COVID-19 Task Force E-lert: The Coronavirus Aid, Relief, and Economic Security (CARES) Act Summary

President Donald J. Trump signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act into law on March 27, 2020. The 854-page bill seeks to provide approximately $2 trillion in relief and assistance to individuals, businesses, state governments, health providers and others affected by the COVID-19 outbreak.

The law addresses almost every element of the U.S. economy. The government agencies and others involved in implementation will be taking urgent action to implement its provisions over the next weeks. The following summary highlights the programs, initiatives, and relief measures created or expanded by the new law.

Relief for Individuals
The CARES Act includes a number of provisions designed to provide quick relief to individuals and families left unemployed or financially disadvantaged by the COVID-19 outbreak.

  • Recovery rebates. Every American taxpayer is eligible for up to $1,200 in refundable tax credits, or $2,400 for couples filing joint tax returns. Families may receive an additional $500 for each child. Credits will be reduced by 5% for the amount of income over $75,000 for individuals, $112,500 for heads of households, and $150,000 for joint returns, and phased out entirely for individuals earning $99,000 or more, heads of households earning $146,500 or more, and married couples earning $198,000 or more. Rebates will be based on 2019 taxes for those who have already filed, or 2018 taxes plus 2019 Social Security statements for those who have not. The rebates will be paid into the accounts taxpayers use to receive tax refunds, or issued by check. Treasury Secretary Steven T. Mnuchin has said these payments could start to go out by mid-April.
  • Retirement plans. Individuals affected by COVID-19 could withdraw as much as $100,000 from their retirement accounts in 2020 without penalty. If repaid within three years, the funds will be treated as a tax-exempt rollover contribution; if not repaid, they will be taxed as income over a three-year period. Those affected could also receive loans for up to $100,000 or the value of their vested benefit in their employer retirement account, whichever is less. Affected individuals with retirement plan loans due by December 31, 2020 will have an extra year to repay them. Certain retirement plan and account minimum distribution rules are modified as well.
  • Charitable contributions. Individual taxpayers who don’t itemize will receive a $300 above-the-line individual charitable contribution allowance for tax years beginning in 2020. The limit on individual charitable deductions for taxpayers who itemize is unlimited for 2020 and limited to 60% of adjusted gross income through 2025.
  • Student loans. Employer student loan assistance received between March 27, 2020 and January 1, 2021 will be excluded from employees’ income tax. Repaid amounts will count toward a $5,250 limit on other types of employer-sponsored education assistance, such as tuition, that can be excluded from income.
  • Unemployment. The federal government will provide an additional $600/week in Federal Pandemic Unemployment Compensation to those receiving unemployment benefits, through July 31, 2020. This payment will not count toward income eligibility limits for Medicaid and the Children’s Health Insurance Program. Unemployment benefits will be available to anyone in quarantine, caring for a family member diagnosed with COVID-19, or out of work for reasons related to the outbreak. Workers who are self-employed or have limited work history and independent contractors would also be eligible for benefits. Benefits will not be available to workers who can work remotely or are receiving paid leave. Those who have already exhausted unemployment benefits may apply for an additional 13 weeks of compensation. These benefit provisions are retroactive to January 27 and will remain available through December 31.
  • Education loan repayment. The Act suspends student loan payments and interest accrual through September 30. For those in federal loan forgiveness programs, those months will count as months in which payments were made. Involuntary collections and negative credit reporting related to student loans will also be suspended for six months.
  • Mortgages, foreclosures & evictions. Homeowners affected by the outbreak can suspend payments on mortgages guaranteed by the FHA, Fannie Mae, or Freddie Mac for 180 days, with another 180 days’ extension possible. Owners of multifamily properties with GSE-backed mortgages may take payment extensions of up to 90 days. The law prohibits foreclosures on single-family homes with GSE-backed mortgages for at least 60 days, starting on March 18, and suspends evictions on multifamily properties with GSE-backed mortgages for at least 120 days.
  • Credit reports. Lenders and other creditors may allow borrowers to suspend debt payments or make partial payments from January 31 through 120 days from March 27. They must report positive information to the credit agencies or give customers with delinquent accounts a chance to resolve their negative information. Borrowers who were delinquent before January 31 will still be reported as delinquent, unless they act to bring their accounts current.

Relief for Small Businesses (1 - 500 employees)
The CARES Act seeks to make it possible for small businesses not only to survive the COVID-19 outbreak, but also to keep their employees paid and insured for at least the next eight weeks. The Small Business Administration will be responsible for most of these programs, but private lenders will be actively involved. 

