April 6, 2020

Overview Of COVID-19 Federal Aid To Businesses

As Connecting the Dots readers are aware from MSCI’s postings about the three COVID-19-related stimulus bills, Congress has created several programs to help businesses through this pandemic. On Monday, April 6 MSCI hosted a call for members with the U.S. Chamber of Commerce to discuss these programs. A replay of the call is available here.

While guidance also continues to be written by several federal agencies, and implementation has gotten off to a somewhat rocky start, here is the latest information we have on each of these programs.

  • Paycheck Protection Program (PPP). On Friday, April 4, the U.S. Small Business Administration (SBA) launched the PPP, which is a loan program for employers with fewer than 500 employees. Loans are provided by any SBA-approved lender and are forgivable to the borrower to the extent that the company retains payroll. The maximum loan is 2.5-times the employers’ average salary, up to a maximum of $10 million, for a term not to exceed 10 years. This aid is available on a first-come, first-served basis, so businesses are encouraged to apply now. A few days later, the U.S. Department of the Treasury released a new Frequently Asked Questions (FAQ) document to further help small businesses apply for PPP loans, which you can access here. The U.S. Chamber of Commerce is tracking how much aid from the PPP should go to each state. The SBA has provided the following information for the program:
  • Debt Relief For Current SBA Loan Holders. For the next six months, the SBA is required to pay all principal, interest, and fees on all existing SBA loan products. If your business has an existing SBA loan, visit the SBA’s webpage on debt relief.
  • Economic Injury Disaster Loan Program. Congress expanded the SBA’s Economic Injury Disaster Loan (EIDL) Loan program to accommodate access to those loans in response to COVID-19. Click here for more information.
  • Economic Stabilization Program. While no official guidance has been released, the Federal Reserve and the U.S. Department of the Treasury will soon announce the framework of a new program to facilitate lending to businesses with 500 employees or more.
  • Employee Retention Tax Credits. This credit is available to businesses of all sizes that face closure orders or suffer economic hardship and continue to pay employees that are furloughed. These businesses may be eligible for a 50 percent credit on up to $10,000 of wages paid to those employees. Click here for information from the Internal Revenue Service (IRS). Click here to read the National Association of Wholesalers’ Legal Advisory explanation of this program.
  • Paid And Family Leave Credits. The second stimulus bill gave businesses with fewer than 500 employees funds to provide employees with paid sick and family and medical leave for reasons related to COVID-19, either for the employee’s own health needs or to care for family members. On April 1, the IRS released new guidance on these tax credits. Click here to learn more.
  • $350 Billion in Interest-Free Loans Through Payroll Tax Deferral. Businesses of all sizes can avail themselves of payroll tax deferral which acts like an interest-free loan. It allows businesses to postpone paying their share of the 12.4 percent Social Security payroll tax owed on their workers’ wages. Half of the taxes will be due at the end of 2021 and the other half at the end of 2022. Guidance has not yet been issued for this program. Stay tuned to Connecting the Dots for more information as it becomes available.
  • Immediate Tax Refunds by Carrying Back Losses. Businesses can also “carryback” losses from 2018, 2019, and 2020 to the previous five years, which will allow businesses access to immediate tax refunds. The limit of 80 percent of taxable income is also suspended, so taxable income can be fully offset by these business losses.
  • Tax Refunds for Investments in Qualified Improvement Properties. Small businesses that made investments in Qualified Improvement Properties during 2018 and 2019 can receive tax refunds now.

The U.S. House Ways and Means Committee has a Frequently Asked Questions document for all of these programs here. These resources also provide more information:

  • On March 30, the S-Corp Association held a webinar explaining the small business provisions included in the COVID-19 related stimulus packages passed by the U.S. Congress. The slide deck from the presentation is available here and a recording is here.
  • The U.S. Chamber of Commerce has released an Economic Injury Disaster Loan (EIDL) guide and an overview of the Employee Retention Tax Credit. It also has a small business guide and checklist for COVID-19-related emergency loans.
  • The Tax Foundation also has guidance on tax provisions in the stimulus bills.

Click here and here to read our full summaries of what are in the COVID-19 stimulus bills.