Updated April 15, 2020 with more information on SBA Paycheck Protection Program
As the threat of the COVID-19 epidemic grows in the United States, many hard-hit communities are reeling with overcrowded hospitals and insufficient supplies. Mandatory shelter-in-place orders as well as voluntary guidelines are seeking to keep non-essential workers at home to reduce the rate of infection. Meanwhile, Congress has been working to adopt emergency legislation to help small business owners and employees weather the economic impacts of this crisis.
On March 27, two days after Senate approval, the House passed the “CARES Act“–a $2 trillion disaster aid package in response to the COVID-19 crisis. The President signed the bill into law later that day. Provisions include assistance to hospitals and state and local governments, rebate checks to individuals and families, loan forgiveness to help small businesses meet payroll and other expenses, expanded unemployment benefits, and funds for airlines and other impacted industries.
The Clean Energy Business Network will continue to monitor and report on developments on the legislation, as well as resources from federal agencies in the coming weeks to help you access these new programs. In the meantime, CEBN has summarized provisions most relevant to small businesses and employees to help cash-strapped companies and families plan how to stay financially solvent during this national emergency.
Congressional information on the CARES Act:
Summary of selected provisions relating to small businesses and employees:
Forgivable Loans: Paycheck Protection Program
- These loans may be used for payroll, rent, mortgage interest, or utilities and in most cases will be forgiven entirely if payroll is maintained.
- IRS guidance has stipulated that due to anticipated high demand, loans may not be granted unless at least 75% of funds are used for payroll.
- Some reductions in forgiveness will be applied if salaries are reduced by more than 25% or employees are laid off (see more information here).
- Any unforgivable portion of the loan must be paid off in two years at a 1% annual interest rate with a 6 month grace-period before payments are due.
- Eligible recipients include businesses with no more than 500 employees (or applicable SBA standard), self-employed individuals, 501(c)(3) nonprofits, 501(c)(19) veterans’ organizations, and Tribal business concerns.
- Applications can be accessed here and will be open on the following dates:
- April 3 for small businesses and sole proprietorships
- April 10 for independent contractors and self-employed individuals
- Loans are facilitated through approved banks; the full list of lenders can be accessed here.
- Note: Current SBA definitions for small businesses impose limitations on companies with a controlling share of equity owned by a parent company or investor that does not meet the size requirements (i.e., “affiliation”), which is a common situation for cleantech startups. CEBN is working with partners across the nation to advocate for swift clarification that startups with equity owners will be eligible for SBA disaster loans.
Consult an FAQ issued by Treasury on April 8 and updated on April 15 and 23 for more details.
Expanded unemployment benefits:
- Creation of a temporary Pandemic Unemployment Assistance program through December 31, 2020 to provide payment to those not traditionally eligible for unemployment benefits (self-employed, independent contractors, those with limited work history, and others) who are unable to work as a direct result of the coronavirus public health emergency
- Increase in unemployment benefits to provide an extra $600 per week per recipient, for an expanded period of four months
- Funding for “short-time compensation” programs to allow employers to reduce employee hours instead of laying off workers, and provide a pro-rated unemployment benefit to affected workers
Tax measures to assist small businesses:
- The CARES Act created a refundable payroll tax credit for wages paid from March 12, 2020 – Jan 1, 2021. This credit applies to 50 percent of the first $10,000 paid to each employee during this period for a maximum credit of $5,000 per employee.
- Credit is available to employers whose operations were fully or partially-suspended or who suffered a 50% decline in gross receipts compared to the same quarter in the prior year.
- Ability to defer the employer portion of Social Security taxes, with repayment over a two-year period
- Modification of net operating losses (NOL) restrictions to allow employers to utilize losses and amend prior year returns, providing critical cash flow and liquidity during the COVID-19 emergency
- Increase in business interest expense deduction from 30% to 50% of taxable income
- Immediate write-off of improvements to qualified facilities as opposed to depreciation on a 39-year schedule
Direct payments and credits to individuals and families:
- An automatic rebate of $1,200 single/$2,400 married for all U.S. residents with adjusted gross income up to $75,000 single/$150,000 married, plus an additional $500 per child
- Above these income thresholds, the rebate is gradually reduced and phased out completely for single filers with incomes exceeding $99,000, $146,500 for head of household filers with one child, and $198,000 for joint filers with no children
- To encourage charitable giving during this crisis, taxpayers will be able to deduct up to $300 in charitable donations even if they do not itemize deductions
Next steps:
The bill does not include any provisions specific to energy. However, we anticipate an additional economic stimulus package later in the year once the immediate public health crisis subsides. Various energy provisions may be on the table at that time, including action on clean energy tax incentives. CEBN will continue to keep members posted about opportunities to engage.
