Summary of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”):

On March 25, 2020, the United States Senate passed the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The Cares Act will move to the United States House of Representatives this week, and the president is expected to sign it after it’s passed by Congress. The CARES Act is one of several phases of legislation meant to address the various impacts of the coronavirus pandemic in the United States. The CARES Act contains the following key provisions:

  • Economic Stabilization and Assistance for Severely Distressed Sectors: $500 billion for Coronavirus Economic Stabilization Act of 2020 to provide loans, loan guarantees, and other investments to passenger air carriers ($25 billion), cargo air carriers ($4 billion), businesses important to national security ($17 billion), and other eligible businesses, states, and municipalities ($454 billion). The program will be overseen by a newly appointed inspector general in the U.S. Department of Treasury and will have a congressional oversight panel to examine the use of funds. The business loans contain certain conditions. In addition, the act provides $32 billion for air carrier worker support to provide financial assistance for employee payroll and benefits for passenger air carriers ($25 billion), cargo air carriers ($4 billion), and airline contractors ($3 billion).
  • Keeping American Workers Paid and Employed Act: $350 billion to provide loans for small employers. The small employers are required to either have fewer than 500 employees, meet the SBA standard, or be self-employed or “gig economy” individuals. Certain nonprofits, veteran organizations, and tribal business concerns also qualify. The loans will equal 250% of an employer’s average monthly payroll up to $10 million. Loans will be available through more than 800 SBA-certified lenders. If the employer maintains its payroll, then the portion of the loan used for covered payroll costs, interest on mortgage, rent, and utilities would be forgiven. These provisions are retroactive to February 15, 2020. In addition, the Act provides for $10 billion in emergency economic injury disaster loans grants that expands eligibility for entities suffering economic harm by giving SBA more flexibility. These grants are for up to $10,000 and can be made within three days. Also, the act provides for $17 billion of small business relief debt to pay all of the principal, interest, and fees on all existing SBA loans for six months to provide relief to small businesses negatively affected. Also, the act provides for $275 million in grants to certain SBA resource partners, and minority business development agency to offer counseling, training, and related assistance.
  • Unemployment Insurance Provisions: Expanded unemployment insurance to help with a new surge in claims. It increases unemployment insurance by $600 per week for a four-month period. This expanded federal unemployment insurance will be in addition to state unemployment payments. This benefit extends to self-employed, independent contractors, and those with limited work history.
  • Rebates and other Individual and business provisions: One-time $1,200 check to individuals ($2,400 for married filing jointly) making $75,000 or less annually (or $150,000 or less for those married filing jointly) in their past tax returns. The payments will phase-out for individuals who made $99,000 (or $198,000 for married filing jointly). A $500 payment would also be sent for every child in qualifying households. The CARES Act added a provision to waive 10 percent early withdrawal penalty for retirement fund distributions up to $100,000. The CARES Act added a provision to delay payment of employer payroll taxes and relax limitations of use of net operating losses for tax purposes.
  • Supporting America’s Healthcare System: $130 billion will go to hospitals, and will be used to increase medical equipment capacity.
  • Coronavirus Relief Fund and Miscellaneous Provisions: About $150 billion will be allocated to state and local governments who are dealing with the impacts of the crisis in their local communities. About $10 billion of borrowing authority will be provided to the US Postal Service.

While the CARES Act contains more detail and other provisions, the summary above provides visibility into the initial broad strokes of the Act. We will provide more detail into specific aspects of the Act in the upcoming days.

Next Steps

In America, the situation is changing by the minute. With the governmental response to the COVID-19 pandemic is evolving quickly, CRI will continue to keep you informed of relevant new developments. If you’re unsure whether the CARES Act will affect you and your business, contact your CRI advisor for more information.