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Coronavirus Aid, Relief and Economic Security Act


Coronavirus Aid, Relief and Economic Security Act

As the coronavirus (“COVID-19”) outbreak continues to create uncertainty across the United States, small business owners and individuals alike are now confronted with many unprecedented and unique challenges.  To help us with these challenges, President Trump signed into law on March 27, 2020 the Coronavirus Aid, Relief, and Economic Security Act (“Act”).  This Act is the largest single injection of cash into the American economy in history and is the third phase of the government’s rapid response to the COVID-19 pandemic.  Extraordinary times call for extraordinary measures and this bill certainly is extraordinary.

What follows is a brief summary of what we believe to be the most important provisions of the Act for small business owners and individuals.

Small Business Loans – The Act provides for two types of loans to small businesses:

  1. Paycheck Protection Program Loan (“PPP”) – This loan program is the most important part of the Act for most small business owners. It sets aside $350 billion in government- backed loans from private banks that can, in some cases, be converted to grants.  This means that if the loan proceeds are used to pay for qualified expenses, the loan will be forgiven.  Qualified expenses are costs related to employee compensation and benefits including payroll costs, continuation of health care benefits, employee compensation (for those making less than $100,000), mortgage interest, rent, utilities and other interest.  The maximum loan amount under this program is 2.5x the average total monthly payroll costs over the previous year, up to $10,000,000.  Businesses that employ fewer than 500 employees are eligible.  To the extent a loan is not forgiven, loan service payments may be deferred for up to one year.
  2. Economic Injury Disaster Loan (“EIDL”) – This loan program is not new and has been offered by the Small Business Administration (“SBA”) for years. However, the Act expands eligibility for the program and makes it easier to apply.  Just like the PPP, these loans are designed to assist those affected by the economic downturn and are available to businesses that employ fewer than 500 employees.  Unlike the PPP where loan proceeds come from a private bank, these loans come directly from the SBA.  These loans have more stringent underwriting standards than the PPP and are therefore harder to get.  It is possible to receive both a PPP and an EIDL as long as the proceeds are not used to pay for the same expenses

Unemployment Insurance – The Act does a number of things as it relates to unemployment insurance.  First, it provides federal funding for expanded unemployment insurance coverage and increased benefits to those whose job or ability to work was impacted by COVID-19.  The Act provides for up to 13 weeks of emergency unemployment benefits for eligible individuals who remain unemployed after exhausting their rights to unemployment benefits under state law.  It also provides for a weekly increase of $600 to amounts customarily available as unemployment benefits under state law.  This increase applies to payments made through July 31, 2020.  Second, the Act provides assistance to certain individuals who typically are excluded from receiving unemployment benefits.   This means that individuals who are unemployed, partially unemployed, or unable to work due to COVID-19 and not otherwise eligible for unemployment benefits now become eligible.

Individual Benefits – The Act provides a number of benefits for individuals in need.

  1. Direct Payments – Beginning immediately, the government will be either directly depositing or mailing checks of $1,200 to each individual who makes less than $75,000 annually, with smaller amounts to individuals making up to $99,000 annually. Couples making less than $150,000 annually will receive $2,400, with smaller amounts to couples making up to $198,000 annually.  People with children under the age of 17 also are entitled to receive $500 per child.
  2. Suspension of Early Withdrawal Penalties – The 10% penalty associated with early withdrawals from retirement accounts is suspended for COVID-19 related distributions. These distributions must take place during calendar year 2020 and are limited to $100,000.  The distributions are included in income ratably over a three-year period and individuals who receive a distribution are permitted to make contributions to replace the distribution up to the amount of the distribution to a retirement account during the three-year period beginning on the date of distribution.
  3. Suspension of Minimum Distribution Rules – The required minimum distribution rules, which mandate that certain individuals withdraw a minimum amount of money from their retirement account every year, have been suspended for 2020.
  4. Charitable Contributions – A non-itemizing taxpayer can claim up to $300 as an “above-the-line” charitable deduction for contributions made in 2020. The limit on charitable cash contributions of 60% of adjusted gross income has been increased to 100% of adjusted gross income.  Any excess contribution can be carried forward to future years.
  5. Student Loans – All federally held student loan payments have been suspended until September 30, 2020. During this time, interest will not accrue.
  6.  Income Tax Payments and Returns – Although the Act did not provide for this, the April 15 deadline for filing income tax returns and making income tax payments has been extended until July 15. This includes 2020 first quarter estimated tax payments.


We have done our best here to summarize what we believe to be the most relevant portions of the Act for you.  The Act contains a lot more information.  As always, please don’t hesitate to contact us if you have any questions or if we can be of assistance in any way.

Written by

Gregory C. Luke, ESQ.

Greg joined THOR in 2002 and is a member of the Wealth Management team. Before joining THOR, Greg spent 12 years in the private practice of law. While practicing law, Greg's main focus was business and estate planning, tax, charitable planning and estate administration.

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