COVID-19 Economic Stimulus Bill
On March 25, 2020 the Senate unanimously passed a $2 trillion COVID-19 response bill, known as the Coronavirus Aid, Relief, and Economic Security Act (“Act”). Today the House of Representatives approved the bill without changes and presented the same to President Trump for his signature.
The Act is intended to provide stimulus to individuals, businesses, hospitals, schools and state and local governments in response to the economic distress caused by these unprecedented times which have forced many businesses to temporarily close their doors and individuals to remain at home across the country. Below is an overview of the major benefits and assistance programs the Act will provide to you and/or your business.
Assistance to Individuals:
The Act includes several benefits designed to keep individuals and their families on their feet and engaged in the economy.
First, the Act will provide eligible individual taxpayers with a tax credit of $1,200 for single filers and $2,400 for those filing jointly. Additionally, eligible taxpayers can receive a $500 tax credit per qualifying child. The aforementioned tax credits will be phased-out by 5% of every dollar the taxpayer’s adjusted gross income exceeds: (1) $150,000 for married couples filed jointly, (2) $112,500 for heads of household, and (3) $75,000 for all other types of filers.
Second, the Act provides unemployment benefit assistance to individuals who are not otherwise entitled to benefits under existing state or federal law for weeks of unemployment, partial unemployment, or inability to work caused by COVID-19 during the period of January 27, 2020 through December 31, 2020. The Act will add $600 per week from the federal government, through the end of July 2020, in addition to the base amount received from the state. Additionally, the legislation will add 13 weeks of additional benefits to provide individuals nearing the maximum number of weeks allowed by their state with an extension and new filers the ability to collect the benefits for a longer period of time.
Third, the Act provides tax relief to individuals who elect to receive a “coronavirus-related distribution,” which is defined under the Act as any distribution from an eligible retirement plan made: (i) on or after January 1, 2020 and before December 31, 2020, (ii) to any individual who is diagnosed with COVID-19, whose spouse or dependent is diagnosed with COVID-19, or who experiences adverse financial consequences as a result of being quarantined, furloughed, laid off, had hours cut, or other factors as determined by the Secretary of the Treasury during the COVID-19 pandemic. Under the Act, individuals who elect to receive a coronavirus-related distribution will not be subject to the Internal Revenue Code’s traditional 10% tax penalty for early withdrawals from eligible retirement accounts, for all distributions up to an aggregate amount of $100,000.
Additionally, the Act provides that for the 2020 calendar year, no one will have to take a required minimum distribution from any individual retirement accounts or workplace retirement savings plans. This is intended to protect individuals from being forced to sell investments that may have fallen in value, which would lock in losses.
Assistance to Businesses
The Act also provides assistance to businesses effected by COVID-19 in an attempt to prevent businesses from laying off employees and/or going out of business. Below are a few of the major benefits that will be available to businesses under the Act.
First, the Act provides an employee retention credit for eligible employers subject to closure due to COVID-19. An eligible employer is defined under the Act as any employer: (1) which was carrying on a trade or business during the 2020 calendar year, and (2) the operation of their trade or business was fully or partially suspended due to government order as a result of COVID-19. Ultimately, eligible employers will receive a credit against applicable employment taxes for each calendar quarter in an amount equal to 50% of the qualified wages with respect to each employee, not to exceed $10,000 per calendar quarter or the applicable employment taxes owed for such calendar quarter.
Second, the Act will allow most employers to defer paying their share of the social security tax from the time the Act is singed into law through December 31, 2020. Half of deferred amount would be due on December 31, 2021 and the other half by December 31, 2022.
Third, the Act provides grants of up to $10,000 to provide emergency funds for businesses with 500 employees or less to cover immediate operating costs such as maintaining payroll, covering paid sick leave and to service other debt obligations. Small businesses may apply directly to the SBA and the grant does not need to be paid back.
Fourth, the Act estabishes the Paycheck Protection Loan Program, which greatly expands SBA loan eligibility and provides short-term loan forgiveness to businesses with 500 or fewer employees. SBA lenders will be authorized to make loans equal to 250% of an employer’s average monthly payroll, not to exceed $10 million. Under the loan program, eight weeks’ worth of payroll including benefits, rent or mortgage payments and utilities will be forgiven, and the amount forgiven would not be treated as taxable income to the business owner. For eligibility purposes, SBA lenders are required to determine whether a business was operating on February 15, 2020 and had employees for whom it paid salaries and payroll taxes, instead basing eligibility on repayment ability.
Although this article highlights the major benefits provided under the Act, the Act provides many additional avenues of assistance to help individuals and businesses overcome these trying times. For more information on how the Act may benefit you or your business contact the attorneys at Rock Fusco & Connelly, LLC.