US Capitol

A team of CLA industry leaders is interpreting the law and will publish content in the coming days to help explain what this means for you, and what steps you can take moving forward.

Regulations

CARES Act Signed Into Law: Includes an Estimated $2 Trillion or More in Stimulus

  • Chastity Wilson
  • Rob Schile
  • Jennifer Boese
  • Todd Sprang
  • Yuliya Ostapenko
  • 3/27/2020

Key insights

  • The CARES Act became law today
  • The Act includes an estimated $2 trillion in stimulus
  • Start your loan application process

Today, the CARES Act, which includes various provisions totaling an estimated $2 trillion or more in stimulus intended to help businesses, individuals, health care providers, states and municipalities, became law.

What can you do now?
Start discussions with your banker regarding the loan application process or visit the SBA information center for additional guidance.

Following is a high level overview of the provisions. This outline does not capture the entirety of funding or policy changes in the Act.

A team of CLA industry leaders is interpreting the law and will publish content in the coming days to help explain what this means for you, and what steps you can take moving forward.

Title I – Keeping American Workers Paid and Employed Act

  • Small Business Administration, forgivable loans up to $10 million
    • Available to businesses, nonprofits, veterans affairs organizations, and tribal business concerns with fewer than 500 employees or, if applicable, the threshold for standard number of employees established by the Administration for the industry in which the business concern, nonprofit organization, veterans organization, or tribal business concern operates
  • $500 billion in loans, loan guarantees, and other investments to economically distressed businesses, states, and municipalities
  • $150 billion to states, tribal governments, and units of local government

Title II – Assistance for American Workers, Families, and Businesses

  • Expansion of unemployment benefits (duration and amounts)
  • Recovery rebates for individuals
    • $1,200 advance credit per person
    • $500 per qualifying child
    • Qualifying taxpayers are under $75,000 adjusted gross income ($150,000 married filing jointly, $112,500 for head of household)
    • Advance payments will be based on 2019 reported income
  • Retirement funds
    • COVID-related distributions up to $100,000 not subject to penalty
      • Available to individual taxpayer (a) who is diagnosed with COVID-19, (b) whose spouse or dependent is diagnosed with COVID-19, or (c) who suffers adverse financial consequences as a result of quarantine, furlough, lay-off, work-hour reduction, inability to work due to lack of child care, or other factors as determined by the Secretary of the Treasury during the COVID-19 pandemic.
    • May be repaid within three years of distribution
    • Income is spread over three years if not repaid
  • Required Minimum Distributions (RMDs)
    • RMD not in effect for 2020 for current or new RMDs
    • If first required distribution not made in 2019: April 1, 2020, distribution requirement waived
  • Partial above the line charitable deduction
    • Above the line $300 cash charitable deduction for 2020 (i.e., can deduct up to $300 without itemizing deductions)
  • Increase limits on charitable contributions
    • Eliminates the 60% limitation for cash donations
    • Corporate level raised to 25% of taxable income
    • Food limit increased to 25% of taxable income from the business
  • Exclusion from income for limited employer payments of student loans
    • Employer payment on employee student loans is tax-free fringe benefit for 2020
    • Not to exceed $5,250 decreased by other educational assistance programs
  • Employee retention credit
    • Credit against employer 6.2% FICA payroll taxes for 50% of wages for each quarter
    • Limit of $10,000 per employee, cumulatively
    • Limited to employment taxes
    • Refundable if the credit is greater than the employer’s employment tax liability.
    • Has to have:
      • Operation of trade or business fully or partially suspended during calendar quarter due to governmental orders limiting commerce, trade, or group meetings due to COVID; or
      • A 50% decline in revenues measured by quarter compared to prior year quarter
    • The credit is applicable to tax-exempts (without decline in revenue provision)
    • Employers with more than 100 full-time employees:
      • Employees not able to work as result of government-ordered suspended operations or meeting decline in revenues test
    • Employers with 100 or fewer full-time employees:
      • Wages paid during government-order suspended operations or meeting decline in revenues test
    • Credit measured on wages plus certain excludible group health plan costs
    • No retention credit if employer receives covered SBA loan under Section 7(a)(36) of Small Business Act (a new provision in this legislation)
    • Retention credit not applicable to governments
    • Effective for wages March 12, 2020, to December 31, 2020
  • Delay of payment of employer payroll taxes
    • Deferral of employer share of 6.2% FICA
    • No deferral if loan under Section 7(a)(36) of Small Business Act is forgiven
    • 50% of self-employment tax allowed to be deferred
    • 50% of deferred amounts due on December 31, 2021, and remainder on December 31, 2022
  • Net operating loss (NOL) 5-year carryback and waiver of 80% taxable income limit
    • 80% of taxable income limitation is waived for 2018 – 2020; now 100% of taxable income may be offset
    • 2018, 2019, and 2020 NOLs can be carried back five years
    • May elect or revoke election to forgo carryback within 120 days of enactment
  • Excess business losses (EBL) limit eliminated for pre-2021 years
    • No EBL for pre-2021
    • EBL eliminates wages from business income
    • EBL will be effective January 1, 2021, to December 31, 2025
  • Modifications to business interest expense limits
    • Interest limitation increased to 50% for 2019 and 2020
    • Does not apply to partnerships for 2019, but partner can use 50% of disallowed 2019 amount in 2020
    • May elect out of these changes
    • May use 2019 taxable income in calculating 2020 taxable income
  • Qualified improvement property (QIP) retroactive fix
    • QIP is now 15-year property
    • Bonus depreciation allowed retroactively
    • Effective for 2018

Title III and Supplemental Legislation – Supporting American’s Health Care System in the Fight against the Coronavirus

