Trump Signs $2T Coronavirus Aid, Relief, and Economic Security Act
Here is what it means for the construction industry
On Friday, President Trump signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act which includes more than $2 trillion to combat the coronavirus pandemic. It is a massive financial injection into our struggling economy with provisions aimed at helping American workers, small businesses and industries wrestling with the economic disruption.
Highlights of the legislation for the construction industry are:
Aid for Distressed Businesses
- Boosts the Small Business Administration Disaster Loan Program by $349 million to help businesses avert layoffs and meet payroll obligations.
- Those with fewer than 500 employees are eligible to apply.
- Loans may be used for employee salaries, paid or family medical leave, insurance premiums, mortgages, rent and utilities.
- Loans will be forgiven if payrolls are maintained.
- Creation of the Paycheck Protection Program. This program will provide eight weeks of cash-flow assistance through 100 percent federally guaranteed loans to small employers (500 or under) who maintain their payroll during this emergency. If the employer maintains its payroll, then the portion of the loan used for covered payroll costs, interest on mortgage obligations, rent, and utilities would be forgiven. Loans would be available immediately through more than 800 existing SBA-certified lenders, including banks, credit unions, and other financial institutions, and SBA would be required to streamline the process to bring additional lenders into the program.
- Provides a refundable payroll tax credit for up to 50 percent of wages paid by employers to employees who faced fully or partially suspended operations due to COVID-19 or if gross receipts declined more than 50 percent in comparison to prior years.
- Employee retention credit for employers subject to closure due to COVID-19. The provision provides a refundable payroll tax credit for 50 percent of wages paid by employers to employees during the COVID-19 crisis. The credit is available to employers whose (1) operations were fully or partially suspended, due to a COVID-19-related shut-down order, or (2) gross receipts declined by more than 50 percent when compared to the same quarter in the prior year. The credit is based on qualified wages paid to the employee. For employers with greater than 100 full-time employees, qualified wages are wages paid to employees when they are not providing services due to the COVID-19-related circumstances described above. For eligible employers with 100 or fewer full-time employees, all employee wages qualify for the credit, whether the employer is open for business or subject to a shut-down order. The credit is provided for the first $10,000 of compensation, including health benefi ts, paid to an eligible employee. The credit is provided for wages paid or incurred from March 13, 2020 through December 31, 2020.
- Defers payment on employer payroll taxes with half due by Dec. 31, 2021 and the remainder due Dec. 31, 2022.
- The provision allows employers and self-employed individuals to defer payment of the employer share of the Social Security tax they otherwise are responsible for paying to the federal government concerning their employees. Employers generally are responsible for paying a 6.2-percent Social Security tax on employee wages. The provision requires that the deferred employment tax be paid over the following two years, with half of the amount required to be paid by December 31, 2021 and the other half by December 31, 2022.
- Waives withdrawal penalties for early withdrawals from retirement plans.
- Provides flexibility for loans from retirement plans for coronavirus-related expenditures.
- Modifications for net operating losses. The provision relaxes the limitations on a company’s use of losses. Net operating losses (NOL) are currently subject to a taxable-income limitation, and they cannot be carried back to reduce income in a prior tax year. The provision provides that an NOL arising in a tax year beginning in 2018, 2019, or 2020 can be carried back five years. The provision also temporarily removes the taxable income limitation to allow an NOL to offset income fully. These changes will allow companies to utilize losses and amend prior year returns, which will provide critical cash flow and liquidity during the COVID-19 emergency.
- Modification of limitation on losses for taxpayers other than corporations. The provision modifies the loss limitation applicable to pass-through businesses and sole proprietors, so they can utilize excess business losses and access critical cash flow to maintain operations and payroll for their employees.
- Modification of credit for prior year minimum tax liability of corporations. The corporate alternative minimum tax (AMT) was repealed as part of the Tax Cuts and Jobs Act. Still, corporate AMT credits were made available as refundable credits over several years, ending in 2021. The provision accelerates the ability of companies to recover those AMT credits, permitting companies to claim a refund now and obtain additional cash flow during the COVID-19 emergency.
- Modification of limitation on business interest. The provision temporarily increases the amount of interest expense businesses are allowed to deduct on their tax returns, by increasing the 30-percent limitation to 50 percent of taxable income (with adjustments) for 2019 and 2020.
- Exclusion for certain employer payments of student loans. The provision enables employers to provide a student loan repayment benefit to employees on a tax-free basis. Under the provision, an employer may contribute up to $5,250 annually toward an employee’s student loans, and such payment would be excluded from the employee’s income. The $5,250 cap applies to both the new student loan repayment benefit as well as other educational assistance (e.g., tuition, fees, books) provided by the employer under current law. The provision applies to any student loan payments made by an employer on behalf of an employee after date of enactment and before January 1, 2021.
- $25 billion for Transit Infrastructure Grants to support operations and capital expenses using existing Federal Transit Administration formulas.
- $1.018 for the national Amtrak network.
- $492 million in grants for the “Northeast Corridor.
- $526 million in National Network grants.
Airlines and Airports
- $9.4 billion for commercial airports to use for operating expenses to help offset the impacts of the coronavirus downturn in airport business.
- $100 million in aid for general aviation airports.
- $500 million to help airports meet their non-federal share requirements for their FY 2020 Airport Improvement Program capital investment grants.
Harbor Maintenance Trust Fund
- Budgetary provision that would deem future expenditures from the Harbor Maintenance Trust Fund (HMTF), up to the level of the previous year’s collected revenue, as “off-budget” or “mandatory” spending. This would ensure all future HMTF user fee revenues are invested in port, harbor, and waterway infrastructure improvements in a timely manner.