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Summary of the $2 Trillion Federal CARES Act

    Client Alerts
  • March 27, 2020

Congress just passed legislation designed to pump $2 trillion into the economy and help millions of American workers and businesses survive the effects of the novel coronavirus pandemic gripping the country. The United States Senate voted late Wednesday to approve the CARES Act by a vote of 96-0. The House passed the legislation Friday afternoon by a voice vote. The bill now heads to the president’s desk for his signature.

The CARES Act is the largest single injection of federal cash into the economy in U.S. history. This third phase of the government’s coronavirus response amounts to 10 percent of America’s total economic output for an entire year. But many economists believe it will need to be followed by a fourth phase and possibly more after that. How much more is needed will depend on when the country can return to something resembling normal business.

Our team is helping clients navigate this legislation and advocating on their behalf as Congress and state legislatures craft additional relief. Below is our breakdown of the CARES Act.

Federal Reserve Lending Program

The bill includes $454 billion to backstop possible losses in lending facilities set up by the Fed, which the central bank could leverage into $4 trillion in lending to businesses. That has led some to describe the rescue package as potentially worth $6 trillion, or almost 30 percent of annual gross domestic product.

Unemployment Benefits

People who are unemployed will get an extra $600 per week for up to four months, on top of state unemployment benefits to make up for 100 percent of lost wages. For the first time, benefits are now available for contractors and gig workers. The legislation also extends unemployment insurance benefits to last an additional 13 weeks.

Loans to Industries: $500 Billion

The Treasury Department will divvy up a $500 billion pot of loans to struggling industries. Rules added to the bill will order an inspector general and accountability committee to oversee how the money is spent, rather than giving the treasury secretary broad power to cut the loan checks.

$367 billion of these loan funds are aimed at keeping the unemployment rate from skyrocketing. Businesses with fewer than 500 workers will be able to apply for government-backed, forgivable loans to cover the costs of their workers’ wages, as well as some other business expenses such as payroll costs, mortgages and rents, utilities, health care costs, and other debt obligations.

The maximum loan amount is 2.5 times the average monthly payroll outlays incurred over a one-year period prior to the date of the loan. Loans are capped at $10 million. If the business borrower keeps employees on the payroll for six months, then these loans could be forgiven and will not require repayment. If companies lay off workers, parts of the loan will not be forgiven.

If the small business has already laid off workers, the company can rehire these workers and then can take advantage of the provisions in this loan program.

Nonprofits can also apply for these funds.

Payments to Individuals

All U.S. residents with adjusted gross income up to $75,000 ($150,000 for married couples) will get a $1,200 ($2,400 for couples) “rebate” payment. They are also eligible for an additional $500 per child. The payments will start phasing out for earners above those income thresholds and will not go to single filers earning more than $99,000; head-of-household filers with one child, more than $146,500; and more than $198,000 for joint filers with no children.

$100 Billion for Hospitals

Health care providers will secure $100 billion in grants to help fight the coronavirus and make up for dollars they have lost by delaying elective surgeries and other procedures to focus on the outbreak. They will also get a 20 percent bump in Medicare payments for treating patients with the virus.

There are still questions about whether there will be significant guardrails on how the money will be split up. The coronavirus will hit rural hospitals especially hard, since they already operate on thin margins and have limited staffing capacity. So some lawmakers have been working to ensure enough money goes to those sites.

Relief for the Airlines and Related Industries

The package includes the following:

  • $25 billion of loans to the commercial passenger airlines ($25 billion in grants to avoid furloughs).
  • $4 billion in loans for cargo airlines ($4 billion in grants to avoid furloughs).
  • $4 billion for other airline industry related grants, including contractors.
  • $17 billion in loans for industries required for national security.

This aid also is contingent on capping executive compensation at $425,000 and preventing stock buybacks and bonuses. The bill also attempts to put in safeguards by taking nonvoting stock interest in these companies that would be sold off by the U.S. government at a later date. Companies must maintain existing employment as of March 13, 2020, to the extent practicable. Further, the national security borrowers must show that they have incurred losses that affect their ability to undertake business continuity. All loans will be made through the end of this year.

Tax Credits for Retaining Payroll

Businesses will get a tax credit for keeping idled workers on their payrolls during the coronavirus pandemic, so long as the businesses meet certain criteria. They will get a refund for half of what they spend on wages, up to $5,000 per worker.

The 6.2 percent payroll tax on wages that businesses usually pay would be delayed and extended over the next two years with 50 percent due at the end of 2021 and any remaining taxes due by the end of 2022. While most or all of these taxes will eventually be paid, it will provide roughly $300 billion in short-term liquidity.

