President Trump signs the Cares Act into Law; Phase 3 of Federal Relief Related to COVID-19

On March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act into law. The CARES Act is 880 pages long consisting of several different divisions and titles listed below. To help you understand the major provisions included, we are sharing an overview of the CARES act prepared by legal counsel for the Council of Insurance Agents and Brokers, Steptoe and Johnson.

Division A—Keeping Workers Paid and Employed, Health Care System Enhancements, and Economic Stabilization

Title I—Keeping American Workers Paid and Employed Act, which includes paycheck protection and loan forgiveness, and small business contracting relief.

Title II—Assistance for American Workers, Families, and Businesses, which includes unemployment insurance and tax relief. 

Title III—Supporting America’s Health Care System in the Fight Against the Coronavirus, which includes provisions related to medical supplies, health care coverage, and paid sick and family medical leave.

Title IV—Economic Stabilization and Assistance to Severely Distressed Sectors of the United States Economy, including relief to airlines, financial institutions, and sectors critical to national security.

Title V—Coronavirus Relief Funds 

Title VI—Miscellaneous Provisions

Division B—Emergency Appropriations for Coronavirus Health Response and Agency Operations

Division A—Keeping Workers Paid and Employed, Health Care System Enhancements, and Economic Stabilization

Title I—Keeping American Workers Paid and Employed Act

The CARES Act amends the Small Business Act (SBA) to create a new Business Loan Program category (hereinafter, the “program”). For the period from February 15, 2020 to June 30, 2020 (covered period), the law allows the Small Business Administration (Administration) to provide 100% federally-backed loans up to a maximum amount to eligible businesses to help pay operational costs like payroll, rent, health benefits, insurance premiums, utilities, etc. Subject to certain conditions, loan amounts are forgivable (see more detailed discussion on loan forgiveness below).


The SBA allows the Administrator to provide loans directly or in cooperation with the private sector through agreements to participate on an immediate or deferred (guaranteed) basis. Lenders authorized to make loans under the SBA’s current Business Loan Program are automatically approved to make and approve loans under this new program, and they may opt to participate in the program under the terms and conditions established by the Department of Treasury (Treasury). Additionally, the Treasury Secretary may extend such authority to additional private sector lenders under criteria established by Treasury (including, for instance, allowing additional lenders to originate loans).

The Administrator may guarantee covered loans under this program on the same terms, conditions, and processes as a loan made under the SBA’s current Business Loan Program. No collateral or personal guarantee is permitted to be required for a loan. The interest rate on loans under the program is not to exceed four percent. There will be no subsidy recoupment fee associated with the loans and no prepayment penalty for any payments made. Additionally, the Administrator has no recourse against any individual, shareholder, member, or partner of an eligible loan recipient for non-payment, unless the individual uses the loan proceeds for unauthorized purposes (see discussion below of permitted uses).

A loan made under the SBA’s Disaster Loan Program on or after January 31, 2020, may be refinanced as part of a covered loan under this new program as soon as these new loans are made available. The CARES Act specifically allows SBA Disaster Loan recipients with economic injury disaster loans made since January 31, 2020 for purposes other than the permitted loan uses under this program to receive assistance under this program.

Unlike prior drafts of the CARES Act, the final version contains a “Sense of the Senate” that the Administrator should issue guidance to lenders and agents to ensure that processing and disbursement of covered loans prioritizes:


In addition to “small business concerns” as currently defined under the SBA, eligible businesses for the new program include any business concern, nonprofit organization, veterans’ organization, or Tribal business if it employs not more than the greater of—

There is a special eligibility rule for businesses in the hospitality and dining industries. For businesses with more than one physical location, if it employs 500 or fewer employees per location and is assigned to the “accommodation and food services” sector (Sector 72) under the North American Industry Classification System (NAICS), the business is eligible to receive a loan.

SBA regulations on entity affiliations (under 13 CFR 121.103) are waived for the covered period for business concerns, non-profits, and veterans’ organizations for:

Sole proprietors, independent contractors, and eligible self-employed individuals (as defined in Congress’s last COVID-19 bill, the Families First Coronavirus Response Act (Families First Act)) are eligible for loan recipients, subject to some documentation requirements to substantiate eligibility.

Loan Maximum, Borrower Eligibility Requirements, and Permissible Uses

The maximum loan amount (capped at $10 million) is the lesser of:



(B) Upon request, for businesses that were not in existence during the period from February 15, 2019 to June 30, 2019 –


(C) $10 million.

