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Coronavirus Aid, Relief, and Economic Security (CARES) Act FAQ

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Summary

How does the Coronavirus Aid, Relief, and Economic Security (CARES) Act affect my business?

Description



Legal Disclaimer

The information contained herein is for general guidance purposes only. It should not be taken for, nor is it intended as, legal advice. We would like to stress that there is no substitute for customers making their own detailed investigations or seeking their own professional advice if they are unsure about the implications of the Coronavirus Aid, Relief, and Economic Security Act (or CARES Act) on their businesses.

While we have made every effort to ensure that the information provided herein is correct and up to date, Sage makes no promises as to completeness or accuracy and the information is delivered on an “as is” basis without any warranties, express or implied. Sage will not accept any liability for errors or omissions and will not be liable for any damage (including, without limitation, damage for loss of business or loss of profits) arising in contract, tort or otherwise from the use of or reliance on this information or from any action or decisions taken as a result of using this information.

FAQ

Question Answer

1. What is the CARES Act?

The Coronavirus Aid, Relief, and Economic Security (CARES) Act, signed into law on March 27, 2020, responds to the COVID-19 (coronavirus disease 2019) outbreak and its impact on the economy, public health, state and local governments, individuals, and businesses.

This stimulus bill includes tax provisions for businesses and individuals, provisions impacting employment and labor laws, provisions related to the small business administration, and provisions related to debtors.

2. Who should I contact for more information?

Contact your accountant, tax professional or legal advisor for more information.

3. Where can I find more information about the CARES Act?

The details of the bill are available on the U.S. Congress website: https://www.congress.gov/bill/116th-congress/house-bill/748

4. My business has 500 or fewer employees. Can my business benefit from the CARES Act?

The CARES Act provides for $349 billion to be used to guarantee loans to small businesses and other entities that have 500 employees or less. The main purpose is to help organizations keep their employees on the payroll between now and the end of June 2020. Hence, the name of the program: Paycheck Protection Program (PPP). This loan program will be administered by the Small Business Administration (SBA). Certain requirements associated with typical SBA loans, such as guarantees, collateral, and a “credit available elsewhere” underwriting, have been relaxed or eliminated. A borrower under a covered loan can have a portion of the principal of the loan forgiven in an amount equal to payroll costs, mortgage interest, rent, or utility costs during the eight-week period following the origination of the loan.

As part of the tax provisions for businesses, a refundable payroll tax credit for 50 percent of wages paid by employers to employees during the COVID-19 crisis is available to employers whose operations were fully or partially suspended, due to a COVID-19-related shutdown order, or whose gross receipts declined by more than 50 percent when compared to the same quarter in the prior year.

In addition to other benefits for businesses, employers and self-employed individuals can 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.

5. My business has more than 500 employees. Can my business benefit from the CARES Act?

A portion of the money allocated to loans, loan guarantees and investments is reserved for employers with between 500 and 10,000 employees, available IF the employers fulfill several employment obligations.
6. I work for a private non-profit or a veteran organization. Could my organization benefit from the CARES Act?

The CARES Act provides for $349 million to be used to guarantee loans to small business with less than 500 employees (including sole proprietorships, independent contractors and self-employed persons), private non-profit organization or 501(c)(19) veterans organizations affected by coronavirus/COVID-19. The main purpose is to help organizations keep their employees on the payroll between now and the end of June 2020. Hence, the name of the program: Paycheck Protection Program (PPP). This loan program will be administered by the Small Business Administration (SBA).
7. Can my employees benefit from the CARES Act?

The CARES Act includes enhanced unemployment benefits to provide payment to those not traditionally eligible for unemployment benefits who are unable to work as a direct result of the coronavirus public health emergency.

The bill also extends the duration of traditional unemployment insurance by 13 weeks. The one-week waiting period is also suspended under CARES.

In addition to other benefits, the enhanced unemployment benefits pay 100 percent of employer’s costs of providing short-time compensation through Dec. 31, 2020, where employers reduce employee hours instead of laying off workers and the employees with reduced hours receive a pro-rated unemployment benefit.
8. When can I apply for a forgivable Paycheck Protection Program loan?

While April 3, 2020 is the general start date for businesses with up to 500 employees to apply for a forgivable Paycheck Protection Program loan, independent contractors and self-employed individuals can apply for the forgivable loans starting April 10.
9. Where can I apply for a forgivable Paycheck Protection Program loan on behalf of my organization?

You can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. You should consult with your local lender as to whether it is participating in the program.

More information is available here: https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program-ppp