The CARES Act consists of 800+ pages of economic relief legislation affecting individuals, businesses, specific industries, and state and local governments. The Coronavirus Response Team at Jaspan Schlesinger LLP has been hard at work analyzing those provisions that are most likely to be of assistance to our clients. A summary for informational purposes only follows below.

We recognize that the CARES Act is dense and may be difficult to digest. If you need specific legal advice, please contact the Chair of our Team, Jessica M. Baquet, at (516) 393-8292 or

Paycheck Protection Program

We previously provided a summary of the CARES Act’s Paycheck Protection Program (PPP). That summary can be found again here.

Borrowers will be apply for PPP loans through SBA-approved financial institutions once regulations are issued by the government, which is expected to happen in the next two weeks.

Debt Service Relief

Borrowers that already have a Small Business Association (SBA) loan of certain types (7(a) loans (including PPP loans), 504 loans and microloans), or that acquire such loans within 6 months after March 27, 2020, will not have to pay principal, interest or fees for six months. The CARES Act provides funding for the SBA to make those payments on borrowers’ behalves.

Entrepreneurial Programs

The CARES Act authorizes the SBA to make grants to small business development centers and women’s business centers (as those terms are defined in the Small Business Act) for education, training and advising of “covered small business concerns” regarding:

  • Accessing and applying for federal resources relating to access to capital and business resiliency;
  • Transmission and prevention of COVID-19 and other communicable diseases;
  • Potential effects of COVID-19 on supply chains, distribution and sale of products of small businesses and mitigation of those effects;
  • Teleworking to slow the spread of COVID-19;
  • Management and practice of remote customer service;
  • Risks and mitigation of cyber threats relating to remote customer service and telework;
  • Mitigation of the business effects of reduced travel and outside activities due to COVID-19; and
  • Other relevant business practices necessary to mitigate the economic effects of COVID-19 or similar diseases.

SBA Economic Disaster Loans

CARES allocates $10,000,000,000 for Emergency Economic Injury Disaster Loans (EIDLs) through the SBA. EIDLs are meant to provide economic relief to businesses that are experiencing a temporary loss of revenue. This additional funding expands the existing EIDL program in response to the COVID-19 pandemic for the period January 1, 2020 through December 31, 2020.

Small businesses, not-for-profit organizations, cooperatives, tribal small business concerns and ESOPs with 500 employees or less, sole proprietorships and independent contractors are eligible for EIDLs under the expanded program.

Some of the ordinary pre-requisites for these loans are waived or modified as follows:

  • Personal guarantees are not required for advances or loans of $200,000 or less.
  • Applicants need not have been in business for one-year prior to seeking an EIDL, so long as the applicant was in business on January 31, 2020.
  • Applicants do not need to certify that they are unable to obtain credit elsewhere.
  • Approval can be based solely on a credit score without the need for the applicant to submit a tax return.

Applicants can request an advance with their application, and the SBA can disburse up to $10,000 to eligible businesses within three days of the application’s receipt. That advance must be used to:

  • Provide paid sick leave to employees unable to work due to the direct effect of COVID-19;
  • Maintain payroll to retain employees during business disruptions or substantial slowdowns;
  • Meet increased costs to obtain materials unavailable from the applicant’s original source due to interrupted supply chains;
  • Make rent or mortgage payments; or
  • Repay obligations that cannot be met due to revenue losses.

Applicants will not be required to repay the amount of any advance, even if they are later denied an EIDL.

SBA provides an online EIDL application here.

Chapter 11 Bankruptcy Relief

The CARES Act modifies the relief available under Chapter 11 of the Bankruptcy Code for certain businesses that seek to reorganize. The Code provides for a streamlined reorganization process for small businesses with aggregate debts of $2.73 million, but CARES increases that limit to $7.5 million for Chapter 11 bankruptcies commenced after March 27, 2020. Additionally, for cases commenced within one year after the enactment of the CARES Act, any federal COVID-19 relief payments are excluded from the calculation of the debtor’s monthly income.

