The Coronavirus Aid, Relief, and Economic Security Act (The Cares Act)


By: Peter Beach, Paul Durham, Andrew Eills, Colleen Lyons & Alexander Pyle

March 27, 2020

On March 26, 2020, the Senate passed the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), the third federal stimulus package designed to address the effects of the COVID-19 pandemic. If, as expected, the current bill is passed by the House of Representatives and signed into law by the President, the CARES Act will become the largest emergency aid package in United States history, and will include direct cash payments to a majority of Americans, additional resources for hospitals and health systems, and financial support for small businesses and targeted economic sectors. Given the breadth and scope of the CARES Act, we will be issuing a number of client alerts in the coming days to describe specific details of the legislation and the legislation’s potential impact on different business sectors. In the meantime, the following is a brief overview of several key elements included in the new stimulus package, as the bill currently stands.

Direct Payments to Citizens

Single Americans will receive a direct payment in the amount of $1,200, married couples will receive $2,400, and families will receive $500 for each child under the age of 17. These payments are subject to phase outs for individuals with adjusted gross incomes in excess of $75,000, with the payment phased out completely for those individuals with adjusted gross incomes greater than $99,000 (such thresholds are doubled in the case of couples).


Tax relief provisions for individuals include a waiver of the 10% early withdrawal penalty on retirement accounts, easing of the income inclusion rules on those withdrawals, an increase in the amount an individual can borrow from a retirement account, relief from the required minimum distribution rules, more generous charitable contribution deductions for both itemizers and non-itemizers, tax-free repayment of a portion of employees’ student loans by their employers and relief from limitations on the use of net business losses against other sources of income. Most of these changes are for 2020 only, but some are retroactive and some will be available in the future.

Tax relief provisions for businesses include a credit against an employer’s share of Social Security payroll taxes if they are forced to suspend or close down due to the COVID-19 epidemic but continue to pay their employees during the shutdown, a delay until the end of 2020 with respect to normal payment deadlines for an employer’s share of Social Security payroll taxes, a five-year carry back period for net operating losses for 2018, 2019 and 2020, an increase in the percentage of net operating losses that can be carried to 2019 and 2020, an increase in the amount of interest expense that can be deducted in 2019 and 2020, an acceleration of recovery of alternative minimum tax credits, correction of a glitch in prior tax law retroactive to 2018 regarding depreciation of qualified improvement property and suspension of certain excise taxes related to the aviation industry and hand sanitizer production.

Real Estate Foreclosures and Evictions

Protections against foreclosures on mortgages and evictions for renters are included in the CARES Act. Those facing a financial hardship from the coronavirus will be given a forbearance on a federally backed mortgage loan of up to 60 days, subject to extension for four periods of 30 days each. The law does not allow fees, penalties or additional interest to be charged as a result of delayed payments. Landlords with federally backed mortgage loans may not evict tenants solely for failure to pay rent for a 120-day period, and they may not charge fees or penalties to tenants for failing to pay rent.

Loans for Businesses and Industry Segments

The Treasury Department is authorized to lend up to $500 billion to businesses, subject to congressional oversight. A portion of this amount is reserved for the airlines and other distressed industries, with the majority of the funds to be made available to other businesses, states, and municipalities. The law includes certain restrictions on businesses receiving loans, such as a prohibition on share repurchases and the payment of dividends for a set period and a requirement to maintain employment levels to the extent practicable, and in any event not to reduce employment levels by more than 10%.

Small Business Loans

The law also provides for federally guaranteed loans of up to $10 million to be made available through the Small Business Administration (“SBA”) at community banks to small businesses that pledge not to lay off their workers. These loans will be available during an emergency period and may be forgiven if the small employer continues to pay workers throughout the duration of the COVID-19 crisis. Other provisions of the law apply specifically to non-profits and mid-size businesses. The act also provides for enhancements to the SBA’s previously announced economic injury disaster loan program, including advances of up to $10,000 made within three days of applying for a loan.

Unemployment Benefits

The CARES Act provides for expansion of federal unemployment insurance and benefits. It includes the provision for a weekly payment of $600 in benefits in addition to benefits already available under State programs for a period up to four months. The law also expands temporary unemployment benefits to furloughed employees, self-employed, contract, freelancers, and “gig” workers who would not otherwise be eligible for unemployment insurance.

Hospitals and Health Systems

The law allocates over $140 billion for hospitals and health systems across the nation, including $100 billion for a new program to provide grants to public entities, not-for-profit entities, and Medicare and Medicaid enrolled institutional providers to pay for unreimbursed expenses or lost revenues attributable to the national public health emergency. The law appropriates $16 billion to the Strategic National Stockpile for personal protective equipment, ventilators, and other medical supplies. Funding of $11 billion is allocated to support research and develop vaccines to prevent the coronavirus. Rural critical access hospitals and rural tribal health programs receive funding through the Health Resources Services Administration of $185 million to augment their services.

Among other measures to address regulatory barriers to care, the law permits nurse practitioners and physician assistants to prescribe home health services and expands telehealth services for providers and patients, including home health and hospice.

In order to ensure funds through Medicare are promptly available, the law calls for accelerated Medicare payments in order for health care facilities to retain stabile cash flows, maintain adequate workforces, and fund new construction projects as may be needed to house patients. Moreover, the legislation creates a new 20% “add on payment” for inpatient treatment. Significantly, the law expressly delays the budgetary sequester until the end of 2020 to provide health care providers with certainty in funding.

Other Provisions

The above list is not exhaustive. The CARES Act includes numerous provisions across a variety of areas, including, for example, a suspension of student loan payments, funding for programs to increase voter access during the coronavirus crisis, and possible grants to state arts and humanities organizations.

Additional Alerts

Please check our COVID-19 resource page regularly for more detailed information on the CARES Act and other legislative and regulatory developments.