The Senate has passed the Coronavirus Aid, Relief, and Economic Security Act, known as the CARES Act. It is expected to be ratified by the House and quickly signed by the President. Estimated at over $2 trillion, the relief package is the largest in U.S. history.
We have summarized below the major provisions that will impact our business, not-for-profit and individual clients:
- Payroll Protection Program
- Provides business interruption loans of up to $10 million to employers with less than 500 employees to be used for employee salaries, rents, mortgages and other qualifying expenses.
- Non recourse loans which do not require a personal guarantee or collateral.
- Forgiveness provisions for the portion of the loan that is used toward qualifying payroll costs and other expenses.
- Expanded use of net operating loss carrybacks from 2018, 2019 and 2020 tax years
- Net operating losses from these years can be carried back five years to claim refunds.
- Removes the 80% income cap on the use of loss carryovers.
- Removes the excess business loss limitation on non-corporate taxpayers.
- Additional Payroll Tax Relief
- Employee retention credit for 50% of qualified wages up to $10,000.
- Deferral on payment of the employer’s portion of certain payroll taxes.
- Other Business Provisions
- Relaxation of the limitation on the deductibility of interest paid.
- Postponement of estimated tax payments.
- Increase in deductibility of corporate charitable deductions.
- Ability to deduct Qualified Improvement Property quicker.
- Recovery Rebates
- Direct payments of up to $1,200 to individuals, subject to income and certain other limitations.
- Additional $500 per qualifying child for eligible taxpayers.
- Expansion of unemployment benefits, including for self-employed and gig-economy workers
- Retirement Plan Distributions
- Up to $100,000 early distribution from qualified plan can be exempt from penalty and income spread out over three years in certain circumstances.
- Required Minimum Distributions (RMDs) for 2020 are suspended.
- Retirement plan loan limits are increased from $50,000 to $100,000.
- Charitable Contributions
- Limitation on current year deduction relaxed.
- New above-the-line deduction of $300 for individuals that do not itemize deductions.
This is a brief overview of certain provisions of the CARES Act. We will share additional details on important provisions of the Act over the coming days. We will keep you posted as new developments occur.
If you have questions or concerns regarding this Client Alert, please contact Frank Washelesky at [email protected] or your ORBA advisor.