To qualify, businesses have to prove they took a 50 percent loss compared to the same quarter in years past. And to keep companies from double-dipping on aid under the bill, employers won’t be able to get special Small Business Administration loans if they opt for the tax credit.

Business Tax Cuts

The relief package includes expanded tax deductions for interest, rising from 30 percent to 50 percent, and it also expands the ability to deduct losses from taxable income.

$150 Billion for State and Local Governments

The agreement will provide $150 billion for state and local governments, with $8 billion set aside for local governments.

Congressional negotiators are already talking about a fourth legislative relief package that could include more money for state and local governments. Governors warned this week that their states are running out of funding to fulfill the skyrocketing number of unemployment claims, and they could face multibillion-dollar budget shortfalls in the weeks and months to come.

$10.5 Billion for the Pentagon

The Defense Department will receive an infusion of $10.5 billion, including $1.5 billion for the National Guard to deploy up to 20,000 on-call soldiers to help state response teams fight the coronavirus over the next six months. The bill will also spend $415 million on research and development work at the Pentagon, aimed at developing vaccines and antiviral medicine.

Employers and Self-Employed Individuals

Employers and self-employed individuals will get to defer the 6.2 percent tax they pay on wages that is used to fund Social Security. The deferred tax will have to be paid over the following two years: half by Dec. 31, 2021, and the other half by Dec. 31, 2022.

$200 Million Telemedicine Investment

The Trump administration will get $200 million for boosting telemedicine by investing in services and devices that help health care providers connect remotely with patients. The Federal Communications Commission helps run a rural health care program devoted to subsidizing the connectivity for health care providers, which gives it some stake in telehealth. This appropriation represents just the FCC's stake in telemedicine, not other parts of the government.

Retail Tax Fix

Retailers, restaurateurs, and hotels will be able to immediately deduct from their taxes what they spend on property improvements.

$25 Billion for Food Stamps and Child Nutrition

The legislation includes nearly $25 billion for food assistance, including nearly $16 billion for SNAP and nearly $9 billion for child nutrition. Congressional leaders acknowledge that they may need to provide additional rounds of food assistance in future legislative relief packages.

$24 Billion for Farmers and Ranchers

Farmers will receive nearly $24 billion, including $14 billion for an obscure Depression-era financial institution that the Department of Agriculture has wide discretion to use to stabilize the farm economy. Another $9.5 billion is set aside for emergency aid for the agriculture sector, including cattle ranchers and fresh fruit and vegetable growers.

Schools and Colleges

The package includes $31 billion to create an education stabilization fund for states, school districts and colleges. Further, there are under $1 billion in appropriations for the Department of Education.

The bill also contains a new individual tax exclusion for employers paying student loans.

Public Transit

The legislation includes $25 billion in emergency direct assistance to transit agencies to compensate for lost revenue.

Economic Development

The Economic Development Administration (EDA) receives $1.5 billion in supplemental funding, directed to the Economic Adjustment Assistance account. The agency also receives surge hiring authority, to allow EDA to properly staff the agency during this crisis; a 2 percent carve-out of the supplemental funds is directed toward “salaries and expenses” to support the surge.

The Community Development Fund (CDBG) receives $5 billion in supplemental funding. $2 billion will be distributed according to the 2020 allocation formulas within 30 days. $1 billion will be distributed to states to combat the spread of COVID-19 within 45 days, in amounts determined by the secretary of Housing and Urban Development based on best available data and need. The balance of supplemental funding will be distributed to states based on a formula determined by the HUD secretary using best available data on COVID-19 and associated economic and housing disruptions.

USDA Rural Development receives $145.5 million in funding. This includes $20.5 million for the Rural Business-Cooperative Service that will make $1 billion in lending authority available, $100 million in grants for rural broadband service, and $25 million in grants for distance learning and telemedicine.

The Minority Business Development Agency receives $10 million in grant funding to support technical assistance to minority business development centers and minority chambers of commerce for counseling for minority business on available COVID-19 related resources.

The Federal Emergency Management Agency receives $45.4 billion for response and recovery, including $400 million for grants for fire/EMS, emergency management, and food and shelter providers.

National Endowment for the Arts & Humanities

NEA receives $150 million in total. This includes $75 million for the National Endowment for the Arts and $75 million for the National Endowment for the Humanities. The money will be used to assist state arts and humanities agencies and partners.


Distilleries will receive a temporary exemption from an excise tax for alcohol they use to make hand sanitizer that’s produced and distributed within Food and Drug Administration guidelines.

For more information, please contact me or your regular Parker Poe contact. You can also find the firm’s other COVID-19 alerts here.