Apr 7, 2020
CARES Act: Provisions for Business Owners and Self-Employed
In case you missed it, we shared the key provisions of the CARES Act affecting individuals in yesterday’s blog post. Today, we’re focused on business owners (primarily under 500 employees), self-employed individuals, as well as certain non-profit organizations.
As noted yesterday, please consult with us and other professionals as more information becomes available. Appropriate professionals consulting your business may include: your corporate tax preparer, banker, treasurer, and financial officers preparing your company’s financial statements.
Don’t hesitate to ask us and we can point you in the right direction for your best resources.
For Business Owners (and Certain Not-for-Profits)
- Paycheck Protection Program loans (potentially forgivable): The Small Business Administration (SBA) Paycheck Protection Program (PPP) is making loans available for qualified businesses and not-for-profits (typically under 500 employees), sole proprietors, and independent contractors. Loans for up to 2.5x monthly payroll, up to $10 million, 2-year maturity, interest rate 1%. Payments are deferred and, if certain employment retention and other requirements are met, the loan may be forgiven.
- Economic Injury Disaster Loans (with forgivable advance): In coordination with your state, SBA disaster assistance also offers Economic Injury Disaster Loans (EIDLs) of up to $2 million to qualified small businesses and non-profits, “to help overcome the temporary loss of revenue they are experiencing.” Interest rates are under 4%, with potential repayment terms of up to 30 years. Applicants also are eligible for an advance on the loan of up to $10,000. The advance will not need to be repaid, even if the loan is denied.
- Payroll tax credits and deferrals: For qualified businesses who are not taking a loan.
- Employee retention credit: An additional employee retention credit (as a payroll tax credit), “equal to 50 percent of the qualified wages with respect to each employee of such employer for such calendar quarter.” Excludes businesses receiving PPP loans, and may exclude those who have taken the EIDL loans.
- Net Operating Loss rules relaxed: Carry back 2018–2020 losses up to five years, on up to 100% of taxable income from these same years.
- Immediate expensing for qualified improvements: Section 168 of the Internal Revenue Code of 1986 is amended to allow immediate expensing rather than multi-year depreciation.
For Employers and Plan Sponsors of Retirement Plans
- Relief for funding defined benefit plans: Due date for 2020 funding is extended to Jan. 1, 2021. Also, the funding percentage (AFTAP) can be calculated based on your 2019 status.
- Relief for facilitating pre-retirement plan distributions and expanded loans: Employers “may rely on an employee’s certification that the employee satisfies the conditions” to be eligible for relief. The participant is required to self-certify in writing that they or a direct dependent have been diagnosed, or they have been financially impacted by the pandemic. No additional evidence (such as a doctor’s release) is required.
- Potential extension for filing Form 5500: While the Dept. of Labor (DOL) has not yet granted an extension, the CARES Act permits the DOL to postpone this filing deadline.
- Exclude student loan pay-down compensation: Through year-end, employers can help employees pay off current educational expenses and/or student loan balances, and exclude up to $5,250 of either kind of payment from their income.
- H2R CPA, “Cares Act will provide billions of dollars of relief,” March 27, 2020.
- R. 748: Coronavirus Aid, Relief, and Economic Security (CARES) Act.
- Nerd’s Eye View, “Analyzing The CARES Act: From Rebate Checks To Small Business Relief For The Coronavirus Pandemic,” Jeffrey Levine, March 27, 2020.
- The Wall Street Journal, “How the Coronavirus Paid Leave Rules Apply to You,” Charity L. Scott, March 27, 2020.
- ThinkAdvisor, “3 Stimulus Bill Provisions Advisors Should Act On Now: Jeff Levine,” Jeff Berman, March 30, 2020.
- S. Chamber of Commerce, “Coronavirus Emergency Loans Small Business Guide and Checklist.”
- S. Small Business Administration, Paycheck Protection Program and Disaster Assistance.