At 1:00 a.m this morning, Senate leader McConnell announced an agreement in the Senate on the principle terms of the Coronavirus Aid, Relief, and Economic Security Act, or “CARES” Act, S.3548, subject to minor and technical revisions. A vote in the Senate is expected soon. Much of the relief proposed in the bill would be accomplished through amendments to the tax code, so we urge our clients to consult early and often with their tax professionals.
The Senate bill could affect small businesses in a number of ways.
- The bill would expand lending to small business through the SBA and participating lenders. The bill would make “small business interruption loans” available to employers with fewer than 500 employees. Loan payments would be deferred for up to one year, and loan amounts used for “maintaining payroll continuity” March 2020 and June 2020 would be eligible for forgiveness. The amount of loan forgiveness would be reduced pro rata, however, for reductions in workforce.
- The bill would provide payments to individuals, including small business owners, in the nature of refundable tax credits. The bill would provide up to $1200 for individuals ($2400 for couples filing jointly). The credit would be reduced by 5% of adjusted gross income in excess of $75,000 ($150,000 for joint returns), but would not be less than $0. And additional $500 credit would be provided per taxpayer dependent.
- The bill would provide cheaper access to qualified retirement funds. The bill would eliminate the 10% tax penalty on early withdrawals from qualified retirement plans for coronavirus related distributions, up to a maximum withdrawal of $100,000. If withdrawals are repaid within three years, then the early distribution would be treated as a rollover (i.e., a direct transfer to a trustee) for purposes of capital gains taxes.
- The bill could permit certain employers to defer payment of payroll taxes due in 2020 for up to two years.
- The bill places some limitations on the recent coronavirus related amendments to Emergency Paid Sick Leave Act, which was passed as part of Congress’s Phase 2 response. If enacted, the bill would cap an employers’ obligation to pay for coronavirus-related sick leave at $511 per day and $5,110 in the aggregate per employee for that employee’s government or doctor ordered self-quarantine or self-care and at $200 per day and $2,000 in the aggregate per employee for that employee’s absence to care for others as a result of coronavirus or coronavirus related school closures.
Laredo & Smith’s Matt Kane is closely monitoring any additional changes and will keep you informed of emerging items that could impact you and your business. Please do not hesitate to to reach out to any Laredo & Smith attorney with questions or concerns about your small business. We are here to help.