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Coronavirus Aid, Relief, and Economic Security Act  “The CARES Act”

A Summary by Blankenship Consuting

Tennessee Business Relief Program Grants

The Tennessee Department of Revenue is currently processing grants to local businesses based on their TNTAP registrations and filings.  This program was expanded on August 13th to include additional businesses and funds, bringing the total to 60 types of businesses that are eligible.  To receive these grants, qualifying businesses must certify their eligibility through TNTAP based on historical economic activity.  THE DEADLINE TO CERTIFY ELIGIBILITY FOR A RELIEF PAYMENT IS SEPTEMBER 25th.  Please take the time to review your TNTAP login and make sure you do not miss the opportunity to take advantage of these business grants due to failure to certify in time.  Information on the program is located at  Please let us know if there is anything we can do to assist you in this process.  If you are an existing Accounting Solutions Group client and we administer your TNTAP filings, please contact our team regarding coordinating your required online certification. 

Paycheck Protection Program Loans


Paycheck Protection Program Loans (“PPP Loans”) will be available until June 30, 2020 to small businesses, including sole proprietors, and certain other organizations. PPP Loans could also be described as conditional grants because all or a portion of PPP Loans will be forgiven if the borrower meets certain conditions, which include retention of employees and maintaining the employees’ wages.  PPP Loans are in the amount of 2-1/2 times the borrower’s average monthly payroll costs, not to exceed $10 million. The total appropriation available to small businesses under this program is $349 billion. Several commentators have estimated that demand from small businesses will far outpace the appropriated amount.

The proceeds of PPP Loans may be used to pay for the following costs and expenses: (1) payroll costs; (2) group healthcare benefits; (3) interest (but not principal) on mortgage loans incurred prior to February 15, 2020; (4) rent on leases entered into prior to February 15, 2020; (5) utilities; and (6) interest (but not principal) on other debts incurred prior to February 15, 2020. Utilities expenses include electric, gas, water, transportation, telephone and internet services which began prior to February 15, 2020.

PPP Loans are forgivable up to the full principal amount of the PPP Loan.  The amount of the PPP Loan forgiveness will be lowered if the borrower reduces its number of Full Time Equivalent (“FTE”) employees or if the borrower lowers the wages of rank and file employees.

The portion of a PPP Loan forgiven will NOT be treated as taxable income.

PPP Loans are nonrecourse and the proprietor is not required to personally guarantee the loan. PPP Loans have no origination fee and the interest rate may not exceed 4.0% per annum. (The SBA has indicated that the interest rate on PPP Loans will be 0.5% per annum, then adjusted to 1% based on bank resistance.  This appears to be a moving target as of the writing of this article.)  Payments on PPP Loans are deferred for a period of at least 6 months, but not more than 1 year. PPP Loans have no prepayment penalty. For any portion of a PPP Loan which is not forgiven, the maturity date of the loan cannot exceed 10 years. (The SBA has announced that the anticipated term of PPP Loans will be 2 years.)

If the borrower’s PPP Loan is forgiven, the borrower is not eligible for the deferral of payroll taxes offered under Sec. 2302 of the CARES Act. Also, an employer who receives a PPP Loan is not eligible for the employee retention credit provided for in Sec. 2301 of the CARE Act.

Eligible Borrowers

Borrowers eligible to receive PPP Loans include any business; nonprofit organization, as described in IRC Sec. 501(c )(3); veterans organization ,as described in IRC Sec. 501(c)(19); or Tribal business with no more than 500 employees. Individuals who are sole proprietors or independent contractors are also eligible borrowers.

A business may have more than 500 employees if their employment is still below the Small Business Administration’s (the “SBA”) determination of the standard number of employees in their industry’s NAICS Code.  Also, for businesses in NAICS Code 72 (Accommodation and Food Service businesses), the business will be eligible if it has no more than 500 employees in any location.  The SBA’s affiliation rules are waived for business in the NAICS Code 72, is a franchisee or received financial assistance from a Small Business Investment Company.

A sole proprietor must submit documentation to substantiate the operation of a business, which may include payroll tax returns, Forms 1099-MISC or income statements.

