In response to the Global pandemic caused by COVID-19, or more commonly called the Coronavirus, the United Sates has enacted the Coronavirus Aid, Relief, and Economic Security Act, or the “CARES Act” (the Act). After much deliberation and continued delays, the Senate was finally able to pass the CARES ACT late on Wednesday night March 25. The House is not expected to vote on the bill until Friday (at the earliest)
Over the course of less than one week, the package grew in size from fewer than 250 pages to almost 900 pages. The Act contains numerous provisions affecting a wide variety of areas intended to provide business relief, individual stimulus payments, enhanced unemployment benefits, support for health care providers, corporate and individual tax relief, as well as assistance to states and cities
As the country’s economy continues to constrict from the impact of COVID-19, many businesses and individuals have been impacted in a variety of ways. We have already seen earlier bills passed related to expanded health care coverage and small business provisions, as well as extensions in tax filing deadlines and payment due dates. The CARE ACT is intended to be a “Phase 3” of the economic stimulus related packages. Further still though, some politicians have hinted additional phases may be required
The size of this economic package is unprecedented. The bill provides $2 Trillion in funding. Further, the U.S. Federal reserve will be able to provide $4 trillion in aid to local governments and industries. Some of the details of the bill are noted below.
For businesses, governments, and health care related enterprises, the Act includes:
$500 billion to back loans and provide assistance to larger companies. There are strings attached to this assistance, including limits on executive bonuses, bans on stock buy-backs, and protection of workers.
$350 billion to aid small businesses including small business loans and forgiveness; however, there appear to be strings attached related to worker retention requirements.
$150 billion for hospitals and other healthcare providers for equipment and supplies
$17 billion earmarked for companies identified as critical to national security (believed to be Boeing);
Over $50 billion to the airline and related industries.
$20 billion to replenish the nation’s stock of medical supplies and the development of coronavirus vaccines and tests.
$400 million to the states for 2020 election assistance.
For individuals, the Act contains a variety of benefits including:
Eligibility for checks up to $1,200, with married couples filing jointly eligible for checks up to $2,400, along with an extra $500 for each child. The funds begin to phase out at higher income levels.
Scheduled cuts to Medicare and Medicaid are rolled back
Unemployment insurance is enhanced and expanded.
Student loan repayments can be deferred.
A number of provisions affect business and individual taxes. Some of the significant tax-related provisions in the bill are summarized below. More in-depth analysis will follow over the coming days when the bill becomes law:
Additional Individual tax provisions include:
2020 recovery rebates for individuals;
Special rules for the deductibility of charitable contributions
Special rules for retirement fund distributions
Certain exclusions for employer-paid student loans
Business tax measures (including business items in individual returns) include:
Delays certain payroll taxes;
Provides credits for certain employee retention
Liberalization of limitations on NOLs and excess business losses;
Changes to business interest deduction limitations
Technical correction changes to Qualified Improvement Property (QIP)
Modifications involving the payment of Sick Pay and Family Medical Leave
The passage of the Act is a significant step forward in assisting many U.S. businesses, and their employees, survive the economic turmoil caused by COVID-19. As the unprecedented fight against the virus continues, it is impossible to say how long the economic down turn will last and how quickly the recovery will take. Hopefully, this Act will help both businesses and individuals
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Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.