Health care

  • $100 billion for health care providers
    • “… to remain available until expended, to prevent, prepare for, and respond to coronavirus, domestically or internationally, for necessary expenses to reimburse, through grants or other mechanisms, eligible health care providers for health care related expenses or lost revenues that are attributable to coronavirus …”
  • $11 billion for vaccines, therapeutics, diagnostics, and other preparedness needs
  • $4.3 billion for the Centers for Disease Control and Prevention
  • $16 billion for the Strategic National Stockpile
  • Funds health centers, national health service corp, and teaching health center graduate medical education programs
  • Provides an additional $1.32 billion in supplemental assistance in 2020 to health centers
  • Allows additional hospitals, like Critical Access Hospitals, to receive advanced Medicare payments
  • Multiple telehealth policies
    • Allow FQHCs, RHCs to furnish telehealth services to individuals in their homes, other settings and be reimbursed (distant site) based on rates (to be developed)
    • Flexibility from face-to-face requirements for home dialysis, hospice
    • $29 million per year (2021-2025) for telehealth network and resource center grants changes, including to rural areas
  • Lifts sequester (2% automatic Medicare cuts) from May-Dec 31
  • Inpatient hospital Medicare add-on payment for COVID-19 patients weighting factor to DRG to which discharge is assigned is increased by 20 percent
  • Home health services
    • Allowing physician assistants, nurse practitioners and clinical nurse specialists to order home health services
    • Encourage the Department of Health & Human Services to consider ways to promote, including through clarifying guidance, telecommunications systems, including remote patient monitoring
  • Funding for multiple rural grant programs
  • Changes requirements related to disclosure of substance use disorder records with patient consent
  • Reauthorization and/or changes to various health care workforce programs
  • Certain waivers for inpatient rehabilitation facilities and long-term care hospitals
  • Various Medicare and Medicaid funding polices are extended, including a delay of the required Medicare Disproportionate Share Hospital reductions
  • Delay durable medical equipment and clinical diagnostic lab tests payment reductions
  • Multiple changes to over-the-counter drugs

Education provisions

  • COVID-19 Pandemic Education Relief Act of 2020
  • Waives the institutional matching requirement for campus-based aid programs.
  • Allows institutions to transfer unused work-study funds to be used for supplemental grants — does not apply to private for-profit institutions
  • Allows institutions to award additional Federal Supplemental Educational Opportunity Grant (SEOG) funds to students impacted by COVID-19
  • Allows institutions to issue work-study payments to students who are unable to work due to work-place closures as a lump sum or in payments similar to paychecks
  • For students who dropped out of school as a result of COVID-19:
    • Excludes the term from counting toward lifetime subsidized loan eligibility;
    • Excludes the term from counting toward lifetime Pell eligibility;
    • Removes the requirement to return Pell grants or federal student loans;
    • Waives the requirement that institutions calculate the amount of grant or loan assistance that the institution must return; and
    • Removes the impact of the student’s grades on the student’s federal academic requirements to continue to receive Pell Grants or student loans.
  • Permits foreign institutions to offer distance learning to U.S. students receiving Title IV funds for the duration of the COVID-19 declaration of disaster
  • Provides authority to grant waivers from the Elementary and Secondary Education Act that are necessary and appropriate due to the COVID-19 declaration of disaster (so long as civil rights laws are not affected).
  • Authorizes the deferment of payments on current Historically Black College and University (HBCU) Capital Financing loans during the national emergency period so HBCUs can devote financial resources to COVID-19 efforts
  • Requires the deferment of student loan payments, principal, and interest for six months, through September 30, 2020, without penalty to the borrower for all federally owned loans
  • Provides participants serving in the National Service Corps programs with the educational award they were due to receive before their duties were suspended or placed on hold during the COVID-19 declaration of disaster. Extends the age limits and the terms of service to allow individuals serving in national service programs to continue participating in programs after the COVID-19 declaration of disaster ends
  • Provides local workforce boards with additional flexibility to use funds received under the Workforce Innovation and Opportunity Act for administrative costs, including for online resources; allows governors to utilize reserved workforce funds on rapid response activities in response to COVID-19
  • Authorizes the waiver of certain outcome requirements for FY2021 grant programs for HBCU and other Minority Serving Institutions (MSI)
  • Authorizes the waiver or modification of current allowable uses of funds for institutional grant programs (TRIO/GEARUP/Title III/Title V/and sections of Title VII), so colleges can re-deploy resources and services to COVID-19 efforts. Permits institutions to request waivers of financial matching requirements in competitive grant and other MSI grant programs in the Higher Education Act
  • For teachers who could not finish their year of teaching service as a result of COVID-19, their partial year of service shall be counted as a full year of service toward TEACH grant obligations or Teacher Loan Forgiveness; waives a requirement that teachers must serve consecutive years of teaching service for Teacher Loan Forgiveness eligibility, if a teacher’s service is not consecutive as a result of COVID-19

Title IV – Economic Stabilization and Assistance to Severely Distressed Sectors of the United States Economy

  • Provides additional funding and relaxed rules for institutions to finance small businesses and nonprofits with Small Business Administration guarantees
  • Temporary lending limit waivers — the Office of the Comptroller of Currency may exempt transactions or series of transactions
  • Lowers community bank leverage ratio requirements and provides grace periods for qualifying banks
  • Alters existing GAAP and recent interagency guidance for loan modifications
  • Provides an optional temporary deferral of Current Expected Credit Loss implementation
  • Provides forbearance and foreclosure relief for federally backed mortgage loans

How we can help

A team of CLA industry leaders is interpreting the Coronavirus Aid, Relief, and Economic Security (CARES) Act and will publish content in the coming days to help explain what this means for you, and what steps you can take moving forward.

Contact Us

  • Chastity Wilson
  • Managing Principal of Tax