The CARES Act — What You Need to Know

Published: 5/5, 2020

Enacated in March the Coronavirus Aid, Relief, and Economic Security (CARES) Act provides more than $2 trillion bill to support individuals and businesses withstand the devastating economic impact of the COVID-19 pandemic. Here are some highlights for small business owners, courtesy of the Associated Equipment Distributors (AED).

 

Creation of the Paycheck Protection Program

This program will provide cash-flow assistance through 100-percent federally guaranteed loans to small employers (500 or under) who maintain their payroll during this emergency. If the employer maintains its payroll, then the portion of the loan used for covered payroll costs, interest on mortgage obligations, rent, and utilities would be forgiven. Loans would be available immediately through more than 800 existing SBA-certified lenders, including banks, credit unions, and other financial institutions, and SBA would be required to streamline the process to bring additional lenders into the program.

•    Maximum Loans: Generally, monthly payroll costs for 2.5 months, not to exceed $10 million. Payroll costs exclude compensation paid to individuals, including the self-employed, above $100,000 a year.

•   Requirements: The employer certifies loan will be used to retain workers, maintain payroll, make mortgage or lease payments, and pay utilities.

•    Loan Forgiveness: The borrower shall have a portion of their loan forgiven in the amount equal to their payroll costs (not including costs for compensation above $100,000 annually), interest payments on mortgages, rent payments, and utility payments between February 15 and June 30, 2020. Loan forgiveness will be reduced if the borrower reduces employment by a ratio similar to their reduction in employment or if the borrower reduces salaries and wages by more than 25 percent.

 

Employee retention credit for employers subject to closure due to COVID-19

The provision provides a refundable payroll tax credit for 50 percent of wages paid by employers to employees during the COVID-19 crisis. The credit is available to employers whose (1) operations were fully or partially suspended, due to a COVID-19-related shut-down order, or (2) gross receipts declined by more than 50 percent when compared to the same quarter in the prior year. The credit is based on qualified wages paid to the employee. The credit is provided for the first $10,000 of compensation, including health benefits, paid to an eligible employee. The credit is provided for wages paid or incurred from March 13, 2020 through December 31, 2020.

 

Delay of payment of employer payroll taxes

The provision allows employers and self-employed individuals to defer payment of the employer share of the Social Security tax they otherwise are responsible for paying to the federal government with respect to their employees. The deferred employment tax may be paid over the following two years, with half of the amount required to be paid by December 31, 2021, and the other half by December 31, 2022.

 

Modifications for net operating losses

The provision provides that a net operating loss (NOL) arising in a tax year beginning in 2018, 2019, or 2020 can be carried back five years. The provision also temporarily removes the taxable income limitation to allow an NOL to offset income fully. These changes will allow companies to utilize losses and amend prior year returns, which will provide critical cash flow and liquidity during the COVID-19 emergency. More information about these and other elements of the CARES Act is available at sba.gov.

 

Phil Kellier will chair next Conexpo-Con/Agg

The Association of Equipment Manufacturers (AEM) has announced Phil Kelliher, a vice president of Caterpillar Inc., will chair the next Conexpo-Con/Agg, set for March 14 – 18, 2023, at the Las Vegas Convention Center in Las Vegas. In his role at Caterpillar, Kelliher has responsibility for Americas Distribution, Service & Marketing, providing governance and administration of Cat dealers in North America and Latin America, as well as leadership of the Global Service and Global Marketing & Brand functions for the enterprise. As chairperson of Conexpo-Con/Agg, Kelliher will lead a cross-section of construction equipment leaders to oversee planning of the triannual global gathering place of the construction industry.