All About the CARES Act


Protecting all Americans, the Coronavirus Aid, Relief, and Economic Security – CARES Act provides workers and their families with direct economic assistance, helping small businesses and preserving jobs.

Passed by the Congress with overwhelming bipartisan support and becoming law on March 27, 2020, it established the $150 billion Coronavirus Relief Fund.

This economic relief package is designed to shield the American people from the economic meltdown and public health consequences of COVID-19.

The four-tier approach adopted by the Treasury Department provides assistance for workers and families, assistance for small businesses and assistance for State and local governments, while preserving jobs for the American industry.

Assistance for Workers and Families

Through Economic Impact Payments and other means, Americans are receiving fast, direct relief during the coronavirus pandemic.

This basically consists of a lump sum of $1,200 for adults earning less than $99,000 (or $198,000 for couples filing jointly) and $500 for each child under seventeen years old, meaning up to $3,400 for a family of four.

Faster than waiting for bank checks, a web-based portal allows people to key in their banking data, while Social Security recipients not filing tax returns in 2018 or 2019 will receive this aid through direct deposits or bank checks, just like any other benefit.

Expanded unemployment insurance includes a $600 per week increase in benefits for up to four months and federal funding of unemployment benefits provided to people who are not usually eligible, such as those with limited work histories, independent contractors and the self-employed.

The federal government is offering to fund the first “waiting week” of unemployment benefits in States that suspend this requirement.

It will also underwrite a further thirteen weeks of unemployment benefits through to the end of 2020, once State unemployment benefits run out.

Assistance for Small Businesses

Almost sixty million people – just under half the US workforce – are employed by small businesses.

The Paycheck Protection Program (PPP) helps protect their income by assigning up to $350 billion to job retention and other expenses.

In addition to small businesses, veterans organizations, tribal companies and some nonprofit organizations are also eligible, together with independent contractors, sole proprietors and the self-employed, if they comply with the Program size standards (generally less than 500 employees, more in certain industries).

Providing small businesses with the funds needed to cover their payrolls, this Program also allows hiring back laid-off employees while covering the related overhead.

Implemented by the Small Business Administration (SBA), this Program provides the resources needed for up to eight weeks of payroll plus benefits, and may also be used to settle rent, utilities and interest on mortgages.

All subject to the same terms, these collateral-free loans will be fully forgiven, if at least 75% of the forgiven amounts are allocated to payrolls, with wage levels upheld and employees retained or quickly rehired.

However, shrinking headcounts and lower wages will reduce the forgiven amounts.

Applications were staggered, starting with small business and sole proprietorships (April 3), followed by independent contractors and the self-employed (April 10).

Applications could be submitted through any federally insured credit union or depository institution, SBA 7(a) lenders and participating Farm Credit System institutions.

Other regulated lenders were being enrolled in the Program, once approved. Run on a first-come first-served basis, there was a funding cap on these loans.

Running dry within days, this Program processed more than 1.3 million loans, with up to 700,000 nonprofits and small businesses still seeking support.

Additional funding  of $10 billion in Economic Injury Disaster Loans  (also forgivable) has also been rapidly depleted, earmarked for small businesses struggling with leaner revenues caused by social distancing and other restrictions prompted by the COVID-19 pandemic.

Assistance for State and Local Governments

Through the Coronavirus Relief Fund, the CARES Act provides for payments to State, Local, and Tribal governments coping with the impacts of the COVID-19 pandemic, also encompassing Puerto Rico, Guam, American Samoa, the US Virgin Islands and the Northern Mariana Islands.

These bailouts may be used to cover only necessary expenditures incurred due to the public health emergency triggered by COVID-19.

This means that they must underwrite actions responding to the coronavirus crisis either directly (such as responding to medical public health needs) or indirectly (by offsetting the effects of the outbreak), thus providing economic support for lost jobs and shrinking revenues resulting from business closures imposed by pandemic-prompted lockdowns.

These outlays must be incurred between March 1 and December 30, 2020, and may not be included in State or government budgets approved after March 27, 2020, when the CARES Act was approved.

Following the most recent US Census Bureau data, these population-based payments may be disbursed at the State level, or can be channeled directly to eligible local governments submitting the necessary certifications, including counties, municipalities, towns, townships, villages, parishes, boroughs or other similar units with populations of over 500,000.

Information on payments to Tribal governments is being released as it becomes available, after discussions between Indian Tribes, the Secretary of the Interior and the Secretary of the Treasury.

Preserving Jobs for The American Industry

By implementing the CARES Act, the Treasury Department is taking unprecedented steps to preserve jobs in industries adversely impacted by the spread of COVID-19.

Providing significant financial support for job creators and businesses, this helps employees while companies gear up to get back into business as quickly as possible.

Employers subject to economic hardships caused by COVID-19 or facing lockdown orders are encouraged to keep employees on their payrolls through 50% employee retention credits for up to $10,000 of wages payable from March 13 to December 31, 2020.

Additionally, the IRS is issuing tax credits for small businesses to cover wage costs during family time off or sick leave.

Boosting cash flows for continued operations and unchanged headcounts, deferred Social Security taxes on payrolls can now be paid off over the next two years: half by December 31, 2021 and the remainder by December 31, 2022.

These credits are available to employers with businesses disrupted by shutdowns and gross receipts down by 50% or more compared to the same quarter last year.

They can be claimed by firms with 100+ headcounts for employees retained but not currently working due to the crisis, and for all wages in smaller firms.

What lies ahead?

As the third round of federal government support prompted by the coronavirus catastrophe, the initial CARES Act follows an initial $8.3 billion approved for public health support and the Families First Coronavirus Response Act.

Although the public health crisis has not yet peaked and the related economic meltdown is still underway, there seems little doubt that these steps are merely the forerunners in a string of government bailouts designed to get the US economy back on an even keel.