President Donald Trump signed on March 27 a third stimulus package passed by Congress to help stabilize the economy and provide relief during the COVID-19 pandemic. The Coronavirus Aid, Relief, and Economic Security (CARES) Act (HR 748) provides more than $2 trillion in relief in the form of direct payments to individuals and families, short-term additional lending opportunities and tax relief for small businesses to help them continue operations and retain employees, temporary additional unemployment benefits as well as temporary relief to student loan borrowers. The following is a summary of the most relevant provisions to the OMS specialty:
Small Business Loan Expansion
Sec. 1102 Paycheck Protection Program
A temporary new Paycheck Protection Program is established to let small businesses, nonprofits and individuals seek loans through the Small Business Administration’s 7(a) loan program to be used for salaries, paid sick and medical leave, mortgage or rent payments. Temporarily expands the 7(a) borrowing limit to $10 million from $5 million.
Eligibility for loans is defined as a small business, 501(c)(3) nonprofit, a 501(c)(19) veteran’s organization or Tribal business concern described in section 31(b)(2)(C) of the Small Business Act with not more than 500 employees or the applicable size standard for the industry as provided by the Small Business Administration (SBA), if higher as well as sole proprietors, independent contractors and other self-employed individuals.
The covered loan period is defined as Feb. 15 to June 30, 2020.
Delegated authority is provided for 7(a) lenders to make determinations on borrower eligibility and creditworthiness and allows these lenders to issue covered loans if they determine a business was operational on Feb. 15, 2020, and had employees for whom it paid salaries and payroll taxes or a paid independent contractor.
The SBA would have to assume that eligible loan applicants in operation as of Feb. 15, 2020, were adversely affected by COVID-19 and require lenders to let them defer payments for at least six months and as long as one year.
The limit on SBA express loans increases from $350,000 to $1,000,000 through the end of 2020.
Sec. 1106 Loan Forgiveness
Borrowers under the new Paycheck Protection Program are eligible for loan forgiveness equal to the amount spent by the borrower during an eight-week period after the origination date of the loan on payroll costs, interest payment on any mortgage incurred prior to Feb. 15, 2020, payment of rent on any lease in force prior to Feb. 15, and payment on any utility for which service began before Feb. 15.
Amounts forgiven cannot exceed the cost of the loan. Eligible payroll costs do not include compensation above $100,000 in wages.
Forgiveness on a covered loan is equal to the sum of the following payroll costs incurred during the covered eight-week period compared to the previous year or time period, proportionate to maintaining employees and wages:
- Payroll costs plus any payment of interest on any covered mortgage obligation (which shall not include any prepayment of or payment of principal on a covered mortgage obligation) plus any payment on any covered rent obligation and any covered utility payment.
Loan forgiveness will be reduced proportionally by any reduction in employees retained compared to the prior year and reduced by the reduction in pay of any employee beyond 25 percent of their prior year compensation. Borrowers that rehire workers previously laid off will not be penalized for having a reduced payroll at the beginning of the period.
Canceled indebtedness will not be included in the borrower’s taxable income.
Any loan amount not forgiven at the end of one year is carried forward as an ongoing loan with terms of a maximum of 10 years at a maximum 4 percent interest. The 100 percent loan guarantee remains intact.
Sec. 1109 United States Treasury Program Management Authority
Borrowers are prohibited from applying for the Paycheck Protection Program loan if that borrower has a previously pending application for a 7(a) loan for the same purpose. The SBA will administer the program, including purchasing and guaranteeing loans, with guidance from the Treasury.
Sec. 1110 Emergency Economic Injury Disaster Loans (EIDL) Grants
The measure provides additional funds to temporarily expand the Emergency Economic Injury Disaster Loans program from Jan. 31 to Dec. 31, 2020, to include among others, individuals operating as sole proprietors. The application process is open on a first-come, first-served basis.
For EIDL loans made in response to COVID-19 before Dec. 31, 2020, the SBA must waive any personal guarantee on advances and loans below $200,000, the requirement that an applicant needs to have been in business for the one-year period before the disaster, and the credit elsewhere requirement.
During the covered period, the SBA would be allowed to approve and offer EIDL loans based solely on an applicant’s credit score or use an alternative appropriate alternative method for determining applicant’s ability to repay.
