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CAREs Act Summary
By Mariel J. Giletto, Susan S. Hodges on March 30, 2020
CAREs Act Summary

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) passed both the Senate and the House.  The President signed it on Friday afternoon, March 27th.  Below is a summary of some of the key provisions contained within the CARES Act.




  • Title I: Keeping American Workers Paid and Employed Act
    • Paycheck Protection Program
      • $349 billion is allocated for small business loans between February 15, 2020 and June 30, 2020
      • Creates the Paycheck Protection Program to provide cash-flow assistance to small business for payroll costs through 100% federally guaranteed loans to employers who maintain their payroll during this emergency.
      • Covered period: February 15, 2020 through June 30, 2020.
      • In addition to payroll costs, the loan can be used for mortgage interest payments, rent, utilities, and interest on other debt incurred prior to February 15, 2020. Payroll costs include, but not limited to: salary, wages, commissions, tips, paid-time-off, dismissal or separation allowance, group health insurance premiums, retirement benefits, state or local taxes, compensation/income to sole proprietors or independent contracts (wages, commissions, income, etc.) capped at $100,000 per year, prorated over the covered period.  Employees/owners with annual salaries of greater than $100,000 are not eligible.
      • Eligibility:
        • Small businesses, nonprofit organizations, veterans organizations, and tribal businesses that employee no more than 500 employees (includes employees who are full-time, part-time, or other basis) or the standard number of employees in the industry, whichever is greater. Businesses in the hospitality and restaurant industries are excused from the 500 employee requirement.
        • Sole proprietors, independent contractors, and self-employed individuals upon submission of proper documentation to establish eligibility.
        • Businesses with more than 1 location that employees 500 or less employees per physical location and has a NAICS code beginning with 72.
      • Maximum Loan Amount:
        • The lesser of:
          • The average total monthly payroll costs during the last 1-year period, multiplied by 2.5. For seasonal employers, the average total monthly payroll payments for a 12-week period for February 15, 2019 or March 1, 2019 through June 30, 2019, multiplied by 2.5, plus any outstanding loan amount pursuant to the Small Business Act’s Disaster Loan Program between January 31, 2020 and the date the loan can be refinanced under this program;
          • For eligible employers that were not in business during February 15, 2019 through June 30, 2019, the average monthly payroll costs beginning January 1, 2020 and ending February 29, 2020, multiplied by 2.5, plus any outstanding loan amount pursuant to the Small Business Act’s Disaster Loan Program between January 31, 2020 and the date the loan can be refinanced under this program; or
          • $10,000,000.
      • Employers can use the loan to refinance 7(a) loans made during the period beginning on January 31, 2020 and ending on the date the loan is made available.
      • No personal liability unless loan proceeds are used for an unauthorized purpose.
      • Eligible employers are required to submit a good faith certification when applying for the loan.
      • Loan fees are waived and no personal guarantee or collateral are required.
      • Interest rates not to exceed 4%.
      • No prepayment penalty for payments made on the loan.
      • Loan Deferment
        • Impacted borrowers: Eligible employers that were in operation on February 15, 2020 and have an approved, or pending approval, loan application on or after the date the bill is enacted. They are presumed to be adversely impacted by COVID-19.
        • Impacted borrows get loan deferment, inclusive of principal, interest, and fees, for at least 6 months but not more than 1 year.
      • Loan Forgiveness. The loan forgiveness is reduced if the business has a reduction in employees (or wages) compared to the year prior, which incentivizes businesses to retain employees. Additionally, if business re-hire workers previously laid off due to COVID-19 (or makes up for the wage reduction), by June 30, 2020, the business is not penalized.
    • Economic Injury Disaster Loans and Grants
      • Economic Injury Disaster Loans ("EIDL"): Businesses with fewer than 500 employees and sole proprietors and independent contractors are eligible. Loans may be used to pay for expenses that generally would have otherwise been met had business not been impacted by COVID-19 (including payroll). Loans may be for a maximum of $2 million. Interest rates are set at up to 3.75 percent for businesses and up to 2.75% for nonprofits. Eligible businesses may receive both Paycheck Protection Program and EIDL funds under specific circumstances.
