This bill — the Coronavirus Aid, Relief, and Economic Security (CARES) Act — would provide direct economic relief to the American people through recovery checks, in addition to small businesses and severely distressed sectors of the U.S. economy. It would also provide resources to help with the healthcare response to the coronavirus (COVID-19) pandemic, ease requirements for students & student loan borrowers, and clarify the application of paid leave requirements. A breakdown of the various provisions in the 247-page bill can be found below.
SMALL BUSINESS INTERRUPTION LOANS (KEEPING WORKERS PAID & EMPLOYED ACT)
This section would make available $299.4 billion in loan guarantees & loan subsidies through the Small Business Administration’s (SBA) 7(a) loan program for businesses with 500 or fewer employees. Loans could be used for payroll support, paid sick or medical leave, employee salaries, mortgage payments, and other debt obligations. Both borrower & lender fees would be waived for 7(a) loans, and the maximum amount would be increased to $10 million through December 31, 2020.
Existing & new SBA lenders would be able to determine borrower eligibility & creditworthiness without going through the SBA’s typical channels. Instead of being required to determine repayment ability (which isn’t possible during the pandemic), lenders would simply be required to determine whether a borrower was operational on March 1, 2020, and had employees for whom it paid salaries & payroll taxes. The government guarantee of 7(a) loans would be increased to 100% through the end of 2020, at which point the guarantee would return to 75% for loans over $150,000 and 85% for loans less than or equal to $150,000. The complete deferment of 7(a) loan payments would be permitted for up to one year, and the SBA would provide guidance to lenders about the deferment process within 30 days.
Loan forgiveness would be available to borrowers in an amount equal to the payroll costs and costs related to debt obligations paid between March 1, 2020, and June 30, 2020. The amount of the loan eligible for forgiveness would be reduced proportionally by the number of employees laid off during this period relative to the borrower’s prior employment levels. Qualified payroll costs would exclude any compensation for employees in excess of $100,000 in annualized compensation, and qualified sick leave & qualified family leave wages as enacted by the Families First Coronavirus Response Act. Loan forgiveness amounts wouldn’t be included in a business’s taxable income. Lenders would verify payroll costs and payments made on debt obligations.
The Treasury Dept. would be authorized to consult with the SBA and other federal financial regulators to establish a process by which lending institutions that aren’t currently authorized to offer SBA loan products are able to provide SBA small business interruption loans for the duration of the president’s national emergency declaration. The Treasury would be allowed to determine the eligibility criteria & terms for the lenders they approve to disseminate small business interruption loans and to write regulations outlining these criteria and terms.
Additionally, this section would include the following appropriations:
$300 million for salaries & expenses for small businesses involved with the SBA;
$240 million would be appropriated for small business development centers & women’s business centers for technical assistance for businesses;
$25 million for resource partner associations to provide online information & training, plus $10 million for technical assistance for businesses at minority business centers; and
$25 for the Office of Inspector General to conduct oversight of this section.
ECONOMIC RELIEF FOR INDIVIDUALS, FAMILIES, AND BUSINESSES
Individuals & Families: This section would provide recovery checks for up to $1,200 for individual taxpayers, and up to $2,400 for married couples filing a joint return. Those amounts would increase by $500 for each child. Taxpayers with little or no income tax liability, but at least $2,500 of qualifying income (such as earned income, Social Security retirement benefits, and veterans’ compensation or pension benefits), would receive a recovery check of at least $600.
Recovery checks would be reduced for higher income taxpayers and begin phasing out at $75,000 in adjusted gross income (AGI) for individual taxpayers & $150,000 AGI for joint filers. The recovery check amount is reduced by $5 for each $100 a taxpayer’s income exceeds the phase-out threshold; and it would phase out entirely for single taxpayers with incomes over $99,000 & joint filers with AGI exceeding $198,000. The Internal Revenue Service (AGI) would base these AGI amounts on the taxpayer’s 2018 tax return.
The April 15th tax filing date would be extended to July 15th to give individuals more time to file their tax returns given the limitations caused by the coronavirus pandemic. All taxpayers would be able to postpone estimated tax payments until October 15, 2020, and there would be no cap on the amount of tax payments that can be postponed to increase the cash available to people experiencing shortfalls during the COVID-19 emergency.
