It’s Saturday morning, and I finally feel like there is some good news out there. I have been reading up on the new Coronavirus Aid, Relief, and Economic Security (CARES) Act and want people to know how significant this potential legislation is.
While it is still just a bill and has not been passed, it lays the foundation for what could be a huge saving grace for small business and a large part of the population. This could have a significant impact on preserving jobs and stabilizing the economy. The CARES Act is 247 pages and includes several provisions; however, I am going to focus on some of the major areas I believe are critical to helping get this country back on its feet.
- Small Business Interruption Loans: $300 billion is to be allocated for Small Business Interruption Loans. For businesses under 500 employees impacted by the economic downturn, these loans are meant to help cover payroll costs through June 30, 2020, and other expenses. Small businesses may take up to $10 million, covering employees making up to $100,000 per year. If the business does not layoff its employees, the payroll portion of those loans is forgiven after four months. The forgiveness amount is adjusted down as layoffs increase. Funds used to pay tipped employees, such as restaurants and bars, may also be eligible for forgiveness.
- Additional business provisions:
- Corporations may delay making quarterly estimate payments until October 15, 2020.
- Businesses with Net Operating Losses (NOLs) in 2018, 2019, 2020 may carry back those losses up to 5 years.
- The employer portion of Social Security payroll taxes may be delayed until January 1, 2021.
- Emergency relief bailout loans to severely distressed sectors of the economy such as airlines.
- Recovery Rebates: These are checks for up to $1,200 per adult and $500 per child. There are income phaseouts for individuals making between $75,000-$99,000 and couples making between $150,000-$198,000. They want to get checks out to people as soon as possible.
- Retirement Account Special Rules: Distributions from certain types of retirement plans of up to $100,000 could be taken on a tax-favored basis with no penalty and have up to 3 years to either repay to amounts or pay the taxes on the distributions to pay for coronavirus related expenses.
- Charitable Contribution Limits: A temporary suspension of the limits on cash donations for individuals and modifies limits for corporations with certain restrictions.
- Students: There is a three-month suspension of student loan payments without interest. There are many provisions for students with colleges and universities allowing emergency financial aid and payments to students with work-study arrangements who were unable to complete their work during the year. There are also many other provisions related to helping students related to waivers and repayments to help students who paid tuition or loan payments without getting to complete their education this year.
While I will reiterate that this is only a bill at this point, it shows how serious the government is taking the situation. While preliminary, it demonstrates a clear understanding of the impact of what could happen without significant government intervention to take care of small businesses and the people of this country. It reflects a realization of how critical time is, and we are hopeful to see something like this get passed within the next week or two, and hopefully sooner. We wish you and your family health and safety during this unprecedented situation.
Gregory R. Banner is the Chief Executive Officer and Senior Financial Advisor with Asset Preservation Strategies, Inc. (APS) in San Diego, California. Greg specializes in
working collaboratively with his clients and their advisors, providing comprehensive planning services which include: family office services, business growth strategies, business exit strategies, asset management, retirement planning, tax reduction strategies, insurance, and estate planning strategies, and asset protection for both individuals and businesses. APS is a financial advisory firm that works with business owners and entrepreneurs, people nearing or in retirement, and strategies for women in wealth. Learn more about them online at asset-preservation.com.