  • SBA 7(a) program expansion. The SBA’s 7(a) loan program has been expanded to include a new Paycheck Protection Program that makes loans available to any business, 501(c)(3) nonprofit organization, veterans group or tribal business with 500 employees or fewer; to sole proprietors, independent contractors, and other self-employed workers; and to hotel and food service chains with 500 or fewer employees per location. The 7(a) loan program limit has been raised to $10 million or 250% of average monthly total payroll costs, with interest rates capped at 4%, and payments deferred for at least six months, up to one year. Borrowers under this Paycheck Protection Program can apply for loan forgiveness for up to eight weeks of payroll costs, mortgage interest, rent, and utility payments, with the SBA paying lenders for accrued debt plus interest.
  • Economic Injury Disaster Loan (EIDL) program expansion. The SBA’s Economic Injury Disaster Loan program has received an additional $10 billion from January 31 through Dec. 31 to cover businesses, cooperatives, employee stock ownership plans, and tribal businesses with 500 or fewer employees, as well as sole proprietors and independent contractors. The SBA may advance as much as $10,000 to existing and newly eligible EIDL recipients within three days of receiving their applications. Recipients can use the advance funds to pay sick leave to employees affected by COVID-19, retain employees, address interrupted supply chains, make rent or mortgage payments, and repay debt. Recipients are not required to repay the advance funds, even if their loan application is ultimately denied.
  • Payroll tax deferral. Employers may defer their payroll taxes through December 31, 2020, and pay those deferred taxes over a two-year period ending in December 2022. Employers with small business loan debt forgiven under the Paycheck Protection Plan are not eligible for this deferral. Self-employed taxpayers may defer 50% of their Social Security tax payments.
  • Employee retention credit. Certain employers may receive refundable credits of up to 50% of eligible employee wages paid between March 12, 2020 and January 1, 2021. Employers can qualify for this credit if they must partially or fully suspend operations because of a pandemic-related government order, or if their income drops below a certain threshold. Employers with more than 100 full-time employees in 2019 will receive credit for wages paid to employees who aren’t working; employers of fewer than 100 people will receive credit for wages paid while operations are suspended, or during a quarter when the company suffers a significant decline in gross receipts. Employers who receive loans under the Paycheck Protection Plan will not receive these credits, and employers may not apply for credit on wages they receive credit for under the work opportunity tax credit or the paid leave credit. 
  • Business losses. Companies may carry back business losses from tax years between December 31, 2017 and January 1, 2021 for five years (separate rules apply for REITs and life insurance companies). Companies may use the full amount of net operating loss carryovers and carrybacks for tax years up to January 1, 2021, an increase from the 80% limit set in 2017. Net operating loss deduction limits will change for pass-through businesses and sole proprietorships as well.
  • Charitable contributions. The limit for corporate charitable deductions has been raised from 10% to 25% for 2020. The deduction for food inventory contributions has been raised from 15% to 25% for 2020.
  • Interest expenses. Businesses may deduct 50% of their interest expenses in 2019 and 2020, instead of 30%.
  • A fix for the “retail glitch.” The CARES Act fixes the so-called “retail glitch” in the 2017 tax bill, which extended the depreciation schedule for qualified improvements by certain restaurants and retail businesses to 39 years. Qualified improvement properties will be classified as 15-year property, or as 20-year property under an alternative depreciation system, which would make the property eligible for temporary “bonus depreciation” under the 2017 law.
  • Alcohol excise tax changes. Hand sanitizer produced and distributed in 2020 in response to the pandemic will be exempt from the federal excise tax on distilled spirits. Hand sanitizer produced under these conditions will also be exempt from federal bulk sales and labeling requirements.
  • Leave program modifications. The CARES Act modifies the emergency sick leave program created by the Families First Coronavirus Response Act. Under the new law, certain workers laid off on or after March 1, 2020, are eligible for family leave benefits if they’re rehired. Federal agencies may use funds to reimburse federal contractors for providing paid pandemic-related leave to employees or subcontractors through September 30, 2020.
  • Bankruptcy code changes. The Act raises the limit for streamlined Chapter 11 for small businesses from $2.73 in debts to $7.5 million. It also excludes federal payments related to COVID-19 from income calculations in Chapter 11, and allows those companies in Chapter 11 to modify their existing reorganization plans if they are experiencing COVID-19 hardships. 

Relief for Large Businesses (500 - 10,000 employees)
The CARES Act seeks to preserve industries that have been disproportionately affected by the pandemic, and industries deemed critical to national security.

