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May 15, 2020

Coronavirus stimulus packages to aid workers, small businesses

Veterinarians affected by pandemic eligible for loans, tax breaks, debt relief
Published on April 29, 2020

In March, Congress passed a $2 trillion measure to provide economic relief to people and businesses facing hardship or economic ruin from the coronavirus pandemic. As of mid-April, the U.S. economy had lost 22 million jobs over the previous four weeks, according to data from the Department of Labor on claims for unemployment benefits.

The programs and initiatives in the Coronavirus Aid, Relief, and Economic Security Act—signed into law March 27—are intended to strengthen the national response to COVID-19 and give small-business owners as well as certain other employers the financial support they need to survive. Two of its major programs ran out of money in a matter of weeks because of overwhelming demand, and a bill providing additional funding was signed into law April 24.

Part of CARES Act document seen through an eyeglass lensFollowing are some of the highlights of the CARES Act.

Paycheck Protection Program

About $350 billion was set aside originally for the Paycheck Protection Program, which provides cash-flow assistance through federally guaranteed loans via the Small Business Administration to employers who maintain their payroll during this emergency. Applicants are required to provide a good-faith certification that the loan is needed because of economic uncertainty and the funds will support retaining workers. Funding is issued by banks or credit unions.

There is also a loan-forgiveness component for the Paycheck Protection Program, with the amount of the loan that can be forgiven equal to the payroll costs—capped at $100,000 cash salary plus benefits per employee—along with covered mortgage interest, covered rent, and covered utilities incurred during the eight-week period beginning on the date the lender makes the first disbursement of the PPP loan to the borrower. However, there are provisions to reduce the amount forgiven based on workforce and pay reductions.

Small businesses and other eligible entities are able to apply to the program if they were financially harmed by COVID-19 between Feb. 15 and June 30. They flooded SBA-approved lenders with PPP requests once the application window opened April 3. On April 16, the SBA announced it would stop accepting applications after approving more than 1.6 million loans submitted by nearly 5,000 lenders and exhausting the initial funding. The AVMA Congressional Advocacy Network sent an alert for AVMA members to call their legislators. Congress provided an additional $310 billion for the PPP with the bill in late April.

The AVMA recommends any veterinary practices interested in the loan program should work with a lender to get their application in the queue. More information is available at jav.ma/PPPloanapplication.

Economic Injury Disaster Loans and advances

Economic Injury Disaster Loans are lower-interest loans issued directly by the SBA. They are available to small businesses to pay for expenses that could have been met had the disaster not occurred, including payroll and other operating expenses, through the end of the year. While the program is authorized to make loans of up to $2 million, news reports indicate that because of the large number of loan applications and the funding available, the SBA is limiting the amount of EIDL loans to $15,000 plus the potential for a grant of $1,000 per employee up to $10,000. The SBA has not yet publicly confirmed the limits, but this would represent a substantial change to the loan program.

Economic Injury Disaster Loan advances are meant to provide emergency advances of up to $10,000 to small businesses. To access the advance, the small business must first apply for an EIDL, then request the advance. If the borrower is ultimately denied the EIDL, the advance will not be required to be repaid and may be used to keep employees on the payroll, pay for sick leave, meet increased production costs because of supply chain disruptions, or pay business obligations, including debts, rent, and mortgage payments.

Again, the SBA announced in mid-April it was unable to accept new applications for the EIDL, including advances, because the agency ran out of money. Congress approved additional funding for the program with the bill in late April.

Eligible businesses are able to apply for both an Economic Injury Disaster Loan and advance as well as a PPP loan, but they cannot use their EIDL for the same purpose as their PPP loan, according to guidance from the U.S. Senate Committee on Small Business & Entrepreneurship.

For more information on an emergency loan or grant, visit jav.ma/EIDLloanapplication.

Employee-retention credit

The employee-retention provision of the CARES Act would provide a refundable tax credit of 50% of wages paid by eligible employers to certain employees during the COVID-19 crisis, provided they did not receive SBA Paycheck Protection Program loans. The credit applies to qualified wages paid after March 12 and before Jan. 1, 2021, and is available to employers, including nonprofits, whose operations have been fully or partially suspended as a result of a government order limiting business, travel, or group meetings. The credit is also provided to employers who have experienced a greater than 50% reduction in quarterly receipts, measured on a year-over-year basis. For employers with more than 100 employees, the credit is available for wages, including certain health care costs, paid to employees—up to $10,000 per employee—who are not providing services because of a full or partial work suspension or revenue decline.

For employers with 100 or fewer full-time employees, the credit is available for wages, including certain health care costs, paid to employees—up to $10,000 per employee—during a full or partial work suspension or a decline in revenue, regardless of whether the employee is providing services. The maximum tax credit per employee is $5,000. More information is available at jav.ma/retentioncredit.

Pandemic unemployment assistance

The CARES Act creates a temporary unemployment insurance program to cover individuals who may be unemployed, partially unemployed, or unable to work because of COVID-19 and are otherwise ineligible for unemployment benefits. This includes self-employed individuals, those with limited work history, and independent contractors. The program is designed to replace lost wages for up to four months and provides a $600 federal benefit in addition to state benefits. Pandemic Emergency Unemployment Compensation provides an additional 13 weeks of federal unemployment benefits through Dec. 31 for people who remain unemployed after state unemployment benefits have been exhausted.

Recovery rebates

People can now receive an advance tax refund of $1,200 for individual filers or $2,400 for joint filers, plus $500 per qualifying child. The refund is for U.S. residents who are not a dependent of another taxpayer and have a valid Social Security number. The rebate amount is reduced for those with adjusted gross income of $75,000 or more for single filers and $150,000 or more for joint filers, with a $5 reduction for each $100 past those income levels until the rebate is completely phased out at $99,000 for single filers and $198,000 for joint filers.

Other provisions

The CARES Act also provides for the following:

  • Waiving the 10% penalty for early withdrawal from qualified retirement accounts for distributions of up to $100,000 for coronavirus-related purposes.
  • Allowing employers to provide a student loan repayment benefit to employees on a tax-free basis for 2020. An employer may contribute up to $5,250 toward an employee’s student loans, and the contribution would be excluded from the employee’s income for tax purposes.
  • Allowing for foreign institutions to offer online learning to U.S. students receiving federal financial aid during the COVID-19 disaster.
  • Deferring student loan payments and interest accrual through Sept. 30 for all federal loans. Consumer reporting agencies have to treat suspended payments as if they were regularly scheduled payments. Debt collections related to federal loans are suspended. Borrowers will still receive credit for making payments to remain on track for loan forgiveness programs such as the Public Service Loan Forgiveness Program.

 

More specific information on COVID-19 small-business loans is available from the AVMA at jav.ma/SBAloans. In addition, a new AVMA Axon webinar provides updates about the small-business loan programs available to veterinary businesses impacted by the COVID-19 pandemic, available at jav.ma/bizloanupdate.