Last night, the Senate unanimously passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) to address the unprecedented public health and economic crisis related to COVID-19.
While the legislation still needs to pass through the House, with changes expected before it goes to the president for signature, there are critical provisions in the CARES Act that breweries should make themselves familiar with.
As currently written, the Coronavirus Aid, Relief, and Economic Security (CARES) Act:
- Provides emergency grants of up to $10,000 to offer immediate relief for small businesses who have applied, or are applying, for Economic Injury Disaster Loans. These grants will be provided by the Small Business Administration (SBA) with strict requirements. Any money a business receives through the emergency grant will impact additional loans they may have with the agency.
- Authorizes businesses with fewer than 500 employees to obtain SBA 7(a) loans with the ability to use a portion of the loan for payroll, salary, mortgage or rent, and utility payments, forgiven. The eligibility requirements for these SBA loans are relaxed with the intention of getting them into the hands of small businesses quickly.
- Requires the SBA to pay the principal, interest, and any associated fees that are owed on the covered loans for a six-month period starting on the next payment due date. The BA is reviewing the requirements for this provision and will provide more information.
- Includes a retention tax credit to encourage employers to keep workers on payroll during the crisis. Businesses would receive a tax credit for keeping idled workers on their payroll during the coronavirus pandemic. The credit is available to employers whose operations are fully or partially suspended due to a COVID-19-related shutdown order, or employers whose gross receipts declined by more than 50 percent when compared to the same quarter in the prior year. This credit is limited to employment taxes and has additional stipulations
- Enables businesses to immediately write off costs associated with improving facilities in lieu of depreciating those improvements over the 39-year life of the building.
- Temporarily increases the amount of interest expense businesses are allowed to deduct on their tax returns, by increasing the 30 percent limitation to 50 percent of taxable income (with adjustments) for 2019 and 2020.
- Provides unemployment benefits to people who are self-employed, independent contractors, have limited work history, and others who are unable to work as a direct result of the coronavirus public health emergency.
- Delays payment of employer payroll taxes allowing employers and self-employed individuals to defer payment of the employer share of the Social Security tax they otherwise are responsible for paying to the federal government with respect to their employees. The provision requires that the deferred employment tax be paid over the following two years, with half of the amount required to be paid by December 31, 2021 and the other half by December 31, 2022.
- Provides a temporary exception from excise tax for alcohol used to produce hand sanitizer. For any breweries/distilleries that have pivoted to making hand sanitizer, the provision waives the federal excise tax on any distilled spirits used for or contained in hand sanitizer that is produced and distributed in a manner consistent with guidance issued by the Food and Drug Administration and is effective for calendar year 2020.
With a package that is estimated to cost more than $2 trillion, the items that are referenced above are just some of the ways that the government is seeking to help breweries and other small businesses. The Brewers Association federal affairs team is working tirelessly on your behalf to find ways to help support craft brewers during this crisis and continues to actively advocate for relief specific to breweries.
The House of Representatives is expected to vote on the bill Friday morning. We will continue to provide our members with more information as the legislation advances.