CARES Act: Summary of Select Provisions

This memorandum was initially published on April 2. It was updated on April 9 to reflect updates and changes to the guidelines announced since their initial adoption.

The Coronavirus Aid, Relief and Economic Security Act (the “CARES” Act) became law on March 27, 2020. The Act contains wide-ranging provisions for government assistance to industries, enterprises and individuals. Reavis Page Jump has summarized below some of the most salient provisions relating to small businesses and individuals. This is meant to be a general guide and not relied upon for legal advice. We expect the agencies tasked with administering these programs to continue issuing regulations and guidance in the coming days, so please be aware that the precise contours of these programs are still developing.

For questions about the CARES Act and how it might apply to a particular situation, please contact Alice Jump, Deena Merlen or Elizabeth Stork.


Title I of the CARES Act has created a special loan program (Paycheck Protection Program or “PPP”) for small businesses in order to help them pay operational costs like payroll, rent, health benefits, insurance premiums and the like. Under certain circumstances, loans will be forgiven—i.e., the borrower is relieved of the obligation to pay the loan back. Here are some of the basics.

Applicable Time Period

Small businesses and other eligible entities will be able to apply if they were harmed by COVID-19 between February 15, 2020, and June 30, 2020. We encourage you to apply as quickly as possible, even though the program extends through June 30, 2020, as there is a cap on the amount of funding, and the favorable terms of these loans will make them very popular. Small businesses and sole proprietorships have been able to apply since April 3, 2020, and independent contractors and self-employed individuals can apply starting on April 10, 2020, with a participating Small Business Administration (“SBA”) lender, bank or credit union. Check to see whether your lender is a participating SBA lender.

Eligible Borrowers

Eligible businesses for the new program include any business concern, nonprofit organization, or veteran or tribal entity if it employs not more than 500 employees (full time or part time), or if it employs no greater than the number of employees set by the SBA as the size standard for certain industries. There are special rules for restaurants, hotels and others in the hospitality industry. They may qualify if they have fewer than 500 employees per location.

A business can qualify for an SBA loan even if it has over 500 employees, if it meets the industry size or revenue standards set by the SBA. You must include the employees or receipts of all affiliates when determining the size of a business. For the purposes of determining your number of employees, the SBA has issued special affiliation rules for the Paycheck Protection Program, available here.

You can reference the SBA’s size standards table or use its tool to determine the standards for your industry.

For more information on SBA size standards, click here.

Sole proprietors, independent contractors and the self-employed may also be eligible for these loans.

General Loan Terms and How to Apply

The loans can be provided by SBA-approved private lenders. Entities should check with their current bank to see if they are approved lenders, although the government is expected to expand the roster of approved lenders significantly. The lender is not permitted to require collateral or a personal guarantee, and the interest rate is not to exceed 4%. In a rule issued on April 2, 2020, the SBA clarified that the interest rate on any loan balance not forgiven will be 1%. Owners, shareholders or partners of the entity will not be liable for non-payment unless the individual uses the loan proceeds for an unauthorized purpose. The maximum term of the loan is ten years.

The loan application is available on the Treasury’s website here. The lender may require its own forms.

Maximum Loan Amount

The maximum loan amount (capped at $10 million) is calculated as follows:

For entities in business between February 15, 2019 – June 30, 2019: The maximum loan is equal to 250 percent of average monthly payroll costs during the 1-year period before the date on which the loan was made. On April 7, the SBA clarified that borrowers can calculate their aggregate payroll costs using data from either the 12 months prior to the application date or from calendar year 2019.

If the business employs seasonal workers, it can opt to calculate the average total monthly payments using either the 12-week period beginning February 15, 2019, or the 12-week period beginning March 1, 2019, and ending June 30, 2019.

For entities NOT in business between February 15, 2019, and June 30, 2019: The maximum loan is equal to 250 percent of its average monthly payroll costs between January 1, 2020, and February 29, 2020.

“Payroll costs” include: payments for salary, wage, commission, or similar compensation; payments for cash tips or equivalent; payments for vacation, parental, family, medical, or sick leave; allowance for dismissal or separation; payment required for the provision of group health care benefits; payment of any retirement benefit; payment of state or local tax assessed on the compensation of employees.    

