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Senate Passes Sweeping CARES Act Stimulus Package To Provide Help To Businesses

As the business community continues to make real-time adjustments to adapt to the crisis caused by the global Coronavirus Disease 19 (COVID-19) crisis, the U.S. Senate passed the largest single stimulus bill in the nation’s history, a sweeping $2 trillion package that will provide significant support to businesses of all sizes.

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As the business community continues to make real-time adjustments to adapt to the crisis caused by the global Coronavirus Disease 19 (COVID-19) crisis, the U.S. Senate passed the largest single stimulus bill in the nation’s history, a sweeping $2 trillion package that will provide significant support to businesses of all sizes.

As the business community continues to make real-time adjustments to adapt to the crisis caused by the global Coronavirus Disease 19 (COVID-19) crisis, the U.S. Senate passed the largest single stimulus bill in the nation’s history, a sweeping $2 trillion package that will provide significant support to businesses of all sizes. The Coronavirus Aid, Relief and Economic Security Act or the “CARES Act” will now be sent to the U.S. House of Representatives for final approval; President Trump is then expected to sign it into law.

Among the highlights of the bill for the business community, according to information released by the U.S. Senate:

Small businesses will get $350 billion to keep the business afloat and make payroll while workers have to stay home.

  • Companies with 500 employees or fewer that keep paychecks steady could get up to $10 million each in forgivable small business loans. In certain circumstances businesses with over 500 employees may still be eligible (see additional guidance from the SBA).
  • Federally guaranteed loans will provide eight weeks of assistance for qualifying employers who maintain payroll.
  • Those who meet requirements would have costs such as utilities, mortgage interest and rent forgiven.

A new grant program has been established for healthcare providers, to target $117 billion to them as they strain to respond to the rising number of infections across the country. An additional $16 billion will go towards building a stockpile of medical equipment, including personal protective gear that has become scarce.

  • Expanded telehealth, higher Medicare reimbursement for doctors and hospitals, and a delay in certain Medicaid cuts to hospitals are part of the coronavirus package focused on healthcare needs during the crisis.
  • The package would ensure states can get a 6.2% increase in matching federal funds for Medicaid and delay scheduled reductions to hospitals that care for a large share.

The U.S. Centers for Disease Control (CDC) will get an additional $4.3 billion through fiscal year 2024, “to prove, prepare for and respond to coronavirus,” according to a draft of the stimulus bill.

  • That money includes at least $1.5 billion for grants for states and localities to “carry out surveillance, epidemiology, laboratory capacity, infection control, mitigation, communications and other public health preparedness.”

The Treasury Department can provide $454 billion in loans, loan guarantees and investments. That specifically includes $25 billion for passenger air carriers, $4 billion for cargo air carriers and $17 billion for businesses that work in national security. The rest of the funds, $454 billion, are given wide latitude to provide loans to businesses, states and municipalities.

  • The measure includes restrictions on businesses who receive the loans. Those businesses may not issue dividends for up to a year after the loan is no longer outstanding, and must retain 90% of employment levels as of March 24, “to the extent practicable,” through September 30. The loans also cannot last longer than five years.
  • There’s a specific provision in the program for direct loans to mid-sized businesses, defined as between 500 and 10,000 employees, as well as non-profit organizations, where no payments will be due for the first six months after the loan is issued.
  • A congressional oversight commission will oversee loans to large companies.
  • The legislation prohibits federally elected officials and their immediate relatives from obtaining funds from the $454 billion program. Businesses that are owned or partly owned by “the President, the Vice President, the head of an Executive department, or a Member of Congress; and the spouse, child, son-in-law, or daughter-in-law” will be barred. The provision applies to anyone with 20% or greater stake in a business.
  • Officers and employees whose total compensation (including salary, bonuses, equity awards and other financial benefits) exceeded $425,000 in 2019 may not receive:
    • total compensation during any consecutive 12-month period that exceeds the total compensation received in 2019, or
    • severance pay or other benefits upon termination that exceed twice the compensation received in 2019
  • Officers and employees whose total compensation exceeded $3 million in 2019 may not receive:
    • total compensation during any consecutive 12-month period that exceeds $3 million plus 50 percent of the excess over $3 million of total compensation received in 2019
  • The legislation includes a prohibition on anyone making more than $425,000 at businesses getting government help from receiving an increase in total compensation from 2019. It also limits severance pay to more than “twice the maximum total compensation received by the officer or employee from the eligible business in calendar year 2019.”

The goal of this unprecedented private-public partnership is to keep the nation’s economy moving, to bolster our healthcare response during this time of crisis and to do everything possible to help businesses remain up and running. This is a huge lifeline businesses have been saying they need to see since the outbreak began, and the hope is it will help everyone endure as the crisis continues to unfold.

We will continue to share additional details as they become available. Should you have immediate questions as to how this bill impacts your business, please contact your blum partner, or reach out to us here.

COVID-19 Business Resources

Disclaimer: Any written tax content, comments, or advice contained in this article is limited to the matters specifically set forth herein. Such content, comments, or advice may be based on tax statutes, regulations, and administrative and judicial interpretations thereof and we have no obligation to update any content, comments or advice for retroactive or prospective changes to such authorities. This communication is not intended to address the potential application of penalties and interest, for which the taxpayer is responsible, that may be imposed for non-compliance with tax law.

Disclaimer: The contents of this resource are for general informational purposes only. While every effort has been made to ensure its accuracy, the information is provided “as is” and no representations are made that the content is error-free. We have no obligation to update any content, comments or other information for retroactive or prospective interpretations or guidance provided by regulators, financial institutions or others. The information is not intended to constitute legal advice or replace the advice of a qualified professional. There are areas of the CARES Act where additional clarification from the Treasury Department and the SBA is needed. Your judgment and interpretation of the act may be needed. Users should consult with their legal counsel and representatives of the lending institution regarding the proper completion of their application and supporting documentation

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