KTT Global Advisors

What Does the $2T Bailout Package Mean for YOU???

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Mar 26, 2020.

S.3548 – “CARES Act”

Business-Related Highlights:
“Forgivable” bridge loans to small business.

  • “Small Business” is defined for this program as having fewer than 500 employees.  Certain larger employers can also qualify.

  • MAY be problematic to PE/VC-owned companies as historically SBA (who will administer program) has looked at portfolio of companies as one company.

  • Must be “substantially affected” by COVID-19.  This includes loss of sales or customers.

  • Can apply between Mar 1 and Dec 31. (“covered period”)

  • Max loan amount = lesser of $10M -or- 4 times average monthly (payroll + mortgage pymnts + rent + other debt) over last year.  Translation: up to $10M.

  • Forgiveness provision only relates to the costs of maintaining payroll between Mar 1 and June 30.  Loan forgiveness is reduced by a percentage if average FTE is lower than same period in 2019.

  • Limitations on use – salaries, mortgage, rent, utilities, debt obligations incurred PRIOR to covered period.

  • Separate provisions related to women-owned and minority-owned businesses.

– Q1, Q2 2020 c-corp estimated tax payments. Delayed from April 15/June 15 to Oct 15.

– Employer payroll tax deferral.  Employer portion only (7.65%).  Payment of amounts due for payrolls between date of enactment and Dec 31 2020, can be deferred 50% until Dec 31, 2021, 50% until Dec 31, 2022.

– Required paid leave. Offset by a credit for wages paid for employees on leave.

– BIG business. Emergency loans to certain “distressed” business; mainly air carriers.  Suspension of aviation excise taxes.

Other Highlights:
– The $1,200 check.  Up to $1,200 per person, $2,400 for joint filers.  $500 for each qualifying child (dependant). Phase out happens at $75K of AGI ($150K MFJ).  Income determined by 2019 tax filing, or 2018 if not filed.  “Checks” (or DD if info on file with IRS) will go out 3 weeks from enacting.

– A bunch of healthcare-related stuff.  Funding for treatment of COVID-19, adjustments to healthcare insurance coverage, accelerated FDA approval, etc

– Education. Payments on federal student loans suspended.  Adjustments to grants and other aid.

– Unemployment. Benefits extended to self employed and people with limited work histories.

– Individual tax.  Filing and payment delay for 2019, and Q1 2020 estimated, from April 15 to July 15.  Withdrawals from tax-favored retirement plans allowed without penalty, subject to limitations.  Charitable contributions: non-itemizers can take an “above the line” (income adjustment) for CCs.

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