CARES Act Snapshot: Major Plan Components
Economic Impact Payments—Direct Payments to U.S. Residents (approximately $507B)—The coronavirus stimulus plan creates a tax rebate of $1,200 per taxpayer plus $500 per child. The amount of the rebate is gradually reduced for incomes above $75,000 per year for individuals, $112,500 for heads of households, and $150,000 for joint filers. The bill directs the Treasury to send these payments as soon as possible. Eligible taxpayers who filed tax returns for 2019 or 2018 will automatically receive an economic impact payment and they do not need to take any action. The IRS will calculate the payment and direct deposit funds into the banking account reflected on returns that have been filed. For more information: IRS Economic Impact Payments.
The Keeping American Workers Paid and Employed Act provides approximately $376B to help prevent workers from losing their jobs and small businesses from going under due to economic losses caused by the COVID-19 pandemic. In addition to traditional SBA Funding programs, the SBA is now administering several new temporary programs to address the COVID-19 outbreak, including The Paycheck Protection Program (PPP), Economic Injury and Disaster Loan (EIDL) Advance, SBA Express Bridge Loans, and SBA Debt Relief.
The Paycheck Protection Program provides eight weeks of cash-flow assistance through 100 percent federally guaranteed loans to small employers who maintain their payroll during this emergency. If the employer maintains its payroll, then the portion of the loan used for payroll, interest on mortgage obligations, rent, and utilities would be forgiven by the SBA. The loans will provide landlords and tenants with liquidity to keep them operating during the crisis. Small businesses may take out loans up to $10M—limited to a formula tied to payroll costs—and can cover employees making up to $100,000 per year. Small businesses can apply through any existing SBA 7(a) lender or through a federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. The Paycheck Protection Program will be available through June 30, 2020.
Economic Stabilization—Loans to Industry (approximately $500B)—The economic stabilization plan of the CARES Act authorizes the Secretary of the Treasury to make loans, loan guarantees and other investments of up to $500B to eligible businesses operating in severely distressed sectors of the economy, states and municipalities. These loans must be paid back and come with public disclosure requirements. The $500B will be allocated to passenger air and cargo carriers, businesses “critical to maintaining national security” as well as eligible businesses, states, and municipalities.
Pandemic Emergency Unemployment Compensation (PEUC)—(approximately $250B)—Expanded unemployment insurance (UI) will be extended to millions of workers throughout the country who are being furloughed, laid off, or finding themselves without work. The benefits will be extended to professionals that are not typically eligible for UI, including self-employed, independent contractors and those with limited work history. The federal government is incentivizing states to repeal any “waiting week” provisions that prevent unemployed workers from getting benefits as soon as they are laid off by fully funding the first week of UI for states that suspend these waiting periods. In addition, the federal government will fund an additional 13 weeks of unemployment benefits through December 31, 2020 after workers have run out of state unemployment benefits.
Healthcare—(approximately $140B)—The funds will address direct health care needs during the emergency and finance treatment and prevention. Allocations will be made to personal and protective equipment for health care workers, testing supplies, increased workforce and training, accelerated Medicare payments, and improving telehealth service access. Funds will also be used for the creation of drugs to treat the virus and support the Center for Disease Control (CDC). In addition, all testing and potential vaccines for COVID-19 will be covered with no cost to the patients affected.
Relief for State and Local Governments (approximately $150B) will be divided proportionally according to population, with $3B being allocated to federally administered U.S. territories and the District of Columbia and $8B for tribal governments. These are open-ended block grants that are directed to be used for costs associated with controlling the epidemic and mitigating economic damage. Each state is guaranteed to receive at least $1.25B even if its population share would indicate a lesser amount.