The borrower must certify the following: (1) that the uncertainty of the current economic conditions makes the loan request necessary to support ongoing operations, (2) the loan funds will be used to retain workers or make mortgage, rent, or utility payments, (3) the borrower has not submitted duplicate PPP Loan applications with multiple lenders, and (4) during the period from February 15, 2020 to December 21, 2020, the borrower has not received another SBA Loan for the same expenditures. A borrower is presumed to be adversely impacted by COVID-19.

Loan Amount

The maximum loan amount is the lesser of A) $10 million or B) the sum of 2-1/2 times the average monthly payroll costs incurred during calendar year 2019 plus the amount of any SBA Economic Injury Disaster Loan obtained after January 31, 2020. (Special rules apply to seasonal employers and new businesses.)

Payroll costs include the following expenses: A) Salary, wages, commissions, or similar compensation; B) payment of cash tips or equivalent; C) pay for vacations and for parental, family, medical or sick leave (see below regarding reduction for FFCRA credits); D) dismissal or severance pay; E) payments for healthcare benefits, including insurance premiums; F) retirement benefits; G) state or local taxes assessed on compensation; and H) the sum of payments of any compensation to or income of a sole proprietor or independent contractor that is a wage, commission, income, net earnings from self-employment or similar compensation not in excess of $100,000. 

Payroll costs do NOT include A) compensation of an individual employee in excess of $100,000; B) federal payroll taxes; C) compensation of an employee whose principal residence is outside the United States; D) qualified sick pay for which a credit is allowed under Sec. 7001 of the Families First Coronavirus Response Act (the “FFCRA”); and E) qualified family leave for which a credit is allowed under Sec. 7003 of the FFCRA.

Use of PPP Loan Proceeds

PPP Loan proceeds may be used for any of the following expenditures during the covered period between February 15, 2020 and June 30, 2020:

  1. Payroll costs (as described in the Loan Amount sections);
  2. Group health care benefits during periods of paid sick, medical or family leave, and insurance premiums;
  3. Employee salaries, commissions and similar compensation;
  4. Interest on mortgage loans, excluding prepayments and principal payments;
  5. Rent;
  6. Utilities; and
  7. Interest on any other debt incurred before February 15, 2020.

Utilities expenses include electric, gas, water, transportation, telephone and internet services which began prior to February 15, 2020.

How to Obtain a PPP Loan

The CARES Act anticipates that the SBA will process applications for PPP Loans through approved SBA lenders including federally insured banks and credit unions. The approved lenders will process and fund the PPP Loan applications. The ACT instructs the SBA to draft regulations and rules within 15 days of passage of the CARES Act.

Forgiveness Amount

A PPP Loan borrower is eligible for forgiveness of the indebtedness for the sum of the following amounts paid during the eight week period beginning on the date of the origination of the PPP Loan (the “covered period.”):

  1. Payroll costs (as described in the Loan Amount section);
  2. Interest on mortgage loans, excluding prepayments and principal payments;
  3. Rent; and
  4. Utilities.

The lenders will be reimbursed by the SBA for the amount of the PPP Loan forgiven.

Limits on Amount of Loan Forgiveness

The amount of a PPP Loan forgiven will be reduced if the borrower reduces its number of Full Time Equivalent (“FTE”) employees or substantially reduces the salary or wages of its rank and file employees.

  1. Reduction for Decline in Number of FTEs

The loan forgiveness will be reduced if the PPP Loan borrower reduces its number of FTEs during the covered period below the number of FTEs during a base period to be selected by the borrower.

The amount of loan forgiveness is calculated using the following formula:

Amount of Eligible Costs Incurred During the Covered Period


Average No. of FTEs per Month Employed During the Covered Period


Average No. of FTEs per Month During the Base Period.

At the election of the borrower, the Base Period is either 1) the period between February 15, 2019 and June 30, 2019 or 2) the period between January 1, 2020 and February 29, 2020.  Special rules as noted below apply for seasonal employers and for employers who furloughed employees without pay or at reduced pay, after February 14, 2020 and before April 26, 2020 and rehires those workers and eliminated the pay reductions by June 20, 2020.

The amount of loan forgiveness cannot exceed the principal amount of the loan or the total amount of eligible costs incurred during the covered period. Accordingly, the fraction shown above applied to eligible costs cannot exceed 1.