An Emergency Grant is established to allow an eligible entity who has applied for an EIDL loan due to COVID-19 to request an advance on that loan of not more than $10,000, which the SBA must distribute within three days. Applicants are not to be required to repay advance payments, even if subsequently denied for an EIDL loan. Advance payment may be used for providing paid sick leave to employees, maintaining payroll, meeting increased costs to obtain materials, making rent or mortgage payments, and repaying obligations that cannot be met due to revenue losses.
An advance payment is required to be considered when determining loan forgiveness if the applicant transfers into a loan made under the SBA’s Paycheck Protection Program.
Sec. 1112 Subsidy for Certain Loan Payments
Deferment of existing 7(a) loan payments is allowed for at least six months and not more than a year. The SBA is required to disseminate guidance to lenders on this deferment process within 30 days.
Sec. 1114 Emergency Rulemaking Authority
The SBA is required to establish emergency regulations on the new loan programs within 15 days.
Bankruptcy
Sec. 1113 Bankruptcy
The threshold is temporarily increased for small businesses with less than $7,500,000 in debt to file for bankruptcy. The increases sunsets after one year and the eligibility threshold returns to $2,726,625. This temporarily excludes coronavirus-related payments from the federal government from being treated as income or counted toward the calculation of disposable income for the purposes of filing bankruptcy.
Individuals currently in Chapter 13 are temporarily allowed to seek payment plan modifications if they are experiencing a material financial hardship due to the coronavirus pandemic, including extending their payments for up to seven years after their initial plan payment was due.
Unemployment Assistance
Sec. 2102 Pandemic Unemployment Assistance
A temporary Pandemic Unemployment Assistance program is created through Dec. 31, 2020, to provide payment to those not traditionally eligible for unemployment benefits (self-employed, independent contractors, those with limited work history and others) who are unable to work as a direct result of the coronavirus public health emergency.
Sec. 2104 Emergency Increase in Unemployment Compensation Benefits
An additional $600 per week payment is provided to each recipient of unemployment insurance or Pandemic Unemployment Assistance for up to four months.
Sec. 2105 Temporary Full Federal Funding of the First Week of Compensable Regular Unemployment for States with No Waiting Week
Temporary funding is provided through Dec. 31, 2020, to states to pay the cost of providing unemployment benefits for recipients as soon as they become unemployed instead of waiting one week before the individual is eligible to receive benefits.
Sec. 2107 Pandemic Emergency Compensation
An additional 13 weeks of unemployment benefits is provided through the Pandemic Emergency Unemployment Compensation program through Dec. 31, 2020, to help those who remain unemployed after state unemployment benefits are no longer available.
Sec. 2108 Temporary Financing of Short-time Compensation Payments in States with Programs in Law
Funding is provided to support “short-time compensation” programs in which employers reduce employee hours instead of laying off workers, and the employees with reduced hours receive a pro-rated unemployment benefit. This provision would pay 100 percent of the costs they incur in providing this short-time compensation through Dec. 31, 2020.
Tax and Business Provisions
Sec. 2201 2020 Recovery Rebates for Individuals
A full $1,200 ($2,400 married) rebate is provided to all U.S. residents with adjusted gross income up to $75,000 ($150,000 married) who are not a dependent of another taxpayer and have a work eligible Social Security number. Such individuals also are eligible for an additional $500 per child. The rebate amount is reduced by $5 for each $100 that a taxpayer’s income exceeds the phase-out threshold. The amount is completely phased-out for single filers with incomes exceeding $99,000, $146,500 for head of household filers with one child and $198,000 for joint filers with no children.
For most Americans, no action on their part will be required in order to receive a rebate check – the IRS will use a taxpayer’s 2019 tax return if filed or, in the alternative, the taxpayer’s 2018 return.
Sec. 2202 Special Rules for Use of Retirement Funds
The 10 percent early withdrawal penalty is waived for distributions up to $100,000 from qualified retirement accounts for coronavirus-related purposes made on or after Jan. 1, 2020. Income attributable to such distributions would be subject to tax over three years, and the taxpayer may recontribute the funds to an eligible retirement plan within three years without regard to that year’s cap on contributions. The provision provides further flexibility for loans from certain retirement plans for coronavirus-related relief.
