With the "Coronavirus Aid, Relief and Economic Security Act" or "CARES Act", U.S. Congress has - at first glance - provided generous and far-reaching funds for relief for troubled American businesses and households. Despite a total volume of almost 2 trillion dollars (!) the funds are likely to be exhausted faster than expected, given the extent of the financial damage caused by the rampant pandemic, It is therefore worthwhile to examine the available instruments offered by the new law as early and as quickly as possible. Whilst there are aid programs at state level in all 50 states, including at municipal level, this article is intended to provide a quick overview of the CARES Act as far as it affects our main target group, small and medium-sized enterprises and their employees.

FOR COMPANIES

Probably the most important and attractive program under the CARES Act is the Paycheck Protection Program through the issue of "Forgivable Loans", i.e. loans with the possibility of subsequent cancellation of the repayment obligation. Individual loans can amount to a maximum of $10 million, but generally up to 2.5 times salaries (less withholding taxes, FICA, paid sick leave and others) over the last 12 months before the loan is granted and must be used for the following purposes:

• Continuation of payment of salaries, with higher paid employees only being eligible for up to $100,000 (although there is for those relief elsewhere through tax relief under the Families First Coronavirus Response Act)
• Rent payments
• Servicing of mortgages
• Expenditure for independent contractors/freelancers

Main prerequisite for the possibility of a retroactive waiver is that employees remain on the payroll until the end of June, that the payroll is fixed and the participating banks which must implement these measures (1,800 banks are involved in the program) are informed accordingly. In cases where companies have already received assistance via loans from the SBA, there are additional possibilities to facilitate the servicing of loans for up to 6 months. In addition to loans, this law also offers a wide range of tax relief for companies:

• The law provides for a so-called "Tax Credit", i.e. a fully refundable tax credit for companies of any size that are closed down or are in trouble. The aim is to rehire dismissed employees or otherwise ensure that they can return to their previous jobs. The amount of the tax credit is 50% of the salaries that will continue to be paid during the Covid-19 crisis, provided the business has been partially or fully discontinued and revenues have decreased by at least 50% compared to the same quarter last year.
• Payment of employers’ social security contributions (6.2% of salary) is deferred for a total period of 2 years, with the first half to be paid by 31.12.2021 and the second half by 31.12.2022.
• Losses from the previous years 2018, 2019, 2020 can be offset for the past 5 years ("carried-back").
• Companies can claim up to 50% of interest-related expenses for tax purposes instead of only 30% as before.

FOR EMPLOYEES

• U.S. employees with incomes under $75,000 will receive a check for $1,200. Families with children will also receive $500 per child. For higher incomes, but below $99,000, this amount decreases gradually. For incomes above that, these benefits are not available.
• There are also further ”unemployment benefits” in addition to those that are being paid at state level. Here, the federal government adds up to $600 per week. This program is currently limited to 4 months.

There are many other benefits in the package also at state level and our team is available to answer any questions you may have or to help you with any of the benefits listed here.v

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