“Payroll costs” do NOT include: the cash compensation of an individual employee in excess of an annual salary of $100,000 (this does not include non-cash benefits); certain federal taxes imposed; compensation of an employee whose principal place of residence is outside of the United States; and qualified sick leave wages or qualified family leave wages for which a credit is already allowed under the Families First Coronavirus Response Act.

In a rule issued on April 2, 2020, the SBA clarified that payments to independent contractors would not be included in the calculation of payroll costs, pointing out that independent contractors could independently apply for their own PPP loan.

On April 7, 2020, the SBA clarified that payroll costs are calculated on a gross basis, and are not reduced by taxes imposed on an employee and required to be withheld by the employer, but payroll costs do not include the employer’s share of payroll tax.

Eligibility Requirements

The borrower must submit a good-faith certification that:

  • The loan is needed to continue operations during the COVID-19 emergency;
  • Funds will be used to retain workers and maintain payroll or make mortgage, lease, and utility payments;
  • The applicant does not have any other application pending under this program for the same purpose; and
  • From February 15, 2020, until December 31, 2020, the applicant has not received duplicative amounts under this program.

Permitted Uses

Businesses may use the loans for the following purposes:

  • Payroll costs (as defined above);
  • Rent/lease agreement payments;
  • Mortgage interest payments;
  • Utilities; and
  • Interest on any other debt obligations incurred before the covered period.

Forgiveness of Certain Loan Amounts

Borrowers are eligible for loan forgiveness for the portion of the loan used for payroll costs (as defined above), mortgage interest, rent and utilities incurred or paid for 8 weeks, commencing from origination date of the loan.

According to the latest guidance from the Treasury Department as of April 1, 2020, payroll costs during the 8-week period must make up at least 75% of your total qualified spend for forgiveness.

The amount of loan forgiveness may be reduced if the employer reduces the number of employees as compared to the prior year or as compared to the beginning of 2020, or if the employer reduces the pay of any employee making $100,000 annually or less by more than 25% as compared to the last calendar quarter. However, if an employer laid off workers or reduced the salaries of workers making $100,000 or less between February 15, 2020, and April 26, 2020, the employer will not be penalized for having a reduced headcount or reduced salaries as described above as long as they eliminate the reduction in headcount or the salary reduction, as applicable, no later than June 30, 2020. (For additional guidance on considerations when contemplating employee furloughs or lay-offs, please see our memorandum on the topic.) Forgiveness may also include additional wages paid to tipped workers.

Borrowers must apply for loan forgiveness to their lenders by submitting documentation verifying the number of employees on payroll and pay rates, including IRS payroll tax filings and State income, payroll and unemployment insurance filings, documentation verifying payments on covered mortgage obligations, lease obligations, utilities and a certification that the amount that is being forgiven was used in accordance with the program’s guidelines for use.

According to the law, if a balance remains after the borrower receives loan forgiveness, the outstanding loan will have a maximum maturity date of 10 years. The Treasury Department clarified on March 31 that all PPP loans will have a maturity date of 2 years and there are no prepayment penalties or fees. Repayment is deferred for six months, though interest will continue to accrue over this period.

Forgiveness amounts that would otherwise be includible in gross income, for federal income tax purposes, are excluded.

Additional Guidance from the SBA

The Interim Final Rule issued by the SBA on April 2, 2020, clarifying the process for calculating payroll costs, among other questions, is available here.

The SBA also published the following Q&A document on April 7, 2020, to address questions from lenders and borrowers, which can be found here.

Finally, the SBA clarified on April 7 that borrowers who submitted loan applications based on the April 2 guidance do not need to change their applications in light of the April 7 FAQ document: “Borrowers and lenders may rely on the laws, rules, and guidance available at the time of the relevant application. However, borrowers whose previously submitted loan applications have not yet been processed may revise their applications based on clarifications reflected in the FAQs.”


In addition to the PPP loan program, the CARES Act expands the SBA’s Disaster Loan Program. The covered period for this section is January 31, 2020 – December 31, 2020. The CARES Act designates all states and their subdivisions to have sufficient economic damage to small business concerns to qualify for assistance under this loan program (rather than the current state or locality declaration approach).

Eligible Borrowers

The following may receive SBA disaster loans:

  • A business with 500 or fewer employees, including non-profits;
  • Sole proprietorships, with or without employees, and independent contractors;
  • Cooperatives with 500 or fewer employees;
  • ESOPs with 500 or fewer employees; and
  • Tribal small business concerns.

