March 27, 2020 4:42pm
(Updated) What’s in the revised Congressional COVID-19 relief bill?
President Trump has signed into law a major Coronavirus relief package. Congress and the White House announced that a deal had been struck to pass a $2 trillion relief package for Americans impacted by the COVID-19 pandemic on March 24. Senate Majority Leader Mitch McConnell unveiled the framework of the legislation – known as the CARES Act – last week.
The bill includes massive amounts of federal funding assistance as well as major (temporary) changes to the federal tax code that will affect the greater Louisville business community.
Read more about the CARES Act below.
Financial aid and relief for individuals, families, and businesses
- The extension of unemployment insurance by 13 weeks, including a four-month enhancement of $600 in benefits on top of state benefits for individuals impacted by the pandemic
- An unemployment benefit structure is established for individuals who would not ordinarily qualify (e.g., self-employed)
- $1,200 in one-time payments direct to individuals ($2,400 for couples) + $500 per child applied equally to workers with incomes up to $75,000/$150,000, phasing out at $99,000/$198,000. Income will be based on 2019 returns if available; 2018 returns if not available.
- Allows for the temporary suspension of payments on federal student loan debt and a freeze on interest accrual
- $350 billion for small business loan programs (at least portions of these loans will be forgivable). The size of the loans would equal 250 percent of an employer’s average monthly payroll. The maximum loan amount would be $10 million. Eligible businesses would include small businesses, self-employed individuals and gig-economy workers, 501(c)(3) organizations and 501(c)(19) veteran organizations, and tribal business concerns with under 500 employees.
- $500 billion fund for broad groups of “severely distressed sectors.” Eligible businesses under this section cannot be eligible for assistance under other parts of the Act.
- $275 billion in emergency aid for state and local governments (read more about these provisions here).
- A $300 charitable deduction is created for individuals who take the standard deduction
- Limitations on deductions for charitable contributions for individuals that itemize and corporations are increased.
- Penalties for early withdrawal of retirement accounts are waived if the withdrawal is related to COVID-19
- Employer-side payroll tax deposits (the 6.2 percent Social Security tax paid by employers) will be delayed until the end of 2020. Half of the deferred amount would be paid in December 2021, and the other half in December 2022.
- Establishment of an employee tax credit program. This is a refundable payroll tax credit for 50 percent of wages paid by employers to employees during the COVID-19 crisis. The credit is available to employers whose operations were fully or partially suspended due to a COVID-19-related shut-down order, or whose gross receipts declined by more than 50 percent when compared to the same quarter in the prior year.
- An exclusion from taxable income for payments made by an employer to an employee or lender for student loan payments
- An exemption from alcohol excise taxes for alcohol used in the manufacturing of hand sanitizer
- A five-year carryback for net operating losses (NOLs) will be allowed. The provision also temporarily removes the taxable income limitation to allow an NOL to fully offset income.
- An acceleration of the ability of companies to recover Alternative Minimum Tax credits.
- Changes are made to net operating losses for pass-through businesses
- The 30 percent cap on the business interest expense deduction imposed by the Tax Cuts and Jobs Act is raised to 50 percent
- Qualified improvement property will be included as qualified property for bonus depreciation
The CARES Act also includes numerous provisions related to health care, education, labor, and more. Access the summaries below to learn more about the bill.