  1. Reduction for Reduced Salary and Wages

The loan forgiveness is reduced by the sum of any reduction in wages and salaries during the covered period for any tested employee that exceeds 25% of the employee’s total wages and salary during the most recent full quarter before the covered period. For loans obtained during the second quarter of 2020, the most recent full quarter will be the quarter ended March 31, 2020.

Tested employees include any employee who did not receive, on an annualized basis, more than $100,000 in wages or salary during any pay period in 2019.

The following table illustrates the compilation of the reduction






Employee Name

Salary & Wages During Most Recent Full Quarter

75% of Salary & Wages During the Most Recent Full Quarter

Salary & Wages Paid During the Covered Period

(3) – (4)

Reduction in Loan Forgiveness

Employee #1

Employee #2

Employee #3

Employee #4

Do not include employees in the compilation who received more than $100,000 on an annualized basis for any pay period in 2019.

Note that the Covered Period is a period of eight weeks totaling 56 days. The salary and wages paid during the eight week Covered Period is being compared to 91 days during the quarter ended March 31, 2020. Accordingly, the number of days in the Covered Period represents only 61.5% of the number of days in the prior full quarter. It is unclear whether this is the result Congress intended or if this is a drafting error that will be corrected by clarifying rules or regulations.

By way of example, Sally Smith works for Good Employer. She makes $400 per day or $2,000 per week. Good Employer retains Sally at her regular rate of pay throughout the covered period. Accordingly, Good Employer pays Sally $16,000 during the covered period (8 weeks x $2,000 per week.) During the prior quarter, Sally was paid $26,000 ($2,000 per week x 13 weeks). With respect to Sally, Good Employer will have a forgiveness reduction of $3,500 even though Sally retained her same rate of pay ($16,000 paid less 75% of the $26,000 paid in prior quarter.)

Perhaps this is what Congress intended. After all, Good Employer will get an income tax deduction of $16,000 for the wages paid to Sally from the PPP Loan proceeds. Using a 21% tax rate, Good Employer gets a $3,360 income tax benefit for the payment of Sally’s wages. But $12,500 of the PPP Loan used to pay Sally will be forgiven.  We believe it is more likely perhaps not, but are awaiting guidance on if this is a drafting error or the intended consequence.  As information is released concerning forgiveness we expect clarification and direction on this matter.

Documentation of Forgiveness

The borrower must submit required documentation to obtain debt forgiveness. Required documentation includes the following:

  1. Verification of number of FTEs on the payroll and their pay rates for a) one year period before loan origination; b) covered period, c) base period elected by borrower, including payroll tax filings;
  2. Verification of mortgage, rent and utility payments during the covered period, which may include cancelled checks, account transcripts or other documents;
  3. A certification from a representative of the borrower that a) documentation submitted is true and correct and b) that the amount for which forgiveness is requested was used to retain employees or make mortgage, rent or utility payments; and
  4. Such other documentation the SBA may require.

The lender is required to make a decision regarding the requested forgiveness within 60 days after the lender receives the borrower’s application for forgiveness.

Incentives for Lenders

The Cares Act provides several inducements for lenders to participate in the PPP Loan program including:

  1. The originating lender will receive a processing reimbursement equal to between 1.0% to 5.0% of the originated loan amount;
  2. Rate of interest of up to 4.0% per annum;
  3. 100% guarantee of principal and accrued interest from the SBA;
  4. 0% Risk Weighting for bank capital requirements;
  5. Exemption from Troubles Debt Restructuring disclosures under existing generally accepted accounting principles.

The demand on lenders has been greater than anything we have seen in our generation.  This demand, coupled with concerns around inadequate funding for the program overall, has resulted

Supplement A
Paycheck Protection Program Loan
Special Rules

Seasonal Employers

In determining the maximum PPP Loan amount for a Seasonal Employer, in lieu of using the monthly average of payroll costs for the 1 year period before the PPP Loan, the Seasonal Employer may use the average payroll costs for either A) the 12 week period beginning February 15, 2019 and ending May 10, 2019 or B) the four month period beginning March 1, 2019 and ending June 30, 2019. The SBA shall promulgate rules defining a “Seasonal Employer.”

