Since the outbreak of COVID-19, Congress and the administration have approved a series of stimulus packages to meet public health needs and aid the economy. The first two stimulus packages were focused heavily on emergency aid to battle the pandemic and to assist those directly stricken by the virus. The third stimulus package, however, is directed toward mitigating the economic damage that businesses and individuals are experiencing under the extraordinary measures being taken to slow the spread of the virus.
As part of this update, you will find a general description of stimulus phases 1 & 2; a detailed review of the stimulus phase 3; links to websites that provide detailed information on specific aspects of the packages; and attachments containing information that we feel will be helpful to you.
This alert is intended to assist you in establishing a fundamental understanding of the various stimulus packages and to provide access to government resources in this area. Due to the complexity of these overlapping bills and their respective provisions, we strongly encourage you to consult with your tax advisors to determine how your company might qualify to take advantage of the benefits being offered under these relief packages.
Phase 1: Signed into law on March 6 – Coronavirus Preparedness and Response Supplemental Appropriations Act
$8.3 billion targeted to aid federal government preparedness for handling coronavirus:
- Additional funding for several federal agencies including Centers for Disease Control and Prevention (CDC), Food and Drug Administration (FDA), National Institutes of Health (NIH), and others
- $4 billion toward coronavirus test availability, and $1 billion in loan subsidies for small businesses
Phase 2: Signed into law on March 18 – Families First Coronavirus Response Act (FFCRA)
$100 billion targeted to aid U.S. citizens impacted by the coronavirus:
- Free coronavirus testing for the uninsured
- Increased federal funds for Medicaid and food security programs like SNAP
- Two weeks of paid sick and family leave
- Increased unemployment insurance benefits
More detail can be found at the Department of Labor site.
Phase 3: Signed into law on March 27 – Coronavirus Aid, Relief and Economic Security (CARES) Act
$2 trillion in emergency economic aid. Key business-related provisions are summarized below. Also, attached here is a section-by-section analysis of the CARES Act that provides greater detail on the entire bill.
A total of $500 billion in emergency funding to the U.S. Department of Treasury’s Exchange Stabilization Fund (ESF) to stabilize key national industries. This will support $4 trillion in loans to businesses from financial institutions.
The Federal Reserve will leverage $454 billion in the ESF to provide approximately $4 trillion in direct assistance to various industries, cities and states.
Businesses will work directly with banks to access this capital. This is expected to be the main mechanism in the CARES Act to provide capital for textile manufacturers with employment levels that exceed SBA small business employee limits.
Also includes direct loans from Treasury to the following major industries:
- $25 billion for passenger airlines
- $4 billion for cargo airlines
- $17 billion for businesses critical to “maintaining national security”
More information on the Treasury Department’s Coronavirus relief efforts can be found at the following sites:
Small Business Loans
Small businesses will have access to an array of programs designed to provide liquidity and sustain employment. The Small Business Administration defines “small businesses” based on total employee levels. Attached here is a listing of the SBA’s small business definitions for specific industries matched to NAICS codes. Textile listings are found on pages 8 & 9.
The bill creates a $349 billion “Paycheck Protection Program” for small employers to help prevent worker layoffs and bankruptcies due to economic losses caused by the COVID-19 pandemic.
The “Paycheck Protection Program” will provide eight weeks of cash-flow assistance through 100 percent federally guaranteed loans to small employers who maintain their payroll during this emergency. Small businesses were able to start applying for the program through an SBA approved lender on April 3, and the program is open through June 30. However, loans will be issue on a first-come, first-served basis, and the SBA expects funds may run out in the next few weeks. This program provides small businesses with a tax-free, forgivable loan valued at 250% of one month’s payroll (up to $10 million) which can be used to pay wages, rent, mortgage interest, and utilities for eight weeks.
