What’s inside the CARES Act for construction professionals?
The construction industry, like most industries, has taken a hard hit amid the COVID-19 crisis. Projects across the country have been delayed or even halted. Many businesses are short on cash and eager for financial aid to get through these uncertain times.
On March 27, President Donald Trump signed the Coronavirus Relief and Economic Security Act, also known as the CARES act. Aimed to propel the U.S. economy toward recovery, the $2 trillion stimulus package puts much needed resources into the hands of struggling individuals and businesses.
So what’s inside the bill to help construction companies like yours? We asked our Buildertrend legal expert Nick Knihnisky to shed light on how you can take advantage of this relief package in this Q&A.
So, what exactly is the CARES Act?
The CARES Act is the third installment of the federal government’s stimulus package to combat the detrimental economic effects of COVID-19. With pieces targeting almost every industry in the American economy, the $2 trillion bill will have dramatic consequences for governments, businesses and individuals.
What type of relief is inside the CARES Act?
Along with some significant medical expenditures, the law includes:
- Increased accessibility for small business loans
- Expanded eligibility for unemployment benefits
- Payroll tax credits, direct loans to large corporations
- Individual benefits, namely direct tax rebates
How can this help construction businesses and general contractors?
The CARES Act should give small businesses and their employees much-needed flexibility and peace of mind as we navigate this difficult time. While we await much-needed guidance from the Treasury and Small Business Administration, the Paycheck Protection Program will hopefully provide virtually every construction business with access to short-term capital to retain employees.
The Paycheck Protection Program provides loans to small businesses. How does that work?
The much-publicized Paycheck Protection Program expands access to federally guaranteed loans for up to 250% of a small business’ “payroll costs,” with a maximum of $10 million. The loans are obtained through private, SBA-preferred lenders.
But the big kicker is that these loans can be forgiven if the business: first spends the loan amount of the business’ payroll, rent, mortgage interest, and utilities, and secondly maintains its payroll.
Who is eligible for these small business loans?
In addition to businesses meeting the SBA’s small business size standard, a business is eligible for the PPP if it has less than:
- 500 employees, OR
- If applicable, the number of employees established by the SBA for the business’ industry
Note: Total number of employees can include full-time and part-time workers.
The CARES Act also includes tax relief. Can that help construction businesses?
Yes, the CARES Act allows businesses to defer any payroll taxes for the rest of 2020. While the amounts are still ultimately due, you can pay half of them in 2021 and the other half in 2022.
Though construction is being deemed an essential business by most states that are issuing stay-at-home orders, businesses that have been forced to close as a result of the COVID-19 are eligible for additional payroll tax benefits. If your business has been forced to close, you are eligible for the Employee Retention Credit to receive a tax credit equal to 50% of wages paid, with a maximum credit of $5,000 for each employee.
What about aid for construction workers and their families?
The stimulus package also includes relief for individuals whether they’re working or have been laid off, including:
Individual Tax Rebate
This is probably the most well-known element of the bill. The CARES Act provides a direct tax rebate to individuals. Individuals making less than $75,000 in 2019 will receive $1,200, while married couples making less than $150,000 in 2019 will receive $2,400. Parents are eligible for an additional $500 per child.
For employees negatively affected by COVID-19, the law suspends the 10% withdrawal penalty for early retirement plan distributions up to $100k. Additionally, employees with an eligible 401(k) can borrow up to $100k or 100% of their vested account balance from their employer retirement plan. However, a participant should ensure his or her plan will provide for these benefits before you immediately attempt to take advantage of them.
If I have been forced to terminate employees, are there any benefits available to them?
Yes. Although each state will be different on how they structure their unemployment insurance program, the CARES Act dramatically expands unemployment benefits. If you had to go through the unfortunate decision to lay off your employees, you should ensure that they are exhausting all access to unemployment benefits. Here are ways the stimulus package expands access to unemployment benefits:
The timeframe for unemployment benefits increases to 39 weeks, up from the typical 26-week maximum. This will allow affected workers to take advantage of benefits through 2020.
The law waives the typical one-week waiting period for unemployment benefits.
In addition to the state-provided benefits, unemployed workers will receive an additional $600 per week. For most states, the standard benefit is 50% of the worker’s previous weekly pay.
The CARES Act expands eligibility for unemployment benefits to include those individuals who are:
- Diagnosed/quarantined with COVID-19
- Caring for a family member with COVID-19
- Scheduled to begin work, but are unable to because of COVID-19
- Forced to quit their job as a result of COVID-19
- Unable to work because their place of employment is closed
We’re here for you
For more information regarding the CARES Act, check out our webisode featuring our expert panel: Nick Knihnisky, our Buildertrend legal expert; Chris Anderson, financial expert from Monthend; and Paul Wurth, co-host of “The Building Code” podcast.
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