In determining the reduction, if any, of the Forgiveness Amount, a Seasonal Employer shall apply the following fraction to determine the Forgiveness Amount:

Amount of Eligible Costs Incurred During the Covered Period


Average No. of FTEs per Month Employed During the Covered Period


Average No. of FTEs per Month Employer During the Period from February 15, 2019 to June 30, 2019.

New Employers

For employers that were not in business during the period from February 15, 2019 to June 30, 2019, at the request of the borrower/employer, the borrower/employer may calculate its average monthly payroll costs for the period from January 1, 2020 to February 29, 2020.


Covers period February 15, 2020 to April 27, 2020 (30 days after date of enactment.) Applies when an employer has had a reduction in FTEs or wages paid after February 15, 2020. This provision permits the employer to eliminate the reduction in FTEs or salary by June 30, 2020.

This provision appears to have limited application. It is unlikely that applicants/employers will receive covered loans much sooner than April 15, 2020. The testing period is the eight week period after the origination of the loan.  The Forgiveness reduction will be based on the eight week period after the loan is received. The borrower/employer will have the opportunity to re-hire employees immediately upon receiving the PPP Loan, and accordingly, be fully staffed during the eight week testing period.

Individual Provisions


One of the most significant benefits to individual taxpayers under the CARES Act will be the recovery rebates.  Eligible individual taxpayers will receive refund payments equal to $1,200.  For taxpayers included in married filing joint tax returns, each individual will receive the $1,200 refund for a total refund payment of $2,400.  In addition to the $1,200 refund for each individual, taxpayers with dependent children under the age of 17 will receive an additional $500 for each qualifying child. 

While a majority of taxpayers will be eligible to receive the recovery rebates, taxpayers with higher adjusted gross income (“AGI”) amounts will be subject to a phase-out and will not be entitled to the refund once AGI exceeds certain amounts.  The phase-out is 5% of every dollar exceeding base amounts as determined by the CARES Act.  For taxpayers filing as single, the phase-out begins for AGI above $75,000.  The refund amount is fully phased-out once AGI is over $99,000 for single taxpayers.  For taxpayers filing as married filing jointly, the phase-out begins for AGI above $150,000.  The refund amount is fully phased-out once AGI is over $198,000 for married filing jointly taxpayers.

Eligible individual taxpayers include all individuals other than non-resident aliens or individuals claimed as a dependent on another taxpayer’s tax return.  Estates and trusts are also not eligible for the refunds.  Additionally, individuals must have valid identification numbers (i.e. valid social security numbers) in order to receive a refund.

The IRS has been instructed to issue the refund checks as quickly as possible.  The rebates will be issued electronically to any account to which a taxpayer has authorized the IRS to make a refund payment, or an account a taxpayer has used to electronically make payment to the IRS.  Treasury indicated that they would provide a mechanism on the website to update taxpayer bank information.  No later than 15 days after the rebate distributions are made, the IRS will mail out notification to taxpayer’s last known address indicating how the payment was made, the amount of payment, and a phone number for reporting any failure to receive the payment.

Retirement Withdrawals

The CARES Act has also modified the rules relating to accessing retirement funds.  A qualified individual can request and receive a distribution from a qualified retirement plan of up to $100,000 without incurring the 10% additional tax penalty normally applied to such distributions.  In order for the distribution to be qualified it must have been made After January 1, 2020 and before December 31, 2020,  and the individual must meet one of the following criteria: 1) the individual, their spouse, or dependent must be diagnosed with the virus SARS-CoV-2 or COVID-19 using a test approved by the CDC; or 2) the individual must experience adverse financial consequences as a result of being quarantined, furloughed, laid off, or having reduced work hours due to the virus; or 3) the individual is unable to work due to a lack of child care availability due to the virus.  Plan administrators can rely on an individual’s certification that one of the above conditions are met in order for the distribution to be qualified.

Qualified distributions from a plan can be repaid to an eligible retirement plan at any time during a 3-year period beginning on the day after the distribution is received in one or more contributions as an effective rollover contribution.  To the degree such contributions are made, the distribution is treated as a rollover distribution under the normal 60-day rule.  If the individual does not make contributions to an eligible retirement plan, then the qualified distribution received is included in income ratably over a three year period, beginning with the year first received.