  • Treasury’s Exchange Stabilization Fund (ESF). The CARES Act provides $500 billion to the Treasury for loans, loan guarantees, and investments to businesses, states, and municipalities affected by the COVID-19 outbreak. This fund specifies $25 billion in loans and loan guarantees for passenger airlines, ticket agents, and aviation inspection and repair services; $17 billion for businesses “critical to national security;” $4 billion for cargo airlines; and $3 billion for catering and ground support contractors. The remainder of the fund is available to support facilities established by the Federal Reserve to support its Commercial Paper Funding Facility (CPFF), Primary Dealer Credit Facility (PDCF), Money Market Mutual Fund Liquidity Facility (MMLF) and Term Asset-Backed Securities Loan Facility (TALF). The Treasury may also use ESF money to backstop money market funds, if necessary.
  • Aviation. To qualify for Exchange Stabilization Fund loans, airlines and related businesses must demonstrate that they cannot reasonably obtain credit elsewhere; that the funds will be prudently invested; that the loans are secured, or made at a rate that reflects market risk; and that the loan will last no longer than five years. Aviation businesses that receive these loans may not buy back stock, pay dividends, or make other common stock-related distributions for the term of the loan plus one year. They must maintain employment levels between March 24, 2020 and September 30, 2020 to the extent practicable, and may not cut employment by more than 10%. They must agree to wage limits on highly compensated employees, and they must certify that they are US-based. The Department of Transportation may require airlines to continue to serve points they were serving before March 1, 2020. The Treasury may accept preferred stock, debt securities, or other financial instruments as payment for loans.
  • Aviation workforce. The $32 billion designated specifically for the aviation industry must go directly to financial assistance for the workforce. These funds can be used only to pay employees, with $100 million reserved for administrative expenses. Companies that receive these funds must agree not to reduce pay or benefits, or enact involuntary furloughs, through September 30, 2020. Recipients must agree to conditions similar to those for ESF loans to the airlines.
  • Defense Production Act waivers. The CARES Act includes a two-year waiver on the $750 million limit on the Defense Production Act Fund’s balance. It also waives a requirement that Congress authorize projects to correct industrial shortfalls of more than $50 million. It waives for one year a requirement that the President give Congress 30 days’ notice before making a loan that would cause federal obligations for the shortfall to exceed $50 million.
  • Payroll tax deferral. Employers may defer their payroll taxes through December 31, 2020, and pay those deferred taxes over a two-year period ending in December 2022. Employers with small business loan debt forgiven under the Paycheck Protection Plan are not eligible for this deferral. Self-employed taxpayers may defer 50% of their Social Security tax payments.
  • Employee retention credit. Certain employers may receive refundable credits of up to 50% of eligible employee wages paid between March 12, 2020 and January 1, 2021. Employers can qualify for this credit if they must partially or fully suspend operations because of a pandemic-related government order, or if their income drops below a certain threshold. Employers with more than 100 full-time employees in 2019 will receive credit for wages paid to employees who aren’t working; employers of fewer than 100 people will receive credit for wages paid while operations are suspended, or during a quarter when the company suffers a significant decline in gross receipts. Employers who receive loans under the Paycheck Protection Plan will not receive these credits, and employers may not apply for credit on wages they receive credit for under the work opportunity tax credit or the paid leave credit.
  • Business losses. Companies may carry back business losses from tax years between December 31, 2017 and January 1, 2021 for five years. (Separate rules apply for REITs and life insurance companies.) Companies may use the full amount of net operating loss carryovers and carrybacks for tax years up to January 1, 2021, an increase from the 80% limit set in 2017. Net operating loss deduction limits will change for pass-through businesses and sole proprietorships as well.
  • Charitable contributions. The limit for corporate charitable deductions has been raised from 10% to 25% for 2020. The deduction for food inventory contributions has been raised from 15% to 25% for 2020.
  • Interest expenses. Businesses may deduct 50% of their interest expenses in 2019 and 2020, instead of 30%.
  • A fix for the “retail glitch.” The CARES Act fixes the so-called “retail glitch” in the 2017 tax bill, which extended the depreciation schedule for qualified improvements by certain restaurants and retail businesses to 39 years. Qualified improvement properties will be classified as 15-year property, or as 20-year property under an alternative depreciation system, which would make the property eligible for temporary “bonus depreciation” under the 2017 law.
  • Extension for minimum contributions to pension plans. Companies that offer single-employer pension plans have until January 1, 2021 to make minimum contributions, which must include accrued interest.

Aid to States & Territories
The CARES Act provides financial support to states, territories, and tribal governments through direct grants and reimbursements.

