Article written by:
Darci Congrove, CPA
Managing Director
To date, three major pieces of federal legislation have been enacted to address the coronavirus public health crisis and the associated economic crisis across the country:
- The Coronavirus Preparedness and Response Supplemental Appropriations Act: $8.3 billion measure to support public health, enacted on March 6, 2020.
- The Families First Coronavirus Response Act: enacted on March 18, 2020, provided immediate funds for public health measures and expanded FMLA and paid sick leave for impacted workers.
- The Coronavirus Aid, Relief, and Economic Security (CARES) Act, the largest stimulus package in the nation’s history, was enacted on March 27, 2020. The $2 trillion CARES Act builds upon the two earlier pieces of legislation, providing significant funding and tax measures to provide economic relief. There are six main groups that will benefit from the wide-reaching provisions: individuals, small businesses, large corporations, hospitals and public health, state and local governments, and education.
INDIVIDUALS
Unemployment Expansion
States will continue to pay unemployment to people who qualify. The amount and duration of payments vary state by state. The CARES Act increases unemployment benefits, while also broadening the group who is eligible to receive benefits.
The federal government will provide full supplementary funding to the states for:
- Covering the first week of regular unemployment to allow unemployed workers to receive benefits as soon as they are laid off,
- Extending unemployment benefits for an additional 13 weeks after state benefits end through December 31, 2020,
- Adding $600 per week per recipient for up to four months, and
- Extending unemployment benefits via a new, temporary Pandemic Unemployment Assistance program, to those not usually eligible: self-employed workers, independent contractors, and those with limited work history.
- These provisions are available to a covered individual for weeks of unemployment, partial unemployment, or inability to work caused by COVID-19 beginning on or after January 27, 2020, and ending on or before December 31, 2020.
Health Insurance
The CARES Act requires all private insurance plans to cover COVID-19 treatments and vaccines, as well as provide all coronavirus tests free of charge.
Evictions and Foreclosures
Subtitle A of the CARES Act, the Coronavirus Economic Stabilization Act of 2020 (CESA) provides protections for individuals who cannot make mortgage payments by:
- Prohibiting certain evictions and foreclosures on federally-backed mortgages for a period of time after CESA’s enactment,
- Providing a 180-day payment forbearance period for borrowers with a federally-backed mortgage,
- Protection against eviction for tenants of federally-assisted rental properties, and
- Requiring that businesses agreeing to an account forbearance or agree to modified payments as a result of COVID-19 impacts must report those accounts as “current” to any credit reporting agency.
SMALL BUSINESSES
Emergency Grants
The CARES Act provides $10 billion for grants of up to $10,000 to provide emergency funds for small businesses to cover immediate operating costs.
Paycheck Protection Program
The CARES Act allocates $349 billion for forgivable Small Business Administration loans under the new Paycheck Protection Program (PPP). These loans will be 100% guaranteed by the federal government and are designed to help small businesses (fewer than 500 employees) impacted by the pandemic and economic downturn to cover payroll and other expenses from February 15, 2020 to June 30, 2020.
- Small businesses may take out loans up to $10 million—limited to a formula tied to payroll costs—and can cover employees making up to $100,000 per year.
- Loans may be forgiven if a business uses the loan for payroll, interest payments on mortgages, rent, and utilities. Forgiveness will be reduced if the borrower has certain reductions in employees or salaries as compared to the previous year.
- Eligible entities include businesses, nonprofit organizations, veterans organizations, or tribal concerns that employ either less than 500 employees or less than the employee size standard set by the SBA for the borrower’s particular industry. Eligible borrowers also include sole-proprietors, independent contractors and other self-employed individuals.
- PPP streamlines the typical loan process by permitting additional lenders to participate, simplifying eligibility standards, expediting approvals and eliminating collateral and credit requirements.
- Borrowers who have received an Economic Injury Disaster Loan through the SBA for the same purpose do not qualify for PPP.
Relief for Existing SBA Loans
There is $17 billion allocated to cover six months of payments (principal, interest and fees) for small businesses already using Small Business Administration loans.
LARGE CORPORATIONS
The CARES Act provides $500 billion to the Treasury Department’s Exchange Stabilization Fund for loans and other funding for large corporations impacted by COVID-19:
- $29 billion in direct lending to help airlines to remain operational and to cover employee wages, salaries and benefits, including passenger air carriers, cargo air carriers, airline contractors and $17 billion in lending for firms deemed critical to U.S. national security.