Individuals are also afforded more flexibility with retirement plan loans.  The maximum loan amount has been increased to $100,000 and additional flexibility has been established to allow for plan loans.

Other Individual Provisions

Other significant individual provisions of the CARES Act include the suspension of required minimum distributions for 2020 for certain qualified retirement accounts, a $300 above-the-line charitable contribution deduction for non-itemizing taxpayers, an increase in the charitable contribution limit to 100% of AGI, and an expanded exclusion from income of employer payments made to pay for higher education of an employee ($5,250 max per year).

Business Provisions

Employee Retention Credit

The CARES Act provides for a new Employee Retention Credit that employers can apply against their payroll tax.  The credit is a refundable credit of 50% of the wages paid by eligible employers to certain employees during the coronavirus crisis.  The credit is available to employers, including non-profits under 501(c), whose operations have been fully or partially suspended as a result of a government order limiting commerce, travel, or group meetings.  The credit is also available to employers that have experienced a greater than 50% reduction in quarterly receipts when compared to the prior year.  The retention credit is not available to employers receiving Small Business Interruption Loans (PPP Loan).

For employers that averaged 100 or less employees in 2019, all employee wages are eligible for the retention credit, regardless of whether or not an employee is furloughed.  For employers that averaged more than 100 employees in 2019, only the wages of employees who are furloughed or face reduced hours as a result of their employer’s closure or reduced gross receipts are eligible for the credit.  This determination will be an interesting exercise to perform.  The credit is not available to an employer if the employer is already receiving a Work Opportunity Credit for the employee.

For purposes of the retention credit, wages of the employee include amounts for health benefits.  The credit is limited to $10,000 of wages per eligible employee.  As such, up to $5,000 per eligible employee may be claimed as a retention credit against payroll taxes.  Wages do not include amounts taken into account for purposes of the payroll credits, for required paid sick leave or required family leave under the Families First Coronavirus Act, or for wages taken into account for the IRC Section 45S employer credit for paid family and medical leave.  The credit is available for wages paid after March 12, 2020 and before January 1, 2021.

Payroll Tax Deposit Timing

In addition to the Employee Retention payroll tax credit, the CARES Act also modifies the timing of payroll tax payment for 2020 for certain taxpayers.  Taxpayers can defer paying the employer portion of payroll taxes through the end of 2020.  Payroll taxes that can be deferred are those taxes incurred from the date of enactment of the CARES Act through the end of 2020.  The deferred payroll taxes are then payable in two installments.  Half is due on December 31, 2021 and the second half is due on December 31, 2022.  No penalties or interest will be due on the deferred payment.  Again, this is not available to employers receiving forgiveness of debts incurred under the Small Business Interruption Loans (PPP Loan).

Net Operating Loss Changes

For taxpayers incurring losses in recent years, the CARES Act modifies the carryback and utilization limitations established under the Tax Cut and Jobs Act (“TCJA”).  Before the modification, net operating losses could only be carried forward and were limited in usage to 80% of taxable income.  The CARES Act allows for carry-back of net operating losses for 5 years and allows for 100% usage.  The net operating loss carry-back provisions apply to losses generated in 2018, 2019, or 2020.

Qualified Improvement Property Clarification

The CARES Act includes a technical correction to the TCJA in relation to Qualified Improvement Property (“QIP”).  QIP is improvements made to real property after acquisition.  Under the TCJA, QIP was not eligible for bonus depreciation.  The CARES Act now make QIP eligible for bonus depreciation for property placed in service after December 31, 2017.

AMT and 163(j)

Two other business provisions of the CARES Act relate to the corporation minimum tax credit and to the deductibility of interest expense.  For the corporate minimum tax credit, 100% of remaining credits can be claimed in 2019.  The TCJA imposed a new limitation for the deduction of interest expense for certain taxpayers with average gross receipts above $26 million.  The limitation is 30% of adjusted taxable income.  The CARES Act increases the limitation percentage from 30% to 50% and allows for the 2020 interest limitation to be based on 2019 adjusted taxable income.

Other CARES Act Highlights

Exemption of Telehealth Services

Under current law, taxpayers may only make contributions to health savings accounts (HSAs) while they are covered by a high deductible health plan. This provision would allow a high deductible health plan to provide telehealth and remote care services without a deductible for 2020 and 2021.