  • Direct grants to states, territories, and tribal governments. The federal government will provide $150 billion in FY2020 to help state, territory, and tribal governments respond to the pandemic. Tribal governments will receive a total of $8 billion; US territories and the District of Columbia will divide $3 billion; and the states will share the remainder, distributed by population, with no state receiving less than $1.25 billion.
  • Unemployment. The federal government will pay the states 100% of the unemployment benefits they provide during the pandemic, including administrative costs. States will also be reimbursed for providing unemployment benefits in the first week, without requiring a waiting period.
  • Work-sharing programs. States will be reimbursed 100% of their costs for supporting “short-time compensation” programs, which allow workers with prorated unemployment benefits to offset employer work reductions in lieu of layoffs, through December 31, 2020.
  • Medicare adjustments. State Medicaid programs may cover home and community-based services that are provided in acute-care hospitals, and the Families First Coronavirus Response Act’s requirement that states maintain premiums to receive the 6.2 percentage point increase in Medicaid funding has been postponed for 30 days.

Expanded and Enhanced Health Programs
The CARES Act includes several provisions to expand access to health care and make it easier for health care providers to treat patients.

  • Medicare payment increases. Sequestration, the automatic cuts in Medicare payments to hospitals and doctors, will be suspended from May 1 through December 31. Sequestration of mandatory funding is extended for one year, through 2030. Hospitals will receive a 20% increase in Medicare payments for treating patients with COVID-19 infections during the emergency. Scheduled reductions in Medicare payments for durable medical equipment, such as wheelchairs, are suspended for the duration of the pandemic. The 15% reduction in payments for clinical diagnostic lab tests scheduled for 2021 has been pushed back a year, and extended through 2024. The Medicare hospital accelerated payment program has been expanded to cover more hospitals for as long as six months, with increases of up to 125% possible for critical access hospitals.
  • Telehealth expansion. Doctors will no longer have to have treated a patient within the last three years in order to receive Medicare payments for telehealth appointments. Federally qualified health centers and rural health clinics may provide telehealth services to beneficiaries in other locations during the pandemic, with reimbursement at rates comparable to those paid in those locations. Patients on home dialysis may receive telehealth services without periodical in-person assessments during the pandemic. Face-to-face recertifications for hospice care may be conducted by telehealth during the pandemic.
  • Medicare coverage for vaccines and treatment. Medicare Part B will fully cover a COVID-19 vaccine without cost-sharing. Drug plans must allow 90-day prescription supplies for Medicare Part D prescription drug beneficiaries.
  • Other Medicare relief and waivers. The requirement that patients in rehab facilities receive at least 15 hours of therapy per week is waived for the duration of the pandemic emergency. HHS will not impose payment adjustments on hospitals that don’t have at least a 50% discharge payment percentage while the pandemic is ongoing. Physician assistants and nurse practitioners may order home health services for Medicare beneficiaries.
  • Enhancements to supplies of medical equipment, drugs and devices. The CARES Act expands the Strategic National Stockpile to include personal protective equipment (PPE) and testing swabs. It provides permanent liability protection to manufacturers of respiratory protective devices designated for use in a public health emergency. It requires drug companies and device manufacturers that manufacture drugs and devices essential in a public health emergency to report any supply chain disruptions to the Food and Drug Administration. The FDA must prioritize reviews and inspections for drugs and devices that would mitigate shortages, and publish lists of device shortages unless doing so would encourage hoarding.
  • New rules for drugmakers and over-the-counter drugs. Drugmakers must report annually on the amount of each drug they manufacture for commercial distribution, and the FDA may require this information during public health emergencies. The FDA must expedite review of animal drugs if they might prevent animal-to-human transmission of life-threatening diseases. The FDA may determine by administrative order whether an over-the-counter drug is “generally recognized as safe and effective,” with a process for public comment and dispute resolution.
  • Expansions to insurance coverage. Health insurers must reimburse coronavirus testing providers based on the advertised cash price or a previously negotiated rate. Testing providers that don’t publish prices online can be fined up to $300/day. The CARES Act expands the types of coronavirus testing insurers must cover. Insurers must also cover approved COVID-19 vaccines without cost-sharing. High-deductible health plans may cover telehealth appointments before patients reach their deductible, for plan years beginning on or before December 31, 2021.
  • Expansions to HSA coverage. Health savings accounts may be used for non-prescription medication and for menstrual products.
  • Funding for community health centers. Community health centers may receive additional supplemental awards totaling $1.32 billion to prevent and treat COVID-19.
  • Protections and support for health care providers. The CARES Act exempts health-care professionals who volunteer to provide COVID-19 related services from liability. It also allows the Department of Health and Human Services to assign National Health Service Corps members to provide pandemic-related services in areas close to their original assignments.
  • Extended funding for Medicaid, Medicare, and public health programs. Scheduled cuts to Medicaid funding for disproportionate share hospitals (DSH) have been postponed until December 1. Funding has been extended through November 30 for community health centers serving vulnerable and underserved populations; the national Health Service Corps (NHSC); the Teaching Health Center Graduate Medical Education (THCGME) Program; the Special Diabetes Program; the Special Diabetes program for Indians; the Sexual Risk Avoidance Education Program; and the Personal Responsibility Education Program. Similarly, funding has been extended through November 30 for Medicare programs including state health insurance assistance programs; the contract with the National Center for Benefits and Outreach Enrollment; a contract with a consensus-based entity, such as the National Quality Forum, on performance measurement; Area Agencies on Aging; and Aging and Disability Resource Centers. Medicaid’s Money Follows the Person demonstration grant program is also extended through November 30, as are the Temporary Assistance for Needy Families program, the Certified Community Behavioral Health Clinics, and the Health Profession Opportunity Grants.
  • Reauthorization of workforce development programs. The CARES Act reauthorizes five separate health workforce development programs through 2025, including programs for nursing, disadvantaged students, primary care training and enhancement, area health education centers, and geriatrics education and training.
  • Reauthorization of Healthy Start and other outreach programs. Healthy Start, rural health care grant programs, and telehealth network and resource center grant programs have also been reauthorized through 2025.

