March 23, 2020

Coronavirus Aid, Relief, and Economic Security Act (CARES Act) Highlights

The federal government’s comprehensive response to the Coronavirus (COVID-19) pandemic addresses not only efforts to contain the virus, but several business changes designed to protect employees and help companies impacted by this traumatic economic event. There were several important updates to paid sick leave and the Family Medical Leave Act along with corresponding business tax credits outlined in the Families First Coronavirus Response Act. Concurrently, there was an extension to filing and payment deadline of income and other taxes by the IRS. To offer additional relief, the Coronavirus Aid, Relief and Economic Security (CARES) Act has been under consideration in Congress. It provides a number of individual and business breaks and incentives to help manage through uncertain times. Although the legislation is still under negotiation, it’s expected many of the current provisions will make it into the final version. To give clients, prospects and others insight into the changes impacting businesses, Wilson Lewis has provided a summary of key changes below.

CARES Act Business Provisions

• Expanded Small Business Interruption Loans – To help support small businesses struggling as a result of Coronavirus, the Act would expand the existing Small Business Administration (SBA) loan program to offer loans of up to $10M to qualifying businesses. Expanded eligibility would be limited to companies with less than 500 employees. The loan could be used to pay debt obligations, payroll support, employee salaries, rent and utilities. It’s important to note those who use this loan to make payroll and employee salaries will not qualify for the SBA Economic Injury Disaster Loan.
• Delayed Tax Payments – Recognizing the challenge businesses may have in meeting estimated tax payments, the Act permits companies to delay estimated tax payments until October 15^th, 2020. In addition, employers and self-employed individuals will be permitted to delay paying the employer’s share of payroll taxes. 50% of taxes would be due by December 31, 2021, and the remaining balance one year later.
• Net Operating Loss (NOL) Deductions – Offering an additional source of tax relief, the Act would change the rules initiated in the Tax Cuts and Jobs Act restricting the use of NOLs from past years. Companies would now be able to amend returns to claim losses from 2018, 2019 and 2020 carried back five years. In addition, the taxable income limit would be removed further expanding the benefits because the NOL could be used to fully reduce income tax.
• Business Interest Expense Deduction – There would be a change that permits a company to claim an interest expense deduction for up to 50% of adjusted taxable income.
• Improvement Costs Write Off – An expansion of the bonus depreciation rules that would allow for the write off of costs associated with building improvements in the current year rather than taking depreciation on a traditional schedule. The immediate write off would allow qualifying companies to amend prior year returns to receive funds and reduce liabilities.
• Corporate AMT Credit – The rules would be changed to expand a company’s ability to claim future refundable tax credits as related to the repealed corporate alternative minimum tax.
• Loans & Loan Guarantees – The Act also makes available $150B to businesses that have incurred economic loss to such a degree it jeopardizes the company’s future. The loans would only be available to those that don’t’ qualify for other relief provided in the Act. There are several discretionary terms and conditions and a provision that allows the federal government to share in gains made through the loans.

Contact Us

It’s clear the CARES Act is meant to provide immediate financial relief and support to businesses. While it’s possible additional changes could be made, the details provided above reflect the level of support to be provided. If you have questions about the information outlined above or need assistance with a COVID-19 business issue, Wilson Lewis can help. For additional information call us at 770-476-1004 or click here to contact us. We look forward to speaking with you soon.