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Senate Passes $2 Trillion Coronavirus Relief Bill

 

Late night Wednesday, March 25, the Senate unanimously approved a $2 trillion "emergency relief" bill (CARES Act) in response to the current COVID-19 pandemic. The Senate vote sends the bill to the House, where a vote to approve was announced for Friday morning. President Trump said he intends to sign it immediately.

Although complete details of the bill are not yet public, a section-by-section summary of the provisions in the bill was given by the Senate Finance Committee. Our highlights of those provisions follow.

Small Business Loan Assistance

In order to assist small businesses the CARES Act has established a $367 billion loan fund for employers, sole proprietors and nonprofits with fewer than 500 employees referred to as “paycheck protection loans” and are fully guaranteed by the federal government through December 31, 2020.

These are generally limited to the lesser of the average payroll costs (limited to $100,000 per employee) for the 1 year period ending on the date of the loan multiplied by 2.5 and are not to exceed $10 million. The loans can be used to cover payroll, benefits, mortgage, rent and utilities. The loans will have a maximum maturity of 10 years and an interest rate not to exceed 4%.

These loans can be partially forgiven, with the total eligible amount eligible for forgiveness limited to the sum of the payroll costs, mortgage interest payments, rent and utilities paid between February 15th and June 30th , the covered period. The loan forgiveness will be reduced based on any decrease in the average of full-time employees during the covered period compared to an earlier base period.

During the covered period, any business that employees not more than 500 employees per physical location and is assigned a North American Industry Classification System (NAICS) code starting with 72, which covers restaurants and bars shall be eligible for this program.

As with any legislation there are numerous details but CironeFriedberg is here to help assist you with the details and application to your individual business.

Unemployment Insurance

The legislation includes $250 billion to expand unemployment benefits. Those individuals who qualify will receive an additional $600 per week for four months, known as “Federal Pandemic Unemployment Compensation,” on top of their typical state benefits for unemployment insurance. The program provides an additional 13 weeks of unemployment benefits for those whose regular unemployment benefits are no longer available, in order to make the regular unemployment and pandemic unemployment programs consistent.

Individuals who would not qualify for regular employment or extended benefits under State or Federal law, such as those who are self-employed, seeking part-time employment, or do not have sufficient work history, will still qualify for unemployment and enhanced benefits under the legislation.

Covered individuals include those who are not eligible for regular compensation or extended benefits under state or federal law, and provide self-certification that they are otherwise able to work but are unemployed because of a COVID-19 related reason, including their place of business being closed or having to care for a family member with the virus.

Individuals who have the ability to telework with pay or who are receiving paid sick leave or other paid leave benefits do not qualify for this program.

The legislation also encourages states to remove their typical one-week waiting period for eligible individuals to begin receiving unemployment and will compensate states the full amount for that first week. Recipients are not required to be seeking work to remain qualified for the benefits.

Recovery Rebates for Individuals

The legislation includes $1,200 recovery rebates for individuals and $500 for each dependent and will be considered advanced refunds of 2020 taxes. Phaseout begins at $75,000 for single filers, $112,500 for heads of households, and $150,000 for joint filers.

Special Rules for Use of Retirement Funds

The bill allows the waiver of the 10% early withdrawal penalty, the spread of the income over 3 years and the ability to recontribute withdrawals up to $100,000, to an individual or their spouse who has been diagnosed with COVID-19 or experiences adverse financial hardship as a result of quarantine, business closure or layoff.

Temporary Waiver of Required Minimum Distribution Rules for Certain Retirement Plans and Accounts

The bill waives all 2020 minimum distributions rules regardless of whether an individual has been impacted by the pandemic.

Allowance of Partial above the Line Deduction for Charitable Contributions

The CARES Act allows an individual, who does not itemize, to make contributions of up to $300 and deduct the contribution “above-the-line” in computing adjusted gross income.

Modification of Limitations on Charitable Contributions During 2020

The bill increases the percent of income limitations for both individuals and corporations. For 2020, individuals can deduct cash contributions up to 100% of adjusted gross Income while corporations can deduct up to 25% of taxable income.

Exclusion for Certain Employer Payments of Student Loans

The bill will modify the rules that allow employers to include the payment of student loan obligations as part of the current rules that provide up to $5,250 of tax-free educational assistance under code Section 127.

Employee Retention Credit for Employers Subject to Closure Due to COVID-19

In the case of an eligible employer, there shall be a credit against applicable employment taxes for each calendar quarter of an amount equal to 50% of the qualified wages with respect to each employee. There are many provisions of this section and we are studying the bill and will send additional alerts with details as soon as available.

Delay of Payment of Employer Payroll Taxes

The new law would again seek to alleviate the burden on employers (including self-employed taxpayers) struggling to make payroll to allow the employers (and self-employed taxpayers) to defer certain payroll taxes that would otherwise be due from the date of enactment through December 31, 2020 these deferred payroll taxes are to be repaid by paying 50% on December 31, 2021 and the other 50% on December 31, 2022. As with other provisions, we are studying the details and provide more information as soon as possible.

Please remember, at the time of this article, the bill has not been signed and is subject to interpretation and change. We will continue to monitor the progress of the bill and provide details as they are available. As with all legislation it is important to perform a thorough analysis of the underlying details and review of your unique situation. Please reach out a CironeFriedberg professional with any questions as we are here to help.

If you need assistance or have any questions on the information in this article, please call your CironeFriedberg professional.  You can reach us by phone at (203) 798-2721 (Bethel), (203) 366-5876 (Shelton), or (203) 359-1100 (Stamford), or email us at info@cironefriedberg.com.
 

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CironeFriedberg, LLP
CironeFriedberg, LLP
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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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