Inclusion of certain over-the-counter medical products as qualified medical expenses

This provision would permit tax-free reimbursement of feminine hygiene products from health savings accounts (HSAs), health reimbursement arrangements (HRAs), health flexible spending accounts (health FSAs), and Archer medical savings accounts (Archer MSAs).

Student Loans

Good news for college students and graduates with outstanding federal student debt.  There is temporary student loan relief for student loan borrowers.  They will be allowed to defer paying their federal student loan without interest payments and without penalty until September 30 automatically. 

The Act also suspends the collection on defaulted debts -- including wage and tax refund garnishment for at least 60 days.  For those borrowers seeking loan forgiveness, they would still see their debt wiped away after 10 years, without being penalized for not making payments over the next six months.  If borrowers would prefer to continue making payments, they would still be allowed to make payments during the six months.

The Act also addresses work study funds.  It allows schools to turn unused work-study funds into supplemental grants and continue paying work study wages while schools are suspended.

For students who are forced to drop out of school as a result of the coronavirus, they wouldn't have that time away from school deducted from their lifetime limits on subsidized loan and Pell grant eligibility. Those students would also not be asked to pay back any grants or other aid they've already received.

There is a list of other areas receiving funding including arts programs, universities and other institutions.

Paid Leaves

There are some refinements in this bill pertaining to the previously discussed Family First Coronavirus Relief Act.  Please click here if you did not already see our coverage of this very important Phase 2 of Congress’s response to the pandemic.  Although it was clearly stated, they have reiterated that under EFMLEA, an employer shall not be required to pay more than $200 per day and $10,000 in the aggregate for each 1 employee for paid leave. In addition, employees are eligible that were employed for at least 30 calendar days.  This includes an employee who was laid off by that employer not earlier than March 1, had worked for the employer for not less than 30 of the last 60 calendar days prior to the employee’s layoff, and was rehired by the employer.

With respect to the Emergency Paid Sick Leave Act, the CARES Act reinforces that previously understood specific limitation.  An employer shall not be required to pay more than either—(1) $511 per day and $5,110 in the aggregate for each employee, when the employee is taking leave for a reason described in items 1) - 3) of the Relief Bill; or (2) $200 per day and $2,000 in the aggregate for each employee, when the employee is taking leave for a reason described in items 4) - 6) as we have discussed.

The Bill also addresses the liquidity concern.  Amendments to tax credits for employers for coronavirus-related paid leave authorizes Treasury to provide advance payments of tax credits that are available to private sector employers that are required to provide up to 12 weeks of paid leave to their employees.

Single Employer Pension Plans

Included is a provision that would delay the required quarterly contributions for 2020 for single employer pension plans to the end of the year. The provision would also allow plans to use 2019 funded status for purposes of determining funding-based limits on plan benefits for plan years that include 2020.

Minimum Funding Rules for Certain Charities

The minimum funding rules for pension plans sponsored by charitable organizations whose primary purpose is to provide medical care and assistance to mothers and children would be modified to allow for more flexibility in the amount of required payments.

Economic Stabilization and Assistance to Severely Distressed Sectors of the United States Economy

Suspension of Aviation Excise Taxes

Under current law, there are several taxes related to aviation, including the 7.5 percent ticket tax and domestic and international segment taxes paid by passengers, as well as the 6.25 percent tax on the transportation of air cargo and the per gallon aviation fuel excise taxes, which range from 4.3 to 21.8 cents per gallon.

Local Government and Not-for-Profit Highlights

Coronavirus Relief Fund

Titles III – IV of the CARES Act provide several relief provisions specifically for local governments and not-for-profit organizations.  The provisions are provided through expansion or relaxation of current grant program guidelines or the creation of new grant revenue streams resulting the creation of various relief funds.

As this takes shape in the coming days, we expect it will keep grant writing departments as well as grantor agencies at both the federal and state levels very busy with requests.  In addition, this will affect grant audits subject to generally accepted governmental auditing standards and Uniform Guidance for the periods that will include from March 2020 thru the remainder of 2020.

