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Updates as of the week of April 20, 2020
The $484 package includes an additional $321 billion for the newly created Paycheck Protection Program.
- The first wave of stimulus checks are being deposited this week. Release of stimulus pay is based on tax brackets. The Treasury is releasing a web portal on April 17, 2020 to collect banking information for the IRS so individuals can receive their payments sooner
- The Department of Treasury is starting to roll out the $340 billion Paycheck Protection Program to assist small businesses
- Relief funds are scheduled to be released soon to State, Local, and Tribal governments through the $150 billion Coronvirus Relief Fund as outlined in the CARES Act
- Employers of all sizes can now receive an Employee Retention Credit for keeping employees on payroll from March 13-December 31, 2020
Updates as of the week of March 30, 2020
Updates as of March 26, 2020
- 2020 recovery rebates for individuals
Provides checks of up to:
- $1,200 for single taxpayers
- $2,400 for married joint filers
- $500 for each dependent child
These checks are based on federal 2018 returns. They are reduced for higher income taxpayers, with phaseouts beginning at $75,000 for single taxpayers and $150,000 for married joint filers, and ending for single taxpayers with incomes exceeding $99,000 and married joint filers with no children and incomes exceeding $198,000.
Taxpayers with little or no income tax liability, but at least $2,500 of qualifying income, would be able to receive:
- $600 for single taxpayers
- $1,200 for married joint filers
Qualifying income includes earned income, Social Security retirement benefits and certain compensation and pension benefits paid to veterans. (Section 2201)
Provides expanded unemployment insurance benefits. The bill: Suspends the 50 percent of adjusted gross income limitation for 2020.(For corporations, the 10-percent limitation is increased to 25 percent of taxable income.)(Section 2205) Provides $46 billion for direct lending to air carriers and ancillary services, and businesses important to maintaining national security. Provides a refundable payroll tax credit for 50 percent of wages paid by employers to employees during the COVID-19 crisis. The credit is available to employers whose (1) operations were fully or partially suspended, due to a COVID-19-related shut-down order, or (2) gross receipts declined by more than 50 percent when compared to the same quarter in the prior year. The credit is generally provided for the first $10,000 of compensation, including health benefits, paid to an eligible employee. The credit is provided for wages paid or incurred from March 13, 2020 through Dec. 31, 2020. (Section 2301)
Allowance of $300 above the line deduction for charitable contributions in 2020. (Section 2204)
Waives the 10-percent early withdrawal for distributions up to $100,000 for coronavirus purposes. In addition, income attributable to such distributions would be subject to tax over three years and taxpayer may recontribute to an eligible retirement plan within three years without regard to the annual cap. Coronavirus-related distributions include distributions to an individual:
Provide income tax exclusion for individuals who are receiving up to $5,250 in student loan repayment assistance from their employer (Section 2206)
Provides $454 billion for loans, loan guarantees and other investments in support of the Federal Reserve’s lending facilities to eligible businesses, states and municipalities. (Sec. 4003) Contains limits on employee compensation.
Allows employers and self-employed individuals to defer payments of the employer share of the Social Security tax on behalf of their employees. Deferred payments must be paid over the following two years, with half due by Dec. 31, 2021 and the other half by Dec. 31, 2022. (Section 2302)
Temporarily increases the limitation on the ability to deduct interest expenses from 30 percent to 50 percent of taxable income for 2019 and 2020. (Section 2306) (This may necessitate filing amended or superceded 2019 returns.)
Enables businesses to immediately write off costs associated with improving facilities instead of depreciating them over the life of the building. Would allow amending a prior year return to take advantage of this provision and correct a drafting error in the 2017 tax reform law. (Section 2307)
Provides that a net operating loss (NOL) from 2018, 2019 or 2020 can be carried back five years, and temporarily removes the taxable income limitation to allow a NOL to fully offset income. (Section 2303)
Allows pass-throughs and sole proprietors to benefit from the relaxed NOL carryback. (Section 2304)
Accelerates the ability for companies to claim eligible alternative minimum tax (AMT) credits now instead of as originally expected through 2021. (Section 2305)
Limitations on mandated family and sick leave, enacted in the phase 2 coronavirus legislation. (See Novogradac Client Alert: Highlights from H.R.6201 – Families First Coronavirus Response Act.) (Secs. 3601 and 3602)
Provides up to 90 days of forbearance for multifamily borrowers with a federally backed multifamily mortgage loan who have experienced a financial hardship. Borrowers receiving forbearance may not evict or charge late fees to tenants for the duration of the forbearance period. Applicable mortgages include loans to real property designed for five or more families that are purchased, insured or assisted by Fannie Mae, Freddie Mac or HUD. (Section 4023)
For 120 days beginning on the date of enactment, landlords are prohibited from initiating legal action to recover possession of a rental unit or to charge fees, penalties or other charges to the tenant related to such nonpayment of rent where the landlord’s mortgage on that property is insured, guaranteed, supplemented, protected, or assisted in any way by HUD, Fannie Mae, Freddie Mac, the rural housing voucher program or the Violence Against Women Act of 1994. (Section 4024)
Provides expanded unemployment insurance benefits. The bill:
Suspends the 50 percent of adjusted gross income limitation for 2020.(For corporations, the 10-percent limitation is increased to 25 percent of taxable income.)(Section 2205)
Provides $46 billion for direct lending to air carriers and ancillary services, and businesses important to maintaining national security.