Similar to special retirement used previously in disaster relief, the 10% early withdrawal penalty for distributions up to $100,000 from qualified retirement accounts would be waived for coronavirus-related purposes. Income from these distributions would be subject to tax over three years, and the taxpayer could recontribute the funds to an eligible retirement plan within three years without regard to that year’s contribution cap. Coronavirus-related distributions would include those:
Made to an individual diagnosed with COVID-19;
Whose spouse or dependent is diagnosed with COVID-19,
Who experience adverse financial consequences as a result of being quarantined, furloughed, laid off, have work hours reduced, are unable to work due to lack of child care, the closing or reduced hours of a business owned or operated by the individual, or other factors as determined by the Treasury Secretary.
To encourage Americans to contribute to churches & charitable organizations in 2020, they would be permitted to deduct up to $300 of cash contributions “above the line” (i.e. whether or not they itemize their deductions).
Businesses: This section would allow corporations to postpone estimated tax payments due after the date of enactment until October 15, 2020, without a cap on the amount of tax payments postponed, to provide cash flow necessary that would help businesses maintain operations & continue paying employees during the COVID-19 pandemic.
Employers & self-employed individuals would be allowed to defer payment of the employer share of the Social Security tax they otherwise are responsible for paying to the federal government (employers are responsible for paying a 6.2% Social Security tax on employee wages). The deferred employment tax would be required to be paid over the following two years, with half to be paid by December 31, 2021, and the other half by December 31, 2022.
The limitations on the ability of companies to use net-operating losses (NOLs) from prior years in the current tax year would be relaxed. Currently, they’re subject to a taxable income limitation and they can’t be carried back to reduce income in a prior tax year. This provision would allow losses from 2018, 2019, or 2020 to be carried back five years, and would temporarily remove the taxable income limitation to allow an NOL to fully offset income. These changes would allow companies to utilize losses & amend prior years’ returns to free up cash flow & liquidity during the COVID-19 pandemic, and would also be available to pass-through businesses & sole-proprietors.
Additionally, this section would:
Accelerate the ability of companies to recover AMT credits;
Temporarily increase the amount of interest expense businesses can deduct from 30% to 50%;
Enable businesses (especially those in the hospitality industry) to immediately write off costs associated with improving facilities instead of having to depreciate those improvements over the 39-year life of the building; and
Allow companies to recover the overpayment of taxes paid on the one-time repatriation toll charge in 2017.
ASSISTANCE TO SEVERELY DISTRESSED SECTORS OF THE U.S. ECONOMY
This section of the bill would provide a total of $208 billion to the Treasury, through the Exchange Stabilization Fund, for sufficiently collateralized loans & loan guarantees to eligible entities, including:
Up to $50 billion for passenger air carriers;
Up to $8 billion for cargo air carriers; and
Up to $150 billion for other eligible entities.
The Treasury Secretary would have the flexibility to provide collateralized loans & loan guarantees to domestic businesses that have incurred losses as a direct result of the coronavirus pandemic so that they can maintain operations. Interest rates on loans extended by the Treasury would be no less than the average yield on the outstanding marketable U.S. debt obligations with a comparable maturity (such as Treasury bills with maturities ranging from a few days to 52 weeks; Treasury notes with maturities between 2 to 10 years; or Treasury bonds maturing in 30 years).
Entities would be eligible if they aren’t otherwise able to reasonably access credit at the time of the pregnancy; and would only be eligible if the Treasury Secretary determines that its continued operations are jeopardized as a result of losses stemming directly from the coronavirus outbreak.
This section would impose the following additional limits on assistance provided under this section:
The Treasury would be prohibited from making grants or direct cash payments to entities.
Entities receiving assistance would be prohibited from increasing compensation for, or providing “golden parachutes” to, executives over a two-year period from this bill’s enactment.
The Treasury would ensure that to the extent feasible & practicable, the government is compensated for the risk in making loans & loan guarantees. To that end, it could enter into contracts to participate (contingent on the financial success of the eligible entity) in the gains of the eligible entity through instruments such as warrants, stock options, common or preferred stock, or other appropriate equity instruments.
This section would clarify that all diagnostic testing for COVID-19 is to be covered by private insurance plans without cost sharing. For tests covered with no cost to patients, insurers would be required to pay either the rate specified in a contract between the provider & the insurer, or if there isn’t a contract, a cash price posted by the provider.
Free coverage without cost sharing would be provided within 15 days for a COVID-19 vaccine that has in effect a rating of “A” or “B” in the recommendations of the U.S. Preventive Services Task Force or a recommendation from the Advisory Committee on Immunization Practices (ACIP).