There are very few borrower requirements to obtain a loan under the new program. Those requirements include a good-faith certification that:

Businesses may, in addition to uses already allowed under the SBA’s Business Loan Program, use the loans for:

In evaluating eligibility of borrowers, a lender must consider whether the borrower was operating on February 15, 2020 and had employees or independent contractors for whom the borrower paid.


Regarding loan payment deferral rights, the CARES Act provides that businesses that were operating on February 15, 2020 and that have a pending or approved loan application under this program are presumed to qualify for complete payment deferment relief (for principal, interest, and fees) for six months to one year. Lenders are required to provide such relief during the covered period (if secondary market investors decline to approve a lender’s deferral request, the Administration must purchase the loan). The Administrator has 30 days from enactment of the CARES Act to provide guidance to lenders on this process.

The program loans qualify for the CARES Act’s broader loan forgiveness provisions in Section 1106. Specifically, indebtedness is forgiven (and excluded from gross income) in an amount (not to exceed the principal amount of the loan) equal to the following costs incurred and payments made during the covered period:

Forgiveness amounts will be reduced for any employee cuts or reductions in wages.

The reduction formula for fewer employees is:

  1. The maximum available forgiveness under the rules described above multiplied by:
  2. Average number of full-time equivalent employees (FTEEs) per month – calculated by the average number of FTEEs for each pay period falling within a month – during the covered period divided by:

Either (at election of the borrower) –

Or, for seasonal employers –

Note that this formula will be used to reduce forgiveness amounts, but cannot be used to increase them.

For reductions in wages, the forgiveness reduction is a straight reduction by the amount of any reduction in total salary or wages of any employee during the covered period that is in excess of 25% of the employee’s salary/wages during the employee’s most recent full quarter of employment before the covered period. “Employee” is limited, for purposes of this subparagraph only, to any employee who did not receive during any single pay period during 2019 a salary or wages at an annualized rate of pay over $100,000.

There is relief from these forgiveness reduction penalties for employers who rehire employees or make up for wage reductions by June 30, 2020. Specifically, in the following circumstances, the forgiveness reduction rules above will not apply to an employer between February 15, 2020 and 30 days following enactment of the CARES Act –

The CARES Act clarifies that employers with tipped employees (as described in the Fair Labor Standards Act) may receive forgiveness for additional wages paid to those employees. Also, emergency advances received under the expanded SBA Disaster Loan Program discussed below will be excluded from forgiveness amounts.

Within 90 days of determining the ultimate forgiveness amount, the Administrator must remit payment plus interest accrued through the date of payment to the lender. Authorized lenders and secondary market participants (at the discretion of the Administrator) may report expected forgiveness amounts, up to 100% of principal, on program loans or on pools of such loans. The Administrator must purchase the expected forgiveness amounts in such reports within 15 days.

There are some required processes to apply for loan forgiveness. Borrowers seeking forgiveness of amounts must submit to their lender –

Lenders who rely on documentation and accompanying certifications are held harmless from SBA enforcement actions and penalties relating to the loan forgiveness.

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

The Administrator has 30 days following enactment of the CARES Act to issue regulations on these forgiveness provisions.



The CARES Act also:


In addition to expansion of the SBA’s Business Loan Program described above, the CARES Act expands the SBA’s Disaster Loan Program. The covered period for this section is January 31, 2020-December 31, 2020. In addition to current eligible entities, the following may receive SBA disaster loans:

The CARES Act makes the following additional changes to the SBA Disaster Loan program during the covered period for loans made in response to COVID-19:

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.

Advances may be used for purposes already authorized under the SBA Disaster Loan Program, including:

If an entity that receives an emergency advance transfers into, or is approved for, a loan under the SBA Business Loan Program (described in the section above), the advance amount will be reduced from any payroll cost forgiveness amounts.

The CARES Act would deem 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 declaration and certification approach).


This section covers loans –

With respect to these loans, it is the Sense of the Congress that the Administration, in addition to the SBA relief already provided under the CARES Act, “should encourage lenders to provide payment deferments, when appropriate, and to extend the maturity of covered loans, so as to avoid balloon payments or any requirement for increases in debt payments resulting from deferments provided by lenders” during the COVID-19-declared emergency.

