On Friday, March 27, President Trump signed into legislation the Coronavirus Aid, Relief and Economic Security Act (CARES) Act. The $2.2 trillion legislation represents the largest stimulus package in U.S. history—dwarfing the $800 billion package signed during the 2008 financial crisis—and provides a variety of economic relief measures to mitigate the impact of the coronavirus pandemic on American society.
This top-level overview represents the first of several upcoming alerts by CBM on various components of the CARES Act.
Among the benefits of the CARES Act are various benefits for individual Americans, including direct cash payments to those who fall within a determined income level, emergency financing and some tax breaks to businesses, expanded unemployment benefits, and funding for government and local efforts to mitigate the impact of the outbreak.
Please read below for CBM’s overview of those benefits.
• A direct payment of $1,200 will be made to each adult and $500 for each child, with phaseouts for individuals earning more than $75,000 annually and couples making more than $150,000
• Individuals making more than $99,000 and couples making more than $198,000 will receive no payments
• Individuals without income or who rely on government benefits as their sole source of income are eligible for this benefit
• No student loan payments will be required for individuals who hold Department of Education loans through September 30, 2020; no interest will accumulate and no penalties will be enforced during this time period
• Individuals with COVID-19 who choose to withdraw up to $100,000 from an employer-sponsored retirement plan will not have to pay the 10% penalty tax; individuals may also take advantage of this benefit if their spouse is diagnosed with COVID-19. Additionally, although the withdrawal will be taxed, taxes will be spread out over three years unless the individual rolls the funds back into the retirement account during that time period.
• Minimum distribution requirements have been waived for individual retirement accounts. Individuals may keep their retirement capital invested if that is their preference.
• States may boost weekly unemployment benefits by $600 through July 31 for any individual who loses their job between now and July 31 as a result of workforce disruptions associated with COVID-19.
• Self-employed individuals and partially-employed individuals not normally eligible for unemployment benefits may now submit claims. This includes independent contractors and “gig” economy workers.
• $500 billion in loans, loan guarantees and assistance will be available for companies that do not conduct stock buybacks and who retain employees.
• Airlines will receive $50 billion from this larger pot for passenger air carriers and $8 billion will be supplied to cargo air carriers.
• $350 billion will be available for small business loans—which will not require payback when used for payroll, rent and interest. CBM will report more in-depth on the SBA loans later this week.
• Businesses will not be required to pay their portion of 2020 payroll taxes until 2021 and 2022.
• The 80% rule has been lifted under the net operating losses for the Tax Cuts and Jobs Act; losses can be carried back five years.
• $150 billion will be made available to state/local governments to respond to COVID-19, $30 billion will be apportioned for states and educational institutions, and $25 billion will support transit programs.
• $45 billion will be allotted for disaster relief.
• $140 billion has been appropriated to support the nation’s health care system including $100 billion for hospitals and the remainder for personal and protective equipment, testing materials, veterans care and other supports including training.
The federal government continues to respond to the swelling number of individuals diagnosed with COVID-19 and the increasing impact of the pandemic on families and businesses. In addition to the CARES Act, Tax Day has been extended to July 15 and passage of the Families First Coronavirus Response Act over a week ago provided for an array of additional sick leave and family leave benefits, credits, penalty waivers and tax deferrals. It is possible that further legislation may be passed in the future.
CBM will continue to provide breaking news to clients and friends of the firm as the COVID-19 situation develops, and we encourage you to keep an eye out for future alerts including one tomorrow dedicated to the impact of the CARES Act on business taxes.
We hope you all stay safe during this unprecedented time.
Please contact us using our online contact form with any questions.
Councilor, Buchanan & Mitchell (CBM) is a professional services firm delivering tax, accounting and business advisory expertise throughout the Mid-Atlantic region from offices in Bethesda, MD and Washington, DC.