The Senate voted unanimously on Wednesday to approve a $2 trillion bill to provide relief to the economy, businesses, and workers that have been hurt by the COVID-19 pandemic. The House is expected to pass the bill by Friday and President Trump has announced he would sign the bill into law.
This bill is in addition to the $100 billion bill already passed to provide free coronavirus testing, increased Medicaid funding, paid leave, and food assistance and the $8.3 billion bill for health agencies.
While nothing has been set in stone, here is what we know about the bill and how it could help you:
Cash Payments Directly to Citizens
Individuals making up to $75,000 a year would receive checks for $1,200. Couples making up to $150,000 would receive $2,400, with an additional $500 per child. Anyone earning $75,000 or less would be eligible for the $1,200 direct payment.
For those earning more than $75,000, the payments would decrease. No checks would be issued to people earning more than $99,000 for individuals or $198,000 for couples.
Increased Unemployment Insurance
According to NBC News, the bill would increase the maximum state unemployment benefit by $600 per week for up to four months.
Unemployment benefits would also be extended to people who usually do not qualify, such as freelancers, gig workers, and furloughed employees.
The bill would also extend unemployment benefits by 13 weeks.
Help for Small Businesses
Approximately $350 billion would be used to provide loans for small businesses. The bill defines small businesses as companies with fewer than 500 employees. These small businesses would be eligible for up to $10 million in forgivable loans to allow them to keep paying their employees. Also, small businesses that sustain payroll would be eligible for additional assistance for things like mortgage interest, rent, and utilities. Thanks to the Hardwood Federation for this breakdown:
Provisions include several changes to the 7(a)-loan program, the SBA’s primary program for providing financial assistance to small businesses. The maximum 7(a)-loan (7a refers to the section of the Small Business Act that authorizes loans to small businesses) amount to $10 million through December 31, 2020 and provides a formula by which the loan amount is tied to payroll costs incurred by the business to determine the size of the loan. Specifies allowable uses of the loan include payroll support, such as employee salaries, paid sick or medical leave, insurance premiums, and mortgage, rent, and utility payments.
The bill increases the government guarantee of 7(a)-loans to 100% through December 31, 2020, at which point guarantee percentages will return to 75% for loans exceeding $150,000 and 85% for loans equal to or less than $150,000.
The bill allows complete deferment of 7(a)-loan payments for at least six months and not more than a year and requires SBA to disseminate guidance to lenders on this deferment process within 30 days.
Loans may be forgiven. The amount of the forgiveness is equal to the amounts spent by the borrower during the eight weeks from loan origination on payroll costs (up to $100,000 in wages), mortgage interest, rent or utilities (subject to certain restrictions).
The forgiveness amount is reduced by layoffs (though the employer may rehire workers to mitigate this reduction) or pay reductions in excess of 25%. Amounts forgiven are not treated as taxable income to the borrower.
Loan amounts may be used for payroll, mortgages, rent, insurance premiums and utility payments.
Aid for Corporations
(Information provided by the Hardwood Federation)
Net Operating Losses (NOLs) — relaxes the limitations on a company’s use of losses from prior years. The Tax Cuts and Jobs Act had eliminated for most taxpayers the use of so-called net operating loss (NOL) carrybacks. The package would allow losses from 2018, 2019, or 2020 to be carried back five years. The provision also temporarily removes the taxable income limitation to allow an NOL to fully offset income. The goal of this language is to allow companies to utilize losses and amend prior years’ returns, which will provide critical cash flow and liquidity during the COVID-19 emergency.
Deferred Social Security Tax Payment — allows employers and self-employed individuals to defer payment of the employer share of the Social Security tax they otherwise are responsible for paying to the federal government with respect to their employees. Employers generally are responsible for paying a 6.2% Social Security tax on employee wages. The provision requires that the deferred employment tax be paid over the following two years, with half of the amount required to be paid by December 31, 2021 and the other half by December 31, 2022.
Refundable Payroll Tax Credit — authorizes a refundable payroll tax credit for 50% of wages paid by employers to employees during the COVID-19 crisis. The credit is available to employers whose (1) operations were fully or partially suspended, due to a COVID-19-related shut-down order, or (2) gross receipts declined by more than 50 percent when compared to the same quarter in the prior year. The credit is based on qualified wages paid to the employee. For employers with greater than 100 full-time employees, qualified wages are wages paid to employees when they are not providing services due to the COVID-19-related circumstances described above.
Corporate AMT Credits — The corporate alternative minimum tax (AMT) was repealed as part of the Tax Cuts and Jobs Act, but corporate AMT credits were made available as refundable credits over several years, ending in 2021. The provision accelerates the ability of companies to recover those AMT credits, permitting companies to claim a refund now and obtain additional cash flow during the COVID-19 emergency.
Business Interest Limitation — temporarily increases the amount of interest expense businesses are allowed to deduct on their tax returns, by increasing the 30% limitation to 50% of taxable income (with adjustments) for 2019 and 2020. As businesses look to weather the storm of the current crisis, this provision will allow them to increase liquidity with a reduced cost of capital, so that they are able to continue operations and keep employees on payroll.
S-Corp and Pass Throughs — language modifies the limitation on losses for taxpayers other than corporations. The provision modifies the loss limitation applicable to pass-through businesses and sole proprietors, so they can utilize excess business losses and access critical cash flow to maintain operations and payroll for their employees.
The bill would also give about $150 billion in stimulus funds to state and local governments to help maintain their budgets after a substantial drop in tax revenues due to COVID-19.
Public Health Funding
Hospitals would receive more than $100 billion in assistance. Additional funding would also be provided for transportation agencies, the Centers for Disease Control and Prevention (CDC), food stamps, and other health care programs.