Navigating Through the CARES Act

By: Marleigh Miller, Search Associate, GattiHR Industrial

The United States Congress has recently passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, commonly known as the Economic Stimulus Bill. If you’ve never heard of this relief package or you’d like to know more, then you’ve come to the right place.

We know that reading and interpreting Bills and Legislation can be hard for some, especially when you don’t have Schoolhouse Rock to break it down for you. Therefore, we did our best to illuminate some of the most important aspects of the first two sections of the Bill. However, this information is not intended to be used or taken as legal advice. Please do not act, or refrain from acting based on this information, without consulting with a lawyer.

While we will try to hit the most major points of the Bill, please refer to CARES Act to see, in depth, very important information about economic stimulation and relief for businesses, individuals and families, support for the medical and healthcare community, COVID-19 patient support, potential student loan relief, recovery rebates for individuals, delayed deadlines and much more.

Division A: Small Business Interruption Loans

Who is eligible for the small business interruption loan?

Any business concern, public or private nonprofit organization, veteran’s organization, religious organization or Tribal business that has 500 or less employees (full time or part time) OR meets the SBA’s (industry dependent) size-standard requirement, is eligible for the loan.

The Small Business Act defines a “small business concern” as an “independently owned and operated business that is organized for profit but does not hold industry dominance on a national level. The business must also have a U.S. locality and operate primarily out of the U.S. or make significant contribution to the U.S. economy through tax payments, or use of American materials, products or labor.” (

*Sole proprietors, independent contractors, free-lancers and self-employed individuals are all eligible for the Paycheck Protection Program. You can apply through any lending institution that is approved by the SBA and is participating in the program. The only things that a lender may consider when deciding eligibility is (A) If the borrower was in operation on or before March 1, 2020 and (B) had employees for whom the borrower paid salaries and payroll taxes.*

How much is the small business loan, and are there restrictions on what it can go towards?

The Act sets the maximum loan amount at (A) the average total monthly payments for payroll, mortgage, rent and payments on any other debt obligations during the one year period before the date the loan is made (different terms for seasonal businesses) multiplied by 4 OR (B) $10,000,000, whichever is less.

Yes, there are restrictions on where the money goes once it is disbursed. The Act limits the use of the loan to:

  • Payroll costs including payroll support, paid sick, medical and family leave, and costs related to the continuation of group healthcare benefits during those periods of leave
  • Employee salaries
  • Mortgage payments
  • Rent (including rent under lease agreement)
  • Utilities and
  • Any debt obligations incurred before the covered period (March 1, 2020 – December 31, 2020).

The money could go towards other operating expenses, but anything outside of this list will not be included in any applicable loan forgiveness.

What are the terms of these loans, and what do the deferment/forgiveness terms look like?

It should be noted that the terms of the loan can differ case-by-case. We can say that the maximum term could be up to 10 years with a capped interest rate of 4% annually. As for deferment, the SBA will consider the borrow as an “impacted borrower” and will require lenders to provide at least 6 months and up to one-year deferment on the loan. If the loan is purchased on the secondary market and there is a refusal to approve a deferral request, the SBA will exercise its authority to purchase the loan so the impacted borrower can receive a deferral period, not exceeding one year.

Partial, if not complete, forgiveness on the loan is achievable. The loan’s purpose is to retain employees at base pay. If the borrower has been successful in retaining it’s employees, the entirety of the loan can be forgiven. The amount forgiven will decrease in relation to the percentage of employees that get laid off. The loan may still be forgiven if employees are rehired by June 30, 2020. The interest accrued is included in any applicable loan forgiveness. Any unforgiven amount will go into repayment under the agreed-upon terms between the borrower and the lender.

The eligibility of forgiveness on the loan will be dependent on whether the borrower used the proceeds for the costs discussed in the previous question (salaries, rent, utilities, debts, etc.) and to what extent. While the loan can be used for other business expenses, the only ones eligible for forgiveness are those that are established as “allowable uses” under Sec. 1102(d)(1).

To file for loan forgiveness, borrowers will first file with their lender, verifying covered expenses and forgiveness amount. After establishing this and filing an application, the SBA will reimburse the lender for the principal amount on the loan. It should be noted that the forgiven debt will not cancel indebtedness income for federal tax purposes.

For more information on small business assistance and relief, please visit:

SBA Small Business Guidance and Resources

The CARES Act Sec. 1101 – 1109

Division B: Individuals & Families

What qualifies an individual to receive the stimulus check?

If you filed your taxes for 2018 or 2019, you are eligible for the stimulus payment. If you haven’t filed for either year, you still have time to file for 2019 and qualify for the check. You can also qualify if you didn’t file for either year, but you have a 2019 SSA-1099 statement (Social Security Benefit Statement) or a Form RRB-1099 (Social Security Equivalent Benefit Statement). You must also be a citizen or resident alien of the U.S. in order to receive the check. You do not qualify for the check if you were claimed as a dependent but if you are under 17 years old, the person that claimed you can get an extra $500.

How much will each person get, and how do I know if I got the full amount?

The payments for each individual are dependent on their Adjusted Gross Income for 2018 or 2019. Individuals with an AGI of $75,000 or less will receive the full payment of $1,200. If an individual filed jointly with a spouse but has no children, he/she will get the full amount of $2,400. An additional $500 is rewarded for each child/dependent (under 17) in the household. Those filing as the Head of Household, earning $112,500 or less are eligible for the full amount of $1,200.

The amount of the payment will start to decrease as an individual’s AGI increases and single individuals coming in at $99,000 are no longer eligible for payment. Married couples filing with no dependents and earning $198,000+ will not get a payment.

If you earned more than $75,000 but less than $99,000 in the calendar year of 2018 or 2019, the amount of your check will adjust based on your AGI and you can calculate how much your check will be HERE.

How many payments will I get?

The Bill states that this is a one-time payment.

Do I need to file an application in order to receive this payment?

No. No application is necessary, and the IRS will already have your information from your 2018 or 2019 return, or from the documents we previously mentioned (SSA-1099 or RRB 1099).

Where will the money be sent and how will I know?

If you e-filed your taxes, the money will be automatically transferred to the provided bank account within three weeks of the Bill being enacted (March 27, 2020). If you did not e-file, but instead filed by mail, a check will be sent to your mailing address provided at the time of filing. After disbursement, the IRS has three weeks to send you a notice of disbursement with information about where the money was sent and how (mail or direct deposit). If there is an issue or you did not receive your money, you can use the info on the notice to contact the IRS.

Is the stimulus check taxable?

This payment is not taxable. However, according to Internal Revenue Code Section 6428, the payment acts as a credit towards your 2020 income taxes. Therefore, when filing taxes for 2020, you’ll include the section 6428 credit, and it will be deducted from any applicable tax refund you receive. If the stimulus check payment is less than your tax refund, you will receive the difference. If the payment is more than your tax refund, you will not have to pay back the difference. For more information on this please see Section 6428.

For more information on relief for individuals and families please visit:

The CARES Act Sec. 2101

Internal Revenue Code Section 6428

Further info on the Individual Stimulus Checks

The remainder of the Bill goes on to explain delayed deadlines including the tax filing deadline which has been postponed from April 15, 2020 to July 15, 2020. Division C and Division D of the Bill go into support for “Severely Distressed Sectors of the U.S. Economy,” as well as the Healthcare response and actions being taken to support America’s medical supply chain, COVID-19 patients, supply shortages, education provisions, labor provisions, and much more. To navigate the Bill, CLICK HERE, and use the hyperlinked table of contents to be directed straight to each desired section. Be sure to use credible sources when trying to understand or translate the law.