BORROWED FROM COVIDWM.ORG
Final Summary of Provisions in CARES Package Most Relevant to ICSC
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ECONOMIC PROVISIONS
LOAN PROGRAM
Small Business “Paycheck Protection Program”
·
New $349 billion
SBA lending program,
modeled on existing
7(a) program, with 100% government guarantee (as opposed
to 75% guarantee for 7(a) loans).
·
Eligibility:
o
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).
o
Businesses in the Accommodation and Food Services
Sector (NAICS Code 72) are eligible with up to 500 employees
at each location. Code 72 is limited
to restaurants and accommodations (hotels).
o
Non-profits with fewer
than 500 employees who are 501(c)3s
and do not receive Medicaid funding.
o
Sole proprietors, the self-employed, and independent contractors.
·
Regulatory Streamlining: SBA’s standard “no credit elsewhere” test is waived
and non SBA- lenders
approved by Treasury
and SBA can provide loans.
·
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, in excess of
$100,000 a year.
·
Requirements:
The employer certifies
that they will maintain their average full-time equivalent employment, with incentives to re-hire if employees have been furloughed.
·
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 in excess of $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%.
·
Banks that already
participate as SBA lenders will administer by making these low interest
rate loans, expected to be tied to the maximum interest
rate for SBA loans as February 15,
2020. There are protections against reselling the loan. The bill also excuses banks who make loans under this program
from certain accounting and loss reserve
requirements, thereby freeing up funds for additional lending.
·
Borrowers who receive
Small Business Interruption Loans are not eligible to receive SBA Economic Injury Disaster Loans
(EIDLs).
Economic Stabilization and Assistance to Severely Distressed Sectors
·
Treasury is working
through the guidance
already and may have it prepared within
5 days. The bill says Treasury
must publish procedures for applications and the minimum
requirements within 10 days
of enactment.
·
The large loan program
is designed for larger impacted
businesses or those that do not otherwise qualify for the SBA loan and where continued
operations are otherwise
jeopardized. Provides direct loans being subject to an annualized interest
rate that is not higher
than 2 percent per annum.
·
For the first 6 months
after any such direct loan is made, there is no principal or interest due or payable. That may be extended at Treasury Secretary’s discretion.
·
Requires the Treasury
Department and Federal Reserve
to publish for the public to see every seven days which companies and entities gain financing through
Treasury’s lending of the bailout
funds.
·
Businesses that take money from the government will have to wait until at least a year after
they’ve paid it back to buy their own stock or pay dividends to shareholders.
·
Borrowers have to try to maintain staffing
at March 24 levels, with a prohibition on reducing
employment by more than 10 percent.
·
Executives of big companies, meanwhile, will face restrictions on their compensation, including bonuses.
·
Treasury Secretary Mnuchin
has the power to waive any of these restrictions but must testify before Congress on the reasons for any waiver.
BANKING
PROVISIONS
Latest version gives the Federal
Deposit Insurance Corp. expanded authority to guarantee bank accounts and ease key lending regulations.
The bill would give the FDIC greater authority
to back-up accounts,
including by guaranteeing business transaction accounts.
The FDIC previously used the transaction account authority in the
2008 financial crisis to shore-up
confidence in accounts
used for payroll
and other business
purposes.
The bill would make it easier
for small banks to take advantage of streamlined capital
requirements that Congress ordered
regulators to establish
in 2018 through the community bank leverage ratio.
The legislation would also rework accounting rules that banks have warned
could inhibit lending.
It would allow banks to postpone
compliance with the Current Expected
Credit Losses (CECL) standard, which requires lenders
to immediately account
for potential losses
when they issue loans, tying up more of their
capital. They would have until the end of the coronavirus public health emergency ends or Dec. 31, whichever is earlier.
Another section of the bill would ease accounting rules to make it easier
for banks to restructure the Troubled Debt Ratio (TDR) without taking a significant hit to their capital. Regulatory relief from
accounting standards for loan modifications related to COVID-19 made by banks.
TAX PROVISIONS
Individual Tax Relief
·
2020 Recovery Rebates
for Individuals
Provides up to $1,200
for individuals; $2,400
for married couples.
Those amounts increase
by
$500 for every child.
The rebate phases
out for incomes
over $75,000 (single)
and $150,000 (married).
Business Tax Relief
·
Qualified Improvement Property
(QIP) technical correction
Fixes an error in the Tax Cuts and Jobs Act (TCJA) that required tenant
improvements to be depreciated over the 39-year life of the building. The fix is retroactive to 2018.
·
Employee retention credit for employers subject to closure
due to COVID-19. The
provision provides
a refundable payroll
tax credit for 50 percent of wages paid during the COVID-19 crisis.
The credit is available to employers whose (1) operations were fully or partially suspended, due to a COVID-19-related shut-down order, or (2) gross receipts declined
by more than 50 percent when compared to the same quarter in the prior year.
·
Delay of Payment
of Employer Payroll
Taxes
Allows employers
and self-employed individuals to defer
payment of the employer share
of the Social Security tax. The bill requires that the deferred
employment tax be paid over the
following two years.
·
5-year Net Operating
Loss (NOL) Carryback
Provides that a loss from
2018, 2019, or 2020 can be carried
back five years and removes
the 80% taxable income limitation to allow an NOL to fully offset
income.
·
Suspension of the Limitation on Losses from Pass-through Businesses
Allows all losses from a pass-through business to offset other sources of and individual’s income, suspending a new rule imposed in the TCJA [IRC section
461(l)].
·
Acceleration of Recovery
of Corporate AMT credits
·
Relaxation
of Business Interest
Deduction Limits
Increases the 30-percent limitation to 50 percent
of taxable income
for 2019 and 2020.
·
More Money for a Longer
Period for More Workers: Makes benefits more generous
by adding a $600/week across-the-board payment increase
through the end of July. In addition,
for those who need it, the bill provides
an additional 13 weeks of benefits beyond
what states typically allow.
·
Temporary Provisions: The
expansion in unemployment benefits expires at the end of 2020 in
recognition of the temporary nature
of this challenge.
UNEMPLOYMENT BENEFITS
·
Includes $250 billion
to Expand Unemployment Benefits: Provides economic
relief and much-needed support
for workers by making a significant investment in unemployment benefits.
·
Unemployment
Benefits for More Americans: Makes
sure self-employed and independent contractors, like Uber drivers and gig workers,
can receive unemployment during the public health emergency. The bill also includes
support to state and local governments and nonprofits
so they can pay unemployment to their employees.
·
More Money for a Longer
Period for More Workers: Makes benefits more generous
by adding a $600/week across-the-board payment increase
through the end of July. In addition, for those who need it, the bill provides an additional 13 weeks of benefits beyond
what states typically allow.
·
Temporary Provisions: The
expansion in unemployment benefits expires at the end of 2020 in
recognition of the temporary nature
of this challenge.
For questions, please
contact gpp@icsc.com.
Doug Zandstra CPA, CFE, EA
Certified Public Accountant
Certified Fraud Examiner
Enrolled Agent
29 Pearl St NW, Ste 225
Grand Rapids, MI 49503
616 970 3000
dougzandstra.com
email dougzandstra@gmail.com
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