Loan Provisions

Disaster Loans are lower interest loans of up to $2 million with principal and interest deferment, that are available to pay for expenses that could have been met had the disaster not occurred, including payroll and other operating expenses.   

Liberalization of Requirements

During the covered period, the CARES Act liberalizes the requirements for Disaster Loans by:

  • Waiving rules related to personal guarantees on advances and loans of up to $200,000;
  • Waiving the “1 year in business prior to the disaster” requirement (except the business must have been in operation on January 31, 2020);
  • Waiving the requirement that an applicant be unable to find credit elsewhere; and
  • Allowing lenders to approve applicants based solely on credit scores (no tax return submission required) or “alternative appropriate methods to determine an applicant’s ability to repay.”

Emergency Advances

Entities applying for loans under the Disaster Loan Program in response to COVID-19 may, during the covered period, request an emergency advance from the Administrator of up to $10,000, which does not have to be repaid, even if the loan application is later denied. The Administrator is charged with verifying an applicant’s eligibility by accepting a “self-certification.” Advances are to be awarded within three days of an application.

If an entity that receives an emergency advance transfers into, or is approved for, a loan under the PPP Program, the advance amount will be reduced from any payroll cost forgiveness amounts. Although a business can apply for both a Disaster Loan and a PPP loan, they cannot be used for the same purposes. For example, if a business uses its Disaster Loan to cover payroll for certain workers in April, it cannot use a PPP loan for payroll for those same workers in April, although it could use a PPP loan for payroll in March or for different workers in April.

How to Apply

To apply for a COVID-19 Economic Injury Disaster Loan and loan advance, click here


The Express Bridge Loan Pilot Program allows small businesses who currently have a business relationship with an SBA Express Lender to access up to $25,000 quickly. These loans can provide economic support to help small businesses to overcome the temporary loss of revenue they are experiencing and can be term loans or used to bridge the gap while applying for a direct SBA Economic Injury Disaster Loan. If a small business has an urgent need for cash while waiting for decision and disbursement on an Economic Injury Disaster Loan, it may qualify for an SBA Express Disaster Bridge Loan. Express Bridge Loans can only be made up to six months after the date of an applicable Presidential Disaster Declaration. For the COVID-19 Emergency Declaration, Express Bridge Loans can be approved through March 13, 2021.

Further information on Express Bridge Loans is available here.


In addition to the loan programs discussed above, the SBA is offering debt relief for current and new SBA borrowers under existing loan programs. The SBA will automatically pay the principal, interest and fees of current 7(a), 504, and microloans for a period of six months, and will automatically pay the principal, interest and fees of new 7(a), 504, and microloans issued prior to September 27, 2020. For more information, see the SBA Debt Relief page here.


Title II, Section B of the CARES Act provides rebates for individual taxpayers, as well as other tax relief.

Direct Payments (Tax Rebates)

U.S. taxpayers will receive rebates of up to $1,200 ($2,400 for joint filers), increased by $500 for each child, depending on income and phased out for individuals making $75,000 ($150,000 for joint filers, and $112,500 for heads of household). The Treasury and IRS will coordinate with the Social Security Administration and other agencies to create a campaign to raise awareness about the availability of the rebates. Nonresident aliens and dependents of other taxpayers are not eligible.

Retirement Accounts

The CARES Act waives the taxes on premature distributions from retirement accounts related to specified individuals affected by COVID-19 for amounts up to $100,000, loosens repayment requirements for such distributions and includes more favorable terms and higher loan limits for loans from qualified retirement plans.

Other Tax Relief

The law provides that up to $5,250 in student loan payments made by employers between the date of the law’s enactment and December 31, 2020, can be excluded from gross income for tax purposes.

The CARES Act also temporarily lifts some limits on deductions for donations of cash to charitable organizations in 2020, and allows individuals who do not itemize their deductions to claim a new above-the-line deduction for up to $300 of donations of cash to certain charitable organizations.


Title II, Section C of the CARES Act provides tax credits for employers for employee retention and defers payment deadlines for employer payroll taxes, among other provisions.

