President Trump Signs Historic $2.2 Trillion Federal Stimulus Package into Law

On a day where the previous week’s unemployment insurance claim numbers approached a staggering record of 3.3 million, legislators worked feverishly to finalize a $2.2 trillion federal stimulus package—the Coronavirus Aid, Relief and Economic Security designed to help employees and businesses weather the COVID-19 tsunami. In what may wind up being part of additional rounds of stimuli, the highlights of CARES Act include:

• Provides immediate cash “recovery rebates” of up to $1,200 ($2,400 for joint filers and an additional $500 per child) to U.S. residents.
• Provides for special-use distributions of retirement funds, as well as temporary waiver of mandatory minimum distributions on certain retirement plans.

For Individuals

• A one-time payment of up to $1,200 for individuals and $2,400 for couples AND $500 added for each child. The benefit starts to phase out above $75,000 in income for individuals and $150,000 for couples, up to a threshold of $99,000 for individuals and $198,000 for joint filers.
• $250 billion for unemployment insurance, increasing payments by $600 per week for 12 weeks and expanding eligibility from 26 to 39 weeks. This also includes self-employed people and independent contractors, such as “gig economy” workers like Uber drivers.
• Federal student loan payments are suspended through the end of September 30, with no interest accrual. 
• Financial hardship forbearance on a federally backed mortgage loan of up to 60 days, which can be extended for 120 days.
• Waives the 10% early withdrawal penalty tax under IRC Sec. 72(t) on early withdrawals up to $100,000 from a retirement plan or IRA for an individual who is diagnosed with COVID-19; whose spouse or dependent is diagnosed with COVID-19; who experiences adverse financial consequences as a result of being quarantined, furloughed, laid off, having work hours reduced, being unable to work due to lack of child care due to COVID-19, closing or reducing hours of a business owned or operated by the individual due to COVID-19; or other factors as determined by the Treasury Secretary. The legislation also permits those individuals to pay tax on the income from the distribution ratably over a three-year period and allows individuals to repay that amount tax-free back into the plan over the next three years. Those repayments would not be subject to the retirement plan contribution limits.
• Doubles the current retirement plan loan limits to the lesser of $100,000 or 100% of the participant’s vested account balance in the plan. Individuals with an outstanding loan from their plan with a repayment due from the date of enactment of CARES through Dec. 31, 2020, can delay their loan repayment(s) for up to one year.
• Temporarily waives of required minimum distribution rules for certain retirement plans and accounts. This provision waives, for the 2020 calendar year, the required minimum distribution rules for certain defined contribution plans (not defined benefit plans) and IRAs. The legislation also includes special rules regarding the waiver period to, in essence, hold harmless those individuals (and plans) who took advantage of the RMD waiver for 2020.Allowance of partial above-the-line deduction for charitable contributions and modification to limitations on charitable contribution during 2020. This provision encourages contributions to charitable organizations during 2020 by permitting an above-the-line deduction of up to $300 for cash contributions, whether an individual itemizes their deductions or claims the standard deduction.

For Companies

• A $500 billion fund for loans and stimulus, including $58 billion for the airlines and $425 billion for other businesses and state and municipal governments.
• $221 billion in business tax breaks.
• $350 billion for small businesses, which includes forgivable loans.
• Employers are eligible for up to a 50% refundable payroll tax credit on wages paid during the crisis. 
• Delay payroll tax for employers, requiring half of the deferred tax to be paid by the end of 2021 and the other half by the end of 2022.
• Expands NOL carrybacks: 2018, 2019, 2020 NOLs to be carried-back five tax years to fullyoffset taxable income.
• Increases the amount of interest expense businesses are allowed to deduct, to 50% of taxable income, for 2019 and 2020.
• “Qualified improvement property” classified as 15-year property under MACRS, which accelerates cost recovery and makes it eligible for bonus depreciation.
• Modification to charitable contribution limitation for 2020. This provision increases the limitation on charitable contribution deductions. For corporations, the “10% of taxable income” limitation is increased to “25% of taxable income” for the 2020 tax year. Additionally, the limitation on deductions for contributions of food inventory is increased, from a 15% limitation to a 25% limitation.
  • This provision also increases the limitation on charitable contribution deductions by individuals who itemize deductions. Additionally, the “50% of adjusted gross income” charitable contribution deduction limitation is suspended for 2020.
• Temporary repeal of Federal Aviation Excise Tax. This provision temporarily repeals, as of the date of enactment through December 31, 2020, Federal excise taxes collected in commercial aviation with respect to the transportation of persons, the transportation of property, and aviation fuel.
• Provides single-employer defined benefit plan funding relief by giving companies more time to meet their funding obligations by delaying the due date for any contribution otherwise due during 2020 until Jan. 1, 2021. At that time, contributions due earlier would be due with interest.

For Health Care

• $117 billion for hospitals and veterans care.
• $16 billion for the national stockpile of pharmaceutical and medical supplies.
• Group health plans and insurance providers must cover coronavirus preventive services without cost-sharing.
• $200 million for telehealth programs.

The package also includes various provisions preventing politicians and business executives from receiving windfalls as a result of this legislation.

EisnerAmper will continue monitor this legislation as it advances toward passage and is signed into law.