CORONAVIRUS AID, RELIEF, AND ECONOMIC SECURITY ACT
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act), a $2.2 trillion stimulus measure, is the largest federal response in history intended to provide relief to individuals, families and businesses in response to the COVID-19 pandemic.
The CARES Act will deliver immediate medical assistance for first responders and patients, monetary assistance to individuals and families, including those who have lost a job, relief to small and large businesses that have shut down, and direct aid to states and municipalities for essential services.
Major components of the CARES Act include the following provisions:
- All testing for COVID-19 will be covered by private insurance plans, with free coverage of a vaccine within 15 days for COVID-19 when such a vaccine is available.
- For eligible small businesses, sole proprietors, independent contractors, and other self-employed individuals the CARES Act provides $349 billion through federally backed loans under a modified and expanded Small Business Administration loan guaranty program. These loans must be originated between February 15, 2020, and June 30, 2020. Loan terms do not require personal guarantees or collateral, and may be forgiven for amounts used to pay for basic operating expenses, such as utilities, rent, mortgage or payroll for up to two months from the origination date. Loan terms will include 4% interest if not forgiven with a maximum maturity rate of 10 years.
- For those who lost employment because of the pandemic, the measure provides supplemental unemployment insurance, including for self-employed, independent contractors, and those with limited work history. The assistance will include an additional $600 per week for each recipient and provides an additional 13 weeks of benefits to those who remain unemployed after state unemployment benefits are no longer available.
- Individual taxpayers with an adjusted gross income of up to $75,000 ($150,000 joint) are eligible for a full $1,200 ($2,400 joint) rebate, and an additional rebate of $500 per child. Taxpayers will not be required to do anything to receive a rebate check, as the IRS will reference prior tax returns to determine rebate amounts. The rebate is reduced by $5 for each $100 of the taxpayer’s income that exceeds $75,000 and completely phases out at $99,000.
- Additional Tax Provisions:
- Temporary waiver of IRA required minimum distribution (RMD) requirements in 2020.
- Penalty-free withdrawals of tax retirement funds of up to $100,000 (income recognized over a three-year period).
- Deferral of 50% of an employers’ payroll tax deposits for 2020 (with 50% of deferred amount due by December 31, 2021 and 50% due by December 31, 2022).
- Refundable employer retention credit equal to 50% of qualified wages against quarterly employment taxes to offset up to $10,000 of wages paid per employee in 2020.
- Technical correction that assigns qualified improvement property with a 15- year recovery period, allowing the bonus depreciation deduction to be claimed for such property retroactive to January 1, 2018.
This sweeping measure will not likely be the last action that federal officials will undertake to address the ongoing effects of the COVID-19 pandemic.