This weekend, the Senate released an updated version of the Coronavirus Aid, Relief and Economic Security (CARES) Act, the third round of federal COVID-19 aid after the government provided $8.3 billion in public health support two weeks ago and passed the Families First Coronavirus Act last week.
While the revised bill in its current form was rejected by the Senate last night, its provisions give us a general idea of the terms that the Senate will be debating and modifying in the coming days. These provisions include:
- Small Business Interruption Loans – The revised bill included $350 billion to help small businesses (fewer than 500 employees) impacted by the pandemic and economic downturn. The bill proposed loans up to $10 million and coverage for employees making up to $100,000 per year.
- Loan Forgiveness – Loan principal and interest owed for this purpose would be forgiven if the business does not lay off its employees. However, firms that have laid off employees may qualify for forgiveness if employees are rehired by April 1, 2020.
- Individual Rebates – The bill provided a $1,200 refundable tax credit for individuals ($2,400 for joint taxpayers). The credit has no minimum qualifying income requirements and phases out at $75,000 for singles, $112,500 for heads of household, and $150,000 for joint taxpayers at 5 percent per dollar of qualified income, or $50 per $1,000 earned. It phases out entirely at $99,000 for single taxpayers and $198,000 for joint taxpayers. Additionally, taxpayers making $2,500 in qualified income with children will receive a flat $500 for each child (also subject to the phaseout).
- RMD Rules – The revised version of the bill waives required minimum distribution rules for certain retirement plans in calendar year 2020.
- Estimated Payments – Quarterly estimated payments are no longer delayed in this version of the bill.
- Business Relief – The bill increased business relief administered through the U.S. Treasury to $500 billion, including $425 billion in loan guarantees.
- Loss Limitations – The new version modifies loss limitations for non-corporate taxpayers, including rules governing excess farm losses. Limitations on excess business losses would be delayed until 2021 under the proposed bill.
- Net Operating Losses – Under the bill, firms may take NOLs earned in 2018, 2019 or 2020 and carry back those losses five years. The NOL limit of 80 percent of taxable income is also suspended, so firms may use NOLs to fully offset their taxable income. The bill also modifies loss limitations for non-corporate taxpayers, including rules governing excess farm losses. Limitations on excess business losses are delayed until 2021.
- Net Interest Deduction Limitation – The net interest deduction limitation, which currently limits businesses’ ability to deduct interest paid on their tax returns to 30 percent of earnings before interest, tax, depreciation, and amortization (EBITDA), has been expanded to 50 percent of EBITDA for 2019 and 2020. This will help businesses increase liquidity if they have debt or must take on more debt during the crisis.
Given the bipartisan support for COVID-19 relief efforts, we anticipate that lawmakers will arrive at an agreement that provides both individuals and businesses much-needed support to survive and recover from this disaster.
Grassi is monitoring this bill as it makes its way through the Senate and to the President’s desk. We will keep you informed of any new developments and how they affect your business and employees.jeff