Monday, March 30, 2020
The $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act – which provides relief to taxpayers, small businesses, unemployed workers, distressed industries, and state/local governments – is the largest economic stimulus package in modern U.S. history. But its implementation remains a work in progress.
Since Hand Law is focused on government, we are publishing regular updates on how policymakers in Washington, Tallahassee, and various Florida localities are responding to the pandemic – and what those responses mean for you. After providing a COVID-19 public health update, this second article addresses the $2 trillion question: When/how will people and businesses access CARES Act benefits?
COVID-19 PUBLIC HEALTH UPDATE
The latest State of Florida daily report (Monday, 3/30 at 11:08 AM) shows 5473 total cases. This is an increase of 2,275 since Friday evening, 3/27. Please continue to track statewide data at https://floridahealthcovid19.gov/ and www.floridahealth.gov/. For local information, visit Florida county emergency websites. The Florida Association of Counties provides other information on county orders, policies and websites. The Florida League of Cities links to municipal websites.
IMPLEMENTING THE CARES ACT: COVID-19 ECONOMIC RELIEF
Now that the CARES Act has been enacted, a key question is how its benefits will reach the intended beneficiaries. In this issue, Hand Law examines three major Act provisions and answers key implementation questions.
Direct Payments: Each American whose last filed tax return reflected an adjusted gross income (AGI) of less than $75,000 for a single filer, or who filed jointly with a total AGI of less than $150,000, will be provided with a $1,200 payment. This payment will be supplemented with an additional $500 for each child under 17. Payments will start to phase out above the $75,000/$150,000 AGI level and end at $99,000/$198,000 AGI.
How will the federal government determine eligibility for direct payments?
If you already filed a 2019 federal income tax return, the U.S. Treasury/Internal Revenue Service (IRS) will base its calculations on that return. If not, your 2018 return will be the basis. In either scenario, a family of four (two adults, two children under 17) with an AGI of less than $150,000 will receive a payment of $3,400. The direct payment will be reduced for filers with an AGI greater than $75,000/$150,000. Anyone with an AGI more than the $99,000/$198,000 maximum will not receive direct assistance.
When will direct payments be distributed?
The IRS has not yet answered this question. Its COVID-19 page states “No information available yet, No sign-up needed.” However, U.S. Treasury Secretary Steven Mnuchin stated yesterday that checks and direct deposits could start to arrive in the week of April 20. See more at www.cnn.com/2020/03/29/politics/treasury-secretary-steve-mnuchin-stimulus-checks/index.html
Expanded Small Business Assistance: The Paycheck Protection Program assists small businesses, non-profits and the self-employed. Employers can obtain loan forgiveness for qualified expenses. See the U.S. Senate Small Business and Entrepreneurship Committee Q&A.
How much loan funding is available through the Paycheck Protection Program?
According to the above-referenced U.S. Senate Committee for Small Business and Entrepreneurship Q&A, the “amount any small business is eligible to borrow is 250 percent of their average monthly payroll expenses, up to a total of $10 million. This amount is intended to cover 8 weeks of payroll expenses and any additional amounts for making payments towards debt obligations. This 8-week period may be applied to any time frame between February 15, 2020 and June 30, 2020.” Average payroll expenses are calculated using the year prior to the loan.
How does a small business apply for the Paycheck Protection Program?
The U.S. Small Business Administration (SBA) has ultimate responsibility for administering the PPP and the other small business assistance measures, but it works through its network of lenders. As the above-referenced Q&A explains, “You can apply for the Paycheck Protection Program (PPP) at any lending institution that is approved to participate in the program through the existing U.S. Small Business Administration (SBA) 7(a) lending program and additional lenders approved by the Department of Treasury. This could be the bank you already use, or a nearby bank. There are thousands of banks that already participate in the SBA’s lending programs, including numerous community banks. You do not have to visit any government institution to apply….”
The SBA first needs to develop rules for administration of the Paycheck Protection Program, and it is not clear how long that process will take. Small business owners should stay in touch with their banks, credit unions or other financial institutions and keep an eye on the SBA webpage.
Are other funding tools available to small businesses?
The SBA offers Economic Injury Disaster Loans (EIDL) and other options: www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources. The Federal Reserve is establishing “a Main Street Business Lending Program to support lending to eligible small-and-medium sized businesses, complementing efforts by the SBA.” See www.federalreserve.gov/newsevents/pressreleases/monetary20200323b.htm. Additionally, the State of Florida is extending emergency bridge loans: https://floridadisasterloan.org. Finally, local governments like the City of Jacksonville are considering small business assistance.
Enhanced Unemployment Insurance: The federal government will add $600/week to state unemployment payments for up to four months, fund an extra 13 weeks of unemployment after state benefits expire, and provide eligibility for certain self-employed workers and independent contractors.
How do Floridians apply for unemployment assistance?
Unemployment is administered at the state government level. Through the CARES Act, the federal government will provide funds to supplement the amount and duration of state unemployment benefits. Floridians should consult the Department of Economic Opportunity to learn about the application process.