The Bipartisan Coronavirus Relief Package Includes:

Money for American Families:

  • One-time tax rebate check of $1,200 per individual for those making $75k and less.
  • For a couple it is $2,400 per couple for those making $150k and less combined
  • $500 per child. 
  • The payments are based on 2018 and 2019 tax returns.
  • The payments are not taxable income.
  • They begin to phase out starting at $75k and ending at $99k for an individual.

Loosened Rules on Retirement Accounts:

  • Suspends requirement for seniors to make withdrawals from retirement accounts.

  • For those who need money for cash flow purposes, penalties for early withdrawals are waived. 

Unemployment Insurance: 

  • In addition to employees who are laid off, the self-employed and contractors will now be eligible for unemployment benefits.

  • Every state has a different payment rate for unemployment.  To simplify the federal portion of the disbursement, the current language includes a $600 per week supplement in addition to the state portion.  

  • In many states this additional amount added to the state payment would be less than one’s pay; but in some states, such as SC, it equates to more than one’s pay thereby discouraging workers from returning to work during the length of time these benefits are in place.  

  • This provision is why the Senate has yet to vote on this package.  Whether they get the support necessary to correct this unintended consequence remains to be seen.  

Key Provisions Helpful to Small Business:

  • Delays payment of 2020 payroll taxes until 2021 and 2022, which will create $300 billion more in cash flow for businesses.

  • The bill also allows businesses to carry back losses from 2018, 2019 and 2020 to the previous 5 years, enabling businesses to access immediate tax refunds.

  • The bill would fix cost recovery for investments in Qualified Improvement Properties, which will allow businesses to immediately expense these investments.  (There was a drafting error in the tax cut and reform bill a couple years ago that accidentally prohibited this.  This correction is a big, big deal for many franchise and restaurant owners – and others as well.)
     

Make Sure You Pay Attention to This:

  • A new loan product is created for Small Business (those with 500 employees or less) called the Paycheck Protection Program that basically extends the SBA’s 7(a) loan guarantee program to all local banks (big & small). 

  • Many ask me where they should call to get help.  Call your local bank or your credit union.  Their leadership knows these federally guaranteed loans are coming their way.  (Only a portion of the banks in NC have experience dealing with the SBA program.  But those that do know it very well will be helping those banks that haven’t dealt with it before.)     

  • This is very important: the loan essentially coverts to a grant if used for payroll and overhead expenses.  Up to 2.5 times one’s 2019 monthly payroll average is the amount that would be eligible to be forgiven.   

  • This can be used retroactively going back to Feb. 15 and runs through June 30.  To receive forgiveness for the loan, employees must have been kept on the payroll the whole time.  The retroactive provision enables a business to hire back any employee that has already been let go making the business eligible for loan forgiveness.

Distressed Business Provisions

  • Provides significant liquidity in the form of loans, loan guarantees and investments to distressed businesses (these provisions primarily affect big companies, those that have already shut down, those that are important to national security, or are aviation related), states and municipalities.

  • Approximately $500 billion is set aside for this Exchange Stabilization Fund.  This funding, coupled with the authority and tools of the Federal Reserve, enables an additional $4 trillion to be leveraged to keep our economy afloat.  

For detailed questions and answers on key items in the bill, many of which are covered above and some of which are not, click here.