What is the CARES Act?
The Coronavirus Aid, Relief, and Economic Security Act is a two trillion dollar relief package intended to aid Americans and businesses impacted by C19. The CARES Act provides $377 billion to small businesses affected by the current economic crisis through several different programs, including the Payment Protection Program (“PPP”), Economic Injury Disaster Loans (“EIDL”) and related grants, current SBA loan relief, in addition to providing billions of dollars for federal unemployment insurance and direct payments to qualifying individuals.
Does the ACT provide assistance for retaining employees?
Yes - the CARES Act offers Payment Protection Program (PPP) loans, which are federally funded and intended to be forgivable for employers maintaining their payroll during the C19 pandemic.
What businesses qualify for PPP loans?
Businesses in operation no later than February 15, 2020, and having fewer than 500 employees per physical location. The CARES Act also extends this program to non profit organizations, sole proprietorships, self-employed individuals, and independent contractors.
How are loan sizes calculated?
The maximum loan size is $10 million but the amount businesses may receive is calculated in different ways:
Businesses operating between February 15, 2019, and June 30, 2019, may receive up to 250% of the average monthly payroll.
Businesses with seasonal workers may use March 1, 2019, to June 30, 2019, for average monthly payroll calculation.
Businesses not operating during the 2019 time period may receive up to 250% of average monthly payroll for the January 1, 2020 to February 29, 2020, time period.
Businesses with an EIDL received between February 15, 2020 and June 30, 2020, may refinance into a PPP loan in a potentially larger amount.
What does “payroll” include under the PPP?
Payroll under the PPP includes: compensation, such as salary, wage, commission, payment of cash tip or equivalent; leave, such as vacation, parental, family, medical, or sick time; severance pay; healthcare and retirement benefits; and payroll taxes.
PPP funds cannot be used for the following: employee/owner compensation over $100,000; taxes imposed or withheld under chapters 21, 22, and 24 of the IRS code; and Families First Coronavirus Response Act credits.
What options do furloughed and separated workers have?
Workers may apply for unemployment insurance, depending on state law eligibility. For example, some states allow furloughed workers to receive UI benefits and others require only a reduction in pay (rather than $0 income). The CARES Act provides for federal unemployment insurance of $600/week for up to four months for qualifying individuals, found here.
Does the CARE Act provide for individual relief?
Yes - Americans with annual adjusted gross income under $75,000 will receive direct payments of $1,200, and joint flyers with AGI under $150,000 will receive $2,400. Direct payments will be reduced for AGI over these amounts; additional information may be found here. The IRS will use 2018 tax returns as the basis for AGI calculations, unless 2019 returns are filed prior to AGI determination.
Individuals with dependents under the age of 18 will receive $500 per child and is prorated based on the same AGI scale. If individuals do not qualify for the direct stimulus payments based on 2018 or 2019 income, but have decreased income in 2020, thay be eligible for a tax credit.
Does the CARES Act provide grants?
Yes - qualifying businesses may apply for a grant up to $10,000 to be used for any business-related expense by applying for an EIDL through the SBA (even if previously applied), found here.
I'm worried about making payments on our SBA loans - what options are available?
The Small Business Debt Relief Program provides other loans, such as non-disaster SBA loans, and microloans. Due to C19, the SBA will cover all loan payments for the next six months and are extending relaxed eligibility requirements to new borrowers. If you have questions or need assistance applying for these loans you can contact your local Small Business Development Center or local Women's Business Center, located here.
Questions, concerns, or additional guidance?
Contact Stephen Rotter or Jennifer Gokenbach
The Workplace Counsel