By Joe Sills Jr.
Fishing Tackle Retailer
WASHINGTON, D.C.— At 11:50 p.m. on Wednesday, March 26, the Senate unanimously passed the Coronavirus Aid, Relief and Economic Security Act. Dubbed the CARES Act, the $2 trillion bill was also passed by the House of Representatives, then signed by President Trump. The bill includes up to $1,200 in relief for many Americans. But what does it mean for small business owners?
Let's start with a breakdown of some key elements in the bill that might impact your business or its employees directly.
$349 billion — Small business loans.
$301 billion — Direct payments to households.
$221 billion — Tax benefits for businesses.
That's over $1 trillion in potential aid that could help small businesses through what scientists say could be a months-long process of combating the COVID-19 virus by social distancing methods that keep most American workers home. Let's take a closer look at each.
Small business loans
Small businesses and nonprofits with up to 500 workers in a single location are now able to apply for loans backed by the Small Business Administration. Those loans convert into grants that do not have to be repaid. The grants cover payroll, rent and utilities up to $10 million, and salaries are capped at $100,000 per year. The amount of grant money is reduced if employees are laid off.
Direct payments to households
The CARES Act would provide direct payments of $1,200 to adults, and $500 per child to households. These payments are processed like tax refunds, running through the IRS. This is a direct one-time payment with no provision for future payments. Direct payments are phased out for individuals making more than $99,000 and are reduced beginning with individuals earning more than $75,000. Married couples without children making more than $198,000 will also receive no payment.
The CARES Act also extends jobless benefits to 39 weeks. It includes a $600 per week increase for unemployed workers for four months with benefits extending to contract workers and freelancers. Unemployment benefits are also extended to independent contractors who are unable to work or partially employed due to COVID-19.
Tax benefits for businesses
Under the CARES Act, employers gain the ability to defer payroll taxes for 2020 and split the balance between 2021 and 2022. Businesses that had their operations limited or closed by government actions—such as a shelter-in-place order— also gain a tax credit for retaining employees equal to 50% of their payroll, although the credit is limited to $10,000 per employee per quarter and to businesses with more than 100 employees.
In addition, retailers who have made improvements since 2018 could benefit from an amendment to the 2017 Tax Cuts and Jobs Act that requires property improvements to be expensed over 39 years. A clerical error in that act resulted in some retailers overpaying by a combined $30 billion, and that money is set to be refunded to qualifying businesses.