Chris Nichols
March 31st, 2020

On Friday, the President signed into law the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which was created to provide immediate support to both households and businesses due to the COVID-19 pandemic and its related consequences. The CARES Act appropriates an unprecedented $2 trillion in aid and comes at a time when many people are feeling financial pain.

Some of these provisions, particularly those targeted at individuals, will go into effect immediately with relief targeted to be delivered in approximately three to four weeks. Other provisions, such as those pertaining to the Small Business Administration (SBA), will need to wait for guidance that should be completed in the next 30 days.

While the details are making their way out, we put together a summary of the major provisions that could impact you.

For Households

  • Most individual taxpayers will be entitled to a $1,200 ($2,400 married) income tax rebate plus an additional $500 per child (income eligibility requirements apply). These payments will start phasing out for individuals with adjusted gross incomes of more than $75,000.

For Small Businesses

  • Establishes a payroll protection program (PPP), which provides for 100% guaranteed loans by the SBA. These loans can be used to cover specific operating costs to include payroll, mortgage payments, rent, and utilities. These PPP loans are sized at the monthly average of 2.5x eligible payroll costs. A portion of these loans equal to eight weeks of covered expenses can be forgiven by the SBA subject to certain limitations.
  • In addition to PPP, the CARES Act authorizes $17 billion for relief of existing SBA 7a loans and $10 billion for emergency grants for operating costs. Business must choose either the PPP program outlined above or one of the tax relief programs below:
    • Employee Retention Credit

      This is a fully refundable 50% tax credit applicable to the employer’s share of payroll taxes on wages up to $10,000 per employee. To be eligible, you must demonstrate that your operations were suspended because of an official government order related to COVID-19, or that your gross receipts declined by at least 50% compared to the same quarter in 2019.

    • Payroll Tax Holiday

      If your company chooses this option, it would give you the ability to defer payment of your share of Social Security taxes for the period beginning on the date of the enactment of the Act (March 27, 2020), and ending before January 1, 2021. The deferred amounts would then be 50% due by December 31, 2021, and the remaining amount by December 31, 2022. Please note that you would still have the liability and would have to eventually make payment of these deferred taxes.

  • There are some other provisions, such as expanding the window for carry back of net operating losses that are within the CARES Act, which can positively impact your tax liability. While this information is changing rapidly, many states and counties have announced various deferral programs. The American Institute of Certified Public Accountants (AICPA) has a good summary for various states that you can download.

For Larger Corporations, Non-profits, and Municipalities

  • The Act set aside $454 billion for liquidity facilities to certain businesses in critical industries in addition to supporting states and municipalities. The program will include direct loans and loan guarantees to affected eligible companies.
  • More than $339 billion in financial support, including $100 billion for hospitals and $150 billion for state and local public health assistance.
  • $25 billion is earmarked in loans and grants to support passenger and cargo transportation companies deemed essential to National Security.
  • Provides the SBA Administrator up to 30 days to issue guidance and regulations needed to implement this Act.

This is not a comprehensive list but just the most material programs for you. Of course, your situation is unique, and some of the details can be impacted by state programs, so you should ultimately consult your tax professional, financial advisor, and/or your legal counsel.

We’re working diligently to track and review these programs. Since we know all these changes can be daunting, in the coming days, we look forward to offering our assistance to help you further navigate your financial needs and lead you how best to help your family and your business.

The articles presented contain summaries, personal opinions, viewpoints and analyses of the author of the article and not those of CenterState Bank. The articles are intended to provide general information on finance, current events, strategy, leadership, risk management, and other related topics and are not intended to be complete or to provide any specific recommendations or advice. Readers should consult their own legal or financial professionals for specific advice on any particular topic.