Chapter 11 debtors with reorganization plans confirmed prior to March 27, 2020 may seek modification of those plans. These debtors must demonstrate at a hearing that they have experienced or are experiencing a material financial hardship due, directly or indirectly, to the COVID-19 pandemic. Any modification granted cannot extend the time period for payments by the debtor beyond seven years after the due date for the first payment under the original confirmed reorganization plan.

Employee Retention Credit

The CARES Act creates a refundable payroll tax credit for eligible businesses that retain/continue to pay their employees in certain circumstances.

Businesses are eligible if they carried on a trade or business during the 2020 calendar year and either of the following conditions are met:

    • Business operations were fully or partially suspended during any quarter of 2020 due to a government order relating to COVID-19; or
    • The business remained open but, during any quarter in 2020, experienced a reduction in gross receipts of at least 50%, (this eligibility ends once gross receipts exceed 80% of gross receipts for the same calendar quarter in the prior year).

For each quarter in which a business is eligible, it will receive a credit against the employer portion of the social security tax that is equal to 50% of “qualified wages,” capped at $10,000 per employee, paid after March 12, 2020 and before December 31, 2020. The definition of “qualified wages” depends on the employer’s size.

Employers that had, on average,100 or fewer full-time employees in 2019, may claim a credit for wages (including qualified health plan expenses) paid while their operations were suspended, and in each period during which there was a “significant decline in gross receipts” as defined by the law.

Employers that had, on average, more than one hundred full-time employees in 2019, can claim a credit for wages (including qualified health plan expenses) paid to an employee who was not working/performing services (e.g., was furloughed) due to the pandemic.

The Department of the Treasury is authorized to advance the payment of this tax credit to employer.

Importantly, no employer will be entitled to take advantage of this employee retention tax credit if it obtains forgiveness of a PPP loan.

Payroll Tax Deferral

Ordinarily, employers are required to deposit federal income taxes withheld from employees’ pay, as well as both the employer and employee contributions to social security and medicare, on a monthly or semi-weekly basis. Under the CARES Act, payroll taxes that would otherwise be due in 2020 are deferred such that 50% of such taxes will be due on December 31, 2021, and the remaining 50% will be on December 31, 2022.

Again, an important caveat is that no employer will be entitled to take advantage of this payroll tax deferral if it obtains forgiveness of a PPP loan.

Modifications to Net Operating Loss Rules

Before the enactment of the Tax Cuts and Jobs Act (TCJA), a net operating loss (NOL) could be carried back two years and used as a deduction against 100% of a business’ taxable income. The TCJA changed this by eliminating the permitted two-year carry back entirely for NOL incurred after 2017. It permitted NOLs to be carried forward indefinitely, but limited the amount of the NOL deduction to 80% of taxable income.

The CARES Act changes this. NOLs incurred after January 31, 2017 but before January 1, 2021 may now be carried back five years. The 80% limit on the deduction is also repealed as to both carry-forwards and carry-backs through the 2020 tax year. A separate deduction limit will apply to tax years 2021 and beyond.

Alternative Minimum Tax Credits

The TCJA eliminated the alternative minimum tax (AMT) for corporations, and allowed corporations to claim a credit in tax years 2018-2021 for previously paid AMT. Fifty percent of the credit was to be treated as refundable in tax years 2018-2020, and 100% was to be treated as refundable in 2021.

Under the CARES Act, AMT credits will be 100% refundable beginning in tax year 2019. The Act also creates a special election that permits businesses to take the entire refundable credit amount in 2018 by filing a refund claim before December 31, 2020. The Secretary of the Treasury must review review and determine these applications, and apply or refund any overpayment, within ninety days.


For health care providers, the CARES Act eases certain restrictions in medicare reimbursement for telehealth services.

Under previous regulations, telehealth services had to be conducted in a manner that involved a video component. That requirement has been eliminated, opening the door to telehealth consultations over the phone.

The CARES Act also eliminates a previous requirement that a health care provider could only provide telehealth services to individuals who the provider had seen in person within the last three years.