Additionally, for these loans, the Administrator must pay (and relieve the borrower of any obligation to pay) the principal, interest, and any associated fees owed in a regular servicing status:

The CARES Act also instructs the Administrator to work with the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of Currency, and state banking regulators to:

Emergency Rulemaking Authority for Small Business Administration

The Administrator is directed to issue regulations to carry out all of the CARES Act Title I provisions described above within 15 days of enactment of the law and waives the notice requirements under the Administrative Procedures Act for such rulemakings.

Title II—Assistance for American Workers, Families, and Businesses


Subtitle A of Title II of Division A of the CARES Act is also known as the “Relief for Workers Affected by Coronavirus Act.” This Subtitle provides federal funding for unemployment compensation (UC) to gig-economy workers adversely impacted by COVID-19 if such workers are not otherwise covered by state UC laws or if such workers have exhausted state UC benefits. If covered by this provision, a gig-economy worker will receive the same UC benefit as regular employees receive under the pertinent state’s UC law.

This Subtitle also provides states the opportunity to enter agreements with the federal government to provide enhanced UC benefits under existing state UC benefit programs The Subtitle provides for immediate UC payments (i.e., no one-week waiting period), an additional $600/week for up to four months (even if the employee is currently making less),[1] and an additional 13 weeks of UC benefits for participating states.

This Subtitle also offers states the opportunity to enter agreements with the federal government to receive funding for state-enacted “short-time compensation” programs to subsidize employees who have their hours reduced in lieu of a layoff, where the federal government would fund the delta between reduced hour payments and the UC benefit.

In addition to administrative and implementation provisions, the Subtitle provides similar enhanced UC benefits under the Railroad Unemployment Insurance Act.


The tax provisions are contained in Subtitles B and C of Title II of Division A of the CARES Act. Subtitle B provides for tax relief for individuals and Subtitle C (discussed in the next section) provides tax relief for businesses. Most of the significant provisions have not changed from the draft version of the CARES Act released on March 22 (see Steptoe summary here), but the Senate has added several new provisions, which are noted below.

Recovery Rebates

The CARES Act provides for recovery rebates of up to $1,200 ($2,400 for joint filers) for US taxpayers. The mechanism for paying the rebates is an advance refundable tax credit. The rebates are subject to certain special rules:

The rebates are available even if the taxpayer has no income, and no action is generally required to claim the rebates. The IRS will use the taxpayer’s 2019 tax return, if filed, or in the alternative, their 2018 return. The CARES Act exempts the rebates from offset to pay debts owed to other federal agencies, state income tax obligations, and unemployment compensation debts (but not for past-due support). It also requires Treasury and the Internal Revenue Service (IRS) to coordinate with the Social Security Administration and other agencies to conduct a public awareness campaign regarding the availability of the rebates.

Retirement Provisions

The CARES Act makes several welcome changes in the retirement space.

Although earlier drafts of the bill broadly extended the tax return filing date for individuals until July 15, which would also have moved the due date for 2019 IRA contributions to July 15, 2020, the provision was removed in the amended CARES Act because the IRS issued Notice 2020-18 extending tax filing and payment due dates. On March 24, the IRS issued FAQs that make clear that the due date for IRA contributions and plan contributions is extended to July 15, using its authority under Code section 7508A to do so.

In addition, the amended CARES Act waives the 10% additional tax for premature distributions related to the coronavirus for amounts not to exceed $100,000 from all plans of the controlled group, subject to the following rules:

While this provision is very advantageous to participants, and allows them to repay hardship distributions over time, which cannot be done under current law, it is likely that the amended loan provisions will be more popular because there is no income inclusion until the loan goes into default. The CARES Act increases the dollar amount available for loans from qualified plans from $50,000 to $100,000 and increases the percentage test limit for loans from half the present value of the participant’s benefit to the present value of his entire benefit under the plan. Furthermore, if the loan repayment is due between the date of the CARES Act’s enactment and before the end of the year, the CARES Act allows the repayment to be delayed for one year from the original due date. Subsequent loan repayments must be adjusted to reflect the delay in the 2020 repayment and any interest accruing during that delay. The five-year limit on loan repayments in section 72(p) disregards the one-year delay for 2020. The individuals to whom this provision applies are the same as those covered by the provision permitting penalty-free distributions.