      • Emergency Economic Injury Grants ("EEIG"): eligible entities as described above may apply for EEIG of up to $10,000 to businesses and nonprofits that have applied for an EIDL. Businesses must apply for a grant within three days of applying for their loan.
      • All applications made through the Small Business Administration
    • Entrepreneurial Development

Allocates $265 million to Small Business Development Centers, Women's Business Centers, or SCORE mentorship chapters. The goal of this section is to expand the reach of these companies in order to better support small business owners through counseling and providing information regarding COVID-19. The bill contemplates a joint platform that consolidates information and resources related to COVID-19 to provide consistent and timely information to small businesses.  Minority Business Development Agency Business Centers will also receive funding to hire staff and provide programming to help their clients respond to COVID-19 related challenges.

  • Title II: Assistance for American Workers, Families, and Businesses
    • Unemployment Insurance Provisions: Covered individuals can receive unemployment benefits while unemployed/partially unemployed/or unable to find work if not receiving any other unemployment compensation for the time period beginning January 27, 2020 through December 31, 2020 for the duration of their unemployment/partial unemployment/inability to work, but not in excess of 39 weeks, inclusive of any tie the employee received regular compensation or extended state or federal benefits.
      • A covered individual is someone who is not eligible for regular compensation or extended benefits under either state or federal law and has exhausted all regular unemployment rights and leave benefits, who is able to work but unemployed, partially unemployed, or unable/unavailable to work because:
        • The individual has been diagnosed with, or is having symptoms of and seeking a medical diagnosis for, COVID-19;
        • A member of the individual’s household has been diagnosed with COVID-19;
        • The individual is caring for a family member/household member who has been diagnosed with COVID-19;
        • The individual’s child or other household member who they are the primary caregiver for cannot attend school or a care facility because it is closed due to COVID-19, and such school or care facility is needed to enable to the individual to work;
        • The individual cannot go to work due to a quarantine imposed as a result of the COVID-19 public health emergency;
        • The individual cannot go to work because the individual has been advised by a health care provider to self-quarantine related to COVID-19;
        • The individual was scheduled to commence employment but now does not have the job or cannot reach the job due to the COVID-19 public health emergency;
        • The individual has now become the major supporter/breadwinner for the family as a result of the head of the household dying from COVID-19;
        • The individual’s employer is closed due to the COVID-19 public health emergency;
        • The individual meets other criteria established by the Secretary of Labor; or
        • The individual is self-employed, seeking part-time employment, does not have sufficient work history, or otherwise would not qualify for regular unemployment or extended state or federal benefits.
      • Individuals with the ability to telework or who are receiving any paid leave or paid leave benefits are not eligible.
      • Amount of Benefits:
        • The weekly benefit amount under the unemployment compensation law of the state where the individual was employed plus $600.
        • For self-employed individuals or individuals who would not qualify under state law (i.e. independent contractors, gig workers), are eligible for the amount of unemployment benefits provided by their State.
      • No waiting period.
    • Rebates and Other Individual Provisions
      • Individual Tax Credits: The federal government is providing tax credits for 2020 and advancing refund checks to individuals, which will result in many individuals receiving checks from the government.  It provides for $1,200 per adult individual with an adjusted gross income of $75,000 or less (adjusted gross income of $112,500 or less for heads of household), $2,400 for married individuals filing a joint tax return with a join adjusted gross income of $150,000 or less, and $500 per child under 17 years old.  If an individual’s adjusted gross income exceeds those threshold, the amount is reduced by 5%.  When determining the amount each individual should receive, the government will use the individuals 2019 tax return, and if the individual has not yet filed the 2019 tax return, the individual’s 2018 tax return will be used.
      • Retirement Savings Accounts: Penalties for withdrawals of up to $100,000 from qualified retirements for COVID-19 related reasons are waived.  While penalty free, the withdrawal is still subject to income tax, but can be spread out over a three-year span, and the individual can re-contribute such funds to their retirement account within three years without regard to the contribution cap.  COVID-19 related reasons include: (1) the individual is diagnosed with COVID-19; (2) the individual’s spouse or dependent is diagnosed with COVID-19; or (3) the individual experiences adverse financial consequences as a result of being quarantined, furloughed, laid off, having reduced work hours, not being able to work due to lack of child care due to COVID-19, having to close or reduce the business hours due to COVID-19 of a business owned/operated by the individual, or other factors determined by the Secretary of Treasury. Further loans from certain retirement plans for COVID-19 related reasons are more flexible.
