On Wednesday March 25, 2020, the Senate passed the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). Two days later, on March 27, the House of Representatives passed the bill and President Donald J. Trump signed it into law. Below are some key provisions of this historic $2 trillion stimulus bill.

Paycheck Protection Program

The Paycheck Protection Program provides $349 billion for the Small Business Administration (“SBA”) to fully guarantee loans using the SBA’s existing 7(a) program. Businesses and nonprofits with fewer than 500 employees are generally eligible to apply, as are sole proprietors, independent contractors, and self-employed individuals. The loans can provide for up to 250% of an employer’s average monthly payroll and the interest rate is capped at 4%. Loans provided pursuant to the Paycheck Protection Program may be used for: payroll; benefits; lease and mortgage obligations; utilities; and interest on existing debt obligations.
Loans can be forgiven up to the aggregate amount of payroll, mortgage interest, rent, and utility payments made during the eight-week period following loan origination, assuming the amount does not exceed the original principal. The amount forgiven is lowered by reductions in full-time employment and in situations where total salaries and wages fall by more than 25% from the applicable prior period; however, this can be mitigated by rehiring employees.

Emergency EIDL Grants

In addition to 7(a) loans, small businesses and non-profits may also receive Emergency Injury Disaster Loan Grants. The CARES Act provides $10 billion for this Section.

Employee Retention Credit for Employers Subject to Closure Due to COVID-19

This Act provides a credit against applicable employment taxes for 50% of wages paid by employers during the COVID-19 crisis. The credit is available to employers whose operations were fully or partially suspended due to COVID-19 or whose gross receipts decreased at least 50% compared to the same quarter last year.

Emergency Relief and Taxpayer Protections

This Act provides $500 billion for loans, loan guarantees, and other investments to businesses, states, and municipalities harmed by COVID-19. It specifically provides $25 billion for passenger air carriers, $4 billion for cargo air carriers, and $17 billion for “businesses critical to maintaining national security.” Businesses that receive funds are prohibited from buying back stock and issuing dividends for the term of the investment plus one year, and are to maintain at least 90% of their workforce.