Some of the grant programs affected include

  • Rural Health Grants
  • Education and Student Aid and Loan Programs
  • Health Education Programs
  • Federally Insured Multifamily and other Housing Loan Programs

For Municipalities, they will be eligible to request a portion of the $150 billion Coronavirus Relief funds related to losses incurred as a result of the Coronavirus from the federal and/or state government thru a certification process.  The Chief executive of each municipality will initiate the certification and provide it to the state or federal government (depending on population size) and will be eligible for a proportional share based on the following formula:

  • (45% of the amount received by the State) X (population of local government/population of state)

Funds shall be used for necessary expenditures incurred due to the public health emergency that were not already in the budget and were incurred in the period from March 1, 2020 – December 31, 2020.

Airports, Police and Fire Departments of local governments are also eligible for various forms of relief including the suspension of aviation fuel excise taxes, $850 million in new grants awarded for local law enforcement using the same formula as the Edward Byrne Memorial Justice Grants and $100 million in Assistance to Firefighter Grants for the purchase of personal protective equipment and supplies.  In addition, the $100 billion Public Health and Social Services Emergency fund will provide reimbursement for health care related expenses or lost revenue include to governmental and not-for-profit healthcare providers.

Institutions of higher education, local educational agencies or education related entities within the state that the Governor deems essential under the definition will receive relief from both the federal government and state agencies under the food and nutrition programs for various improvements to equipment and for food purchases.  The creation of the $30 billion Education Stabilization Fund will reimburse state and local education agencies, both public and private elementary, secondary and higher education through September, 2021, for supplies, training, technology purchases, etc. to maintain the operation of and continuity of services in local education agencies and continue to employee existing staff.

Unemployment Insurance Provisions

Blankenship CPA Group, PLLC does not practice labor law, provides no assurance whatsoever as to any matter related to labor law, and only includes herein reproduction and no interpretation of labor related matters pertaining to unemployment benefits as expanded by the CARES Act.  We recommend that you always consult with an employment attorney before making any separation decision.  If you do not have an attorney, please call your CPA here at the firm and we would be happy to recommend one.


Unemployment insurance benefits for those who are unemployed as a result of the pandemic have been radically liberalized, both in terms of duration and dollar amount of benefits.  The augmented program in many cases results in higher compensation than employment.  This short term reality should be considered by employers when considering staffing levels and an employee’s contributions to revenues during this difficult period in our country’s history.  Consideration of furlough and continuation of benefits, as well as partial utilization of employees, for many clients should be made in light of the increased benefit available and the outcome for both the employer and the employee. 

The Program can be summarized as follows:

  • First, a $600 supplement to state-paid unemployment compensation for those who already qualify.
  • Second, a pandemic unemployment assistance program which matches the normal state unemployment rate plus $600 for unemployed workers who would not normally be eligible.
  • Third, an extension of unemployment compensation by 13 weeks beyond the eligibility time states provide under current law.

Section 2102 creates the temporary Pandemic Unemployment Assistance program (the “Program”), effective January 27, 2020 through December 31, 2020.  It covers individuals who would not otherwise be eligible for unemployment insurance and benefits including the self-employed, independent contractors, and those with limited work history, or who have exhausted their unemployment benefits and can self-certify that they are able to work and available for work within the meaning of applicable State law, except the individual is unemployed, partially unemployed, or unable or unavailable to work because:

  • They have been diagnosed with COVID-19 or are experiencing symptoms of COVID-19 that require a medical diagnosis.
  • A member of their household has been diagnosed with COVID-19.
  • They are providing care for a family member or member of their household who has been diagnosed with COVID-19.
  • A member of their household for which they have primary caregiving responsibility is unable to attend school or another facility that has been closed as a direct result of the COVID-19 public health emergency and because of this closure they are unable to work.
  • They are unable to work because of a quarantine imposed as a result of the COVID-19 public health emergency.
  • They are unable to work because they have been advised to self-quarantine by a health care provider.
  • They were scheduled to start a job but are unable to do so as a result of the COVID-19 public health emergency.
  • They have become a “major support for a household” because the breadwinner in the household has died as a direct result of COVID-19.
  • They quit their job as a direct result of COVID-19.
  • Their place of employment is closed as a direct result of the COVID–19 public health emergency

Individuals who are able to telework with pay or who have received paid sick leave or other paid leave benefits are ineligible to receive assistance under the Program.