The CARES Act adds a provision permitting a one-year delay in required minimum distributions (RMDs) for defined contribution plans described in Code section 401(a), as well as for defined contribution plans described in section 403(a) and (b), IRAs, and section 457 plans. Thus, the change does not appear to apply to defined benefit plans. The delay applies to both 2019 RMDs that needed to be taken by April 1, 2020 and to 2020 RMDs. The CARES Act also adds the special rollover rule similar to the one enacted in 2009, allowing amounts subject to the RMD rules in 2020 that have already been taken to be rolled over into a retirement arrangement.

The CARES Act delays the due date for amendments to plans, so long as the plan is operated as if the amendment is in effect and any subsequent writing is retroactive, as follows:

The Secretary of the Treasury can delay these dates. The Act makes clear that the retroactive amendment will not violate the cutback provisions of Employee Retirement Income Security Act of 1974 (ERISA) or the Code.

The CARES Act also delays minimum funding contributions for qualified plans, including quarterly contributions until January 1, 2021. The amount of each such minimum required contribution shall be increased by interest accruing for the period between the original due date and the payment date, at the effective rate of interest for the plan for the plan year in which the payment is made.

The amendments made by to the retirement provisions apply for calendar years beginning after December 31, 2019, allowing participants who have already taken plan distributions the benefit of these provisions.

Finally, the amended CARES Act expands the circumstances under which the Secretary of Labor can postpone certain filing deadlines. Currently, ERISA allows the Labor Secretary to delay filing deadlines up to one year if the President has declared a “disaster” under the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act) or if there has been a terroristic or military action. As of March 25, 2020, President Trump has only declared the COVID-19 pandemic a “national emergency” (which is different than a “disaster”). The CARES Act amends section 518 of ERISA to permit the Labor Secretary to postpone certain filing deadlines by up to one year if the Secretary of the Department of Health and Human Services (HHS) declares a “public health emergency” pursuant to section 319 of the Public Health Service Act. HHS Secretary Alex Azar did just that on January 31, 2020.[2]

Charitable Contributions

The CARES Act encourages individuals to contribute to churches and charitable organizations in 2020 by relaxing some of the limitations on charitable contributions:

Treatment of Student Loans

The CARES Act expands the definition of employer-provided educational assistance that is excluded from gross income to include up to $5,250 in student loan payments made by an employer between the date of enactment and the end of 2020.

The CARES Act also suspends involuntary collections on student loans, including by offsetting an income tax refund.


Employee Retention Credit

The CARES Act provides eligible employers – including tax-exempt organizations but not governmental entities – a refundable credit against payroll tax (Social Security and Railroad Retirement) liability equal to 50% of the first $10,000 in wages per employee (including value of health plan benefits). Eligible employers must have carried on a trade or business during 2020 and satisfy one of two tests:

For employers with more than 100 full-time employees, only employees who are currently not providing services for the employer due to COVID-19 causes are eligible for the credit. The employee retention credit is effective for wages paid after March 12, 2020, and before January 1, 2021.

Delay of Employer Payroll Taxes

The CARES Act postpones the due date for depositing employer payroll taxes and 50% of self-employment taxes related to Social Security and Railroad Retirement and attributable to wages paid during 2020. The deferred amounts would be payable over the next two years – half due December 31, 2021, and half due December 31, 2022.

Treatment of Losses

Certain changes to the loss provisions made by the Tax Cuts and Jobs Act (TCJA) are suspended in an effort to allow companies to utilize greater losses as well as to claim refunds for certain losses. Specifically, the CARES Act:

Corporate AMT Credits

The corporate AMT was repealed as part of the TCJA, but corporate AMT credits are allowed as refundable credits until 2021. The CARES Act accelerates the ability for companies to recover those AMT credits.

Limitation on Business Interest Expense

The CARES Act would temporarily increase the limitation on interest deductions imposed by the TCJA. Specifically, the Act would increase the 30% of adjusted taxable income (ATI) threshold to 50% of ATI, for tax years beginning in 2019 and 2020. (Special tax year 2019 rules would apply to partnerships.) It would also allow a taxpayer to elect to use tax year 2019 ATI in lieu of tax year 2020 ATI for the purpose of calculating its tax year 2020 limitation.

Excise Tax Exemption for Hand Sanitizer

The CARES Act exempts from excise taxes any distilled spirits removed during 2020 for use in hand sanitizer.

