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3 key provisions on the CARES Act

The following provides an overview of some of the key provisions under the CARES Act which provides funding to help stabilize the U.S. economy over the coming weeks and months. While this document covers provisions from the legislative text, many of the parameters of the assistance authorized by the CARES Act will be determined in coming days and weeks in regulatory action by Treasury, the Small Business Administration (SBA) and the Federal Reserve.

1. Small Business Loan Program. The legislation allots almost $380bn in loans and grants from the SBA. $349bn is available through 7(a) loans from the SBA for the Payroll Protection Program. An additional $27bn was added in emergency grants to aid in servicing existing SBA loans.

  • Wide Coverage and Eligibility: In addition to traditional small business (e.g. <500 employees), assistance will be extended to non-profits, sole proprietors, independent contractors, self-employed individuals and “gig” workers with additional coverage for hospitality / food industry.
  • Note however that the employee figure is expected to take into account affiliates, determined using the SBA’s affiliate rules.
  • The program is retroactive to February 15 and runs through June 30.
  • Companies will be eligible for loans equal to 2.5x an employer’s average total monthly payroll costs up to a $10mm cap.
  • Payments can be deferred and forgiven under the program.
  • The legislation provides that federal agencies, including the SBA and the Treasury, will issue regulations and/or guidance to implement the Payroll Protection Program, and the SBA is required to issue regulations under emergency rule making authority by April 11, 2020.

2. “Cash Payments” for Individuals. Treasury will issue payments to individuals as a rebate for the 2019 tax year. Parameters include:

  • Individuals making up to $75,000, heads of households up to $112,500 and joint filers up to $150,000 will receive a $1,200 check, or $2,400 in the case of eligible individuals filing a joint return. Children of qualifying individuals / families will also receive $500.
  • Phase out begins above $75,000 / $150,000 so that payments would decrease at a rate of $5 for every additional $100 in income.
  • Payments cease at $99,000 individual / $198,000 joint filer threshold.

3. Expanded Unemployment Benefits. The bill provides for $600 weekly payments in addition to regular unemployment compensation, for up to four months through July 31, 2020. Individuals may not receive more than 39 weeks of combined unemployment assistance between state and local resources for this year. This additional benefit is only available between January 27, 2020 and December 31, 2020 unless extended.

The information contained above is presented as a general understanding of this topic and is not to be relied upon as professional guidance. We recommend you consult with your professional and apply your specific circumstances to the content provided here before acting upon any information discussed above.