The CARES Act: A User's Guide for Broadcasters

• Small Business Administration (SBA) Loan Program

  • If you operate a small business as of February 15, 2020 that employs 500 employees or fewer or fall into another covered category such as certain nonprofits, veteran organizations, tribal businesses, sole proprietorships, self-employed individuals or independent contractors, you are eligible for a loan, which may be forgivable through the Paycheck Protection Program (PPP).
  • The maximum loan amount is 250 percent of your average monthly payroll expenses, determined by the average monthly payroll from 2019, capped at $100,000 on an annualized basis for each U.S.-based employee, plus an additional 25 percent of that amount, up to a total of $10 million. This amount was originally intended to cover eight weeks of payroll expenses and other business costs after the loan was issued. The PPP Flexibility Act, signed into law on June 5, extended this eight-week usage period to 24 weeks or December 31, 2020, whichever came first, but did not allow for additional loans.
  • You can apply for the PPP at any lending institution that is approved to participate in the program through the existing Small Business Administration (SBA) 7(a) lending program. Additional lenders will also be approved by the Department of Treasury. This could be the bank you already use or a nearby bank. You can call your bank or find SBA-approved lenders in your area here. You can call your local Small Business Development Center or Women’s Business Center and they will provide free assistance and guide you to lenders.
  • Starting April 3, 2020, small businesses and sole proprietorships can apply. Starting April 10, 2020, independent contractors and self-employed individuals can apply. You must apply for the PPP loan by June 30, 2020, but note that funds may run out before then, so all potential borrowers are encouraged to apply as early as possible. The borrower application can be found here, with a helpful walk-through tool available here.
  • The amount of principal that may be forgiven is equal to the sum of expenses for payroll and existing interest payments on mortgages, rent payments, leases and utility service agreements. Payroll costs include employee salaries up to an annual rate of pay of $100,000, hourly wages and cash tips, paid vacation, sick or medical leave, taxes on compensation and group health insurance premiums. Initial CARES Act guidance stated that at least 75 percent of the forgiven amount must be used for payroll, but the PPP Flexibility Act reduced this to 60 percent. If you would like to use the PPP for other business-related expenses like inventory, you can, but that portion of the loan will not be forgiven.
  • To calculate your payroll costs, see the methodology beginning on page 8 of the interim final rule.
  • Borrowers can seek loan forgiveness at the end of the eight-week period for which they use the loan. Borrowers will work with lenders to verify covered expenses and the proper amount of forgiveness. No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees. Borrowers must complete and submit the Loan Forgiveness Application to their lenders. This application details the documentation that must be submitted for forgiveness consideration.
  • The purpose of the PPP is to help you retain your employees at their current base pay. Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. If you keep all your employees, the entirety of the loan, including interest, should be forgiven. Forgiveness will be reduced if full-time headcount declines or if salaries and wages decrease. If you lay off employees, the forgiveness will be reduced by the percentage decrease in the number of employees. If your total payroll expenses on workers making less than $100,000 annually decreases by more than 25 percent, loan forgiveness will be reduced by the same amount. If you already laid off employees between February 15 and April 26, 2020, you can still be forgiven for the full amount of your payroll cost if you rehire your employees by December 31, 2020. If you are unable to rehire those employees or reopen to business in a way that complies with safety standards, more leeway will be provided for loan forgiveness.
  • If you use the loan for reasons not covered under the forgiveness provisions, the loan carries an interest rate of one percent. Loan payments may be deferred until after the SBA notifies the lender of loan forgiveness status, during which period interest will accrue, starting at the origination of the loan. If the borrower fails to apply for forgiveness within 10 months of the end of the forgiveness period, then the start date for payments will commence on that date. The loan will be due in two years but can be paid off earlier with no prepayment penalties or fees. Loans taken out after June 5 may have an extended maturity period of five years.
  • To request loan forgiveness, you must submit a request to the lender servicing the loan. That request must include documents that certify what your eligible expenses were and what the loan was used for. The lender must make a decision on the forgiveness within 60 days of that certification.
  • You can take out a state bridge loan and still be eligible for the PPP loan.
  • If you took out an Economic Injury Disaster Loan (EIDL) related to COVID-19 before the PPP became available (between January 31, 2020 and the date at which the PPP becomes available), you would be able to refinance the EIDL into the PPP for loan forgiveness purposes. However, you may not take out an EIDL and a PPP for the same purposes. Remaining portions of the EIDL, for purposes other than those laid out in loan forgiveness terms for a PPP loan, would remain a loan. If you took advantage of an emergency EIDL grant award of up to $10,000, that amount would be subtracted from the amount forgiven under PPP.
  • For more information, visit the SBA’s guidance page for the PPP or this overview site and information sheet from the Treasury Department.

• Corporate Tax Changes

  Delay of Payment of Employer Payroll Taxes

  • If you are an employer or self-employed individual, you can defer payment of the employer’s share of the Social Security tax you are otherwise responsible for paying to the federal government with respect to your employees.
  • Half of the taxes incurred through the end of 2020 must be repaid by December 31, 2021 and the other half by December 31, 2022.

  
  

  Modifications for Net Operating Losses

  • If you have net operating losses (NOL), this provision relaxes the policy that previously did not allow that NOL to be carried back to reduce income in a prior tax year. You may now carry back five years an NOL arising in a tax year beginning in 2018, 2019 or 2020.
  • You may now also use an NOL to fully offset income in 2020, as the law temporarily removes the taxable income limitation.

  
  

  Modification of Limitation on Business Interest

  • You may now temporarily increase your amount of interest deductibility in 2019 and 2020 from the prior 30 percent limitation to 50 percent of adjusted taxable income.
  • This provision intends to increase liquidity with a reduced cost of capital, enabling businesses to continue operations and keep employees on payroll.

• Treasury Loans

  NOTE: As the government continues to update these programs, we will update this section of the user’s guide. Please check back here regularly.

  "Distressed Industries"

  • In an effort to aid entities that might not otherwise be able to secure lending, the law tasks the Treasury Department with providing liquidity to eligible businesses, states and municipalities by providing loans, loan guarantees and other investments.
  • The Treasury Department has broad discretion to issue loans to businesses of any size and has at least $454 billion to use for these purposes.
  • If you take out such a loan, you must:
    
    • not use it to buy back stocks, unless contractually obligated, until 12 months after the direct loan is no longer outstanding,
    • freeze executive compensation and termination packages,
    • maintain employment levels at current or pre-COVID-19 levels to the “extent practicable” and
    • repay the loan in five years or less.

  
  

  Main Street Lending Program

  • The Main Street New Loan Facility (MSNLF), Main Street Priority Loan Facility (MSPLF) and Main Street Expanded Loan Facility (MSELF) have been created to facilitate lending to U.S. small and medium-sized businesses. These loans are designed for businesses that were unable to access the Paycheck Protection Program (PPP) or that require additional financial support after receiving a PPP loan.
  • Note that these loans are not forgivable but are intended to help companies that were in sound financial condition prior to the onset of the COVID-19 pandemic obtain credit to maintain their operations and payroll until conditions normalize.
  • These new Facilities share many traits, listed here. Where they differ, those elements are broken down further below.
  • For all Main Street Loan Facilities, eligible borrowers must:
    
    • Have up to 15,000 employees (including all full-time, part-time and seasonal employees or persons otherwise employed by the business and its affiliates, and excluding volunteers and independent contractors) or $5 billion in 2019 revenue;
    • Be established in the U.S. prior to March 13, 2020, with significant operations and a majority of its employees based in the U.S.; and
    • Participate in only one of the Main Street Loan Facilities and not have received specific support pursuant to the Coronavirus Economic Stabilization Act of 2020 (Subtitle A of Title IV of the CARES Act).
  • Loans under these Facilities must have the following features:
    
    • Four-year maturity;
    • Principal and interest payments deferred for one year (unpaid interest will be capitalized);
    • Adjustable rate of London Interbank Offered Rate (LIBOR) (one or three month) plus 300 basis points; and
    • Prepayment permitted without penalty.
  • Loans must be taken out by September 30, 2020, unless the government extends this program.
  • Main Street loans may be new loans or used to increase the size of existing loans.
  • Borrowers that have taken advantage of the PPP (see “Small Business Administration (SBA) Loan Program” section of this page) may also take out Main Street loans. However, borrowers may not have received specific support pursuant to the Coronavirus Economic Stabilization Act of 2020 (Subtitle A of Title IV of the CARES Act).
  • Nonprofit organizations are not currently eligible for Main Street Lending Facilities, but the Federal Reserve and Treasury Department may change this over time.
  • While earnings before interest, taxes, depreciation and amortization (EBITDA) currently serves as the key underwriting metric for the Main Street Lending Facilities, the Federal Reserve and Treasury Department recognize that this is not generally the standard for credit risk and will be evaluating the feasibility of adjusting the loan ability metrics.
  • Any eligible business shall make a good-faith certification that:
    
    • It requires financing due to the exigent circumstances presented by the COVID-19 pandemic;
    • It will make commercially reasonable efforts to maintain its payroll and retain its employees during the term of the loan; and
    • It has a reasonable basis to believe that if it receives this loan, it has the ability to meet its financial obligations for at least the next 90 days and does not expect to file for bankruptcy during that time period.
  • Additionally, borrowers must:
    
    • Not use the loan to buy back stocks, unless contractually obligated, until 12 months after the direct loan is no longer outstanding;
    • Freeze executive compensation and termination packages.
  • The Federal Reserve is currently working to create the infrastructure necessary to operationalize the Main Street Lending Program (Program). More information will be posted here as it becomes available. Once the Program is operational, small and medium-sized businesses interested in the Program should seek to apply for Program loans from an eligible lender.
  • For further information, see this press release from the Federal Reserve and this Main Street Lending Facility FAQ document.

  
  

  The Main Street New Loan Facility (MSNLF)

  • Program for new loans.
  • Minimum loan size is $500,000.
  • Maximum loan size is the lesser of:
    
    • $25 million or
    • An amount that, when added to the eligible borrower's existing outstanding and committed but undrawn debt, does not exceed four times the eligible borrower’s adjusted 2019 EBITDA.
  • Principal amortization is one-third at the end of the second year, one-third at the end of the third year and one-third at maturity at the end of the fourth year.
  • The loans must not be, at the time of origination or at any time during the term of the Eligible Loan, contractually subordinated in terms of priority to any of the Eligible Borrower’s other loans or debt instruments.
  • Eligible Lenders will pay the Main Street special purpose vehicle (SPV) a transaction fee of 100 basis points of the principal amount of the MSNLF or MSPLF Loan at the time of origination, and may pass on this fee to Eligible Borrowers. In addition, the Eligible Borrower will pay the Eligible Lender a fee of up to 100 basis points of the principal amount of the MSNLF or MSPLF Loan at the time of origination. Eligible Lenders have discretion over whether and when to charge Eligible Borrowers this fee.
  • An Eligible Borrower may refinance existing debt owed to another lender at the time the MSPLF Loan is originated.
  • Find further information here.

  
  

  Main Street Priority Loan Facility (MSPLF)

  • Program for new loans.
  • Minimum loan size is $500,000.
  • Maximum loan size is the lesser of:
    
    • $25 million or
      
      • An amount that, when added to the eligible borrower's existing outstanding and committed but undrawn debt, does not exceed or six times the eligible borrower’s adjusted 2019 EBITDA.
    • Principal amortization is 15 percent at the end of the second year, 15 percent at the end of the third year and a balloon payment of 70 percent at maturity at the end of the fourth year.
    • At the time of origination and at all times thereafter, the Eligible Loan must be senior to or pari passu with, in terms of priority and security, the Eligible Borrower’s other loans or debt instruments, other than mortgage debt.
    • Eligible Borrowers may, at the time of origination of the loan, refinance existing debt owed by the Eligible Borrower to a lender that is not the Eligible Lender.
    • Eligible Lenders will pay the Main Street SPV a transaction fee of 100 basis points of the principal amount of the MSNLF or MSPLF Loan at the time of origination and may pass on this fee to Eligible Borrowers. In addition, the Eligible Borrower will pay the Eligible Lender a fee of up to 100 basis points of the principal amount of the MSNLF or MSPLF Loan at the time of origination. Eligible Lenders have discretion over whether and when to charge Eligible Borrowers this fee.
    • Find further information here.
    
    

    Main Street Expanded Loan Facility (MSELF)

    • Program for increased loans.
    • Minimum loan size is $10 million.
    • Maximum loan size of the MSELF is the lesser of:
      
      • $200 million,
      • 35 percent of the Eligible Borrower’s existing outstanding and undrawn available debt that is pari passu in priority with the Eligible Loan and equivalent in secured status (i.e., secured or unsecured) or
      • an amount that, when added to the Eligible Borrower’s existing outstanding and undrawn available debt, does not exceed six times the Eligible Borrower’s adjusted 2019 earnings before EBITDA.
    • Principal amortization is 15 percent at the end of the second year, 15 percent at the end of the third year and a balloon payment of 70 percent at maturity at the end of the fourth year.
    • At the time of origination and at all times thereafter, the increased tranche must be senior to or pari passu with, in terms of priority and security, the Eligible Borrower’s other loans or debt instruments, other than mortgage debt.
    • Eligible Lenders will pay the Main Street SPV a transaction fee of 75 basis points of the principal amount of the MSELF Upsized Tranche at the time of upsizing and may choose to pass on this fee to Eligible Borrowers. In addition, the Eligible Borrower will pay an Eligible Lender a fee of up to 75 basis points of the principal amount of the MSELF Upsized Tranche at the time of upsizing. Eligible Lenders have discretion over whether and when to charge Eligible Borrowers this fee.
    • Find further information here.

