[co-authors: Ricky Callaway, Paul Kavinoky and Katie Ashley]

The third stimulus effort responding to the COVID-19 pandemic – the CARES Act – has been signed by President Trump and is now law. The $2 trillion stimulus legislation provides much-needed emergency aid to businesses and individuals amid the crisis.

What’s in the Bill

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) amends H.R. 748 and responds to the economic and health crisis brought on by the novel coronavirus pandemic. The $2 trillion direct stimulus legislation combined with authorization of Federal Reserve actions could amount to a total economic stimulus package of up to $6 trillion.

Our firm will produce detailed analyses of the legislation, but below are some of the key provisions in the bill:

• $500 billion in economic stabilization loans, loan guarantees, and other investments to provide liquidity to businesses/states/municipalities
  • $454 billion could be used to purchase obligations/other interests directly or from secondary markets
• $349 billion for small business loans through SBA
• $150 billion for the establishment of a “Coronavirus Relief Fund,” also referred to as State Stabilization Funds, for state/local/tribal governments
• $100 billion for hospitals
• $27 billion for vaccines/therapeutics/diagnostics/stockpiles
• Expanded tax deductions/write-offs
  • Tax credits for companies that retain employees despite shutdown orders or slowdowns
  • Employers can defer some payroll taxes
  • Businesses with losses can use deductions more easily to offset income
  • Expands tax deductions for charitable donations
• Temporary relief for borrowers with federally backed mortgages
  • Those experiencing financial hardship due to virus
  • FHA/VA/Fannie Mae/Freddie Mac loans
  • Could suspend payments for 180 days with possible 180-day extension
• Direct payments of $1,200 to individual taxpayers making up to $75,000 ($150,000 for couples filing jointly)
  • Phased out above those thresholds
  • $500 for each child
• Expansion of unemployment benefits
  • Extra $600 per week for four months in addition to state benefits
  • Gig workers covered
  • States encouraged to waive waiting period
• Retirement account changes
  • Those affected by the coronavirus could withdraw up to $100,000 from employer-sponsored retirement funds without 10% penalty
  • Certain retirement plan/account minimum distribution requirements would be modified for 2020
• Suspension of Medicare sequestration through end of year/extension of some health programs until December

Also of note:

• Treasury Secretary could require equity/other securities in return for aid
• Companies receiving government loans subject to further prohibitions, including:
  • No stock buybacks throughout term of loan plus one more year
  • Executive bonuses limited
  • Must be neutral in any union organizing effort by workers during term of loan

Further Stimulus

The Senate adjourned after their passage of the legislation and is expected to be out of session until April 20. Congress is expected to work on at least one additional stimulus package, Stimulus Four. This package is expected to address industries that need initial or additional help and areas that would help jumpstart the economy (infrastructure will be considered, for example), as well as fix or provide clarifications to the first three stimulus efforts.

Please note that Paul Kavinoky, Katie Ashley and Ricky Callaway are not attorneys.