PPAI Provides An Analysis Of The CARES Act For Promo Businesses
PPAI continues to closely monitor the federal government’s response to the coronavirus pandemic. On Friday, a PPB Newslink Breaking News reported that the Coronavirus Aid, Relief, and Economic Security (CARES) Act had been approved by the House and signed into law by President Trump. PPAI Government Relations Manager Maurice Norris, along with the Association’s D.C.-based lobbyist and its legal counsel, continue to study the legislation aimed at providing relief to businesses and individuals affected by the coronavirus pandemic. The Act has significant implications for the promotional products industry and the text below outlines and explains some of these including deferred tax payments, loans with forgiveness options, and direct payments to businesses and individuals.
The CARES Act, H.R. 748, modifies elements of the Tax Reform Act of 1986 to help businesses mitigate their coronavirus-related losses. With a total value of $2 trillion, the legislation authorizes federal funding for states, companies, individuals and other entities adversely affected by the coronavirus pandemic and expands the eligibility criteria for the relief programs. PPAI members can look for further updates to follow in the days ahead and can also subscribe to GR Today here and follow this and related news at pubs.ppai.org.
Keeping Employees Paid and Employed - Payroll Protection Loans: The CARES Act provides $350 billion for paycheck protection loans to small businesses and nonprofits to help them maintain their workforce. There are options for these loans to be forgiven if the employer maintains their payroll throughout the public health crisis.
The amount of the loan is 2.5 times the average monthly expenses for payroll from March 2019-February 2020, with a cap of $10,000,000. The loan proceeds can be used to pay payroll, benefits, rent or mortgage payments, utilities and interest on pre-existing loans. The loan will be forgiven to the extent the borrower maintains its payroll from March 15-June 30, with compensation capped at $100,000 for any individual employee. There is no loan forgiveness for mandated sick pay or new FMLA paid leave. The changes in full-time equivalent employees will adjust the amount of loan forgiveness.
Employers may delay the payment of the employer portion of FICA payroll taxes until December 31, 2021, if they do not qualify for the loan forgiveness. The employer may pay 50 percent of payroll taxes on December 31, 2021, and the remaining 50 percent by December 31, 2022.
Particularly significant for the promotional products industry is that this law expands eligibility for this program to include independent contractors, sole proprietors and some self-employed individuals. The paycheck protection program will be administered by the SBA. Those interested may contact the SBA to investigate applying for a loan. This provision is retroactive to February 15, so it may include coverage for employees who have already been laid off, and remains effective until June 30.
Pandemic Unemployment Assistance Program: The legislation creates a pandemic unemployment assistance program for several categories of workers, including people who may not typically be eligible for unemployment benefits.
This unemployment assistance is now available for self-employed and part-time workers as well as independent contractors, so long as the covered individual meets the certification requirements.
- Former employees whose employers did not subscribe to state unemployment are eligible for unemployment compensation under the CARES Act.
- The criteria is basically as follows: the individual is able and available for work, except the individual is unemployed, partially unemployed, or unable or unavailable to work because of effects of COVID-19 on the individual, the individual’s family member or the individual’s employer.
- An individual will not qualify if the individual has the ability to telework with pay; or is receiving paid sick leave or other paid leave benefits, regardless of whether the individual meets the certification criteria.
This unemployment relief also includes a temporary emergency increase of $600 per week to individuals who receive pandemic unemployment assistance, or unemployment insurance. Unemployed workers may connect with local and state unemployment insurance resources and monitor future announcements from federal and state governments.
Small Business Loans: The CARES Act expands the funding issued through small business loans. The CARES Act relaxes some existing Small Business Administration (SBA) restrictions, so recipients may be eligible to receive loan forgiveness for some payroll costs, including mortgage interest payments, rent and utilities.
The CARES Act also expands the availability of these loans to include public and private entities with up to 500 employees. The law also provides funding for the Small Business Administration to help companies cover six months of payments for businesses that already have SBA loans.
