What Are In U.S. COVID-19 Stimulus Bills?
More forms and information regarding the U.S. Small Business Administration’s Paycheck Protection program is now available:
- Paycheck Protection Program Application Form
- Paycheck Protection Plan Information Sheet for Borrowers
- SBA’s Paycheck Protection Program Overview
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. MSCI is grateful to the S-Corp Association for allowing us to share this resource with our members. The webinar addresses:
- Mandated Leave Details
- Delayed Tax Filing & Payment
- Delayed Payroll Tax Payments & Other Tax Provisions
- New Small Business Loan Program
The contents of the presentation are not legal advice or opinions and are intended to convey general information only. An attorney should be contacted for advice on specific legal issues.
On April 1, the Internal Revenue Service released new guidance on tax credits authorized in the second COVID-19 stimulus bill. The tax credits will help small businesses offset the cost of new paid leave requirements. Click here to learn more about how to implement these policies
Also on April 1, the U.S. Chamber of Commerce released additional background related to federal government aid for businesses that are impacted by COVID-19:
- Economic Injury Disaster Loan Guide
- Employee Retention Tax Credit Guide
- Coronavirus Emergency Loans: Small Business Guide and Checklist
Third Stimulus Bill
The U.S. Congress has passed a third COVID-19 stimulus bill. The $2.2 trillion piece of legislation includes $504 billion for support to large businesses; $377 billion for small businesses; $290 billion for tax benefits for individual taxpayers; $280 billion in business tax cuts; $260 billion for expanded unemployment benefits; $180 billion for health programs; $175 billion for aid to state and local government; $45 billion for disaster assistance; $42 billion for food stamps and other safety net programs; $10 billion in personal tax cuts and $67 billion in other spending.
While we have highlighted several provisions of the bill below, MSCI encourages its members to read the following summaries of the legislation. The National Association of Wholesalers has provided a section-by-section summary of the bill here and the National Association of Manufacturers has an FAQ here. Lawmakers also have provided several resources to help Americans understand what is in the bill, including:
- An explanation of the legislation’s tax benefits;
- An explanation of the legislation’s small business provisions; and
- An explanation of the legislation’s unemployment provisions.
Provisions of particular interest to MSCI members include:
- Small Business Paycheck Protection Program. The bill includes $350 billion allocated for the Paycheck Protection Program, which is meant to help small businesses (fewer than 500 employees) impacted by the pandemic and economic downturn to make payroll and cover other expenses from February 15 to June 30. Notably, small businesses may take out loans up to $10 million—limited to a formula tied to payroll costs—and can cover employees making up to $100,000 per year. Click here for more information from the U.S. Senate about how this program will work. The U.S. Chamber of Commerce also has information here.
- Employee Retention Credit. 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 shut-down order, or (2) gross receipts declined by more than 50 percent when compared to the same quarter in the prior year. Click herefor more information on the employer tax provisions in the bill.
- 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 they otherwise are responsible for paying to the federal government with respect to their employees. The provision requires that the deferred employment tax be paid over the following two years, with half of the amount required to be paid by December 31, 2021 and the other half by December 31, 2022.
- Modifications For Net Operating Losses. The provision relaxes the limitations on a company’s use of losses. Net operating losses (NOL) are currently subject to a taxable-income limitation, and they cannot be carried back to reduce income in a prior tax year. The provision provides that an NOL arising in a tax year beginning in 2018, 2019, or 2020 can be carried back five years. The provision also temporarily removes the taxable income limitation to allow an NOL to fully offset income.
- Modification Of Limitation On Losses For Taxpayers Other Than Corporations. The provision modifies the loss limitation applicable to pass-through businesses and sole proprietors, so they can utilize excess business losses and access critical cash flow to maintain operations and payroll for their employees.
- Modification Of Credit For Prior Year Minimum Tax Liability Of Corporations. The corporate alternative minimum tax (AMT) was repealed as part of the Tax Cuts and Jobs Act, but corporate AMT credits were made available as refundable credits over several years, ending in 2021. The provision accelerates the ability of companies to recover those AMT credits, permitting companies to claim a refund now and obtain additional cash flow during the COVID-19 emergency.
