CARES Act for Business: PPP, Tax credits, Tax deferrals

April 4, 2020

NOTE:  The information presented here is subject to change.  The specific details of these acts continue to be worked out and have changed several times already.  Please do not rely solely on this information when taking action on them.

UPDATED:  4/3/2020

The following represents a summary of the Paycheck Protection Program (PPP) and other business assistance options recently signed into law through the CARES Act—also referred to as the Stimulus Package.

Title 1 of the CARES Act, entitled “Keeping American Workers Paid and Employed Act,” provides relief for small businesses and their employees who are adversely affected by the COVID-19 outbreak. The key provision in this Act is the Paycheck Protection Program—an emergency lending facility to provide small business loans on favorable terms to borrowers impacted by the current economic state.


If you would like help in understanding the PPP or with getting assistance to apply for this loan please contact us as soon as possible.

The following offers highlights of the Paycheck Protection Program that small business owners need to be aware of and consider as they move forward: 

  • Program is administered by the SBA.
  • $349 Billion has been allocated to the program.
  • Available to businesses with 500 employees or less.  A few exceptions apply.
    • Also includes:
      • 501(c)3 Organizations
      • Individuals that operate as a sole proprietor
      • Individuals that operate as an independent contractor.
      • A self-employed individual who regularly carries on any trade or business.
      • A Tribal business concern that meets the SBA size standard.
      • A 501(c)(19) veteran’s organization that meets the SBA size standard.
  • Loan period ranges from March 15, 2020 through June 30, 2020.
  • Loan amount generally equates to 2.5 times average monthly payroll expenses for 12 months prior to the loan origination—up to $10 million.   
  • Loan interest is rate capped at 1%. 
  • Loan duration is a maximum of 2 years.
  • Loan forgiveness is available—A borrower is eligible for loan forgiveness equal to the amount spent on the following items, during the eight-week period beginning on the loan origination date: 
    • Payroll costs
    • Mortgage interest incurred in the ordinary course of business
    • Rent paid based on a leasing agreement
    • Payments for utilities—including electricity, gas, water, transportation, telephone or internet
  • To receive full forgiveness, 75% of funds used must be used for payroll costs.

Note: The loan forgiveness amount can be reduced if there is a reduction in the number of employees or a reduction of greater than 25% in wages paid to employees.  Other factors may reduce forgiveness as well. 

  • Collateral is not required to secure the loan.
  • No personal guarantee is required to secure the loan.
  • Loan repayments are automatically deferred for six months and up to one year. This includes interest, fees and loan principal.
  • Payment Protection Program loans are applied for through approved banks. The SBA may administer some loans based on viability – applicable credit history and showing the ability to repay.
  • For businesses that have been denied SBA loans previously, lending requirements are more lenient.
  • Businesses cannot combine the PPP with one of the following programs.  A business cannot use the PPP and the Economic Injury Disaster Loan to pay for the same expenses. 


Other CARES Act Program Options

Employee Retention Payroll Tax Credit 

  • The Employee Retention Payroll Tax Credit cannot be used in conjunction with the Payroll Protection Program or any other loan where payroll costs are forgiven.
  • Employee retention credit is equal to 50% of qualified wages with a cap of $10,000 wages.  Maximum credit per employee is $5000. 
  • The employer’s gross receipts must be 50% or less than the same calendar quarter in 2019 to qualify.
  • For employers with 100 or less employees, qualified wages are defined as wages paid for all employees during the period—whether they were able to work or not. For employers with 100 or more employees, qualified wages are defined as wages paid to employees not providing services.

To obtain an advance credit under this provision of the CARES Act, please complete the IRS Form 7200.

Deferral of Employer Social Security Taxes
The deferral of employer social security taxes cannot be used in conjunction with the Payroll Protection Program. This allows an employer to defer their portion of Social Security taxes from March 27, 2020 to January 1, 2021. 50% is due by December 31, 2021 and the remainder by December 31, 2022.

It is expected that you would elect this provision using the Form 941.  Please consult your payroll service provider for more information as it becomes available.

Note:  If you would like assistance in analyzing these three options, please contact us.