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CARES ACT & Its Impact on Small Business - Part II

In addition to the grants and funding identified in Pullano & Farrow’s prior Legal Briefings, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) provides additional support to small businesses.

Entrepreneurial Development ($265 million) [Section 1103 of the CARES Act]

o Authorizes the provision of grants to small business development centers (to be awarded 80% of eligible grants) and women’s business centers (to be awarded 20% of eligible grants) so that these partners can provide education, training, and advising to small businesses and their employees on:

  • Accessing and applying for Federal resources;

  • The hazards and prevention of COVID-19 and its impact on the supply chain, distribution, and sale of products;

  • Management and practice of telework;

  • Management of remote customer service;

  • Risks of (and mitigation) of cyberthreats;

  • Mitigation of the effects of reduced travel; and

  • Other business topics.

o Associations representing small business development centers and women’s business centers are also authorized to receive grant funding to establish a centralized online platform for resources and a training program for education.

Statewide Trade Expansion Program [Section 1104 of the CARES Act]

o Extends the availability of federal grant funding for the State Trade Expansion Program from fiscal years 2018 and 2019 through the end of fiscal year 2021.

Minority Business Development Agency ($10 million) [Section 1108 of the CARES Act]

o Provides grants to minority business centers and minority chambers of commerce to provide education, training, and advising to for-profit business enterprises that are owned 51% or more by one or more socially disadvantaged individuals and management and daily control of the business operations are by one or more socially disadvantaged individuals.

o Similar to the Entrepreneurial Development Program, grants are to be used for: education, training, and advising on certain topics.

Employee Retention Credit for Employers [Section 2301 of the CARES Act]

o Eligible employers are allowed a credit against employment taxes for each calendar quarter in an amount equal to 50% of the qualified wages per employee. The amount of qualified wages per employee, however, is limited to $10,000 per calendar quarter.

o However, if an employer receives a small business interruption loan, then the employer is not eligible for the retention credit.

o Eligible employers include:

-those carrying on a trade or business during 2020, and

-with respect to any calendar quarter, for which:

  • the operation or business is fully or partially suspended during the calendar quarter, or

  • the calendar quarter is within the period (1) beginning with the first calendar quarter after December 31, 2019 for which gross receives for the calendar quarter are less than 50% of the gross receipts for the same calendar quarter in the prior year; and (2) ending with the calendar quarter following the first calendar quarter beginning after a calendar quarter described in (1) for which gross receipts are less than 80% for the same calendar quarter in the prior year.

Delay of Payment of Employer Payroll Taxes [Section 2302 of the CARES Act]

o Employers may defer payment of employment taxes from the enactment of the CARES Act until January 1, 2021.

o 50% of the deferred amount is due by December 31, 2021 and the other 50% is due by December 31, 2022.

Modifications For Net Operating Losses [Section 2303 of the CARES Act]

o Employers may deduct losses incurred in 2018, 2019, or 2020 and carryback for 5 years, applying the losses against 100% of the prior years’ income.

Modifications on Limitation of Business Interest [Section 2304 of the CARES Act]

o The net business interest deduction limitation is raised from 30% to 50% of adjusted taxable income for 2019 and 2020.

o Special rules apply with respect to partnerships.

o Adjusted taxable income from 2019 may be substituted for 2020 when determining the deduction limitation.

Payroll Credits for Sick Leave [Section 3606 of the CARES Act]

o Employers can apply for payroll credits in an amount up to 100% of the qualified sick leave wages paid by an employer with respect to a calendar quarter, subject to certain limitations

The full text of the CARES Act can be found at