Covered individuals may receive assistance under for a maximum of 39 weeks, including any weeks for which the covered individual received regular unemployment benefits provided under Federal or State law.  The amount of benefit provided to a covered individual under the Program is equal to the amount of unemployment benefit the covered individual would otherwise be entitled to under Federal or State law plus an additional amount referred to as Federal Pandemic Unemployment Compensation in the amount of $600 per week.  The Program removes any waiting periods established by state unemployment laws.

The following details the additional pertinent sections of the CARES Act unemployment provisions:

The Secretary of Labor may issue clarifying guidance to allow States to interpret their State unemployment compensation laws in a manner that would provide maximum flexibility to reimbursing employers as it relates to timely payment and assessment of penalties and interest pursuant to such State laws.

Section 2104 provides for an additional $600 per week payment, referred to as “Federal Pandemic Unemployment Compensation,” to recipients of unemployment insurance or Pandemic Unemployment Assistance.  The Federal Pandemic Unemployment Compensation will not count as income for purposes of determining eligibility for Medicaid and the State Children’s Health Insurance Program (CHIP).

The Federal Treasury is authorized to fully reimburse states who provide unemployment compensation to individuals for their first week of regular unemployment (i.e., without a one-week waiting period). All costs associated with waiving the waiting period will be fully covered through December 31, 2020.  Also, funding is available for states to hire temporary or former staff for “emergency” flexibility through December 31, 2020, or take other “temporary actions to quickly process unemployment claims.”

Section 2107 provides an additional 13 weeks of unemployment compensation, through December 31, 2020, to all individuals who otherwise would be ineligible for such compensation because they have exhausted all rights to regular unemployment compensation under applicable state or federal law with respect to this benefit year, provided they (i) have no rights to regular unemployment compensation under any applicable state or federal law, (ii) are not receiving unemployment compensation under Canadian law, and (iii) are able, available and actively seeking work.

The amount of unemployment compensation payable to an individual under this Section is equal to the amount of unemployment benefit the individual would otherwise be entitled to under applicable federal or state law plus the amount of Federal Pandemic Unemployment Compensation ($600).

States must establish Pandemic Emergency Unemployment Compensation Accounts for each eligible individual who files an application for pandemic emergency unemployment compensation. Each account must be funded by an amount equal to 13 times the individual’s average weekly benefit amount, including the amount of Federal Pandemic Unemployment Compensation.  States will be fully reimbursed by the Federal Treasury for all costs associated with the Pandemic Emergency Unemployment Compensation program established by Section 2107.

Perhaps one of the more beneficial programs for employers.  Section 2108 provides important funding to so-called short-time compensation programs, whereby employers reduce employee hours instead of laying off workers and the employees with reduced hours receive a pro-rated unemployment benefit. This provision would reimburse states for 100 percent of the costs they incur in providing this benefit through December 31, 2020.  This section specifically exempts reimbursements for benefits paid to individuals who are employed by the participating employer on a seasonal, temporary, or intermittent basis.  New short-time compensation programs shall be eligible for payments under this section after the effective date of such enactment.  Under these programs the Treasury would reimburse 50 percent of the costs that a state incurs in providing short-time compensation through December 31, 2020. The other 50 percent of costs would be paid by participating employers.

If a participating state enacts a short-time compensation law that complies with Section 13 3306(v) of the Internal Revenue Code of 1986, the state would then be disqualified from receiving funding under Section 2109 and would be eligible for full reimbursements under Section 2108.

Section 2110 provides for $100 million in grants to be given to states to support the implementation and administration of short-time compensation programs.

Section 2111 requires the Department of Labor to develop and disseminate existing model legislative language to be used by states in developing and enacting such short-time compensation programs and periodically review and revise such model legislative language.

Section 2115 provides that there is $25 million appropriated for the Office of the Inspector General of Department of Labor to carry out audits, investigations, and other oversight of the provisions of this subtitle.

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The information contained herein is general in nature and based on authorities that are subject to change. Blankenship CPA Group, PLLC guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Blankenship CPA Group, PLLC assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. Circular 230 Disclosure: This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.


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