Washington Report: COVID-19 and the CARES Act

By Patty Power, ACPA Washington Advocate

The novel coronavirus plaguing the world has generated an unprecedented response in its scope, size, and speed within Washington. Between March 6 and March 27, Congress passed, and the president signed, three laws to provide relief directly to individuals, businesses and local governments with a total price tag over $2.3 trillion. On March 13, President Trump declared a national state of emergency, which opened up to $50 billion in additional funding and regulatory waivers needed to allow swift government action. Many states have requested and received “major” emergency declarations from the White House, releasing even more resources and regulatory relief.

The Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) enacted on March 27, 2020 included most of the provisions discussed below.

As a result of COVID-19’s serious public health risks, businesses small and large have been impacted negatively. Congress has provided new authority for Small Business Administration (SBA) loan and grants, including the following:

Paycheck Protection Program provides loans for up to $10 million determined by the prior eight weeks’ average payroll, plus 25 percent of that amount. Payments of this loan will be deferred for six months. And if you maintain your workforce, SBA will forgive the portion of the loan proceeds used to cover the first eight weeks of payroll and some other expenses. The CARES Act authorized $349 billion for this program.

Economic Injury Disaster Loans for eligible small businesses (generally under 500 employees) up to loan amounts of $2 million (cap determined by payroll calculation) for a wide variety of purposes, including, payroll and commissions, insurance premiums, mortgage interest payments, rent, utilities and interest on other debt incurred prior to January 31, 2020. You can apply online.

SBA Debt Relief will pay the principal and interest of new 7(a) loans issued prior to September 27, 2020 and will pay the principal and interest of current 7(a) loans for a period of six months. This is not a deferment, but actual debt forgiveness.

SBA Express Bridge Loans are available to address urgent needs for cash up to $25,000 while a small business waits for decision and disbursement of an economic injury disaster loan. These are available to small businesses who currently have a business relationship with an SBA Express Lender.

In addition, the CARES Act provides a refundable tax credit against OASDI* payroll tax liability equal to 50 percent of the first $10,000 paid per employee so long as business operations have been fully or partially suspended due to government orders OR your business experiences a year-over- year reduction in gross receipts of at least 50 percent calculated by comparing calendar quarters. Eligibility for the credit continues until gross receipts exceed 80 percent year-over-year.

For employers with more than 100 full-time employees (measured by 2019 count), only employees who are currently not providing services for the employer due to COVID-19 causes are eligible for the credit. Employers with 100 or fewer employees do not need to furlough employees to take the credit. The employee retention credit is effective for wages paid after March 12, 2020, and before January 1, 2021. The CARES also postpones the due date for depositing an employer’s OASDI payroll taxes and 50 percent of self-employment OASDI taxes attributable to wages paid after March 27, 2020 and before January 1 2021. The deferred amounts would be payable over the next two years—half due December 31, 2021, and half due December 31, 2022. The deferral is not available to any taxpayer who has debt forgiven under the small business interruption loan program of the Cares Act.

As employers, you need to know how your obligations to your employees have been influenced by the recent legislation. While these provisions were modified by the CARES Act, they were established by the Families First Coronavirus Response Act (the “FFCRA”) and apply to businesses with up to 500 employees.

Emergency Family and Medical Leave (“FMLA”) Expansion established paid FMLA leave for employees unable to work (or telework) due to needing to care for a son or daughter under 18 whose school or child care provider is closed due to COVID-19. Twelve weeks of FLMA is provided, with the first two weeks unpaid.

Emergency paid sick leave is required for employees unable to work or telework for a number of reasons related to COVID-19 for two weeks. This paid sick leave is to be made available in addition to any paid leave policies already in place. And the employee may use this paid sick leave before using sick leave available under existing HR policy.

There are dollar caps for both expanded FMLA paid leave and paid sick leave.

Refundable tax credits are available in an amount equal to 100 percent of the qualified paid leave.

For more information about these leave requirements and to find copies of the posters you are required to post, please go to the Department of Labor’s COVID-19 and the American Workplace webpage.

Congress has acknowledged that this first wave of legislation may not be enough. Economists agree that the impact on the national and global economy will be directly related to the length of the pandemic and the social distancing requirements deemed necessary to reduce its impacts on public health. ACPA will keep you informed about new developments here in Washington.

Be safe!

*Old age, survivors, and disability insurance.