CONGRESS PASSES EXTENSIVE CORNAVIRUS ECONOMIC STIMULUS BILL
Last Friday Congress passed a $2 Trillion Economic Stimulus Bill (the “CARES Act”) that provides for loans to small businesses (under 500 employees) as well as payroll tax credits to encourage employers to continue to pay their employees while their businesses are closed down or curtailed due to the coronavirus pandemic. Information regarding small business loans will be included in another Alert. Key employment-related provisions include:
Unemployment Insurance Provisions
This CARES Act creates a temporary Pandemic Unemployment Assistance program through December 31, 2020 to provide payments to workers displaced as a result of the COVID-19 crisis, and includes payments to those not traditionally eligible for unemployment benefits (self-employed, independent contractors, those with limited work history, and others) who are unable to work as a direct result of the coronavirus public health emergency. The CARES Act also supplements traditional state unemployment insurance and provides an additional $600 per week payment to each recipient of unemployment insurance or Pandemic Unemployment Assistance for up to four months. In addition, the CARES Act provides funding to pay the first week of unemployment benefits, permitting states to pay unemployment compensation benefits to recipients as soon as they become unemployed instead of waiting one week before the individual is eligible to receive benefits.
The CARES Act also provides an additional 13 weeks of unemployment benefits through December 31, 2020 to help those who remain unemployed after the applicable weeks of state unemployment benefits are no longer available (i.e., increasing total weeks of eligibility in Pennsylvania from 26 to 39). Employees whose hours are reduced are eligible for pro-rated unemployment benefits.
Employee Retention Credit For Employers Subject To Closure Due To Covid-19
This provision provides a refundable payroll tax credit for 50 percent of wages paid by employers to employees during the COVID-19 crisis in order to induce employers to retain employees. The credit is available to employers whose (1) operations were fully or partially suspended, due to a COVID-19-related shut-down order, or (2) gross receipts declined by more than 50 percent when compared to the same quarter in the prior year.
The credit is based on qualified wages paid to the employee. For employers with greater than 100 full-time employees, qualified wages are wages paid to employees when they are not providing services due to the COVID-19-related circumstances described above. For eligible employers with 100 or fewer full-time employees, all employee wages qualify for the credit, whether the employer is open for business or subject to a shut-down order. The credit is provided for the first $10,000 of compensation, including health benefits, paid to an eligible employee. The credit is provided for wages paid or incurred from March 13, 2020 through December 31, 2020.
Delay Of Payment Of Employer Payroll Taxes
The CARES Act also allows employers and self-employed individuals to defer payment of the employer share of the Social Security tax they otherwise are responsible for paying to the federal government with respect to their employees. Employers generally are responsible for paying a 6.2 percent Social Security tax on employee wages and must submit those amounts to the IRS quarterly. The provision requires that the deferred employment tax be paid over the following two years, with half of the amount required to be paid by December 31, 2021 and the other half by December 31, 2022. The Social Security Trust Funds will be held harmless under this provision.
Direct Payments To Individual Taxpayers
Under the CARES Act, the Secretary of the Treasury has been directed to provide rebate checks to individual taxpayers in order to stimulate the economy. Individual taxpayers with an adjusted gross income of $75,000 or less will receive a $1,200 rebate check, and an additional rebate of $500 per dependent child. Taxpayers filing jointly will receive $2,400 in addition to the $500 per child. The rebates will be proportionally phased out for individual taxpayers with adjusted gross income of $75,000 to $99,000 and for joint filers with adjusted gross income of $150,000 to $198,000. The phase out reduces a taxpayer’s rebate by $5 for each $100 of adjusted gross income in excess of the applicable phase-out thresholds (i.e. $75,000 or $150,000, as the case may be).
We will continue to provide updates to our clients regarding important COVID-19 legislation that affects employers and employees. If you have any questions regarding the foregoing, please contact Jennifer Chalal at email@example.com or Nancy Abrams at firstname.lastname@example.org or Peter Cripps at email@example.com.