Coronavirus Guidelines for America: https://www.whitehouse.gov/wp-content/uploads/2020/03/03.16.20_coronavirus-guidance_8.5x11_315PM.pdf
Coronavirus (COVID-19) Website: www.coronavirus.gov
PHASE I - Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020 (Signed into law on March 6, 2020)
- The bill provides $8.3 billion in emergency funding for federal agencies to respond to the coronavirus outbreak. Of the $8.3 billion, $6.7 billion (81%) is designated for the domestic response and $1.6 billion (19%) for the international response.
- Text of Act can be found at: https://www.congress.gov/bill/116th-congress/house-bill/6074
PHASE II - Families First Coronavirus Response Act (FFCRA) Effective April 1, 2020
- The FFCRA requires certain employers with fewer than 500 employees to provide their employees with paid sick leave or expanded family and medical leave for specified reasons related to COVID-19. These provisions will apply from the effective date through December 31, 2020.
- Employers of health care providers may elect to exclude such employees from eligibility for leave
- Small businesses with fewer than 50 employees may qualify for exemption from the requirement to provide leave due to school closings or child care unavailability if the leave requirements would jeopardize the viability of the business as a going concern.
- Every dollar of required paid leave (plus the cost of the employer’s health insurance premiums during leave) will be 100% covered by a dollar-for-dollar refundable tax credit available to the employer.
- Generally, the FFCRA provides that covered employers must provide to all employees:
- Two weeks (up to 80 hours) of paid sick leave at the employee’s regular rate of pay where the employee is unable to work because the employee is quarantined (pursuant to Federal, State, or local government order or advice of a health care provider), and/or experiencing COVID-19 symptoms and seeking a medical diagnosis; or
- Two weeks (up to 80 hours) of paid sick leave at two-thirds the employee’s regular rate of pay because the employee is unable to work because of a bona fide need to care for an individual subject to quarantine (pursuant to Federal, State, or local government order or advice of a health care provider), or care for a child (under 18 years of age) whose school or child care provider is closed or unavailable for reasons related to COVID-19, and/or the employee is experiencing a substantially similar condition as specified by the Secretary of Health and Human Services, in consultation with the Secretaries of the Treasury and Labor.
- A covered employer must provide to employees that it has employed for at least 30 days:
- Up to an additional 10 weeks of paid expanded family and medical leave at two-thirds the employee’s regular rate of pay where an employee is unable to work due to a bona fide need for leave to care for a child whose school or child care provider is closed or unavailable for reasons related to COVID-19.
- The first 10 days of the emergency leave may consist of unpaid leave. Employees may choose to substitute any accrued vacation leave, personal leave, medical or sick leave for use during those 10 days. If the employee chooses to do so, the remainder of the 12 weeks of leave is paid by the employer, calculated as described in the above section.
- Qualifying Reasons for Leave: Under the FFCRA, an employee qualifies for paid sick time if the employee is unable to work (or unable to telework) due to a need for leave because the employee:
- is subject to a Federal, State, or local quarantine or isolation order related to COVID-19;
- has been advised by a health care provider to self-quarantine related to COVID-19;
- is experiencing COVID-19 symptoms and is seeking a medical diagnosis;
- is caring for an individual subject to an order described in (1) or self-quarantine as described in (2);
- is caring for a child whose school or place of care is closed (or child care provider is unavailable) for reasons related to COVID-19; or
- is experiencing any other substantially-similar condition specified by the Secretary of Health and Human Services, in consultation with the Secretaries of Labor and Treasury.
- Duration of Leave:
- For reasons (1)-(4) and (6): A full-time employee is eligible for up to 80 hours of leave, and a part-time employee is eligible for the number of hours of leave that the employee works on average over a two-week period.
- For reason (5): A full-time employee is eligible for up to 12 weeks of leave at 40 hours a week, and a part-time employee is eligible for leave for the number of hours that the employee is normally scheduled to work over that period. (An employee may elect to substitute any accrued vacation leave, personal leave, or medical or sick leave for the first two weeks of partial paid leave under this section)
- Calculation of Pay:
- For leave reasons (1), (2), or (3): employees taking leave shall be paid at either their regular rate or the applicable minimum wage, whichever is higher, up to $511 per day and $5,110 in the aggregate (over a 2-week period).
- For leave reasons (4) or (6): employees taking leave shall be paid at 2/3 their regular rate or 2/3 the applicable minimum wage, whichever is higher, up to $200 per day and $2,000 in the aggregate (over a 2-week period).
- For leave reason (5): employees taking leave shall be paid at 2/3 their regular rate or 2/3 the applicable minimum wage, whichever is higher, up to $200 per day and $12,000 in the aggregate (over a 12-week period—two weeks of paid sick leave followed by up to 10 weeks of paid expanded family and medical leave).
- Tax Credits: Covered employers qualify for dollar-for-dollar reimbursement through tax credits for all qualifying wages paid under the FFCRA. Qualifying wages are those paid to an employee who takes leave under the Act for a qualifying reason, up to the appropriate per diem and aggregate payment caps. Applicable tax credits also extend to amounts paid or incurred to maintain health insurance coverage.