Individuals are allowed to make withdrawals up to $100,000 from their retirement accounts through the end of 2020, and such funds would be treated as a tax-exempt rollover contribution if repaid within the next three years. Otherwise, they would be taxed as income over three years.
Sec. 2203 Temporary Waiver of Required Minimum Distribution Rules for Certain Retirement Plans and Accounts
The required minimum distribution rules are waived for certain defined contribution plans and IRAs for calendar year 2020.
Sec. 2204 Allowance of Partial above the Line Deduction for Charitable Contributions
Individuals are permitted to deduct up to $300 of cash contributions to churches and charitable organizations in 2020 whether they itemize their deductions or not.
Sec. 2205 Modification of Limitations on Charitable Contributions during 2020
The limitations are increased on deductions for charitable contributions by individuals who itemize as well as corporations. For individuals, the 50 percent of adjusted gross income limitation is suspended for 2020. For corporations, the 10 percent limitation is increased to 25 percent of taxable income.
Sec. 2301 Employee Retention Credit for Employers Subject to Closure due to COVID-19
The provision provides a refundable payroll tax credit for 50 percent 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 shutdown 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 more 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. For eligible employers with 100 or fewer full-time employees, all employee wages qualify for the credit whether the employer is open for business or subject to a shutdown order. The credit is provided for the first $10,000 of compensation, including health benefits, paid to an eligible employee. The credit is provided for wages paid or incurred from March 13 through Dec. 31, 2020.
Employers cannot receive the credit if they receive a loan under the SBA Payment Protection Program. Wages taken into account for the paid leave credits established under the second coronavirus law cannot be used for this credit.
Sec. 2302 Delay of Payment of Employer Payroll Taxes
The provision allows employers and self-employed individuals to defer payment of the employer share of the Social Security tax. The deferred tax would be paid over the following two years with half the amount to be paid by Dec. 31, 2021, and the other half by Dec. 31, 2022. This provision would not apply to employers who had debt forgiven under the 7(a) Small Business Administration loan program. Social Security Trust Funds are held harmless.
Sec. 2303 Modifications for Net Operating Losses
A company’s use of net operating losses from prior years is relaxed by allowing a loss from 2018, 2019 or 2020 to be carried by five years, and the taxable income limitation is temporarily removed to allow a net operating loss to fully offset income. Such changes apply to pass-through businesses and sole proprietors as well.
Sec. 2304 Modification of Limitation on Losses for Taxpayers other than Corporations
The loss limitation applicable to pass-through businesses and sole proprietors is modified.
Sec. 2305 Modification of Credit for Prior Year Minimum Tax Liability of Corporations
Companies are allowed to recover alternative minimum tax (AMT) refundable credits now – rather than over several years – to allow additional cash flow during the COVID-19 emergency.
Sec. 2306 Modification of Limitation on Business Interest
The amount of interest expense businesses are able to deduct on their tax returns is temporarily increased from 30 percent limitation to 50 percent of taxable income for 2019 and 2020.
Sec. 2307 Technical Amendment regarding Qualified Improvement Property
Businesses are allowed to immediately write off costs associated with improving facilities instead of having them depreciate over the 39-year life of the building.
Sec. 3601 Limitation on Paid Leave
The amount of family leave an employer has to pay per employee for those who take leave to care for a child whose school or day care has closed because of the coronavirus is capped at $200 per day and $10,000 aggregate.
Sec. 3602 Emergency Paid Sick Leave Limitation
The amount of emergency paid sick leave an employer has to pay an employee for taking sick leave related to the employee’s quarantine or diagnosis is capped at $511 per day and $5,110 aggregate. Also, an employee taking sick leave to care for a quarantined individual or child whose school or daycare has closed is capped at $200 per day and $2,000 aggregate.
Sec. 3605 Paid Leave for Rehired Employees
An employee who was laid off by an employer March 1, 2020, or later is allowed to have access to paid family and medical leave in certain instances if the employee is rehired by the employer. The employee would have had to work for the employer at least 30 days prior to being laid off.