TCJA Technical Corrections

The CARES Act would adopt a few TCJA technical corrections, on a permanent basis:

Title III—Supporting America’s Health Care System in the Fight Against the Coronavirus


The CARES Act expands the types of testing that would be covered with no cost-sharing beyond the scope of the types of testing contemplated by the Families First Act. In addition to the in vitro diagnostic testing approved, authorized, or cleared by the FDA, it also covers in vitro diagnostic testing for which the developer has requested, or intends to request, emergency use authorization from the FDA or that a state (which has told HHS it is reviewing such test) has authorized. It leaves open for coverage other types of testing by covering any “other test that the Secretary determines appropriate in guidance.”

The CARES Act also requires that the group health plan or insurer reimburse the provider for either the negotiated cost of the testing or if there is no negotiated price between the group health plan (or insurer) and the provider, for the cash price of the diagnostic testing as reflected on its website. The provider is required to publicize that price on a publicly available website. If a provider fails to publicize the price of the testing, it is subject to a fine not to exceed $300 per day.

The CARES Act provides that if preventive measures, defined as an “item, service, or immunization that is intended to prevent or mitigate coronavirus disease 2019” become available, then group health plans/insurers must also cover such preventive measures with no cost-sharing obligation. The item or service must meet certain criteria of the United States Preventive Services Task Force or must have a recommendation from the CDC “with respect to the individual involved.” It is unclear how an individual-by-individual approval is intended to work in practice.


The CARES Act provides a few clarifications and makes modest changes to the Family Medical Leave Act provisions in the previous Families First relief package. Those changes include:

In terms of clarifications, the new package clarifies that the $200 per day/$10,000 total cap on paid leave is per employee, which was omitted from the Families First Act.

Similarly, there are parallel changes made to the paid sick leave provisions from the Families First Act, which include:

The CARES Act also makes a clarification that the paid leave dollar limits under these provisions are per employee.

DOL regulations are expected in April to address additional questions and details under these Families First Act provisions.


The CARES Act clarifies that for plan years beginning on or before December 31, 2021, a plan will not fail to be a high deductible health plan by failing to have a deductible for telehealth and other remote care services.

In addition, the CARES Act repeals the rule enacted in the Affordable Care Act that prohibited over-the-counter medicines (i.e., non-prescribed) other than insulin from being “qualified medical expenses.” Thus, users of health savings accounts or flexible spending accounts would be able to use funds in those accounts to cover over-the-counter medical products, including those needed in quarantine and social distancing, without a prescription. The provision also adds menstrual products to the definition of qualified medical expenses.

Title IV—Economic Stabilization and Assistance to Severely Distressed Sectors


Title IV of the CARES Act provides $500 billion to Treasury’s Exchange Stabilization Fund for loans, loan guarantees, and investments in the Federal Reserve’s lending facilities to support states, municipalities, and “eligible businesses,” which include air carriers and US businesses that have not received “adequate economic relief” in the form of other loans or loan guarantees.

The $500 billion is allocated as follows:

The Federal Reserve programs include the Money Market Mutual Fund Liquidity Facility, the Commercial Paper Funding Facility, the Primary Market Corporate Credit Facility, the Secondary Market Corporate Credit Facility, and the Term Asset-Backed Securities Loan Facility. For more information about these facilities, please see Steptoe’s alert Federal Reserve Establishes, Expands Emergency Capital Liquidity Facilities.

For each of the loan and loan guarantee programs, the Treasury Secretary establish terms and conditions, covenants, representations, warranties, and other requirements (including audit requirements).

Direct Loans for Eligible Businesses

An eligible business borrower must be created or organized in the US and have significant operations in and a majority of its employees based in the US.

The loan must be entered into directly by the eligible business as the borrower, and the rate of the loan must reflect the risk and the current average yield on Treasury securities of comparable maturity. The loan cannot be forgiven. In order to receive a loan under the CARES Act, the borrower must agree to not buy back stock or pay dividends for a period of time that extends one year beyond the term of the loan. Furthermore, during the life of the loan, the borrower can only invest in, or loan to, American businesses.

Borrowers are subject to two tiers of executive compensation (including salary, stock, and bonuses) restrictions for a period of time that extends one year beyond the term of the loan. Officers or employees who received more than $425,000 in total compensation in 2019 cannot receive a pay raise in 2020, and cannot receive severance pay or other benefits that are more than twice the 2019 compensation amount. Officers or employees who received more than $3 million in total compensation in 2019 cannot receive total compensation in 2020 in excess of (i) $3 million plus (ii) 50% of the excess over $3 million.

