Details of the US Coronavirus Aid Bill
The US Senate and House passed a massive aid bill, S. 3548, The Corona Aid, Relief, and Economic Security (CARES) Act, to shore up the economy and preserve and recover jobs. The total amount is $2.2 trillion, but it also enables the Treasury to make loans to large businesses of up to $4.5 trillion, making the potential economic impact over $7 trillion. This amount exceeds the $4.5 trillion annual US budget and is sizable next to the 2019 US GDP of $21.5 trillion. That means the bill could supplement a shortfall the size of 1/3 of the US economy.
You can read the full text of the CARES Act and we summarize some highlights below.
All of us are worried about our favorite airlines, big hotels, small hotels, restaurants, bars, gyms, and stores and all the people we know who own and work in them and so were the senators who wrote and approved this bill. This bill addresses businesses of every scale.
(The following is a summary and should not be considered legal or financial advice. You should consult your accountant or attorney for advice in your specific context).
The Wall Street Journal summarized the major target sectors as follows:
- $250 billion to make unemployment insurance available to more categories of workers and to extend the duration of benefits to 39 weeks from the 26 weeks typical in most states. It would also provide an extra $600 a week for four months.
- $301 billion in direct payments to households.
- $349 billion in loans to small businesses, with the amount spent on payroll, rent or utilities converting into grants that don’t have to be repaid.
- $500 billion for loans, loan guarantees or other aid to businesses, states and municipalities—including the possibility that the government will take direct equity stakes in distressed companies. Of the total, $29 billion is set aside for cargo and passenger airlines, and $17 billion is for businesses deemed critical to national security, such as Boeing. The remaining $454 billion would go to backstop losses in lending facilities established or expanded by the Federal Reserve.
- $32 billion in grants to cover wages at passenger air carriers, cargo air carriers and contractors.
- $150 billion in direct aid to states, distributed according to population size. A municipality could apply to receive aid directly, reducing the amount available to the rest of the state.
- $221 billion in a variety of tax benefits for businesses, including allowing businesses to defer payroll taxes, which finance Medicare and Social Security, for the rest of the year. It would also temporarily allow businesses to claim deductions using today’s losses against past profits to claim quick refunds for cash infusions.
- $340 billion in supplemental spending, which includes $117 billion for hospitals and veterans’ care. It also includes $25 billion mostly for public transit to make up for revenue lost because of dwindling ridership.
The House of Representatives has also passed the bill and President Trump is expected to sign quickly on March 27.
If you have been laid off or had your hours reduced, you can now get an extra $2400 a month for 4 months and draw standard unemployment for up to 39 weeks total.
Individuals who make less than $75,000 individually or $150,000 as a couple will receive $1200 each and $500 per child. If the IRS has your direct deposit information, you will receive this amount in weeks. If you get your tax return by mail, it could take up to 4 months to arrive.
Small businesses can borrow up to $10,000,000 with the maximum amount determined as 4 times the monthly payroll plus any business debt incurred. If the small business provably maintains payroll headcount and compensation to March 1 levels, the loan can be forgiven and the debt forgiveness will not be counted as income. There are some restrictions on payroll costs of people who make more than $100,000 a year, which prevents payments from going to owners and executives who can control their comp and keeps focus on people who really need the cash bridge to when the economy opens up again.
Qualifying for the CARES small business loans/grants requires submission of the full loan application package at: https://disasterloan.sba.gov/apply-for-disaster-loan/index.html
The SBA is a notoriously slow government department, but Sen. Marco Rubio said they were working on accelerating approval to as little as 36 hours, which would be outstanding.
Large companies will need to work with the loan program to be set up by the Treasury.
The government has not published the guidelines on exactly how to apply, so starting with the SBA disaster loan process could get you oriented to the kinds of documents and questions they will need answered to provide the support.