Sec. 3606 Advance Refunding of Credits
Employers are allowed to receive an advance tax credit from the Treasury instead of having to be reimbursed on the back end. Regulatory authority is created to implement the tax credit advances.
Student Loan Borrower Relief
Sec. 2206 Exclusion for Certain Employer Payments of Student Loans
Employers are temporarily enabled to provide a student loan repayment benefit to employees on a tax-free basis. Under the provision, an employer may contribute up to $5,250 annually toward an employee’s student loans, and such payment would be excluded from the employee’s income. The $5,250 cap applies to both the new student loan repayment benefit as well as other educational assistance (e.g., tuition, fees, books) provided by the employer under current law.
Sec. 3513 Temporary Relief for Federal Student Loan Borrowers
Student loan payments, principal and interest are suspended for six months through Sept. 30, 2020, without penalty to the borrower for all federally owned loans.
Drugs and Devices
Sec. 3102 Requiring the Strategic National Stockpile to Include Certain Types of Medical Supplies
It is clarified the Strategic National Stockpile can stockpile medical supplies.
Sec. 3103 Treatment of Respiratory Protective Devices as Covered Countermeasures
Permanent liability immunity is provided to manufacturers of respiratory protective equipment, such as masks and ventilators, in the event of a public health emergency to incentivize production and distribution.
Sec. 3111 Prioritize Reviews of Drug Applications; Incentives
The FDA is required to prioritize and expedite the review of drug applications and inspections to prevent or mitigate a drug shortage.
Sec. 3112 Additional Manufacturer Reporting Requirements in Response to Drug Shortages
Manufacturers of drugs that are critical to public health during an emergency are required to notify the FDA of supply chain interruptions for active pharmaceutical ingredients.
Sec. 3121 Discontinuance or Interruption in the Production of Medical Devices
During a public health emergency, device manufacturers are required to submit information about a device shortage or device component shortage upon request from the FDA.
Miscellaneous Provisions
Sec. 3215 Limitation on Liability for Volunteer Healthcare Professionals during COVID-19 Emergency Response
Liability protections are provided for healthcare professionals for providing volunteer services during the coronavirus emergency.
Sec. 3224 Guidance on Protected Health Information
The Department of Health and Human Services (HHS) is required to issue guidance on what is allowed to be shared of patient record during the public health emergency related to COVID-19.
Sec. 3701 Health Savings Accounts for Telehealth Services
A high-deductible health plan (HDHP) with a health savings account (HSA) is allowed to cover telehealth services prior to a patient reaching the deductible, increasing access for patients who may have COVID-19, protecting other patients from potential exposure to the virus and expanding the ability for HSAs to be used for over-the-counter medicines.
Sec. 3702 Over-the-Counter Medical Products without Prescription
Patients are allowed to use funds in HSAs and FSAs for the purchase of over-the-counter medical products, including those needed in quarantine and social distancing, without a prescription from a physician.
Sec. 3703 Expanding Medicare Telehealth Flexibilities
A requirement is eliminated in Coronavirus Preparedness and Response Supplemental Appropriations Act of 2020 (Public Law 116-123) that limits the COVID-19 Medicare telehealth expansion authority during the COVID-19 emergency to situations where the physician or other professional has treated the patient in the past three years. This would enable beneficiaries to access telehealth, including in their home, from a broader range of providers, reducing COVID-19 exposure risk.
Sec. 3704 Allowing Federally Qualified Health Centers and Rural Health Clinics to Furnish Telehealth
Federally Qualified Health Centers and Rural Health Clinics are temporarily allowed to furnish telehealth services to beneficiaries in their home or other setting. Medicare would reimburse for these services at a composite rate similar to payment provided for comparable telehealth services under the Medicare Physician Fee Schedule.
Sec. 3709 Increasing Provider Funding through Immediate Medicare Sequester Relief
The Medicare sequester, which reduces payments to providers by 2 percent, is temporarily lifted from May 1 through Dec. 31, 2020, boosting payments for hospitals, physicians, nursing homes, home health and other care. The Medicare sequester would be extended by one-year beyond current law.
Sec. 3801 Extension of Physician Work Geographic Index Floor
Through Dec. 1, 2020, payments are temporarily increased for the work component of physician fees in areas where labor cost is determined to be lower than the national average.
