The CARES Act offers real immediate assistance to small businesses struggling with the uncertainties generated by the ongoing health and economic crises due to COVID-19. Discuss this with your own tax and legal advisors. I have provided a number of links below that I have found useful in my own research.

TL;DR – There is a extraordinary small business lifeline in the CARES Act, specifically the Paycheck Protection Program, which can turn a guaranteed small business loan into a tax-free grant equal to approximately 8 weeks worth of business operating expenses.

We have spent the last couple of weeks dissecting the effects of the Families First Coronavirus Response Act (FFCRA) on small businesses that are grappling with a shocking loss of business due to the COVID-19 pandemic. Layoffs, furloughs, reductions in hours — and their resulting effect on employee benefits — all of these small business survival responses demanded immediate attention as business owners scrambled to simultaneously protect their businesses, their families, and their employees.

Following the signing of the CARES Act on Friday, I believe the next two weeks are going to focus on small businesses accessing a massive cash infusion designed to bring employees back up to full-time pay, at least through the end of June (even if unable to full-time work due to shelter-in-place restrictions).

For businesses that use the loans to ensure employees keep their jobs and returned to full pay (including the rehire of laid-off employees, where applicable), can have the portion of the loan that is equal to 8 weeks of certain business operating expenses forgiven (not required to repay). Specific operating expenses include:

  • Payroll (with caps at $100K+ annual comp, and not including payroll taxes)
  • Rent, mortgage interest, utilities
  • Group health insurance benefits

In addition, small businesses that are suffering a 50% or more loss in revenue vs. the prior year (calculated by calendar quarter) may be eligible for up to $5,000 per employee payroll tax credit. These tax credits are separate from the payroll tax credits offered under the FFCRA’s emergency sick leave and FMLA benefits. It is our understanding that businesses cannot benefit from this tax credit and the Paycheck Protection Program.

In short, while the FFCRA was designed to provide immediate sick leave and family protection for employees, the CARES Act is designed to keep American businesses going through the end of June.

Below is a collection of the most helpful resources I have found. I recommend you review and discuss with your tax and legal advisers as soon as possible.

Best overviews of CARES Act:
U.S. Chamber of Commerce Small Business Guide and Checklist
U.S. Senate Committee on Small Business & Entrepreneurship

Immediate analysis from national law firms:
Gibson Dunn (specific focus on the Paycheck Protection SBA loan program)
Skadden (a little more dense/detail than the other links)

Third party analysis:
Forbes – Peter J. Reilly – Paycheck Protection Program

I hope you find this helpful, and I am happy to discuss any of this with you, and in particular what it means for your ability to retain employees and to continue their employee benefits.

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