- $454 billion reserved for loans, loan guarantees and other investments to eligible businesses, states and municipalities.
- Companies receiving loans under this program are prohibited from making stock buybacks and paying dividends for a certain period of time and are required to maintain current staffing levels to the extent practicable and to retain no less than 90% of the March 24, 2020 employment level.
- Loans also include terms limiting employee compensation and severance pay for firms taking loans. All loans, their terms and any investments or other assistance provided by the government must be publicly disclosed. A Special Inspector General for Pandemic Recovery will be appointed, along with a special Congressional Oversight Commission to provide oversight of all loans and other uses of taxpayer dollars.
- If an eligible business receives a loan or loan guarantee under this section, the Treasury Secretary is authorized to enter into contracts under which the Federal Government could participate in the gains of the eligible business or its security holders through the use of such instruments as warrants, stock options, common or preferred stock, or other appropriate equity instruments.
HOSPITALS, PUBLIC HEALTH & FEDERAL SAFETY NET
The CARES Act contains a $340 Billion supplemental appropriations package directed towards the health care industry impacted by the COVID-19 pandemic, which includes:
- Direct funding to hospitals, the CDC and veterans’ health organizations,
- Authorizing additional funding to federally qualified health centers and reauthorizing grant programs to strengthen rural community health,
- Addressing supply shortages and adding resources to the strategic national stockpile,
- Coverage of diagnostic testing for the virus,
- Support for an increase in hiring for vital health care jobs, including the establishment of a Ready Reserve Corps of doctor and nurses to respond to COVID-19 and other public health emergencies,
- Improving telehealth service access and flexibility by expanding the list of providers who can provide such services, relaxing place-of-service limitations, and increasing reimbursement rates,
- Encouragement for the creation of drugs to treat the virus, including additional funding to the FDA to prioritize and expedite approval of new drugs,
- Providing liability protection for doctors who provide volunteer medical services during the public health emergency related to COVID-19,
- Strengthening Medicare and Medicaid provisions by delaying program-wide payment cuts, allowing advance Medicare payments to hospitals, and adding a 20% add-on payment for items and services rendered to hospital in-patients with COVID-19, and
- Providing support for educational institutions for vaccines, therapeutics and diagnostics.
The Families First Coronavirus Response Act provided funding for food programs and also waived work requirements for SNAP, formerly known as food stamps. The CARES Act includes a second wave of funding for major food security programs, with significant dollars allocated to:
- Supplemental Nutrition Assistance Program, also known as SNAP, which will help to cover the expected cost of new applications to the program as a result of the coronavirus.
- American Indian reservations, Puerto Rico, Northern Mariana Islands and American Samoa all get additional funds and access to federal nutrition programs.
- Food banks and other community food distribution programs, a large portion of which will go to state and local governments for use toward specific COVID-19 response efforts, including direct aid for those state and local governments running out of cash due to high numbers of cases.
- Community Development Block Grants
- K-12 schools
- Higher education, and
- Programs for children and families, including immediate assistance to child care centers.
STATE AND LOCAL GOVERNMENTS
The Families First Coronavirus Response Act increased the federal share of Medicaid payments by 6.2%. It provided reimbursements to states for the cost of expanding certain public assistance programs through the emergency period. The CARES Act provides $150 billion in direct support to state and local governments to help fight the coronavirus.
EDUCATION
The CARES Act includes relief for college students and graduates with outstanding federal student debt:
- All student loan principal and interest payments will be deferred for three months without penalty to the borrower for all federally owned student loans. The Act includes language that this deferral may be extended for an additional three months (total six months).
- Schools may turn unused work-study funds into supplemental grants and continue paying work-study wages while schools are suspended.
- Students who drop out of school as a result of the coronavirus will not have that time away from school deducted from their lifetime limits on subsidized loan and Pell Grant eligibility. Those students will also receive relief on repayment of grants or other aid already received.
Other programs: There is a very long list of other areas receiving funding, including arts programs, universities and other institutions.
The CARES Act includes several changes in tax policy aimed at providing tax benefits to individuals and businesses. To view a summary of the tax provisions within the CARES Act, click here.
Please contact your GBQ representative should you have questions, or if you’d like to discuss the above information in more detail.
