The CARES Act: Can it help your business?

Editor's Note: This is part two in a two-part series on the CARES Act.

The Coronavirus Aid, Relief, and Economic Security or CARES Act contains a wealth of provisions to help U.S. companies weather the financial losses caused by COVID-19. The act, signed into law at the end of March, provides new loan programs that vary depending on a company's size, in addition to new unemployment and tax benefits. Businesses within the ATM industry that have been impacted by the coronavirus have already started taking steps to help their employees, their businesses and their future.

Provisions designed to benefit companies with less than 500 employees, such as the Paycheck Protection Program, were described in part oneof this two-part series on the CARES Act. Part two explores new loans for companies with 500 to 10,000 employees, along with the new unemployment and tax benefits.

Attorneys for Akin Gump Strauss Hauer & Feld LP, based on Washington, D.C., provided an overview of these loans and benefits during a webinar last week sponsored by the National Automatic Merchandising Association.

An additional $454 billion allocated

In addition to the SBA loans described in part one of this series, the CARES Act appropriates at least $454 billion to the U.S. Treasury to support direct lending programs for eligible"mid-size"businesses, states and municipalities, attorney Brendan Dunn said during the webinar.

The direct lending loans for mid-size businesses will be much larger than the SBA loans and they are not designed to be forgivable, he explained.

"It is similar to the SBA program that ultimately it's going to be run through the banks,"Dunn said."The liquidity that will be available through this (direct lending) program will dwarf what's available under the SBA lending program."

Dunn said there should be an announcement about the direct lending program in the next week or two. The law does not say how the Treasury Secretary must distribute the loans and loan guarantees, or the maximum loan amount, but eligible companies cannot have other credit"reasonably"available.

"This is clearly a huge priority to get this program up and running,"Dunn said."They have focused on SBA first."

Dunn characterized the new direct lending program as"prescriptive"on account of the number of stipulations, such as requiring borrowers to remain neutral in union organizing efforts for the term of the loan, and restrictions on stock buybacks, dividends, capital distributions, offshoring prohibitions and executive compensation.

Participants must retain 90% of the workforce with full compensation and benefits until Sept. 30, 2020, and certify they intend to restore no less than 90% of the workforce that existed as of Feb. 1, 2020, and must restore all compensation and benefits within four months and termination of the emergency declaration related to COVID-19.

"You're most likely going to be in a position where you're working with your bank and the local Fed and the regional Fed that's charged with implementing the program in order to get the lending," he said.

New unemployment benefits

The law also includes a pair of new unemployment benefit programs.

The first is a temporary 39-week benefit for the remainder of the year for workers who were not previously eligible if they find themselves unemployed due to COVID-19, said attorney Josh Teitelbaum.

This program, called Pandemic Unemployment Assistance, will be available to partially or self-employed, independent contractors such as "gig economy" workers, freelancers and people with a limited work history, Teitelbaum said. These workers must have a COVID-19 specific reason for being unemployed, such as having the illness, being required to stay at home because of the pandemic, or being responsible for someone who has the illness.

The second program is called Pandemic Emergency Unemployment Compensation and is for workers eligible for state-based unemployment. This benefit consists of 13 additional weeks of unemployment compensation, which will be equal to the state weekly unemployment benefit plus an additional $600.

"Under both programs, beneficiaries can get an additional $600 per week from the federal government," Teitelbaum said."And perhaps most importantly, there is no impact on employer unemployment insurance contribution at the state or federal level. States will develop agreements with the Department of Labor in order to take advantage of the increased unemployment insurance benefits provided by the CARES Act."

New tax benefits

Businesses are also eligible for additional tax benefits under the CARES Act, as explained by attorney Zach Rudisill.

For 2018 through 2020, corporations will be allowed to carry back net operating losses that arose in 2018 through 2020 to the five preceding tax years, including years for which the corporate tax rate was 35%, Rudisill said. The corporate tax rate was 35% pre-2018, not the current 21%.

Corporations will also be allowed to use net operating losses incurred in those years to offset taxable income. This removes the 80% limitation in place since 2018.

In 2019 and 2020, corporations will be permitted to deduct more borrowing costs — up to 50% of earnings rather than only up to 30%. In addition, they will be permitted to use 2019 earnings for calculating the 2020 interest deduction limit.

As of March 27, 2020, employers are be able to defer payment of their share of the Social Security tax they otherwise are required to deposit to the U.S. Treasury electronically monthly or semiannually through 2020.

Employers that qualify and had their business fully or partially suspended by a COVID-19 related government order or experienced a significant decline in gross receipts may get a refundable payroll tax credit by as much as $5,000 per employee for wages and health benefits paid from March 13 through Dec. 31, 2020, Rudisill said. If the aggregate credit amount exceeds the employer's payroll tax liability, the excess will be refundable. The credit amount is equal to half of the qualified wages of an employee, but such wages cannot be more than $10,000 per employee.

For ATM operators with equipment in non-essential stores, any credit offered could be lifesaving.

"The majority of our customers are in bars and restaurants and with those businesses closed that means no [ATM] processing, no sales, no part sales, no revenue streams of any sort," said Phil Webb, owner and founder of PDQ Merchant Enterprise. "I want to say we were prepared for something like this, but no one could ever have an idea that this would ever happen. For us, we spread our risk over different arenas so we're fortunate. But there's a lot of companies, a lot of companies that are going to be hurting for a long time when this is over."