Senate Approves Relief Package

On Wednesday March 25 the United States Senate passed a $2 trillion emergency relief package. The legislation now goes to the House of Representatives, where it is expected to be passed by voice vote on Friday. President Trump has already said he would sign the legislation.

The deal includes cash payments for a large percentage of the U.S. population, support for health care systems and hard-hit industries, forgivable and low-interest loans for small businesses, options of payroll tax deferment, other tax credits and accounting measures for individuals and businesses, and much more.

Below you will find details on specific items of interest.

For Businesses: The following changes are designed to support cash flow, improve liquidity and keep employees on payroll

  • Creates new Paycheck Protection Loans (through Small Business Administration)
  • Businesses can get these loans forgiven if they maintain payroll from 2/15/2020 through 6/15/2020 (as defined by headcount) for use on payroll costs, mortgage interest, rent and utilities over an 8-week period.
  • The amount forgiven will be reduced proportionally by any employee reductions, and the employer will need to work with a lender to justify their payroll was maintained through documentation.
  • Eligibility: businesses with less than 500 employees, sole proprietors, independent contractors, and self-employed individuals (many in the food and hospitality industry will qualify even if they are above 500 employees with multiple locations)
  • All borrower and lender fees are waived, amongst other requirements. Automatic deferral of principal, interest and fees for 6 months
  • A small business cannot get a new loan under this program if they receive an SBA Economic Injury Disaster Loan.
  • Delays employer payroll taxes
  • Allows employers and self-employed individuals to defer employer share of the Social Security Tax.
  • The deferred payment must be paid over the following two years: one-half due by 12/31/2021, and the second due by 12/31/2022
  • Creates an employee retention tax credit for businesses subject to partial/full closure.
  • An employer can get a refund up to $5000/worker for wages paid during this period if they can show they lost 50% of typical revenue during this period.
  • An employer cannot receive the tax credit if they get a special SBA Loan
  • The credit can be used against applicable employment taxes for each calendar quarter and is calculated on the wages paid to employees during this period.
  • Tax-exempt organizations can qualify.
  • Eases limitations on a company’s use of net operating losses from previous years.
  • This provision allows for a loss from 2018, 2019 or 2020 to be carried back five years.
  • Temporarily removes the taxable income limitation to allow for net operating losses to fully offset income.
  • Modifies the loss limitation for pass-through entities and sole proprietors (to benefit the from net operating loss changes the same as above)
  • Increases business interest deduction
  • Temporarily increases the amount of interest businesses are allowed to deduct on tax returns from 30 to 50% of taxable income from 2019 and 2020.
  • Retailers, restaurateurs and hotels can immediately deduct from their taxes what they spend on property improvements.
  • Furloughed workers can receive full pay from the Federal Government for up to four months.
  • Unemployment is extended from 26 to 39 weeks and an additional $600/week will be provided for four months.

In addition to the above content, the following is targeted more for individuals:  

  • $1,200 recovery rebates ($2,400/couple) to individuals earning up to $75,000 ($150,000/couple); $500 additional for each child
  • The amount would scale down with income for those making up to $99,000 ($198,000), and those earning more would be ineligible.
  • Penalty-free COVID-19-related withdrawals from retirement accounts up to $100,000.
  • Modifications of limitations on charitable contributions during 2020
  • The 50% of adjusted gross income limitation is suspended for individuals and the corporate limitation is increased from 15% to 25%.
  • Allows individuals to deduct $300 of cash contributions to charitable organizations whether they itemize their deductions or not.