On March 27, 2020, the House of Representatives passed the largest economic bill in U.S. history, and President Trump has signed the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) into law.
The CARES Act provides much-needed stimulus to individuals, businesses and hospitals in response to the economic distress caused by the coronavirus (COVID-19) pandemic.
While the scope of the CARES Act is wide ranging, this communication is limited to a high-level overview of several cash flow and tax relief considerations available to our valued customers.
Paycheck Protection Loans (PPLs) and Economic Injury Disaster Loans (EIDLs) are available to companies that employ no more than 500 employees. The CARES Act expands the Small Business Act to authorize $349 billion in additional lending to small businesses and certain nonprofits to allow such businesses to pay expenses such as salaries, health care benefits, sick leave, mortgage, rent, utilities, accounts payable, and interest on debt incurred before the coverage period. Depending on the loan program:
The CARES Act authorizes the Treasury Secretary to provide up to $500 billion worth of loans and loan guarantees to eligible businesses, states and municipalities. No more than $25 billion can be loaned to passenger air carriers, no more than $4 billion to air cargo carriers, and no more than $17 billion to businesses important to maintaining national security.
The remaining $454 billion is to support lending to eligible businesses, states and municipalities. The U.S. Treasury has until December 31, 2020, to deploy the capital. Any loans made shall be at a rate determined by the Secretary based on the risk and the current average yield on outstanding U.S. debt of comparable maturity.
In order to receive support, organizations must meet certain eligibility requirements that may extend beyond the term of the support:
The loans will not exceed five years and will not be forgiven.
The CARES Act provides $275 billion in business tax provisions to provide critical cash flow and liquidity during the COVID-19 emergency:
The Internal Revenue Service will soon issue guidance for implementing the CARES Act. It is anticipated that additional stimulus legislation will be forthcoming as the COVID-19 pandemic continues.
In regard to the CARES Act, companies should review the legislation, determine your eligibility and seek guidance from your accounting, tax and finance professionals. Please make sure you research state-specific programs through your state government website as well.
As your business partner, Penske will continue to monitor and provide timely updates on developments as they arise.
The CARES Act:
The U.S. Chamber of Commerce for Coronavirus Loans, Small Business Guide and Amounts by State:
U.S. Small Business Administration – Funding Programs, Loan Resources and Local Offices:
IRS Coronavirus Tax Relief:
U.S. Treasury Department: