CARES Act Summary Update

There have been two major updates to the CARES Act this week. Governor Abbott provided guidance to local governments on access to aid and Congress authorized additional funding for PPP loan program. See Lloyd Gosselink’s updated CARES Act summary for details.

CARES Act Overview

President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act,” or the “Act”) Friday, March 27, 2020. The CARES Act seeks to provide economic stimulus and financial relief to individuals, businesses (including non-profits), state and local governments, and hospitals in response to the economic distress caused by the Coronavirus (“COVID-19”) pandemic by appropriating $2 trillion toward economic relief and preparedness measures. The CARES Act will inevitably impact the majority of the nation’s businesses and people, as well as every state and many local governments.

CARES Act Top Takeaways

1. Appropriates $349 billion for the Paycheck Protection Program, which can benefit small businesses, including 501(c)(3) nonprofits. These loans are forgivable. The processes established for loan forgiveness incentivize companies to retain employees. This program is being administered through the SBA and further information on the application process can be found at https://www.sba.gov/funding-programs/loans/paycheck-protection-program-ppp. On April 24, 2020, the President signed the Paycheck Protection Program and Health Care Enhancement Act, appropriating an additional $321.3 billion to the Paycheck Protection Program.
2. Appropriates $10 billion for Emergency Economic Injury Disaster loans and grants, while expanding eligibility to nonprofits and agricultural cooperatives. The loan approval process has been streamlined by implementing a self-certification process, and waiving certain red tape rules. Applicants are eligible for an advance of $10,000, which does not have to be paid back—even if the applicant is ultimately denied the loan. This program is being administered through the SBA. Information on self-certification and other requirements can be found at https://covid19relief.sba.gov/#/. The aforesaid Paycheck Protection Program and Health Care Enhancement Act appropriates an additional $10 billion for Economic Injury Disaster loans and grants authorized under the CARES Act, and an additional $50 billion to the SBA to fund its 7(b) loan program.
3. Expands eligibility for unemployment insurance and provides people with an additional $600 per week on top of the unemployment amount determined by each state.
4. Provides for the distribution of $1,200 directly to Americans making $75,000 or less ($150,000 in the case of joint-filers, and $112,500 for heads of household) and $500 for each child, to be paid “as rapidly as possible.”
5. Appropriates $500 billion for assistance to businesses, states, and municipalities, with no more than $46 billion to support passenger air carriers, air cargo carriers, and businesses critical to maintaining national security. The remaining $454 billion is dedicated to support lending to eligible businesses, states, and municipalities.
6. Appropriates $150 billion in a Coronavirus Relief Fund (the “CRF”) to states, tribal governments, and local general governments to help cover costs incurred as a result of COVID-19. Early estimates suggest Texas will receive $11.24 billion, of which about $3.2 billion will go directly to local governments with populations of 500,000 or more. How much, if any, funding will be available to local governments with populations less than 500,000 and/or that are not in the category of “general” is unclear and will need to be sorted out through guidance as the program is implemented. Governor Abbott announced Wednesday, April 23rd, 2020, that governments eligible for federal CRF funds serving populations of less than 500,000 will be able to apply directly to the Governor’s Office for relief. The Governor tapped Texas A&M AgriLife Extension Service to provide a series of free online trainings to help local officials navigate the receipt and administering of CRF funds.
7. Provides the Secretary of the Treasury with the authority to make loans or loan guarantees to states, municipalities, and eligible businesses and loosens a variety of regulations on prior legislation imposed through the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Economic Stabilization Act of 2008, and others.

As regulations and procedures are put in place by various agencies to implement these programs, local governments and businesses impacted by COVID-19 should be tracking the additional expenses they have incurred. For local governments, these should be expenses that were not included in their current fiscal year budgets. Once the programs are established in the coming days and weeks, and clarification provided regarding the extent of coverage, having such information readily available will help in determining whether any of these programs are available to provide relief.