      • Charitable Contributions: Taxpayers may deduct up to $300 of cash contributions to qualifying charitable organizations if the taxpayer does not itemize deductions.  Also, taxpayers are entitled to a full deduction of qualifying charitable donations for individuals up to the amount of their taxable income.  If the qualifying charitable donation exceeds the individual’s taxable income, the excess can be carried over to the next tax year.  Corporations can deduct qualified charitable contributions up to 25% of taxable income.
      • Student Loan Payments: The definition of employer-provided educational assistance that is excluded from gross income was expanded to include up to $5,250 in student loan payments made by an employer between the date of enactment and the end of 2020.  Payments of principal and/or interest by the employer to the employee or to the lender will be tax-free. 
    • Business Provisions
      • Employee Retention Credit: Refundable credit against employer's share of payroll taxes each calendar quarter equal to 50% of qualified wages per employee, up to $10,000 per quarter per employee. Applicable to businesses subject to closure (either complete closure or reduced hours) or businesses who have seen significant decline in profits (gross receipts) less than 50% of gross receipts for the equivalent calendar quarter in the previous year. Credit limited to taxes on wages paid as reduced by any applicable tax credits, including those passed under the Families First Coronavirus Response Act.
      • Delay of Payment of Employer Payroll Taxes: Applicable payroll taxes paid by employer delayed from date of Phase III enactment through December 31, 2020.Half of deferred amount to be paid by December 31, 2021, and the other half by December 31, 2022.
      • Modifications for Net Operating Losses: Permits net operating losses from tax years 2018, 2019, or 2020 to be carried back for five years.
      • Modification of Limitation on Losses for Taxpayers Other than Corporations: For taxable years beginning after December 31, 2020 through January 1, 2026, the taxpayer's excess business loss for the taxable year will not be permitted.  Excess business losses do not take deductions for losses from sales or exchanges of capital assets into account.  Gains from sales or exchanges of capital assets not to exceed the lesser of: (1) capital gain net income as determined by gains and losses attributable to a trade/business; or (2) capital gain net income. 
      • Modification of credit for prior year minimum tax liability of corporations: Accelerated ability for companies to recover corporate alternative minimum tax credits by claiming refund now.
      • Modifications of limitation on business interest: Increases 30 percent limitation on interest expense deduction to 50 percent of taxable income, with adjustments) for 2019 and 2020
  • Title III: Supporting America’s Health Care System in the Fight Against the Coronavirus
    • Education Provisions
      • Provides numerous waivers including: waivers for some higher education institutions to match federal funding; possible waivers relating to assessments, accountability, and related reporting requirements, and some requirements for funding; and possible waivers for some eligibility requirements, waiting periods, and allotment requirements under the Higher Education Act.
      • Provides funding for local education agencies through the Elementary and Secondary School Emergency Relief Fund for:
          1. Any activity authorized by the Elementary and Secondary Education Act including the IDEA, the Adult Education and Family Literacy Act, the Perkins Act, or the McKinney-Vento Homeless Assistance Act;
          2. Coordination of preparedness and response efforts in response to COVID-19;
          3. Providing Principals and other school leaders with the resources necessary to address the needs of their individual schools;
          4. Activities to address the unique needs of low-income children, children with disabilities, English language learners, racial and ethnic minorities, students experiencing homelessness, and foster care youth, including how outreach and service delivery will meet the needs of each population;
          5. Development and implementation of procedures and systems to improve the preparedness and response efforts of local education agencies;
          6. Training and professional development for staff of the LEA on sanitation and minimizing the spread of infectious diseases.
          7. Purchasing supplies to sanitize and clean facilities of a LEA;
          8. Planning for and coordinating long term closures, including provision of meals to eligible students, how to provide technology for online learning to all students, how to provide guidance for carrying out requirements under the IDEA, and how to ensure other educational services can continue to be provided consistent with all Federal, State and Local requirements;
          9. Purchasing educational technology for students served by the LEA that aids in regular and substantive educational interaction between students and their classroom instructors, including low-income students and students with disabilities, which may include assistive technology or adaptive equipment.
