CARES Act – Businesses
- Paycheck Protection Program (PPP) Loan Forgiveness
Please see our website for a summary of this provision of the Act.
- SBA- Emergency Injury Disaster Loan (EIDL)
If you have applied for and received this loan, it can be refinanced as part of the Paycheck Protection Loan. You are NOT allowed to have both an outstanding EIDL and an outstanding PPP loan. Three days after applying for this loan, you are allowed a $10,000 advance, which does not have to be repaid even if you do not ultimately qualify for the loan. The $10,000 advance does not have to be repaid as long as it is used on allowable expenses:
- providing paid sick leave to employees unable to work due to the direct effect of COVID–19;
- maintaining payroll to retain employees during business disruptions or substantial slowdowns;
- meeting increased costs to obtain materials unavailable from the applicant’s original source due to interrupted supply chains;
- making rent or mortgage payments; or
- repaying obligations that cannot be met due to revenue losses.
- Employee Retention Credit
Employers receive a refundable quarterly payroll tax credit equal to 50% of qualified wages paid to an employee. For purposes of the credit, up to $10,000 of qualified wages per employee are considered. Excess credits are refundable.
Eligible employers include those:
(1) whose trade or business is fully or partially suspended during the calendar quarter due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings (for commercial, social, religious, or other purposes) due to COVID-19, or
(2) who have a 50% decrease in gross receipts for the same calendar quarter in the prior year.
This credit does not apply to governmental employers.
Applies to wages paid after March 12, 2020, and before January 1, 2021.
This credit is not available if you received Paycheck Protection Program loan.
- Delay of Payment of Employer Payroll Taxes
Employers and self-employed taxpayers may delay payment of the employer portion of payroll taxes (Social Security and Medicare) through the end of 2020. Fifty percent of any payroll taxes deferred under this provision must be paid by December 31, 2021, with the remaining fifty percent paid by December 31, 2022.
This deferral is not available if you received Paycheck Protection Program loan.
- Business Losses (NOLs)
The CARES Act amends IRC §172(b) to allow for the carryback of losses arising in taxable years ending after December 31, 2017 and before January 1, 2021 to each of the five taxable years preceding the taxable year of such loss (however, real estate investment trusts (REITs) are not permitted such carrybacks).
The CARES Act does not alter the indefinite carryforward of NOLs arising in those years. The CARES Act also amends IRC §172(a) to remove the income limitation so that NOLs can be used to offset 100% of taxable income (disregarding the NOL deduction itself). The amendment applies to tax years beginning before January 1, 2021 (previously, tax years beginning after December 31, 2017, were subject to an 80% limitation).
- Limitations on Excess Business Losses
The CARES Act removes the limitation on excess business losses for taxpayers other than corporations for tax years beginning after December 31, 2017, and before January 1, 2021.
The Act also makes technical corrections to the excess business loss provisions to clarify:
(1) that net operating losses and the qualified business income deduction under §199A are not included in calculating an excess business loss; and
(2) the extent to which capital gains are included to determine the amount of an excess business loss.
- Qualified Improvement Property
The CARES Act corrected the technical omission which required qualified improvement property to be depreciated as 39-year, nonresidential real property, unless it separately qualified as 15-year property. This removed qualified improvement property from eligibility for bonus depreciation. The CARES Act corrects prior Congressional oversight by defining qualified improvement property as 15-year property, thus making it eligible for bonus depreciation and allowing 100 percent of improvements to be deducted in the year incurred. This is effective for property place in service after September 27, 2017 and the change can be made by amending prior year returns or on the 2019 return due July 15, 2020.
- Subsidy of Existing Small Business Administration Loans
The CARES Act contains certain provisions to assist businesses with existing SBA business loans, which includes 7(a) and 504 loans.
The provision provides that the SBA will pay all principal, interest and fees on all existing SBA loan products for six months. The CARES Act does not currently have any requirement for businesses to qualify for the subsidy except that the SBA loan must have existed prior to enactment of the legislation.
This loan payment subsidy specifically excludes loans made pursuant to the Paycheck Protection Plan and will not apply to disaster relief loans applied for under the SBA.