More information on the Payroll Protection Program can be found at the following site: https://home.treasury.gov/policy-issues/top-priorities/cares-act/assistance-for-small-businesses
Debt relief for small businesses
For six months, the Small Business Administration (SBA) is required to pay all principal, interest and fees on all existing SBA loan products including 7(a), Community Advantage, 504, and Microloan programs.
SBA must enact these programs with regulations no later than 15 days after the act is signed into law.
More information on the Small Business Administration’s Coronavirus loan relief programs can be found at the following site: https://www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources
Several tax provisions were included in the bill to keep businesses open, including assistance with cashflow and providing credits for employers to keep employees on payroll.
Employers of all sizes that face closure orders or suffer economic hardship due to the coronavirus crisis that continue to pay employees that are furloughed may be eligible for a 50% credit on up to $10,000 of wages paid to those employees.
Employers would be able to delay the payment of their 2020 payroll taxes until 2021 and 2022, leading to approximately $300 billion of extra cash flow for businesses.
Businesses will be allowed to carry back losses from 2018, 2019, and 2020 to the previous five years, which will allow businesses access to immediate tax refunds.
Businesses will be allowed to increase the amount of interest expense they can deduct on their tax returns, from the current 30 percent limitation up to 50 percent of taxable income (with adjustments) for 2019 and 2020.
The corporate Alternative Minimum Tax (AMT) was repealed as part of the Tax Cuts and Jobs Act, but corporate AMT credits were made available as refundable credits over several years, ending in 2021. The CARES Act accelerates the ability of companies to recover those AMT credits, permitting companies to claim a refund now and obtain additional cash flow during the COVID-19 emergency.
More information on the IRS Coronavirus tax credits can be found at the following site: https://www.irs.gov/newsroom/covid-19-related-tax-credits-for-required-paid-leave-provided-by-small-and-midsize-businesses-faqs
Direct tax refund checks to many Americans
Checks will be sent to qualifying citizens in amounts of $1,200 per person or $2,400 per couple and increased by $500 for each child in the household. Those amounts will decrease for individual tax filers with adjusted gross income over $75,000, and joint filers at $150,000 based on 2018 tax return.
More information on the IRS Coronavirus relief payments can be found at the following site: https://www.irs.gov/newsroom/economic-impact-payments-what-you-need-to-know
Certain rules on retirement accounts are loosened
Older Americans that are subject to mandatory minimum distributions from their retirement accounts will be able to keep their capital invested instead of being forced to cash out to draw on that capital without penalty, which is suspended for 2020.
Also waives the 10% penalty on coronavirus-related early distributions from 401(k)s and IRAs, which applies to distributions made at any time during 2020.
Includes $250 billion to expand the size and scope of unemployment benefits, including for workers furloughed as a result of the COVID-19 pandemic.
States have policies in place to allow furloughed workers to receive unemployment benefits and part-time workers can receive partial benefits. The Pandemic Unemployment Assistance Program also helps workers stay connected to their employer by allowing unemployment benefits for workers who have a job but are unable to work or telework due to COVID-19-related reasons and are not receiving paid leave through their employer.
Increases benefits by adding a $600/week across-the-board payment increase through the end of July. In addition, for those who need it, the bill provides an additional 13 weeks of benefits beyond what states typically allow.
The expansion in unemployment benefits expires at the end of 2020.
More information on the Department of Labor Coronavirus unemployment benefits can be found at the following sites:
Medical Supply Chain
Implements policies to examine the domestic medical supply chain, replenish the Strategic National Stockpile, and prevent shortages in the future.
Directs the National Academies to study the manufacturing supply chain of drugs and medical devices and provide Congress with recommendations to strengthen the U.S. manufacturing supply chain.
Clarifies that the Strategic National Stockpile can stockpile medical supplies, including PPE, medical devices, and swabs necessary for diagnostic testing for COVID-19.
Clarifies that during a public health emergency, a medical device manufacturer is required to submit information about a device shortage or device component shortage upon request of the FDA.
For further COVID-19 related questions or support, please email ATA by clicking here.