March 27, 2020

The Coronavirus Aid, Relief and Economic Security Act: What it Means and How it Affects Us

Written By

, Stoll Keenon Ogden PLLC


Sarah Jackson Bishop
Member, Stoll Keenon Ogden PLLC
(502) 875-6245

Connor Egan
Attorney, Stoll Keenon Ogden PLLC
(859) 231-3042

Andrew T. Hagerman
Attorney, Stoll Keenon Ogden PLLC
(502) 568-5730

On March 25, 2020, the Senate reached an agreement on legislation to provide economic and healthcare relief in response to the Covid-19 (“coronavirus”) pandemic. The House of Representatives is expected to vote on the legislation, entitled the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), today, Friday, March 27, 2020.

The CARES Act is comprehensive legislation, which addresses labor, tax, small business, and healthcare, among other things, and spans over 800 pages. The following are some highlights for families and businesses:

1. Keeping American Workers Paid and Employed:

• Expands the pool of small businesses eligible for loans under the Small Business Act to include, among other things, sole proprietorships and self-employed individuals, and establishes a formula (tied to payroll costs) for loans of up to $10 million for such businesses. These loans may be used for payroll purposes, qualifying employee leave, rents, mortgages, and utilities. Instead of repayment ability, which is the traditional metric used for Small Business Act loan determinations, the CARES Act instruct lenders to base lending decisions on whether the loan applicant was in operation with payroll obligations as of February 15, 2020.

• Increases eligible lenders for Paycheck Protection Program loans and waives the collateral and personal guarantee programs for such loans. It also limits the maximum interest rate for any Paycheck Protection loan to 4 percent and permits deferment for up to one year. In addition, Paycheck Protection loans are 100 percent guaranteed by the federal government and the Act provides for forgiveness of certain portions of the loaned amount for a limited period.

• Expands eligibility for Economic Injury Disaster Loans (“EIDL”) to include certain qualifying businesses with less than 500 employees, including private non-profits and sole proprietorships. The Small Business Administration is authorized to approve such loans based solely on the applicant’s credit score, and the legislation authorizes emergency grants to serve as advances on these loans. And applicants are not required to pay back the advances if their application is ultimately denied.

2. Assistance for American Workers, Families, and Businesses:

• Instructs the Internal Revenue Service (“IRS”) to send tax rebates to the majority of Americans. Those who qualify will receive a $1,200 rebate ($2,400 for eligible joint filers), plus $500 per qualifying child. Not everyone will receive this rebate. The amount is reduced by 5 percent of so much of adjusted gross income which exceeds: (1) $150,000 in the case of a joint return; (2) $112,500 in the case of a head of household; (3) $75,000 in the case of any other qualifying taxpayer.

• Expands unemployment benefits, including the elimination of any wait period. The CARES Act also provides significant assistance to states for expanded unemployment payments resulting from the pandemic.

• Permits the withdrawal of up to $100,000 from certain retirement accounts for COVID-19 related purposes. Such amounts may be repaid to the account within three years without regard to annual contribution limits.

• Expands above-the-line charitable contributions and temporarily suspends limitations on certain charitable contributions for tax purposes.

• Permits deferment of payroll taxes for certain employers and creates an employee retention tax credit of up to $10,000 for each employee.

3. Supporting America’s Healthcare System:

• Instructs the Secretary of Health and Human Services (“HHS”) to expedite the review of life-supporting and life-sustaining drugs, including drugs that are “critical to the public health during a public health emergency.”

• Requires all health insurers to cover COVID-19 testing without cost-sharing, and mandates that insurers pay providers for such testing at either (a) a negotiated rate or (b) the published cash price, which providers must make available online.

• Cost-sharing is also eliminated for COVID-19 testing for Medicare Part-B participants and provides that uninsured persons should receive no-cost COVID-19 testing under their state’s Medicaid program.

• Creates a Medicare accelerated-pay program for cash poor hospitals and allows enhanced use of telehealth programs for Medicare recipients.

• Appropriates $1.32 trillion for the prevention, diagnosis, and treatment of COVID-19, and expands the use of telehealth technology, particularly in rural communities.

• Permits the use of Health Savings Account funds of telehealth fees and over-the-counter medical products without a prescription. Likewise, Flex Spending accounts can be used to purchase over-the-counter medical products.

• Exempts volunteer health care professionals from liability from certain errors or omissions related to providing health care services during a public health emergency.

• Alters the daily and aggregate limits for family and medical leave to $200 and $10,000, respectively. Alters the daily and aggregate limits for emergency paid sick leave to $511 and $5,110, respectively.

• Expands unemployment compensation eligibility by providing up to an additional $600 per week in federal benefits on top of whatever state benefits a worker is entitled to receive for up to four months. Also extends unemployment compensation eligibility to independent contractors and furloughed employees.

The CARES Act’s Healthcare provisions also addresses education in multiple ways. It suspends all student loan payments, for loans owned by the federal government, through September 30, 2020, with no interest to accrue on the loans, nor any collection activities to occur through that date. It also increases appropriations for health professional schools, allows undergraduate and graduate students to use supplemental grants for emergency aid, permits students to continue receiving work-study payments if they are prevented from working due to a qualifying emergency, and gives the Secretary of Education authority to waive certain obligations of educational institutions and state and local agencies.

4. Economic Stabilization and Assistance to Distressed Sectors of the Economy:

The CARES Act appropriates $500 billion dollars to be distributed to sectors of the economy determined to be particularly impacted by COVID-19 shutdowns as follows:

1. Direct lending:

o $25 billion for passenger air carriers;
o $4 billion for cargo air carriers;
o $17 billion for businesses important to national security.

2. $454 billion for loans, loan guarantees, investments to support to Federal Reserve’s lending facilities to eligible businesses, states, municipalities.

There are significant restrictions on these loans. They cannot be forgiven and cannot have a duration of longer than five years, among other things. Borrowers must retain 90 percent of their employees and cannot effectuate stock buybacks while the loan is pending, or for one year following the loan. Borrowers also have limitations on executive compensation. And air carriers receiving loans must continue air transport.

The CARES Act also provides significant relief for private borrowers as well, which in turn affects private lenders. The Act requires that furnishers to credit reporting agencies who agree to account forbearance or modified payments concerning an obligation or account of a consumer that has been impacted by COVID-19 report such obligation or account as “current” or as the status reported prior to the accommodation. The Act also prohibits foreclosures on federally-backed mortgages for a 60-day period beginning on March 13, 2020 and provides up to 180 days of forbearance for borrowers on a federally-backed mortgage who have experienced financial hardship related to COVID-19.

5. Coronavirus Relief Fund:

The CARES Act provides $150 billion to states, territories, and Tribal governments for use on expenditures incurred due to the COVID-19 public health emergencies, including a minimum of $1.25 billion for states with relatively small populations.

Stoll Keenon Ogden understands that these are trying times for our clients and our country. Our firm operations have continued uninterrupted and our attorneys are equipped to serve as we always have – for over 120 years.

If you would like to discuss the resources available to you or your business or non-profit, the effects of the Coronavirus pandemic on your operations, or any other important matters, please do not hesitate to contact your trusted Stoll Keenon Ogden professional.

Please also be sure to check out the Stoll Keenon Ogden Coronavirus Resource webpage for additional articles and information related to the latest information on new laws and directives enacted by federal, state, and local governments in response to the Coronavirus pandemic.

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