The President just signed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). We are digesting the 880 pages of law and will be providing updates on a regular basis. In the meantime, we’d like to get some of the highlights to you.
A key business provision of the CARES Act provides for Payroll Protection loans of up to $10 million to COVID-19 impacted businesses with fewer than 500 employees.
The loans provide for the following.
They are guaranteed 100% by the Small Business Administration and are nonrecourse (no personal guarantees or collateral required);
They must be taken out between February 15, 2020, and June 30, 2020;
They may be forgiven for amounts used to cover basic operating expenses such as payroll costs, rent and mortgage, and utilities for up to two months from the loan origination date;
Any cancellation of debt is excluded from any federal income tax, and
Have a maximum maturity rate of 10 years and 4% interest on any amounts not forgiven.
We have been in contact with several SBA Lenders and at the time of this email none yet had any idea how the logistical and paperwork process for obtaining the Payroll Protection loans are going to work. It is unfortunate that these lenders have not been gearing up to support the legislation in a more proactive way. As we discover the mechanics of the process, we will let you know and post the information.
Following are some of the other tax and economic highlights of the CARES Act.
Tax credit rebates of up to $1,200 per individual and $500 per child. These payments are phased out for those with adjusted gross income over $75,000 for a single taxpayer, $150,000 married filing joint taxpayers and $112,500 for a head of household. These payments will be "rapidly advanced;"
Deferral of 50% of an employers' Social Security payroll tax deposits for 2020 (with 50% of deferred amount due by December 31, 2021, and 50% due by December 31, 2022);
A 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;
The reinstatement of net operating loss (NOL) carrybacks for the 2018–2020 taxable years, and repeal of the 80% taxable income limitation for the 2018–2020 taxable years;
Penalty-free withdrawals of tax retirement funds of up to $100,000 with the taxable income portion recognized over a three-year period;
A temporary waiver of required minimum distributions (RMD) requirements for 2020;
Increased individual and corporate charitable contribution deductions for 2020;
The deferral of excess business loss limitations until 2021;
Deferral of an employer's 2020 minimum contributions to its single-employer defined benefit pension plan until January 1, 2021;
An increase in the business interest deduction limitations from 30% to 50% of adjusted taxable income for the 2019 and 2020 taxable year.
There are many other provisions and opportunities within the legislation. The team here at Scholl & Company is ready to help you discover how the CARES Act can help both individuals and business owners. Call us at (831)758-5966 or email help@schollcpa.com for assistance. Whether you are a current client or not, we welcome your calls and questions.