On Friday March 27th, Congress passed the “Coronavirus Aid, Relief and Economic Security Act” dubbed the CARES Act.

The roughly $2.2 trillion stimulus package provides widespread emergency assistance to individuals, families, small businesses and corporations affected by the current pandemic.

For business owners, the bill provides emergency benefits to help retain employees, defer tax payments, reduce tax liability and increase deductibility.  Most importantly, employers and nonprofits with fewer than 500 employees (even independent contractors and self-employed workers) are eligible to apply for Paycheck Protection Program loans up to $10 million through the Small Business Administration, with some amounts spent on payroll, rent, mortgage interest or utilities converting into grants that don’t have to be repaid (provided workers stay employed through June 30, 2020).  The program is designed to ensure that small businesses do not lay off employees.

Pressure has built to facilitate the flow of funds quickly – Treasury Secretary Steve Mnuchin indicated in a recent White House briefing that the SBA will streamline the underwriting of loans and expand their current approved lenders list of around 1,800 institutions to include almost all FDIC-insured banks.


What’s the best way to receive funding for an SBA Paycheck Protection Program loan?

The first step is to approach your current lender or bank about applying for the PPP loans.  It is expected the SBA, who guarantees the loans, will work swiftly with lenders to release detailed guidelines and underwriting criteria that will be relaxed in order to originate same-day loans.  The White House has indicated the approximate timeline for a fully functioning program to be the tail end of the March 30th week.


What can I do to prepare after contacting my lender or bank?

Prepare documentation on the adverse effects on your business associated with the pandemic and related government response to encourage social distancing and self-quarantine.  Additionally, business loans will be based on how much business owners compensated employees between January 1 and February 29.  If you use the funds for the approved purposes and maintain the average size of your full-time workforce, the principal of the loan will be forgiven meaning you will only be responsible for interest payments capped at 1%.  Therefore, preparing the most recent profit & loss statement, current payroll records and staffing information will accelerate the underwriting process.


What are the other major benefits available to me under the bill?

Provisions include:

  • Employee retention credits for employers

A one-time refundable payroll tax credit for 50% of wages paid by eligible employers to certain employees during the COVID-19 crisis.

  • Deferral of social security payroll taxes

Employers will be able to defer the 6.2% payroll tax related to social security for the entirety of 2020, with 50% of the deferred taxes due in 2021 and the remaining 50% of the deferred taxes due in 2022.

  • A temporary repeal of taxable income limitations on net operating losses (NOLs)

The CARES Act temporarily removes the taxable income limitation to allow a NOL to fully offset income (previously limited to the lesser of 80% of taxable income or aggregate NOL carryforwards and NOL carrybacks).

  • A modification the rules relating to NOL carrybacks

The CARES Act will allow taxpayers to request refund for NOLs that originate in tax years beginning after December 31, 2018 and before January 1st, 2021.

  • A technical correction on bonus depreciation for qualified improvement property

The CARES Act will allow taxpayers to apply the 100% bonus depreciation deduction for qualifying improvements to real estate placed in service after December 31, 2017.


The response by Congress to pass the 883-page CARES Act came together in a matter of days, which will likely lead to different interpretations of the various provisions.  MKS expects further clarification on the details of the bill, but our professionals are working diligently to provide current and accurate information to our clients.  Please continue to refer to our website for updates under the “COVID-19 Updates” tab.