- Prohibitions: Employers may not discharge, discipline, or otherwise discriminate against any employee who takes paid sick leave under the FFCRA and files a complaint or institutes a proceeding under or related to the FFCRA.
- Penalties and Enforcement: Employers in violation of the first two weeks’ paid sick time or unlawful termination provisions of the FFCRA will be subject to the penalties and enforcement described in Sections 16 and 17 of the Fair Labor Standards Act. 29 U.S.C. 216; 217. Employers in violation of the provisions providing for up to an additional 10 weeks of paid leave to care for a child whose school or place of care is closed (or child care provider is unavailable) are subject to the enforcement provisions of the Family and Medical Leave Act. The Department will observe a temporary period of non-enforcement for the first 30 days after the Act takes effect, so long as the employer has acted reasonably and in good faith to comply with the Act. For purposes of this non-enforcement position, “good faith” exists when violations are remedied and the employee is made whole as soon as practicable by the employer, the violations were not willful, and the Department receives a written commitment from the employer to comply with the Act in the future.
- Department of Labor Model Notice: https://www.dol.gov/sites/dolgov/files/WHD/posters/FFCRA_Poster_WH1422_Non-Federal.pdf
- Duration of Leave:
PHASE III – Coronavirus Aid, Relief and Economic Security Act (CARES Act) (signed into law March 27, 2020)
On March 27, 2020, Congress passed a $2 trillion stimulus bill designed to provide relief to individuals and businesses impacted by the coronavirus (COVID-19) outbreak. The Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) includes appropriations of more than $850 billion in loans to impacted businesses, as well as numerous tax breaks and protections for individuals and employers alike.
The text of the CARES Act is here: https://www.congress.gov/bill/116th-congress/senate-bill/3548/text
Lending for Small Businesses
As part of the CARES Act, the “Keeping American Workers Paid and Employed Act” provides relief for small businesses (among others) impacted by the COVID-19 outbreak. The Act includes nearly $350 billion in funding for loans through the Small Business Administration (SBA) under the “Paycheck Protection Program.” The program will provide small businesses of 500 or fewer employees with zero-fee loans for which principal and interest is deferred for up to a year. The maximum loan amount is $10 million and is calculated for each eligible company as 2.5 times the company’s average monthly payroll costs for employees making less than $100,000. Qualifying businesses are eligible to receive these loans without personal guarantees or collateral.
April 1, 2020 UPDATE: The U.S. Treasury Department has now issued guidelines for PPP loan applications. Applications will be accepted from small businesses starting April 3, 2020. Go to: https://home.treasury.gov/policy-issues/top-priorities/cares-act/assistance-for-small-businesses
The Act also expands the availability of “emergency injury disaster loans” (EIDL) and makes available $10,000 advances (payable within 3 days of applying) for businesses to maintain payroll, preserve their supply chain, or meet other obligations like rent or mortgage payments. The advances need not be repaid even if the application for the EIDL is subsequently denied.
Assistance for Workers and Businesses
The “Relief for Workers Affected by Coronavirus Act” provides federal funding for unemployment benefits including $600 per week for up to four months in addition to state benefits. Notably, the types of workers who qualify for federal benefits has been expanded to include individuals not otherwise covered by state unemployment compensation laws, such as independent contractors, the self-employed and gig economy workers. Those who have been prevented from working as a result of COVID-19 (for instance, those quarantined as a result of exposure, or those whose places of employment have shut down by operation of a “shelter at home” order) will receive the same unemployment compensation benefits as regular employees receive under applicable state law.
Taxpayers are entitled to direct tax rebates in the form of checks of up to $1,200 for individuals earning up to $75,000 per year or $2,400 for couples earning less than $150,000, plus $500 per child for qualifying taxpayers. Rebates are gradually scaled down until income thresholds of $99,000 per individual and $198,000 per couple are reached, at which point they are phased out entirely. The CARES Act also relaxes certain caps on individual charitable contributions.
In the event an individual is diagnosed with COVID-19 or experiences adverse financial consequences as a result of the COVID-19 crisis, the CARES Act permits special disbursements and loans of up to $100,000 from 401k and other qualified retirement plans, waiving the normal 10% early withdrawal penalty. Any withdrawal amount required to be included in gross income may be spread out over a three-year period for this purpose.
Small Business Relief
The Act contains general payroll relief as an incentive to employers to retain their employees. Eligible employers are entitled to an employee retention tax credit equal to 50% of the qualified wages, capped at a $5,000 credit per employee. Any employer whose operations were fully or partially suspended by government order or who suffered a significant decline in gross receipts (50% year-on-year decline) is eligible for the retention credit. Payroll taxes are deferred altogether for most employers over the next two years—with half due by December 31, 2021 and the remainder by December 31, 2022. Business operating losses for 2020 can also be carried back for up to five years.