          10. Providing mental health services and supports
          11. Planning and implementing activities related to summer learning and supplemental after school programs, including providing classroom instruction or online learning during the summer months and addressing the needs of low-income students, students with disabilities, English language learners, migrant students, homeless students, and children in foster care; and
          12. Other activities that are necessary to maintain the operation of and continuity of services in LEAs and continuing to employ existing staff of the LEA.Funding for higher education institutions to cover any costs associated with any significant changes to instruction due to COIVD-19. At least 50 percent of the funding must be used to provide emergency financial aid grants to students for expenses due to campus operations disruptions resulting from COVID-19 (i.e. for food, housing, technology, course materials, healthcare, child care). None of the funding may be used for pre-enrollment recruitment, endowments, or facilities related to athletics, sectarian instruction, or religion worship.
      • Funding for higher education institutions to cover any costs associated with any significant changes to instruction due to COIVD-19. At least 50 percent of the funding must be used to provide emergency financial aid grants to students for expenses due to campus operations disruptions resulting from COVID-19 (i.e. for food, housing, technology, course materials, healthcare, child care). None of the funding may be used for pre-enrollment recruitment, endowments, or facilities related to athletics, sectarian instruction, or religion worship.
      • Any local education agency or higher education institute that receives such funding must continue to pay its employees and contractors during the period of any closure or disruption due to COVID-19, to the greatest extent practicable.
    • Labor Provisions
      • Employees who were laid off on March 1, 2020 or after that had worked for the employer for at least 30 day within the last 60 days prior to being laid off, and are subsequently rehired by the employer are now eligible employees for purposes of the federal Emergency Family and Medical Leave Act.
      • Allows employers to receive the tax credit for the paid leave pursuant to the federal Emergency Paid Sick Leave and federal Emergency Family and Medical Leave Expansion in advance rather than awaiting a reimbursement.
      • Allows the federal government to reimburse federal contractors for the cost of paid sick leave paid to employees who cannot work due to the closure of a federally owned or leased site when the ability to work remotely is not possible. However, the reimbursement cannot be duplicative of any tax credits the contractor uses to cover the loss of the paid leave.
  • Title IV: Economic Stabilization and Assistance to Severely Distressed Sectors of the United States Economy
    • Coronavirus Economic Stabilization Act 2020: authorizes financial institutions to make loans to mid-sized businesses not otherwise addressed in the Act.
      • Authorizes $500 billion to be split among
        • Passenger airlines,
        • Cargo airlines,
        • Businesses critical to national security, and
        • Programs or facilities established by the Board of Governors of the Federal Reserve System for the purpose of providing liquidity to the financial system that supports lending to eligible businesses, States, or municipalities
      • Eligible businesses: Defined as businesses that does not receive adequate economic relief under the Act
      • Rates to be determined by the Secretary of Treasury.
      • Business must be created or organized in the US and have majority of employees located in US.
      • Authorizes financial institutions to make loans to eligible businesses with 500-10,000 employees
        • Treasury Secretary is tasked with publishing procedures and loan requirements within the next few days.
      • Eligible borrowers must certify:
        • Uncertainty of economic conditions as of date of application makes loan necessary to support ongoing operations.
        • Funds will be used to retain at least 90% of employees at full compensation and benefits until September 30, 2020.
        • Recipient intends to restore not less than 90% of workforce as of Feb 1, 2020, including all compensation and benefits no later than 4 months after termination of public health emergency as declared by Federal HHS.
        • Created or organized and domiciled within US with significant operations and employees in US.
        • Not a debtor in a bankruptcy proceeding.
        • Recipient will not pay dividends with respect to common stock or re-purchase any equity listed on national securities exchange while direct loan is outstanding.
        • Will not outsource jobs for 2 years after completing loan repayment and abrogate existing collective bargaining agreements for term of loan and for 2 years after.
        • Will remain neutral in any union organizing effort for term of loan.
  • Title V: Coronavirus Relief Funds
    • A $150 billion fund for state, local, and tribal governments to use to cover unbudgeted costs incurred between March 1, 2020 and December 30, 2020, related to COVID-19. $139 billion is to be shared between the states in proportion to population, but each state will receive at least $1.25 billion. However, if a local government applies for funding, the payment is made directly to the local government and the amount is subtracted from the state’s allocation. 
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