• Unemployment Insurance/Compensation

  • The Pandemic Unemployment Assistance program allows unemployment benefits for workers who have a job but are unable to work or telework due to COVID-19-related reasons and are not receiving paid leave through their employer. This is in addition to traditional unemployment insurance.
  • If you can certify that you’re ordinarily able and willing to work but can’t because of the COVID-19 emergency – whether you’ve tested positive, are caring for a family member who has or are unable to reach the office due to quarantine – you should be eligible for assistance.
  • Eligible recipients include furloughed workers, the self-employed and contractors. This is true even if you were scheduled to start a job but lost it or are unable to work as the result of COVID-19. Those able to work from home do not qualify. In some states, part-time workers can receive partial benefits.
  • Under this temporary program, the federal government will waive the normal one-week waiting period but individual states must choose to accept that help.
  • Recipients do not need to demonstrate that they have been looking for work, allowing furloughed employees to stay connected to their employers once this time passes.
  • Employers can reduce employee hours instead of laying off workers and the employees would receive a pro-rated unemployment benefit for their reduced hours. This is known as "short-time compensation."
  • Although it varies by state, most states provide access to unemployment benefits for a maximum of 26 weeks. The CARES Act provides for an additional 13 weeks of unemployment, through December 31, 2020, for those who need it. Even after that period, an extended benefits program may trigger an additional 13 to 20 weeks of compensation.
  • Unemployment benefits across the country averaged $385 per week in February 2020 but vary significantly by state. Generally, a person’s benefits replace about one-third to half of their wages. The CARES Act provides an additional $600 per week on top of whatever a person would normally receive in their state for the next four months.
  • The additional $600 in weekly benefits through July 31 is designed to keep as many workers as whole as possible through the emergency. Some may temporarily receive more benefit than their previous paycheck. People receiving unemployment do not receive health insurance, retirement or other important benefits that can be available at work.
  • Unemployment benefits are taxable income and they generally count as income when determining eligibility for public assistance programs.
  • To find out how to apply for unemployment in your state, visit this site.

• Employee Retention Credit

  • If you are an employer whose:
    
    • operations were fully or partially suspended due to a COVID-19-related shutdown order or
    • gross receipts declined by more than 50 percent when compared to the same quarter in the prior year, you may claim a refundable payroll tax credit for 50 percent of wages paid between March 12, 2020 and January 1, 2021, up to the first $10,000 of compensation, including health benefits, per employee.
  • 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. For employers with greater than 100 full-time employees, qualified wages are those wages paid to employees when they are not providing services due to COVID-19 related circumstances.
  • Note that the CARES Act prohibited claiming this tax credit cannot be claimed if an employer is also claiming loans from the SBA PPP, but the PPP Flexibility Act struck this provision, so an employer can take advantage of both.
  • For more information, visit this page from the Senate Finance Committee and read these frequently asked questions provided by the IRS.

• Economic Impact Payments for Individuals

  • If you have an adjusted gross income up to $75,000 ($150,000 married), are not a dependent of another taxpayer and have a work eligible social security number, you are eligible for the full $1,200 ($2,400 married) payment. In addition, any dependent child (claimed for the child tax credit) under 17 adds an additional $500.
  • This is true even for those who have no income as well as those whose income comes entirely from non-taxable means-tested benefit programs, such as SSI benefits.
  • For the vast majority of Americans, no action on their part will be required in order to receive a rebate check. The Internal Revenue Service will use a taxpayer’s 2019 tax return if filed or in the alternative their 2018 return. This includes many low-income individuals who file a tax return in order to take advantage of the refundable Earned Income Tax Credit and Child Tax Credit. The government will use Social Security forms to get payments to seniors.
  • The rebate amount is reduced by $5 for each $100 that a taxpayer’s income exceeds the phase-out threshold. The amount is completely phased-out for single filers with incomes exceeding $99,000, $146,500 for head of household filers with one child and $198,000 for joint filers with no children.