Health Resources & Services Administration (HRSA) grant programs that promote the use of telehealth technologies for healthcare delivery, education, and health information services would be reauthorized. Telehealth offers flexibility for patients with, or at risk of contracting, COVID-19 to access screening or monitoring care while avoiding exposure to others.
HRSA grant programs to strengthen rural community health by focusing on quality improvement, increasing healthcare access, coordination of care, and integration of services would be reauthorized. Rural residents are more likely to be older & have a chronic disease, which could increase their risk for more severe illness if they contract COVID-19.
A Ready Reserve Corps would be established to ensure the U.S. has enough trained doctors & nurses to respond to COVID-19 & other public health emergencies. Doctors would provide volunteer medical services during the COVID-19 public health emergency would have liability protections.
This section would clarify that the Strategic National Stockpile (SNS) can stockpile medical supplies, such as swabs needed for COVID-19 diagnostic tests. It would provide permanent liability protection for manufacturers of personal protective equipment (PPE), such as masks & ventilators, in the event of a public health emergency to incentivize production & distribution.
Food & Drug Administration (FDA) policy would be clarified to allow for laboratory-developed tests & diagnostic kits to be used to test patients in advance of an Emergency Use Authorization (EUA).
The FDA would be required to prioritize & expedite the review of drug applications & inspections to prevent or mitigate a drug shortage. Drug manufacturers would be required to submit more information when there is a supply interruption, including about active pharmaceutical ingredients when they’re the cause of the interruption.
Manufacturers would be required to make contingency plans to ensure a backup supply of products. The FDA & Government Accountability Office (GAO) would be directed to review internal coordination at FDA on drug inspection & enforcement & drug shortages. Drug manufacturers would have a safe harbor to communicate truthful & non-misleading information regarding products with an emergency authorization from the FDA. During a public health emergency, a medical device manufacturer would be required to submit information about a device shortage or device component shortage upon request by the FDA. The GAO would examine FDA coordination, communication, and decision-making within FDA related to assessing device shortages & risks associated with the supply of devices.
Nutrition requirements under the Older Americans Act meal programs would be waived during the COVID-19 public health emergency to ensure seniors can get meals in case certain food options aren’t available.
The Dept. of Health & Human Services (HHS) would be required to issue guidance on what is allowed to be shared of patient record sharing during the COVID-19 public health emergency.
The Biomedical Advanced Research & Development Authority (BARDA) would be allowed to more easily partner with the private sector on research & development by removing the cap on other transaction authority.
The FDA priority review voucher incentive would be made permanent to incentivize companies to develop countermeasures more quickly.
Breakthrough Therapy designations would be provided for animal drugs that can prevent human diseases, and speed up the development of drugs to treat animals to help prevent animal-to-human transmission which is suspected to have occurred with the outbreak of novel coronavirus, leading to the COVID-19 pandemic.
This section would waive the institutional matching requirement for campus-based aid programs, and allow institutions to transfer unused work-study funds for use as supplemental grants. Institutions could award additional Supplemental Educational Opportunity Grants for Emergency Aid to students impacted by COVID-19, and could issue work-study payments to students unable to work due to workplace closures as a lump sum or in payments similar to paychecks.
Students who dropped out of school because of COVID-19 would have this term excluded from counting toward lifetime subsidized loan eligibility. They would also be excluded from counting toward lifetime Pell grant eligibility, and wouldn’t be required to return Pell grants from this term. For students who dropped out of school as a result of COVID-19, their grades wouldn’t affect their federal academic requirements to continue to receive Pell Grants or student loans in the future.
Historically Black Colleges & Universities (HBCUs) would be able to defer payments on current Capital Financing loans during the national emergency period so they can devote funding to COVID-19 efforts.
The Secretary of Education would be able to defer student loan payments, principal, and interest for 3 months without penalty to the student, and could defer for an additional 3 months if necessary under the public health emergency declaration.
This section would create a limitation that an employer shouldn’t be required to pay more than $200 per day and $10,000 in the aggregate for each employee in paid family & medical leave. Additionally, employers wouldn’t be required to pay more than $511 per day and $5,110 in the aggregate for sick leave or more than $200 per day and $2,000 in the aggregate to care for a quarantined individual or child for each employee in paid leave.
The Labor Dept. would have the authority to use regulation to expand the exemption for small businesses with fewer than 50 employees from paid leave provisions.
Applications for unemployment compensation & assistance with the application would have to be accessible in person, by phone, or online.
The Office of Management & Budget (OMB) would be allowed to exclude certain executive branch employees from the paid family leave mandate.