More Support for Small Businesses and Nonprofits in the CARES Act

Renner Business News; April 1, 2020

The Coronavirus Aid, Relief, and Economic Security (CARES) Act includes provisions to make it easier for employers to help their employees during the COVID-19 crisis. It also supports charitable giving by corporations able to help others and accelerates deductions for businesses that are experiencing business losses.

Employee Retention Credit for Businesses and Nonprofits

The CARES Act allows eligible employers a refundable credit for half the wages they pay to employees who cannot work because of business cutbacks due to COVID-19. Employers who have suspended or reduced operations to comply with a government order requiring them to close their business or cancel meetings, or whose business has declined by more than half, are eligible and can claim the credit against the employer portion of payroll tax.

Employers of up to 100 employees get the credit on all wages and health benefits paid up to $10,000 per employee. Employers with more than 100 employees only get the credit on wages paid to employees who aren’t working because of COVID-19 cutbacks.

Employers can reduce payroll tax deposits by the amount of the credit earned.

This credit does not apply to wages paid under the emergency sick leave and family leave provisions of the Families First Coronavirus Response Act. Employers are already receiving a credit for those wages. Employers receiving support through the Paycheck Protection Program are not eligible.

Payroll Tax Payment Deferral

The CARES Act also allows employers to delay part of their 2020 payroll tax payments. Employers who are not receiving support through the Paycheck Protection Program can defer payment of their 2020 employer FICA into two payments, which are due at the end of 2021 and 2022.

Pension Contributions

The CARES Act gives employers more time to make pension contributions due in 2020. Single employer pension plan contributions can be delayed until Jan. 1, 2021. Employers should pay delayed contributions with interest.

Education Assistance Programs

Employers with Education Assistance Programs can currently pay employees’ tuition and other education costs up to $5,250 as a tax-free benefit. Under the CARES Act, employers may now include payments of an employee’s student loan debt as a tax-free education assistance benefit.

Business Charitable Contributions

Generally, corporations can only deduct charitable contributions up to 10% of taxable income.  Under the CARES Act, corporations will be able to deduct charitable contributions up to 25% of taxable income.

Business Net Operating Losses

The CARES Act loosens the restrictions on applying current business losses to prior years.  Businesses will now be able to take business losses from 2020 and deduct them against the income earned from 2015 through 2019 to obtain a refund of prior taxes paid. This also applies to losses prior to 2020, which can be carried back to the previous five years.

The law also provides for a loosening of limits on losses being carried forward.

Other Provisions

The CARES Act includes a number of provisions to support small businesses and charities with loans and grants, including the Paycheck Protection Program, Emergency Economic Injury Grants and Disaster Loans and Small Business Debt Relief.

The CARES Act includes much-needed relief for individuals (hyperlink to April 1 article once posted) including rebate checks, additional charitable deductions and penalty waivers for retirement distributions.

There are many details in the CARES Act as well as many details still being worked out. For specifics on how these provisions apply to your situation, consult your financial professional.

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