Loans and Loan Guarantees for Mid-Size Businesses

The CARES Act instructs the Treasury Secretary to “endeavor to seek the implementation” of a program or facility to support banks and other lenders who make direct loans to mid-size businesses and nonprofit organizations with 500-10,000 employees. The implementation of a mid-size direct lending program or facility does not preclude the Federal Reserve from establishing a Main Street Lending Program to support lending to small and mid-sized businesses.

Under any program or facility established for this purpose under the CARES Act, eligible borrowers would again be limited to entities or businesses domiciled in the United States with significant operations and a majority of its employees in the United States. The borrower could not be a debtor in bankruptcy and the borrower would need to certify that the uncertainty of current economic conditions makes a loan necessary to support ongoing operations.

Unlike the direct loans described above, mid-size business loans under this program would come from private lenders. By law, the interest rate for these loans could not exceed 2% and principal and interest payments would be delayed for the first six months (or for such longer period as the Treasury Secretary may determine).

The mid-size business loans would come with several restrictions. The borrower must, among other things, agree to not buy back stock or pay dividends for a period of time that extends one year beyond the term of the loan; intend to restore 90% of its workplace from February 1, 2020; and restore all employees’ compensation and benefits within four months of the termination of the COVID-19 public health emergency. The borrower also must certify it will (i) retain 90% of its workforce (at full compensation and benefits) until September 30, 2020; (ii) not outsource or offshore jobs for the term of the loan and two years thereafter; (iii) not abrogate collective bargaining agreements for the term of the loan and two years thereafter; and (iv) remain neutral in any union organizing efforts for the duration of the loan.

Loans and Loan Guarantees for Air Carriers, Cargo Air Carriers, and Businesses Critical to Maintaining National Security

Finally, the CARES Act provides $46 billion for loans or loan guarantees to air carriers, air cargo carriers, and “businesses critical to maintaining national security.”

To qualify for a loan or loan guarantee from these funds, the borrower must be created or organized in the US and have significant operations in and a majority of its employees based in the US. The borrower must demonstrate that a loan or loan guarantee is not reasonably available and that it has incurred or is expected to incur covered losses that jeopardizes the continued operations of the business.

The loan or loan guarantee must be as short as practicable but not more than five years. It must be entered into directly by the eligible business as the borrower, and cannot be forgiven. The loan or loan guarantee’s rate must reflect the risk of the loan or loan guarantee, but the rate cannot be less than an interest rate based on market conditions for comparable obligations prior to the COVID-19 outbreak.

These loans and loan guarantees also have several restrictions. Borrowers must, among other things, agree to not buy back stock or pay dividends for a period of time that extends one year beyond the term of the loan. The borrowers also must retain 90% of their workforce until September 30, 2020.

Borrowers are subject to two tiers of executive compensation (including salary, stock, and bonuses) restrictions for a period of time that extends one year beyond the term of the loan. Officers or employees who received more than $425,000 in total compensation in 2019 cannot receive a pay raise in 2020, and cannot receive severance pay or other benefits that are more than twice the 2019 compensation amount. Officers or employees who received more than $3 million in total compensation in 2019 cannot receive total compensation in 2020 in excess of (i) $3 million plus (ii) 50% of the excess over $3 million.

Borrowers who receive these funds also must provide the Treasury Secretary with a warrant or equity interest in the business or, alternatively, a senior debt instrument issued by the borrower. The Treasury Secretary will not exercise voting power with respect to any shares of common stock, but will retain the right and discretion to sell, exercise, or surrender a warrant or any senior debt instrument for the primary benefit of taxpayers.

Finally, the CARES Act authorizes the Secretary of Transportation to require, to the extent reasonable and practicable, loan or loan guarantee recipient air carriers maintain scheduled air transportation until March 1, 2022, taking into consideration the air transportation needs of small and remote communities and the need to maintain well-functioning health care and pharmaceutical supply chains.

States and Municipalities

The CARES Act instructs the Treasury Secretary to “endeavor to seek the implementation of a program or facility” that “provides liquidity to the financial system that supports lending to states and municipalities.”

Air Carriers

The CARES Act requires the Secretary of Transportation to require, to the extent reasonable and practicable, loan or loan guarantee recipient air carriers maintain scheduled air transportation until March 1, 2022, taking into consideration the air transportation needs of small and remote communities and the need to maintain well-functioning health care and pharmaceutical supply chains.