Provides a refundable payroll tax credit for 50 percent of wages paid by employers to employees during the COVID-19 crisis. The credit is available to employers whose (1) operations were fully or partially suspended, due to a COVID-19-related shut-down order, or (2) gross receipts declined by more than 50 percent when compared to the same quarter in the prior year.
The credit is generally provided for the first $10,000 of compensation, including health benefits, paid to an eligible employee. The credit is provided for wages paid or incurred from March 13, 2020 through Dec. 31, 2020. (Section 2301)
Defense Production Act (DPA)/ Emergency Powers – Executive Order – March 19, 2020
- President can incentivize U.S. companies and industries to increase the production of critical equipment and goods, in part through loans and loan guarantees
- DPA can be helpful in removing obstacles in the supply chain by prioritizing the production of critical goods.
Families First Coronavirus Response Act ~$350B – March 18, 2020
- Provides paid sick and family leave
- Free COVID-19 testing
- expanded food assistance and unemployment benefits, and additional protections for health care workers
- R. 6201 & Supplement
President declares National Emergency – March 13, 2020
- Frees up billions in federal funds
- President invoked Stafford Act; designed to bring orderly and systematic means of federal natural disaster assistance for state and local governments in carrying out their responsibilities to aid citizens
The Federal Reserve
Updates as of the week of April 20, 2020
To facilitate lending to small businesses via the Small Business Administration’s Paycheck Protection Program (PPP), the Federal Reserve on Thursday announced that it is working to expand access to its Paycheck Protection Program Liquidity Facility (PPPLF) for additional SBA-qualified lenders as soon as possible.
SBA-qualified PPP lenders include depository institutions, such as banks and credit unions, as well as non-depository institution lenders, such as some Community Development Financial Institutions. Currently, only depository institutions are eligible to participate in the PPPLF, and over 1000 have already been approved to access the program.
The SBA’s PPP guarantees loans from qualified lenders to small businesses so that those businesses can keep workers employed. The PPPLF supports the PPP by extending credit to financial institutions that make PPP loans, using the loans as collateral. The additional liquidity from the PPPLF increases the capacity of financial institutions to make additional PPP loans.
Updates as of the week of April 13, 2020
Federal Reserve take additional actions to provide up to $2.3 trillion in loans to support the economy
- Bolster the Small Business Administration’s Paycheck Protection Program (PPP) by supplying liquidity to participating financial institutions through term financing backed by PPP loans to small businesses.
- Ensure credit flows to small and mid-sized businesses with the purchase of up to $600 billion in loans through the Main Street Lending Program.
- The Department of the Treasury, using funding from the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) will provide $75 billion in equity to the facility.
- Increase the flow of credit to households and businesses through capital markets
- Help state and local governments manage cash flow stresses caused by the coronavirus pandemic by establishing a Municipal Liquidity Facility that will offer up to $500 billion in lending to states and municipalities.
Updates as of the week of March 23, 2020
- The Federal Open Market Committe (FOMC) will purchase at least $500 billion of Treasury Securities and at least $200 billion of mortgage-backed securities
- $30 billion in financing to new credit programs to employers, consumers, and businesses
- Dept. of Treasury will provide $30 billion in equity to new credit programs
- Two new facilities to support credit:
- Primary Market Corporate Credit Facility (PMCCF)
- Secondary Market corporate Credit Facility (SMCCF)
- Third facility to support flow of credit to consumers and businesses
- Term Asset-Backed Securities Loan Facility (TALF)
- Expansion of Money Market Mutual Fund Liquidity Facility (MMLF)
- Expansion of the Commercial Paper Funding Facility (CPFF)
- Forthcoming: Main Street Business Lending Program to support small and medium sizes businesses in conjunction with the SBA
Updates as of the week of March 16, 2020
- Fed Funds rate cut to 0%
- Quantitative easing $700mm ($80mm on 3.16 & 3.17) rest over next few months
- Discount window – reduced prime rate by 150bps
- Flexibility in Bank Capital requirements
- Coordinated International Action to Lower Pricing on U.S. Dollar Liquidity Swap Arrangements
- Creation of a Commercial Paper Funding Facility
- Creation of a Primary Dealer Credit Facility