to large businesses. These businesses will have to pay the government back and will be subject to public disclosures and other requirements.
- Stock Buyback Ban: All businesses receiving a loan under the CARES Act are barred from making stock buybacks for the term of the loan plus one year.
- Reporting Requirements: All loans, their terms, and any investments or other assistance provided by the government must be publicly disclosed.
- Airlines: $61 billion is to help airlines and their contractors stay open. A portion ($32 billion) is set aside to assist in covering employee wages, salaries, and benefits: $25 billion for passenger air carriers, $4 billion for cargo air carriers, and $3 billion for airline contractors. And the other portion ($29 billion) is set aside for loans and loan guarantees for air carriers.
Ryan’s service lines are diligently working on the opportunities outlined in the CARES Act to provide our clients with tangible relief as soon as possible. We invite you to learn more by clicking on our service lines (Credits and Incentives, Federal Income Tax, State Income and Franchise Tax, and Human Capital Tax) and our COVID-19 Updates site for specific information, as well as our webinar at which we will more fully discuss these opportunities.
TECHNICAL INFORMATION CONTACT:
Sharon Welhouse
Principal, Practice Leader, Credits and Incentives
Ryan
512.960.1146
sharon.welhouse@ryan.com
The material presented in this communication is intended to provide general information only and should solely be seen as broad guidance and not directed to the particular facts or circumstances of any individual who may read this publication. No liability is accepted for acts or omissions taken in reliance upon the content of this piece. Before taking (or not taking) any action, readers should seek professional advice specific to their situation from Ryan, LLC or other tax professionals. For additional information about this topic, please contact us at info@ryan.com.
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- Sharon M. Roberts