What’s in the CARES Act for Idaho workers, businesses?

President Donald Trump signed the Coronavirus Aid, Relief and Economic Security Act — or CARES Act — into law on March 27. This $2.2 trillion emergency stimulus bill contains provisions for the economic relief of employees, the self-employed and businesses.

While the $1,200 direct economic stimulus payments to individuals have already received a great deal of press, other provisions of the CARES Act will benefit both individuals and small businesses in the coming weeks.

For individuals

The CARES bill adds $600 per week from the federal government on top of the base unemployment benefit from Idaho. The added payment will last four months. CARES also adds 13 weeks over which claimants can receive benefits.

In the past, self-employed individuals such as freelancers or contractors were not eligible for unemployment insurance benefits. CARES creates the Pandemic Unemployment Assistance program, which will last through the end of this year. The program will provide help to many self-employed people who lose work due to the COVID-19 pandemic. The details of this program have not been released by the U.S. Department of Labor.

CARES also requires all private insurance plans to cover COVID-19 treatments including a COVID-19 vaccine if one becomes available. It makes all novel coronavirus tests free.

CARES also includes measures to help with federal student loan payments including:

• The ability to pause student loan payments until Sept. 30
• No accumulation of interest on student loan payments through Sept. 30
• No garnishment of wages, tax refunds and any Social Security benefit payments for student loan debt collection

For small businesses

The main CARES feature for small businesses is a forgivable loan program for firms with 500 or fewer employees. There are also changes to the rules for allowable expenses and deductions to make it easier for companies to stay open and keep employees on the payroll.

The CARES act allocates $350 billion for Small Business Administration (SBA) forgivable loans. The amounts available are up to $10 million per business. Amounts used to maintain payroll, pay for rent or mortgage and service existing debt can be forgiven, provided they are used for workers employed through the end of June. For small businesses with existing SBA loans, there is an additional $17 billion allocated to cover six months of loan payments.

The specific details of the main CARES SBA loan programs are as follows:

SBA Paycheck Protection Program

•  Eligibility: Any business concern, nonprofit organization (501(c)3), veterans organization (501(c)19) or tribal business that employs fewer than 500 employees or meets size standard. Sole proprietors, independent contractors and eligible self-employed individuals. Nonprofits receiving Medicaid expenses are ineligible.
• Cap: 250% of an employer’s average monthly payroll (wages, tips, FML, health benefits, retirement, state and local taxes), capped at $10 million
• Turnaround Time: ~2 weeks
• Loan Forgiveness: Payroll for eight weeks (including paid sick, medical or family leave and group health benefits), rent, mortgage interest and utilities between Feb. 15, 2020 and June 30, 2020 can be forgiven. The amount of forgiveness can be reduced by any change in staffing or payroll expenses. Amounts forgiven shall be excluded from taxable income.
• Interest: 4% max
• Deferment of Payment: Up to 12 months
• Covered Loan Period: Feb. 15, 2020 – June 30, 2020
• Can apply through any SBA-approved lender

SBA Express Loan

• Eligibility: Any business concern, nonprofit organization (501(c)3), veterans organization (501(c)19) or tribal businesses that employs fewer than 500 employees or meets size standard. Sole proprietors, independent contractors and eligible self-employed individuals. Nonprofits receiving Medicaid expenses are ineligible.
• Cap: $1 million
• Turnaround Time: ~36 hours
• Loan Forgiveness: None
• Interest: 4.5–6.5% over the prime rate
• Deferment of Payment: Up to six months
• Covered Loan Period: Feb. 15, 2020 – June 30, 2020
• Can apply through any SBA lender

SBA Economic Injury Disaster Loan (EIDL)

• Eligibility: Any business concern, nonprofit organization (501(c)3), veterans organization (501(c)19) or tribal business that employs fewer than 500 employees or meets size standard; sole proprietors, independent contractors and eligible self-employed individuals. Nonprofits receiving Medicaid expenses are ineligible.
• Cap: $2 million
• Turnaround time: ~six weeks to three months, however, advance cash grants of $10,000 are available within three days if requested.
• Forgiveness: $10,000 of any cash grant if used to maintain payroll and monthly expenses.
• Interest: 3.75% for small businesses; 2.75% for non-profits.
• Apply directly through the SBA.

Businesses may not take advantage of more than one SBA loan resource or it may be considered a “duplication of benefit.”

Businesses may not be forgiven for amounts paid for employee leave if those businesses are eligible for a tax credit to offset that cost.

Any business that does not have a loan forgiven under the new SBA Paycheck Protection Program is eligible for payroll tax deferral.

A nice benefit hiding in the CARES act is the SBA loan amounts that are forgiven will not be included in gross income of the borrower as cancellation-of-debt income for federal income tax purposes.

For all businesses

CARES establishes a fully refundable tax credit for businesses of any size that are closed or distressed to help keep workers on the payroll. The goal is to have employees hired back or put on paid furlough to make sure they have jobs upon return. The credit covers up to 50% of payroll on the first $10,000 of compensation, including health benefits, for each employee.

For employers with more than 100 full-time employees, the credit is for wages paid to employees when they are not providing services because of the pandemic. Eligible employers with 100 or fewer full-time employees can use the deduction even if they aren’t closed.

CARES also increases the limitation on deductible business interest from 30% to 50% of earnings before interest, taxes, depreciation and amortization for 2019 and 2020.

Given the newness of the legislation, many of the details of how programs will be administered have been left to the Internal Revenue Service, the Department of Labor, the Small Business Administration and other affected federal agencies to develop in the next few weeks.