Summary of the $2+ trillion “Phase 3” of the CARES Act for Businesses

Summary of the $2+ trillion “Phase 3” of the CARES Act for Businesses

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On Wednesday, March 25, 2020 the US Senate unanimously passed the “Phase 3” congressional response to the COVID-19 public health crisis. The stimulus bill was signed into law on Friday, March 27, 2020. The Coronavirus Aid, Relief and Economic Securities Act (CARES) provides $2 trillion in aid for public health spending, financial relief for both citizens and small business, as well as more industry-specific relief measures. Below we offer a very high-level overview of the provisions of the bill that may impact our business community. The information provided is sourced directly from The Council for Insurance Agents and Brokers’ (CIAB) legal team at Steptoe & Johnson, LLP. The professionals at Steptoe & Johnson have put together an extensive analysis of the provisions of the bill available on their COVID-19 Resource Center. Additionally, RCM&D clients, partners and friends can access additional information through the RCM&D COVID-19 Resource Center.

The CARES Act is 880 pages long, consisting of several different Divisions and Titles:

Division A—Keeping Workers Paid and Employed, Health Care System Enhancements, and Economic Stabilization

Title I—Keeping American Workers Paid and Employed Act, which includes paycheck protection and loan forgiveness, and small business contracting relief.

The CARES Act amends the Small Business Act (SBA) to create a new Business Loan Program category. For the period from February 15, 2020 to June 30, 2020, the law allows the Small Business Administration to provide 100% federally-backed loans up to a maximum amount to eligible businesses to help pay operational costs like payroll, rent, health benefits, insurance premiums, utilities, etc. Subject to certain conditions, loan amounts are forgivable.

Read more about the Title I including, loan terms, program operations, eligibility, permissible uses, payment deferral, and more details from Steptoe & Johnson, LLP.

Title II—Assistance for American Workers, Families, and Businesses, which includes unemployment insurance and tax relief.

The most significant provision under Title II for the business community falls under Subtitle C – Business Provisions.

Employee Retention Credit - Under this subtitle, the CARES Act provides eligible employers – including tax-exempt organizations but not governmental entities – a refundable credit against payroll tax (Social Security and Railroad Retirement) liability equal to 50% of the first $10,000 in wages per employee (including value of health plan benefits).

For employers with more than 100 full-time employees, only employees who are currently not providing services for the employer due to COVID-19 causes are eligible for the credit. The employee retention credit is effective for wages paid after March 12, 2020, and before January 1, 2021.

Delay of Employer Payroll Taxes - Postpones the due date for depositing employer payroll taxes and 50% of self-employment taxes related to Social Security and Railroad Retirement and attributable to wages paid during 2020.

Treatment of Losses - Certain changes to the loss provisions made by the Tax Cuts and Jobs Act (TCJA) are suspended in an effort to allow companies to utilize greater losses as well as to claim refunds for certain losses

Read more about Title II subtitles including Subtitle A which provides federal funding for unemployment compensation to gig-economy workers and Subtitle B which provide recovery rebates for US taxpayers as well as more provisions and details of Subtitle C from Steptoe & Johnson, LLP.

Title III—Supporting America's Health Care System in the Fight Against the Coronavirus, which includes provisions related to medical supplies, health care coverage, and paid sick and family medical leave.

Changes to Testing and Preventive Services - The CARES Act expands the types of testing that would be covered with no cost sharing beyond the scope of the types of testing contemplated by the Families First Act. The CARES Act also requires that the group health plan or insurer reimburse the provider for either the negotiated cost of the testing or if there is no negotiated price between the group health plan (or insurer) and the provider, for the cash price of the diagnostic testing as reflected on its website.

Changes to Paid Sick Leave and Family Leave Provisions from Families First Act - The CARES Act provides a few clarifications and makes modest changes to the Family Medical Leave Act provisions in the previous Families First relief package. Some changes include:

  • A new rule for rehired employees under which “eligible employee” (defined as employed for at least the last 30 calendar days).
  • Allows for advances on anticipated tax credits for employers’ paid family leave costs and provides penalty relief for failure to deposit tax amounts in anticipation of credits allowed in this section.
  • Clarification that the $200 per day/$10,000 total cap on paid leave is per employee.
  • Includes provisions intended to improve the ability of taxpayers to monetize the benefit of the recently-enacted sick and family leave credits.

Health Savings Accounts - The CARES Act clarifies that for plan years beginning on or before December 31, 2021, a plan will not fail to be a high deductible health plan by failing to have a deductible for telehealth and other remote care services.

Read more about Title III including important details regarding each of the sections outlined in the above summary from Steptoe & Johnson, LLP.

Title IV—Economic Stabilization and Assistance to Severely Distressed Sectors of the United States Economy, including relief to airlines, financial institutions, and sectors critical to national security.

Title IV of the CARES Act provides $500 billion to Treasury’s Exchange Stabilization Fund for loans, loan guarantees, and investments in the Federal Reserve’s lending facilities to support states, municipalities, and “eligible businesses,” which include air carriers and US businesses that have not received “adequate economic relief” in the form of other loans or loan guarantees.

The $500 billion is allocated as follows:

  • $25 billion in loans and loan guarantees for air carriers;
  • $4 billion in loans and loan guarantees for cargo air carriers;
  • $17 billion in loans and loan guarantees for businesses critical to maintaining national security; and
  • $454 billion for loans, loan guarantees, and investments in support of facilities established by the Federal Reserve to support lending to eligible businesses, states, and municipalities.

Included in this title are loans and loan guarantee criteria, main street lending program, non-profit lending programs, executive compensation restrictions, protections against collective bargaining agreement, as well as provisions for states and municipalities, air carriers.

Read more about Title IV including important details for the above listed information as well as for congressional oversight, transparency, conflicts of interest and reporting obligations; residential mortgage provisions and foreclosure moratorium; and other relevant provisions.

Title V—Coronavirus Relief Funds

Title V of Division A of the CARES Act appropriates $150 billion for states, territories, Indian Tribes, and local governments to respond to the COVID-10 emergency.

Title VI—Miscellaneous Provisions

Title VI provides (i) borrowing authority for the US Postal Service and (ii) an “emergency” designation for the funds appropriated in Division A.

Division B—Emergency Appropriations for Coronavirus Health Response and Agency Operations

Division B of the CARES Act consists of emergency appropriations for various programs that may be available to companies during these difficult times. These programs are summarized below, grouped by the various Appropriations Subcommittees. This is not a comprehensive list of all the new appropriated money, but a selection of those various grant, loan, or contract opportunities for those in the private sector to help deal with the consequences of COVID-19. 

  • Agriculture, Rural Development, Food & Drug Administration and Related Agencies.
  • Commerce, Justice, Science and Related Agencies
  • Defense
  • Financial Services and General Government
  • Homeland Security
  • Interior, Environment & Related Agencies
  • Labor, Health & Human Services, Education and Related Agencies
  • Department of Education
  • Transportation, Housing and Urban Development, and Related Agencies
  • Assistance for Government Contractors and Federal Grants
  • Lobbying Compliance Considerations

Read more about Division B as well as important details of the programs within each of the above listed appropriations subcommittees.

The information provided above is sourced directly from The Council for Insurance Agents and Brokers’ (CIAB) legal team at Steptoe & Johnson, LLP. The professionals at Steptoe & Johnson have put together an extensive analysis of the provisions of the bill available on their COVID-19 Resource Center. Additionally, RCM&D clients, partners and friends can access additional information through the RCM&D COVID-19 Resource Center.

Author: Steptoe & Johnson, LLP.