CARES Act Summary

A summary on provisions in the federal “CARES” Act for Small Business

NOTE: This information was provided by the U.S. Chamber of Commerce.

Small Business “Paycheck Protection Program:”

New $349 billion lending program, modeled on existing SBA 7(a) program, with 100% government guarantee (as opposed to 75% guarantee for 7(a) loans).
Eligibility:
- Small businesses as defined by SBA size standards (generally up to 500 employees, but up to 1,500 employees depending on the sector and certain sectors are based on revenue).
- Businesses in the Accommodation and Food Services Sector (NAICS Code 72) are eligible with up to 500 employees at each location. o 501 (c)(3) non-profits with fewer than 500 employees.
- Sole proprietors, the self-employed, and independent contractors.

Regulatory Streamlining:
- SBA’s standard “no credit elsewhere” test is waived
- All lenders (non-SBA lenders to be approved by Treasury and SBA) can provide loans
- No personal guarantee or collateral required
- Lenders defer fees, principal, and interest for no less than 6 months and no more than 1 year.

Maximum Loans: Generally, monthly payroll costs for 2 ½ months, not to exceed $10 million. Payroll costs exclude compensation paid to individuals, including the self-employed, above $100,000 a year.
Requirements: The employer certifies loan will be used to retain workers, maintain payroll, make mortgage or lease payments, and pay utilities.
Loan Forgiveness: The borrower shall have a portion of their loan forgiven in the amount equal to their payroll costs (not including costs for compensation above $100,000 annually), interest payments on mortgages, rent payments, and utility payments between February 15 and June 30, 2020. Loan forgiveness will be reduced if the borrower reduces employment by a ratio similar to their reduction in employment or if borrower reduces salaries and wages by more than 25%.

Business Tax Provisions:

Employee retention credit for employers subject to closure due to COVID-19 (permits fully refundable 50% tax credit applicable to the employer’s share of payroll 5 taxes on wages up to $10,000 per employee; widely available with special rules for small employers).
Delay of payment of employer payroll taxes (defer payment of the employer share of the Social Security tax due between now and January 1, 2021 to December 31, 2021 (50% due) and December 31, 2020 (remaining due).
Modifications for net operating losses (for 2018, 2019, 2020, loss can be carried back 5 years, temporarily suspends 80% limitation; extends to pass-throughs, sole proprietors).
Accelerates ability of companies to recover AMT credits.
Modification of limitation on business interest (for 2019, 2020, increases 30% limitation to 50%).
Technical amendment regarding qualified improvement property.
Temporary exception from excise tax for alcohol used to produce hand sanitizer (for 2020).