The largest economic relief bill in U.S. history—the Coronavirus Aid, Relief and Economic Security (CARES) Act—is now law, and businesses large and small can benefit from the many programs, tax breaks and financial incentives that can be found within this monumental piece of legislation. Of particular interest to pet and pet supplies business owners and managers are the following programs and provisions:
• Loans of up to $10 million are available through the Small Business Administration’s (SBA’s) Preferred Lenders, including banks and credit unions. The government will pay off the loan balance if a business either does not lay off workers or rehires those already laid-off.
• Zero-interest loans are available for businesses with fewer than 500 employees—loans that could also be forgiven under certain circumstances, such as not firing workers.
• Tax-related provisions include an increase in the deduction ceiling for the amount of business interest, from 39% to 50%.
• Greater flexibility is being given for pet businesses to deduct losses—all losses—against taxable income. Unfortunately, there is no change to the rule preventing net operating losses (NOLs) from being carried back to previous years to produce a refund of previously paid taxes. The NOL carryforward remains viable.
• Approximately $200 billion in tax assistance will be provided to small businesses, much of it through delays for the payment of payroll taxes typically paid by employers on workers’ wages. The 6.2% tax on wages normally paid would instead have to be paid over the next two years.
• The Tax Cuts and Jobs Act’s (TCJA) so-called "retail glitch" that made the cost of improvements made to retail property depreciable has been corrected. Now, qualified improvement property has been assigned a 15-year useful life and is eligible for 100% bonus depreciation—including all improvements after Sept. 27, 2017.
• The CARES Act allocates $250 billion to expand unemployment insurance to more workers and lengthen the duration to 39 weeks (up from the normal 26 weeks). An extra $600 per week will be provided to each unemployed individual for four months.
• A new program called Pandemic Unemployment Assistance was created specifically for the self-employed and contract workers who are typically ineligible for unemployment benefits.
• To help bring back workers already laid off, the eight weeks of unemployment assistance will be retroactive to Feb. 15, 2020.
• Also provided are incentives for work-sharing and a program to cover a portion of lost wages for workers whose hours have been reduced, all designed to incentivize businesses to retain workers by employing them for less time.
Aimed at bigger busineses:
• A financial lifeline is included for the hardest hit industries, such as the airlines, that makes up $500 billion available to help them. To qualify, receiving companies must bar pay raises for certain executives and stock buy backs. Businesses retaining workers despite significant losses could qualify for a tax credit.
• Businesses with 500 to 10,000 employees that take government loans will be obligated to remain neutral in any "union organizing effort" during the period of the loan.
Although the March 15 tax filing deadlines for many businesses has passed, individuals—including many pet and pet supply retailers and other small business owners—now have until July 15 to file tax returns. Best of all, if money is owed to the IRS, delayed payments will be interest and penalty-free for 90 days.
The help provided in the new CARES Act supplements many of the benefits created by the Family First Coronavirus Response Act (FFCR) that was passed in March, and the actions of the administration. However, lawmakers and the Administration continue drafting additional measures that will help blunt the economic fallout from the coronavirus pandemic.
As always, the ever-changing response to this pandemic and the complexity of the rules when dealing with its economic impact, make professional assistance advisable.
Mark E. Battersby is a freelance writer, columnist and author with more than 25 years experience with business taxes and finance.