- Modification Of Limitation On Business Interest. The provision temporarily increases the amount of interest expense businesses are allowed to deduct on their tax returns by increasing the 30-percent limitation to 50 percent of taxable income (with adjustments) for 2019 and 2020.
- Limitations On Paid Leave And Paid Sick Leave. The bill creates a limitation stating an employer shall not be required to pay more than $200 per day and $10,000 in the aggregate for each employee under this section. It also says an employer shall not be required to pay more than $511 per day and $5,110 in the aggregate for sick leave or more than $200 per day and $2,000 in the aggregate to care for a quarantined individual or child for each employee under this section.
Another potential resource for MSCI members: The Small Business Administration’s Economic Injury Disaster Loan (EIDL) program provides targeted, low-interest loans to small businesses that have been impacted by the COVID-19 crisis. The National Association of Manufacturers has provided an overview of the SBA loan process and other programs to aid in businesses’ response to the COVID-19 crisis here. The SBA also has a website offering a list of resources here.
Second Stimulus Bill
As a reminder, the Families First Coronavirus Response Act, the second stimulus bill designed to address the COVID-19 pandemic will go into effect on April 1, 2020. This legislation institutes free coronavirus testing, establishes paid leave policies, enhances federal unemployment insurance, expands food security initiatives, and increases federal Medicaid funding. The U.S. House of Representatives has provided a detailed summary of the paid leave provisions in the bill. This summary also includes an FAQ that MSCI encourages all members to review. It is available at this link. The following employees are eligible for leave:
- Employees at companies with fewer than 500 employee;
- Employees who work under a multiemployer collective agreement and whose employers pay into a multiemployer plan; and
- Local, state, and federal government employees.
They are eligible for:
- Eligible full-time employees are entitled to two weeks (80 hours) of fully paid time off (up to $511 per day) to self-quarantine, seek a diagnosis or preventive care, or receive treatment for COVID-19.
- Eligible part-time employees are entitled to fully paid time off (up to $511 per day) for the typical number of hours that they work in a typical two-week period to self-quarantine to seek a diagnosis or preventive care, or receive treatment for COVID-19.
- Eligible full-time employees are entitled to two weeks (80 hours) paid time off at two-thirds of their regular pay (up to $200 per day) to care for a family member or to care for a child whose school has closed, or if their child care provider is unavailable due to COVID-19.
- Eligible part-time employees are also entitled to the typical number of hours that they work in a typical two-week period at two-thirds of their typical pay (up to $200 per day) to care for a child whose school has closed, or if their child care provider is unavailable, due to COVID- 19.
Employers initially front the cost of emergency paid sick leave but will be fully reimbursed by the federal government within three months. The reimbursement will cover both the wages paid and the employer’s contribution to employee health insurance premiums during the period of leave. Employers will be reimbursed through a refundable tax credit that counts against employers’ payroll tax, which all employers pay regardless of non-profit/for-profit status. Employers will submit emergency paid sick leave expenses as part of their estimated quarterly tax payments. If employer’s costs more than offset their tax liability, they will get a refund from the IRS. Click here for more information about how these provisions will work. Click here for a helpful fact sheet from Bloomberg that explains how the tax credits will work.
The. U.S. Department of Labor’s Wage and Hour Division (WHD) has announced how these paid leave mandates will work. They have also shared fact sheets for how this will affect employees, how it will affect employers and a helpful FAQ sheet for employers. The DOL has also requested that the public submit questions, concerns and recommendations for the implementation of the FFCRA. Interested parties can find more information and provide input at the WHD’s online submission here. The new guidance includes two new posters, one for federal workers and one for all other employees, that will fulfill notice requirements for employers obligated to inform employees about their rights under this new law. It also includes a Field Assistance Bulletin describing WHD’s 30-day non-enforcement policy. The new guidance addresses critical issues such as whether employers may post required notice electronically, whether employers must provide notice of this law to recently laid-off individuals, when FFCRA applies to federal workers and when enforcement of the new rules will begin.
Before Congress passed this legislation, MSCI and dozens of other organizations had sent a letter regarding the family and medical leave provisions. That letter is here.