Regulatory Relief for Financial Institutions
Federal banking regulators have said that the industry’s fundamentals are strong; the CARES Act includes several provisions designed to relieve regulatory burden and improve liquidity in the system.

  • CECL exemptions and extensions. Banks and credit unions need not comply with the Financial Accounting Standards Board’s current expected credit losses (CECL) standard until December 31, or until the pandemic is declared over.
  • Troubled debt restructuring waivers. Financial institutions need not classify certain pandemic-related payment deferrals as troubled debt restructurings (TDRs), through December 31 or 60 days after the end of the pandemic emergency.
  • Reduced capital requirements for smaller institutions. The federal banking agencies must allow community banks with assets of less than $10 billion to maintain capital-to-asset ratios of 8%, rather than the current 9%.
  • Expanded lending authority for national banks. The Comptroller of the Currency must raise lending limits on national banks for loans they make to nonbank financial institutions, to the levels allowed for traditional financial institutions.
  • Expanded deposit insurance coverage. The FDIC may guarantee other types of deposits, including deposits that don’t earn interest. The National Credit Union Administration may increase its coverage levels for non-interest-bearing accounts.
  • Expanded access to the Central Liquidity Facility. Corporate credit unions may borrow through the Central Liquidity Facility if they are not able to obtain credit from other sources.
  • Closed Federal Reserve Board meetings. The Federal Reserve may hold private meetings under “unusual and exigent circumstances,” which would not be subject to the Sunshine in the Government Act.

Education Support
The CARES Act gives the Department of Education broad authority to waive requirements for schools and students in the wake of the pandemic, and to offer flexibility in the use of grants and payments.

  • Financial waivers. The Department of Education will waive the requirement that academic institutions match a portion of federal student aid for two school years. The Department will also waive repayment of grants and loans by students who received support and had to withdraw from school because of the pandemic. The Department will waive teacher student loan forgiveness requirements for consecutive service if the disruption was caused by the pandemic, and if the borrower completes a combined total of five years of qualifying service.
  • Other waivers. The Department will also have broad authority to grant waivers at the request of state and local governments, school systems, or the Bureau of Indian Education, for the current school year, on matters including academic assessments, institutional support, professional development, allocation, accounting, and reporting requirements.
  • Expanded student eligibility for loans and grants. Students who do not complete a semester because of the pandemic will not lose that semester’s eligibility under the lifetime usage limits on subsidized loans and Pell Grants.
  • Flexibility of funding and payments. The Department of Education may allow institutions to keep grants and loan assistance that students were unable to use because of the pandemic. Institutions may also roll over unused funds from the previous five years to the next five-year grant period. They can make work-study payments to students who were unable to fulfill work requirements because of pandemic-related closings. They can use unspent work-study grants to support low-income students, and use supplemental educational opportunity grants to provide emergency aid for students’ unexpected expenses and urgent needs. Schools may grant students leaves of absence, and exclude credits for classes a student began but didn’t finish because of the pandemic when evaluating the student’s progress for financial aid eligibility purposes.