On Friday, March 27, President Donald Trump signed into law a bipartisan package, the Coronavirus Aid, Relief, and Economic Security (CARES) Act (H.R. 748), which offers $2 trillion in health care and economic relief to Americans and businesses. The massive aid package contains a combination of funding for tax benefits for businesses and individuals, appropriations for government programs supporting coronavirus relief efforts public health programs, and other items to help stabilize the economy amid the ongoing COVID-19 pandemic.
Importantly, the bill includes several provisions that AFS has been strongly advocating, including loans for small business manufacturers and delayed payroll tax payments to boost liquidity.
The law is aimed at providing relief for individuals and businesses that have been negatively impacted by the coronavirus outbreak. Here’s a look at some of the key provisions included in the bill and what that may mean for metalcasters:
- Small business relief: $350 billion is being dedicated to preventing layoffs and business closures while workers have to stay home during the outbreak. Companies with 500 employees (based on NAICS code) or fewer that maintain their payroll during coronavirus can receive up to 8 weeks of cash-flow assistance. If employers maintain payroll, the portion of the loans used for covered payroll costs, interest on mortgage obligations, rent, and utilities would be forgiven. Detailed information on the new SBA Loan program, the Paycheck Protection Program, is located here.
- Large corporations: $500 billion will be allotted to provide loans, loan guarantees, and other investments to large corporations. These will be overseen by a Treasury Department inspector general. These loans will not exceed five years and cannot be forgiven.
- Payroll taxes: The measure allows employers to delay the payment of their portion of 2020 payroll taxes until 2021 and 2022.
- Use of retirement funds: The bill waives the 10% early withdrawal penalty for distributions up to $100,000 for coronavirus-related purposes, retroactive to Jan. 1. Withdrawals are still taxed, but taxes are spread over three years, or the taxpayer has the three-year period to roll it back over.
- RMDs suspended: Required Minimum Distributions from IRAs and 401(k) plans (at age 72) are suspended.
- Net Operating Losses: The Tax Cuts and Jobs Act (TCJA) net operating loss rules are modified. The 80% rule is lifted, and losses can now be carried back five years.
- Excess Loss Limitations: The excess loss limitation (ELL) rules for pass-through entities are suspended.
- Interest Expense Limitation: The interest expense limitations are increased to 50% from 30% for tax years beginning in 2019 or 2020. Taxpayers can also elect to calculate the interest limitation for 2020 using their 2019 adjusted taxable income as the relevant base, which often will be significantly higher.
- Direct payments: Americans who pay taxes will receive a one-time direct deposit of up to $1,200, and married couples will receive $2,400, plus an additional $500 per child. The payments will be available for incomes up to $75,000 for individuals and $150,000 for married couples.
- Unemployment: The program provides $250 billion for an extended unemployment insurance program and expands eligibility and offers workers an additional $600 per week for four months, on top of what state programs pay. It also extends UI benefits through Dec. 31 for eligible workers. The deal applies to the self-employed, independent contractors and gig economy workers.
- Hospitals and health care: The deal provides over $140 billion in appropriations to support the U.S. health system, $100 billion of which will be injected directly into hospitals. The rest will be dedicated to providing personal and protective equipment for health care workers, testing supplies, increased workforce and training, accelerated Medicare payments, and supporting the CDC, among other health investments.
- Coronavirus testing: All testing and potential vaccines for COVID-19 will be covered at no cost to patients.
A detailed summary of the legislation can be found here. Read the full bill text here.