Healthcare and Paid Sick Leave Provisions
The CARES Act expands the recently enacted Families First Coronavirus Response Act (FFCRA). In addition to several changes to health care coverage for COVID-19 testing, the Act clarifies provisions relating to paid sick leave and family leave, including the following:
- It expands the definition of “eligible employees” under the FFCRA to include individuals who were: (1) laid off by their employer on or after March 1, 2020; (2) had worked for that employer for at least 30 days in the last 60 calendar days prior to the lay-off; and (3) were rehired by the employer.
- It allows for advances on the tax credits called for by the FFCRA and penalty relief for a failure to deposit tax amounts if the failure was due to the anticipation of the tax credits. The details and process for tax credit advances will be worked out in instructions provided by the Department of Labor (DOL).
- The CARES Act also makes a clarification that the paid leave dollar limits under these provisions are per employee.
Department of Labor regulations are expected in April to address additional questions and details under these Families First Act provisions.
Economic Stabilization and Assistance to Severely Distressed Sectors
The CARES Act appropriates $500 billion for loans, loan guarantees, and investments to be overseen by the Treasury Department for the benefit of states, municipalities, and certain eligible businesses, including air carriers and other qualifying businesses. The Treasury Secretary will publish procedures in the coming weeks by which companies may apply for this additional lending. Until those procedures are put in place, it is difficult to anticipate how these funds will be made available to distressed sectors of the economy. The CARES Act does place limits on executive compensation for companies that obtain economic stabilization loans. The CARES Act also creates the Office of the Special Inspector General for Pandemic Recovery to supervise the loans and investments made by the Treasury Department.
Residential Mortgage Forbearance and Foreclosure Moratorium
During the COVID-19 national emergency, a borrower with a federally backed mortgage loan experiencing financial hardship as a result of the emergency may obtain a forbearance of up to 180 days, regardless of delinquency status, which may be extended for an additional period of up to 180 days at the request of the borrower. During such forbearance, no fees, penalties, or added interest shall be charged on delayed payments. Multifamily borrowers may also request forbearance for up to 30 days, with two additional 30-day extensions.
For the 60-day period beginning March 18, 2020, no servicer of a federally backed mortgage may initiate any foreclosure or execute a foreclosure-related eviction (except in the case of vacant or abandoned property). The Act further prevents landlords from bringing actions to recover possession from a tenant for nonpayment of rent for certain federally insured or guaranteed housing for a period of 120 days.
Various tax benefits are also being made available to property owners, including:
- Allowing non-REIT businesses a five-year carryback of net operating losses (“NOLs”) for 2018, 2019, and 2020. The CARES Act modifies the rules relating to NOLs for taxable years beginning in 2018, 2019, and 2020. The new rules (i) allow NOLs incurred in 2018, 2019, and 2020 to be carried back up to five years preceding the year of the tax loss and carried forward for an indefinite period, (ii) repeal the 80% Limitation for taxable years beginning before January 1, 2021, and (iii) provide that NOL carryforwards arising from taxable years beginning before 2018 are not subject to the 80% Limitation when carried forward to tax years beginning in 2021 and beyond.
- Increasing the limit on deductible business interest from 30% to 50% of adjusted taxable income (calculated similarly to EBITDA) for 2019 and 2020. Different rules apply in the case of partnerships.
- Qualified Investment Property (“QIP”) is now available for immediate expensing, rather than subject to the 39-year depreciation period—an estimated $170B windfall for real estate investors. The new provision in the CARES Act is an attempt to fix a drafting error in the 2017 Tax Cuts and Jobs Act (“TCJA”). Now, improvements to the interior of a non-residential building (so-called QIP) are eligible for immediate expensing, instead of being subject to the 39-year depreciation period of a building. With this change, the federal government is hoping to incentivize investment in capital improvements and ultimately bolster economic activity in the real estate and construction industries.
- For taxable years starting after December 31, 2017, the TCJA prevented non-corporate taxpayers from deducting more than $250,000 ($500,000 for joint filers) of net business losses against other sources of income (the “Business Loss Limitation Rule”). The CARES Act retroactively repeals the Business Loss Limitation Rule for the 2018, 2019, and 2020 taxable years.
- Excluding the cancellation of debt related to new, emergency small business loans from income
Temporary Relief for Federal Student Loan Borrowers
The Act automatically defers payments for federally owned student loans for six months, through September 30, 2020.
The CARES Act amends the recently passed Small Business Reorganization Act. Where previously the SBRA applied only to small businesses with aggregate debts of less than $2.7 million, the CARES Act raises that debt limit to $7.5 million, which will provide a greater number of small businesses the opportunity to participate in the SBRA’s more streamlined and less costly procedures to reorganize a small business.
The CARES Act also provides that Chapter 13 plans confirmed prior to the COVID-19 pandemic can now be amended on account of a “material financial hardship” caused by the pandemic. The Act also allows Chapter 13 debtors to exclude from their “current monthly income” (which is generally used as a baseline to calculate how much disposable income should go to pay creditors) “payments made under Federal Law” relating to the national emergency declared relating to COVID-19.