The Coronavirus Aid, Relief, and Economic Security Act, or “CARES Act” was signed into law on March 27, 2020 and is designed to provide financial assistance to small businesses impacted by COVID 19. The U.S. Senate Committee of Small Business & Entrepreneurship has published an 11 page outline of the four major programs. For the benefit of our clients, those programs are briefly summarized here.
- Paycheck Protection Program. This program revises SBA 7(a) to provide a direct incentive to small businesses to keep workers on payrolls. It temporarily relaxes eligibility and provides more favorable terms for loans. The application period currently closes on August 8, 2020.
- SBA Economic Impact Disaster Loans.– Offers loans of up to $2,000,000 at 3.75% interest charged to for-profit businesses and 2.75% charged to non-profit organizations. If you already have an EIDL loan, you are not eligible for a new one, but can refinance. You may be eligible for an emergency grant of up to $10,000 within 3 days of your application.
- Employee Retention Tax Credit. This program provides a refundable tax credit against certain employment taxes. Eligible employers access the credit by reducing employment tax deposits equal to 50 percent of the qualified wages an eligible employer pays to employees after March 12, 2020, and before January 1, 2021. The credit applies to the first $10,000 in wages paid by the employer during the COVID-19 crisis. For employers with 100 or fewer employees, all wages paid qualify for the credit, whether or not the employee is working. For employers with more than 100 employees, only wages paid to those employees who are not currently working will qualify.
- CARES Act Retirement Plan Relief. The CARES Act permits employers to amend eligible retirement plans (including 401(k) and 403(b) plans) to allow plan participants to receive coronavirus-related, penalty-free distributions of up to $100,000 during 2020 – without incurring the 10 percent early distribution penalty tax that normally applies to distributions made prior to age 59 ½. It further provides for a one-year extension of loan repayments, and a waiver of required minimum distributions for 2020.
- Expansion of FFCRA COVID-19 Diagnostic Testing. The Families First Coronavirus Response Act (the “FFCRA”) required group health plans and health insurance issuers to cover diagnostic tests for detection of the virus that causes COVID-19, without cost-sharing or preauthorization requirements. The CARES Act expanded this coverage requirement.
Takeaway
These are but a few of the government programs that small businesses should be aware of in a constantly changing environment. Need more information? Contact CASHMAN LAW today for a free consultation to see how we might help your business navigate during difficult times.
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