Executive Compensation Restrictions

In order for an eligible borrower to participate in CARES Act funding programs, the borrower must agree to cap all employee compensation (including salary, stock, and bonuses) for a period ending one year after the loan is repaid. For employees receiving more than $425,000 per year, (i) these employees cannot receive more compensation than they received in 2019; or (ii) severance pay or other benefits upon termination cannot exceed twice the 2019 compensation amount. Officers or employees receiving more than $3 million per year cannot receive total compensation in excess of (i) $3 million plus (ii) 50% of the excess over $3 million.

Protection Against Collective Bargaining Agreement

The CARES Act prohibits the issuance of a loan, loan guarantee, or investment on a borrower’s implementation of measures to enter into negotiations with the certified bargaining representative of the borrower’s employees regarding pay or other terms and conditions of employment. This provision will remain in effect from the date of the loan or loan guarantee and remain in place for one year after the loan or loan guarantee is no longer outstanding.


Inspector General for Pandemic Recovery

The CARES Act establishes an Office of the Special Inspector General for Pandemic Recovery, led by a Presidentially-appointed, Senate-confirmed Special Inspector General. The Office will function for five years and has a $25 million budget. The Special Inspector General is tasked with conducting, supervising, and coordinating audits and investigations of the making, purchase, management, and sale of loans, loan guarantees, and other investments made by the Treasury Secretary. The Special Inspector General must file quarterly reports with Congress that provide the details of all loans, loan guarantees, and other investments.

Congressional Oversight Commission

The CARES Act establishes a Congressional Oversight Commission to conduct oversight of the Treasury Department and the Federal Reserve and the agencies’ implementation of the CARES Act. Members of the Congressional Oversight Commission include appointees selected by the Speaker of the House, the House Minority Leader, the Senate Majority Leader, the Senate Minority Leader, and a Chairperson appointed by the Speaker of the House and the Senate Majority Leader after consultation with the Senate Minority Leader and the House Minority Leader.

The Congressional Oversight Commission must furnish four distinct reports, every 30 days, to Congress, addressing the impact and effectiveness of the loan, loan guarantee, and investment programs, the extent to which transaction information publication has contributed to market transparency, and how the loans, loan guarantees, and investments have minimized long-term taxpayer costs and maximized taxpayer benefits. The Congressional Oversight Commission’s authority terminates on September 30, 2025.

Transaction Reports

The CARES Act requires the Secretary of the Treasury to publish on the Treasury Department’s website a plain language description about each loan and loan guarantee within 72 hours of the transaction. Additionally, Treasury and the Federal Reserve must report to the relevant congressional committees on transactions and the authorization of new facilities, respectively.

Conflicts of Interest

The CARES Act prohibits any company in which the President, Vice President, executive department head, Member of Congress, or any of the individual’s spouse, child, son-in-law, or daughter-in-law own a controlling interest, from participating in these programs.


Foreclosure Moratorium and the Right to Request Forbearance

The CARES Act provides that a borrower with a federally-backed mortgage loan may request forbearance, regardless of delinquency status and without penalties, fees, or interest, by submitting a request to the borrower’s servicer and affirming financial hardship due to COVID-19. A forbearance must be granted for up to 180 days and extended for an additional period of up to 180 days at the request of the borrower, though the initial or extended forbearance may be shortened. Servicers must notify the borrower in writing of their right to request forbearance throughout the period of a national emergency. Multifamily borrowers with a federally-backed multifamily mortgage loan that was current on February 1, 2020 may also request a forbearance for up to 30 days, with two additional 30-day extensions.

The CARES Act also prohibits the servicer of a federally-backed mortgage loan, except for a vacant or abandoned property, to initiate any foreclosure process, move for a foreclosure judgment or order of sale, or execute a foreclosure-related eviction or foreclosure sale for at least 60 days beginning on March 18, 2020.

Eviction Protection

The CARES Act prevents landlords from bringing legal causes of action to recover possession from tenant for nonpayment or rent or other fees or charges for 120 days if the dwelling is a property insured, guaranteed, supplemented, protected, or assisted in any way by the US Department of Housing and Urban Development (HUD), Fannie Mae, Freddie Mac, the rural housing voucher program, or the Violence Against Women Act of 1994.

Suspension of GAAP for COVID-19 Loan Modifications

The CARES Act allows financial institutions to make loan modifications related to COVID-19 or it effects without being categorized as a troubled debt restructuring. Such suspensions are applicable for the term of the loan modification, and may be made from March 1, 2020 through the earlier of (i) 60 days after the expiration of the national emergency declaration or (ii) December 31, 2020.

