Senate Proposed CARES Act (S. 3548)

The White House and Senate have announced they’ve come to an agreement in terms of the Coronavirus Aid, Relief, and Economic Security (CARES) Act being negotiated in the Senate Finance Committee. This is a first step in the process, which will still require passage by both the full Senate and the House, before reaching the President’s desk for signature. There are still some logistical and philosophical challenges along the way.

Here are some of the key provisions of the Republican’s proposed bill of interest to small and middle-market businesses and individuals.

Small Business Interruption Loans

  • Expanded eligibility during 2020
  • Higher max loan amounts based on borrower’s monthly obligations
  •  Loan forgiveness for borrower’s costs of maintaining payroll continuity

Individual Relief

  • Tax credit of $1,200 individual or $2,400 joint returns
  • Phase out at 5% of AGI above $75,000 individual or $150,000 joint returns
  • Provisions for advance payment of credit
  • Delay of any estimated tax payments until October 15, 2020
  • Elimination of penalty for early withdrawals from retirement plans up to $100,000
  • Income from early withdrawals spread over a 3-year period
  • Increase in limits on loans from qualified plans from $50,000 to $100,000

Business Provisions

  • Delay of any estimated tax payments until October 15, 2020
  • Delay of employer’s Social Security deposits, and 50% of self-employed individual’s SE tax
  • Temporary repeal of income limitations on Net Operating Losses (“NOL”)
  • Ability to carryback NOLs from 2018-2020 to 5 preceding tax years
  • Business loss limitation provisions pushed back to apply to years beginning after 12/31/20
  • Modification of the business interest limitation from 30% to 50% of 2019 and 2020 adjusted taxable income
  • Fixing the provision for qualified improvement property to be entitled to 15 year depreciable life rather than 39 year

Assistance to Severely Distressed Sectors

Loans and loan guarantees available to eligible businesses:

  • Eligible businesses means (A) an air carrier, or (B) a US business that has incurred covered losses such that the continued operations of the business are jeopardized and that has not otherwise applied for or received economic relief in the form of loans or loan guarantees provided under any other provision of this Act
  • Treasury shall review and decide on applications

Various other aviation, health, education and labor provisions

  •  Regulatory and tax relief, appropriations, waivers and deferments
The House Democrats have introduced a competing relief package with many similar provisions, but with the following notable differences:
  • Individual cash credit of $1,500 per person up to $7,500 for a family of five
  • More extensive economic injury disaster loans for small businesses
  • Fewer assistance loans to corporations, with more limits on executive comp, worker retention, reporting and stock buyback
  • Additional grants to Arts & Humanities
  • Grants to states to conduct election audits and expanded voting and voter registration
  • Carbon emission offset for airlines receiving assistance
  • Renter and homeless assistance funding
  • Collective bargaining, subsidizing failing or insolvent private pension plans, Postal Service bailout and student loan forgiveness

It appears the substantive provisions have basically been negotiated and there aren’t many differences. However, additional modifications and haggling are anticipated to sway the necessary votes. We will keep you posted as the relief package moves through the process.