Employee Retention Credit

Employers (including non-profits) will receive a refundable credit against payroll tax liability for FICA taxes if their business operations are fully or partially suspended due to COVID-19-related government shutdown orders, or if their gross receipts declined by over 50 percent when compared to the corresponding calendar quarter of the prior year. The refundable credit is applicable for all wages (including qualified health plan expenses) paid between March 12, 2020, and January 1, 2021, and is equal to 50 percent of qualified wages up to $10,000 (or $5,000 in credit) per employee. Qualifying wages are based on the average number of a business’s employees in 2019. The credit ends in the calendar quarter following the quarter in which the employer’s gross receipts exceed 80 percent of the corresponding quarter of the prior year. The credit is reduced by credits taken for sick leave and expanded FMLA leave under the Families First Coronavirus Response Act.

Employers who had more than 100 employees, on average, in 2019 can claim the credit only for employees who are retained but not currently providing services for the employer due to COVID-19-related causes.

Employers who are otherwise eligible but receive a covered loan under the Small Business Act will not be eligible for the employee retention credit.

Employers can reduce their required deposits of payroll taxes that have been withheld from employees’ wages by the amount of the credit. According to the Treasury Department as of April 1, 2020:

Eligible employers will report their total qualified wages and the related health insurance costs for each quarter on their quarterly employment tax returns or Form 941 beginning with the second quarter. If the employer’s employment tax deposits are not sufficient to cover the credit, the employer may receive an advance payment from the IRS by submitting Form 7200, Advance Payment of Employer Credits Due to COVID-19.

Eligible employers can also request an advance of the Employee Retention Credit by submitting Form 7200.

Payroll Tax Deferral

Employers can defer payment of the employer’s share of payroll taxes for wages paid during 2020, and a similar deferral applies for 50% of self-employment taxes. Payment would be due over the next two years, with half due December 31, 2021, and half due December 31, 2022. The deferral is not available, however, to employers who receive PPP loan forgiveness.

Other Tax Benefits

The law includes other tax benefits for businesses, including temporarily suspending some provisions in the Tax Cuts and Jobs Act to allow companies to utilize greater losses to offset taxable income and claim refunds for some losses, and increasing limits on interest deductions.


Title II, Section A of the CARES Act expands unemployment insurance coverage for those unemployed as a result of COVID-19, including gig-workers and others not normally eligible.

Pandemic Unemployment Assistance (“PUA”)

The law provides unemployment assistance to the following Covered Individuals who are not eligible for regular unemployment compensation or extended benefits, or who have exhausted rights to regular unemployment compensation or extended benefits, and are otherwise able to work and available for work within the meaning of applicable State law, except that they are unemployed, partially employed, or unable or unavailable to work because of one or more of the following reasons:

  • The individual has been diagnosed with COVID–19 or is experiencing symptoms of COVID–19 and seeking a medical diagnosis;
  • A member of the individual’s household has been diagnosed with COVID–19;
  • The individual is providing care for a family member or a member of the individual’s household who has been diagnosed with COVID–19;
  • A child or other person in the household for whom the individual has primary caregiving responsibility is unable to attend school or another facility that is closed as a direct result of the COVID–19 public health emergency and such school or facility care is required for the individual to work;
  • The individual is unable to reach the place of employment because of a quarantine imposed as a direct result of the COVID–19 public health emergency;
  • The individual is unable to reach the place of employment because the individual has been advised by a health care provider to self-quarantine due to concerns related to COVID–19;
  • The individual was scheduled to commence employment and does not have a job or is unable to reach the job as a direct result of the COVID–19 public health emergency;
  • The individual has become the breadwinner or major support for a household because the head of the household has died as a direct result of COVID–19;
  • The individual has to quit his or her job as a direct result of COVID–19;
  • The individual’s place of employment is closed as a direct result of the COVID–19 public health emergency; or
  • The individual meets any additional criteria established by the Secretary of Labor for unemployment assistance.

As to the final criterion above, on April 5, 2020, the Department of Labor issued additional guidance for independent contractors: Individuals who work as independent contractors with reportable income may qualify for PUA benefits if they are unemployed, partially employed, or unable or unavailable to work because the COVID-19 public health emergency has severely limited their ability to continue performing their customary work activities, and has thereby forced them to suspend such activities. For instance, even if a driver for a ridesharing service would not fit under one of the criteria above because she has no “place of employment” that she is unable to reach because of COVID-19, the driver may still qualify because an emergency order restricting movement makes continued operations unsustainable.

Covered individuals also include individuals who are self-employed, seeking part-time employment, do not have sufficient work history, or otherwise would not qualify for regular unemployment or extended benefits under State or Federal law or Pandemic Emergency Unemployment Compensation and meet the requirements above.