Economic Injury Disaster Loans: The CARES Act provides funding for the SBA’s Economic Injury Disaster Loan (EIDL) program. Small-business owners in all U.S. states, territories and in Washington, D.C. are now eligible to apply for a long-term, low-interest loan due to COVID-19. The SBA’s EIDL program can provide small businesses with working capital loans of up to $2 million to overcome the temporary loss of revenue they are experiencing.
The CARES Act also allows the SBA to offer businesses emergency grants up to $10,000 to cover operating costs. Under the terms of the CARE Act, the SBA can expedite grants to give companies access to a portion of the loan funds to pay for a variety of debt obligations, including sick leave and payroll.
Recovery Checks Directly To Taxpayers: Under the 2020 Recovery Rebate for Individuals, the CARES Act provides recovery checks to most taxpayers, consisting of up to $1,200 for individuals, $2,400 for married couples filing jointly and $500 for children. The relief-assistance payments will be means tested, and the eligibility for the assistance will decrease incrementally at incomes above $75,000.
Tax Deadline Extension: The CARES Act also extends the individual tax filing deadline from April 15 to July 15. Corporations may postpone estimated tax payments due after the date of enactment until October 15, 2020.
Family First Coronavirus Response Act – Emergency Paid Sick Leave and Emergency Family And Medical Leave: Under the Family First Coronavirus Response Act passed on March 20, 2020, which was modified by the CARES Act, employers with fewer than 500 employees are to provide two weeks’ worth of paid sick leave (80 hours for full time; two weeks average for part time). Employees qualify if they have 30 days or more tenure with the employer, and covers if an employee is unable to work due to quarantine or isolation; is experiencing symptoms of COVID-19 or is caring for someone who is in quarantine or isolation; or has a child or children in schools or childcare that have closed due to COVID-19. Employers themselves will receive tax credits to offset the costs of providing this paid leave.
In addition, the Family Medical Leave Act (FMLA) now includes Public Health Emergency Leave. This paid leave must arise from the same reasons as the paid sick leave. This new portion of FMLA applies to employers with more than one employee. After the two weeks paid sick leave or two weeks paid leave under an employer’s existing policies, the employee may take up to 12 weeks of paid family medical leave at two-thirds of their compensation.
The Secretary of Labor has the authority to issue regulations to exempt small businesses (those with fewer than 50 employees) from the requirements of the emergency paid leave and emergency FMLA when the imposition of such requirements would jeopardize the viability of the business as a going concern. Regulations in this regard have yet to be issued (as of March 31, 2020).
The CARES Act amends the Families First Coronavirus Response Act to limit employers’ obligations regarding emergency paid sick leave. Under the CARES Act provisions, obligations for employers is limited to $511 per day and $5,110 overall, or $200 per day and $2,000 overall, depending on the circumstances surrounding the employee’s paid leave. Simply put, the compensation obligations are equal to the credit permitted under each of the Acts (Emergency Paid Sick Leave Act and Emergency FMLA).
Other Relief and Miscellaneous and Indirect Relief: Some obligations for businesses affected by the coronavirus pandemic will be relaxed through deferred payments on estimated taxes, increased deductibility for interest expenses and some delayed payments for payroll taxes, as noted above. In addition, the CARES Act contains the following:
- Every taxpayer will be allowed to take up to $300 as a charitable contribution without itemizing deductions.
- The cap on charitable contribution deductions is suspended for 2020.
- The corporate charitable donation limit is increased to 25 percent from 10 percent.
- The Department of Education will suspend payments for student loans without penalty through September 30.
Disclaimer: This summary report of recent laws is not, and should not be construed as, legal or tax advice, and the summary report should not be relied upon as such. Each reviewer is encouraged to consult independent legal and tax counsel before making any decisions concerning the matters in this communication
PPAI members can look for further updates as they become available and can also subscribe to GR Today here and follow this and related news at pubs.ppai.org. Suppliers and distributors are encouraged to use PPAI’s new status page to post and view updates and status reports regarding supplier company’s operations.