CARES Act Summary: March 23, 2020

To Our Clients and Friends – We prepared the following executive summary of the SBA Disaster Loans and theFamilies First Coronavirus Response Act (the “Act”) as of March 23, 2020. (No regulations have been issued yet. We suspect that there will be changes as the situation continues to evolve). SBA Loans – The disaster declaration allows eligible businesses to apply for low-interest economic injury disaster loans, which means potential relief for thousands of businesses across North Carolina. If you are interested, either call the SBA Customer Service Center at 1-800-659-2955, or 1-800-877-8339 if deaf or hard of hearing or email the SBA at disastercustomerservice@sba.gov. Applications are available at disasterloan.sba.gov. The potential exists for loans of up to $2M. The maximum loan-term is a 30-year amortization schedule (based on your ability to repay principal & interest, just like a personal home mortgage) with rates of 3.75%. Some may also carry deferments of one-year. The Act applies to small/mid-sized business owners (partnerships, corporations, limited liability companies, associations, trusts), and self-employed individuals, and estates. What need to know about the Act: What is it? When is the new law effective? What counts as a “small to mid-sized business?” What does the Act do for small to mid-sized businesses? What are the benefits the Act provides? How does this work? Please let us know if we can answer any questions you have about how you or your business might be affected by the Act or the Coronavirus outbreak. We are monitoring the legislation and will try to keep you informed as we know more. We look forward to helping you plan to emerge on the other side of this situation as a better, stronger, more successful organization.

• In general, the Act establishes new regulations for employee benefits (such as paid sick leave) during the Coronavirus emergency for small to mid-sized businesses and self-employed persons, among others.

• The Act goes into effect on April 2, 2020.
• The effective period ends December 31, 2020.
• There is a temporary non-enforcement period of 30 days. “The Department of Labor will not bring an enforcement action against an employer for violations of the act so long as the employer has acted reasonably and in good faith to comply with the act.” (For more information, see the U.S. Department of Labor website: www.dol.gov).

• A business with 500 employees or less (this includes self-employed persons).

• The Act establishes federal paid leave benefits due to the Coronavirus outbreak.
• Small and mid-sized employers will receive tax credits and federal payroll-tax credits in order to fund the new, mandatory benefits.

• The April 15, 2020 deadline for filing federal income-tax returns and paying any related tax has been extended to July 15, 2020. There is no need to file for an extension. At this point, the NCDOR has informally indicated that this extension will apply to North Carolina state income tax returns (it’s unclear whether the payment deadline is also being extended).
• Mandatory paid leave and sick leave for workers affected by Coronavirus.
  • Employers are required to provide employees with 80 hours of paid sick leave and expanded paid child care leave (for employees whose children’s schools are closed and/or whose children’s usual care providers are unavailable).
    • Businesses with 50 employees or less are eligible for an exemption from this requirement in cases where the viability of the business is threatened.
    • Paid sick leave for employees: The Act limits this benefit to $511 per day for up to 10 days ($5,110 total) for an employee in quarantine because of Coronavirus or an employee who is seeking a medical diagnosis related to Coronavirus.
    • Paid leave for employees caring for family members affected by the Coronavirus: The Act limits this benefit to $200 per day (total maximum: $10,000).
• Employers will receive 100% reimbursement for paid leave required by this Act for the following:
  • Health insurance costs (employers reimbursed for 100% of insurance costs).
  • Employers face no payroll tax liability.
  • Self-employed persons receive an equivalent credit.

• The Act allows businesses to retain and access funds that would otherwise be paid to the IRS as payroll taxes. Usually, employers are required to take money out of their employees’ paychecks for Social Security and Medicare taxes. Instead of depositing this money with the IRS, employers are now entitled to use those funds to pay their employees for the mandatory sick and child care leave provided by this Act.
  • If these funds are insufficient to cover the costs required by the Act, then employers may file a request for an accelerated payment from the IRS (the IRS expects to process such requests within 2 weeks or less).