Covered individuals do NOT include individuals able to telework with pay or who are receiving paid sick leave or other leave benefits. However, individuals receiving paid sick leave or other paid leave benefits or who are able to telework with pay for less than their customary workweek may still be eligible for reduced PUA.

Terms and conditions for receiving unemployment insurance under State unemployment insurance laws, including requirements regarding availability for work, search for work, and refusal to accept work, will still apply unless inconsistent with the new law.

The individual must be able to work, available to work, and actively seeking work to receive assistance. The law requires, however, that States provide flexibility in meeting such requirements in case of individuals unable to search for work because of COVID–19, including because of illness, quarantine, or movement restriction.

Time Period

PUA will cover up to a total of 39 weeks (including any weeks during which the individual received regular or extended unemployment benefits under State or Federal law) between January 27, 2020, and December 31, 2020. The first week in which PUA may be paid is the week ending February 8, 2020.

Amount of Benefit

Covered Individuals will be entitled to the weekly benefit amount authorized under the unemployment compensation law of the State where the individual was employed (subject to a minimum set by the federal Disaster Unemployment Assistance program).

For those without reported wages sufficient to establish a weekly benefit amount under the State unemployment compensation law, the benefit amount will be calculated using the formula for calculating Disaster Unemployment Assistance benefits under federal law.

Benefit Administration

Payments will generally be administered by State unemployment agencies in accordance with agreements with the federal Department of Labor.

There will be no waiting period for the federal unemployment compensation, and the federal government will reimburse States for payments that would otherwise not have been paid during a one-week waiting period if they eliminate their waiting periods.

Pandemic Emergency Unemployment Compensation (“PEUC”)

In addition to covering workers not traditionally eligible for unemployment assistance, the CARES Act provides an additional 13 weeks of unemployment benefits for those who exhaust their state unemployment benefits.

As with PUA, to be eligible for PEUC, workers must be able to work, available to work, and actively seeking work, but the law requires States to provide flexibility in meeting such requirements in light of illness, quarantine, or movement restriction. Except where inconsistent with the CARES Act, State law requirements for maintaining benefit eligibility continue to apply.

Federal Pandemic Unemployment Compensation (“FPUC”)

Individuals eligible for regular unemployment compensation, PUA, PEUC, Short-Time Compensation, and certain other categories of federal benefits will also be eligible for an extra $600 per week for weeks of unemployment between the date on which the State enters an agreement with the Federal government to pay such unemployment compensation and July 31, 2020. (If an agreement between the State and the Federal government was in place no later than March 28, 2020, the first week for which this benefit could be paid was the week ending April 4, 2020.)

The extra $600 in FPUC benefits should be paid concurrently with an individual’s existing unemployment compensation benefits. If States are unable to immediately start providing the FPUC benefits, they must provide retroactive benefits for weeks in which individuals would have been entitled to those benefits. The extra $600 payments will not be counted as income for the purposes of Medicaid or CHIP.

States must notify individuals of their entitlement to FPUC. Individuals do not have to apply for these payments separately. Except where inconsistent with the CARES Act, requirements for maintaining benefit eligibility under State and Federal law continue to apply.

Short-Time Compensation

States can enter agreements to have the federal government reimburse payments made under “short-time compensation programs,” also known as work sharing programs, which subsidize wages of employees whose hours have been reduced.

Unemployment Support for Non-profits and State, Local, and Tribal Governments

For non-profits and governmental entities that have “reimbursable arrangements” with state unemployment insurance programs, the federal government will pay 50% of their unemployment compensation reimbursement for laid-off or furloughed workers between March 13, 2020, and December 31, 2020. The Department of Labor will also issue clarifying guidance to allow States to interpret their unemployment compensation laws in a manner to provide maximum flexibility to reimbursing employers as it relates to timely payment and assessment of penalties and interest.

This article is intended as a general discussion of these issues only and is not to be considered legal advice or relied upon. RPJ Partner Alice K. Jump 
and Associate Liz Stork counsel both companies and individuals on employment, labor, and corporate matters, and are available to consult on specific matters. They are admitted to practice in New York as well as the U.S. District Courts for the Southern, Eastern, and Western Districts of New York, the U.S. District Court for the District of Colorado and the U.S. Courts of Appeals for the Second and Tenth Circuits. Attorney Advertising.