The Senate passed a $2.2 trillion stimulus package to help states, businesses and individuals counter the negative economic impacts of the coronavirus, with the House expected to pass the bill today. The plan will provide, among other things, direct payments to individual taxpayers, loans and grants to assist distressed businesses and benefits for the unemployed. It is the largest stimulus package in modern U.S. history. The President is expected to sign the bill immediately.
Benefits for Businesses
$350 billion for Small Business Administration guaranteed loans and tax credits to small companies that pledge to keep their employees (or re-hire laid-off workers by June), with the loans of up to 2.5 times a company’s monthly payroll being forgiven if the business continues to pay workers for the duration of the crisis, with a maximum of $10 million per business;
Tax credits for qualifying businesses that continue to pay employees, resulting in refunds for ½ of what they spend on wages, up to $5000 per worker. To qualify, businesses must prove they took a 50% loss compared to the same quarter in past years. Note however, that a company must choose either an SBA loan or this tax credit and cannot have both.
A $500 billion aid fund for distressed businesses, which includes:
$425 billion for a new lending agency, to be overseen by an inspector general and Congressional panel, to offer direct loans for “seriously distressed and absolutely essential companies.” This likely will take at least a few months to set up;
$58 billion in grants and loans for airline companies and certain other industries; and
$17 billion in direct loans for companies related to national security;
$130 billion for hospitals, health care providers and community health centers;
$150 billion for states to fund unemployment claims and make up for losses of tax revenue while businesses are closed ($8 billion of which is for localities);
A lowering of the minimum required capital reserves for small banks for as long as the crisis continues;
Employers and self-employed individuals can defer the 6.2% Social Security tax they pay on wages and instead pay them over the following two years;
Retailers, restaurants and hotels may immediately take tax deductions for improvements done in the last two years, rather than spreading it out over several years as originally required; and
Prohibition on publicly-traded companies using stimulus loans for stock buybacks or executive bonuses, and on any of the loans going to businesses controlled 20% or more by the President, Vice-President, Members of Congress and Cabinet Secretaries, or their spouses or children.
While all loans are being given with the expectation of repayment, some of the loans reportedly are designed to eventually be forgiven and effectively become grants. The great majority of these loans are for small businesses, but the bill’s fine print provides that hotels and restaurant chains with more than 500 employees can also take advantage of the benefits.
Other benefits that may trickle down to Businesses
$10.5 billion to the Department of Defense;
$30 billion in emergency funds for education;
$3.5 billion for states to fund child care facilities and college work-study jobs during the crisis;
$400 million to protect and prepare voting systems for the 2020 election cycle;
$150 million in grants for cultural programming for Americans stuck at home;
$425 million for mental health and substance abuse related to the pandemic; and
$100 million for rural broadband.
Benefits for Individual Taxpayers and Families
Direct payments of $1200 to taxpayers ($2400 to a couple filing jointly), decreasing as family income goes above $75,000 and stopping at $99,001 (or $198,001 for couple filing jointly), plus an extra $500 per child;
Massive expansion of unemployment insurance, increasing benefits for laid-off workers by $600 a week for four months and extending jobless insurance by 13 weeks, including for freelancers, furloughed employees and gig workers, plus temporary expansion of unemployment insurance to people who want to work but can’t because they are sick or caring for a sick family member (this includes self-employed people);
$25 billion for the food stamp and child nutrition programs;
Allowing people to withdraw up to 10% of their retirement accounts (up to $100,000) without the usual 10% fee;
Suspension of federal student loan repayments until September 30, interest-free; and
$33.5 billion for aid to farmers and agricultural workers.
Treasury Secretary Steve Mnuchin has told the media that he expects money to start going out to individuals and businesses within three weeks. He also noted that the US Government may take equity stakes in airline companies in exchange for the billions in direct grants to those companies.
The contents of this Alert are for informational purposes only and do not constitute legal advice. If you have any questions about this Alert, please contact the Shulman Rogers attorney with whom you regularly work or a member of the Shulman Rogers Business and Financial Services Department.
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