In the early morning on March 25, 2020, the White House and Senate finally reached an agreement on a $2 trillion package to respond to the current economic crisis caused by the COVID-19 pandemic. Though a deal has been struck on the key points of the Bill, many details are still being finalized. However, a few assumptions are possible based on the drafts being circulated during these final deliberations. Until the Bill is passed by both Senate and House, and signed by the President, it is subject to change.
The CARES Act includes direct economic relief for individuals through “recovery checks” based on past income earned and taxes paid.
The Business Relief allows a deferral of the employer’s share (6.2%) of the Social Security or Self-Employment tax. This can be paid over two years. In addition, some net operating losses from 2018, 2019, or 2020 will be eligible for a five-year carryback.
For many small businesses, the interruption loans and loan forgiveness through the SBA § 7(a) loan program may be the most relevant. If a company employs fewer than 500 employees, it may be eligible to receive an SBA loan amounting to a maximum of 2.5 months of payroll and related costs.
These “related costs” are expected to include salaries, health insurance, retirement contributions, mortgage payments, rent, utilities, and other debt obligations.
As long as the loan is used for payroll and related costs as defined in the final Bill, many companies will be eligible for loan forgiveness.
BridgehouseLaw will continue to update you with the latest developments in Congress.