Credit Reporting Relief

The CARES Act requires reports to credit reporting agencies to show accounts as “current” even when there has been an account forbearance or agreement to modify payments on an account impacted by COVID-19. This will apply from January 31, 2020 through the later of 120 days after (i) enactment, or (ii) expiration of the national emergency declaration.


Debt Guarantee Authority

Section 4008 of the CARES Act amends Section 1105 of the Dodd-Frank Wall Street Reform and Consumer Protection Act to allow for a guarantee of deposits held by insured depository institutions to be treated as a debt guarantee program. Specifically, through December 31, 2020:

Government Temporary Hiring Flexibility

The CARES Act allows HUD, the Securities and Exchange Commission, and the Commodity Futures Trading Commission additional hiring flexibility upon a determination by the respective agency heads that an expedited recruitment process is necessary and appropriate to respond to the COVID-19 outbreak until the earlier of (i) the expiration of the national emergency declaration, or (ii) December 31, 2020.

Community Banks

The CARES Act requires prudential banking agencies to adopt an interim final rule reducing the community bank leverage ratio from nine percent to eight percent and providing a grace period for qualifying community banks to satisfy the requirement. The interim final rule will expire the earlier of (i) the expiration of the national emergency declaration, or (ii) December 31, 2020.

Tax Treatment of Loans

The CARES Act treats loans made or guaranteed by Treasury as debt for federal income tax purposes. It also instructs Treasury to issue guidance ensuring that ownership interests arising from loans and loan guarantees provided by the federal government under the CARES Act do not trigger a change in ownership for section 382 purposes.

Aviation Excise Taxes

The CARES Act provides an excise tax holiday from the date of enactment through the end of 2020 for aviation ticket taxes (both passengers and freight) and taxes on kerosene used in commercial aviation.

Title V—Coronavirus Relief Funds

Title V of Division A of the CARES Act appropriates $150 billion for states, territories, Indian Tribes, and local governments to respond to the COVID-10 emergency. The Secretary of the Treasury is charged with the administration of these funds pursuant to a detailed allocation procedure, with significant oversight authorities.

Title VI—Miscellaneous Provisions

Title VI provides (i) borrowing authority for the US Postal Service and (ii) an “emergency” designation for the funds appropriated in Division A (meaning that the spending is not subject to routine Congressional budgetary procedures).

Division B—Emergency Appropriations for Coronavirus Health Response and Agency Operations

Division B of the CARES Act consists of emergency appropriations for various programs that may be available to companies during these difficult times. These programs are summarized below, grouped by the various Appropriations Subcommittees. This is not a comprehensive list of all the new appropriated money, but a selection of those various grant, loan, or contract opportunities for those in the private sector to help deal with the consequences of COVID-19.


Department of Agriculture (USDA)



Department of Commerce

National Science Foundation (NSF)

National Aeronautics and Space Administration (NASA)

Department of Justice


Department of Defense


Federal Communications Commission (FCC)

Small Business Administration (Administration)

Election Assistance Commission (EAC)


Federal Emergency Management Administration (FEMA)

Cybersecurity and Infrastructure Security Agency (CISA)

Department of Homeland Security (DHS)


National Endowment for the Arts

National Endowment for the Humanities


Department of Health and Human Services (HHS)

Department of Education

Corporation for Public Broadcasting


Department of Transportation (DOT)

Department of Housing and Urban Development (HUD)


Although this legislation provides much-needed access to federal funds for federal contractors and grantees to address urgent challenges caused by COVID-19, those federal dollars continue to carry with them many of the same unique compliance risks and requirements imposed by the US Government. Unlike the commercial marketplace, the US Government also has available to it drastic and harsh remedies for non-compliances that could have a significant adverse effect on the reputational and financial value of targeted companies and other recipients. In light of those drastic remedies and because emergency conditions and urgent requests can often place a strain on compliance efforts, contractors and other recipients of this federal funding should have meaningful and sophisticated compliance programs in place to address and mitigate those risks.


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[1] Senator Sasse offered an amendment to change this, but the amendment failed.

[2] Note that Treasury and the IRS have similar authority to extend deadlines up to a year, provided by Code section 7508A, but they have interpreted their authority to include emergency declarations. See Notice 2020-18, 2020-15 I.R.B. ___; Rev. Rul. 2003-29, 2003-1 C.B. 587.