The $2 trillion economic relief plan passed by the U.S. Senate this week includes benefits for both consumers and retailers hard-hit by the coronavirus pandemic.
The bill, known as the CARES Act (Coronavirus Aid, Relief and Economic Security Act), provides needed liquidity to both businesses and consumers while providing additional funding for healthcare.
In addition to the widely touted immediate relief for consumers in the form of $1,200 per adult, the bill includes an additional $15.5 billion for Supplemental Nutrition Assistance Program (SNAP) funding as the industry expects a large uptick in SNAP participants due to the economic effect of the pandemic. It also extends the Temporary Assistance for Needy Families (TANF) authorization period. For businesses, it also allows employers to delay 50% of payroll taxes for the remainder of the year and gives them more access to business loans.
The CARES Act also corrects one of the biggest sticking points for grocers. The so-called "retail glitch," described as a drafting error in the Tax Cuts and Jobs Act of 2017, included a provision providing businesses with a 100% bonus depreciation to be used to write off the full costs of short-lived investments immediately. Congress intended to help retailers invest with the inclusion of this provision. However, due to a drafting error, some categories of business investment, most notably qualified improvement property, or QIP, were excluded from being 100% eligible for bonus depreciation. Due to this error, retailers making investments to improve their stores have faced a more restrictive cost recovery period that is twice than under the prior law.
FMI-The Food Industry Association provided a summary of the CARES Act:
SNAP: The bill adds $15.5 billion in funding for SNAP and directs the secretary of agriculture to hold it in a contingency fund to support participation if it exceeds the previous budget estimates for the year. "In short, we expect a large uptick in SNAP participation and benefit levels, these funds will pay for that increase," FMI said.
TANF: The bill extends current TANF authorization through Sept. 30 and appropriates as much sums as necessary.
Charitable Contributions: The charitable contribution limit increased from 15% to 25% of taxable income for food donations.
Single-Employer Pensions: Payment of minimum required contributions delayed for single-employer plans, multi-employer pensions were not addressed in the bill.
Payroll Tax Deferral: The bill allows a delay in the payment of employer-side payroll taxes for the rest of 2020. Half (50%) can be deferred until December 31, 2021; the other 50% by December 31, 2022 with some limitations.
Net Operating Loss “Carryback” Revision: Losses in 2018, 2019, 2020 are eligible for carryback of the five years allowed.
Business Interest: For tax years 2019 and 2020, the bill allows up to 50% of interest paid to be deducted, up from 30%.
QIP Fix: The bill fixes the drafting error that was in the Tax Cuts and Jobs Act.
Exclusion of Employer Student Loan Repayments: Made between date of enactment and 2021.
Child Care: An additional $3.5 billion in funding was appropriated for the Child Care and Development Block Grant to provide child care assistance to healthcare sector employees, emergency responders, sanitation workers and other workers deemed essential during the response to coronavirus, without regard to income eligibility requirements.
Emergency Sick and Family Medical Leave: An employer’s obligation is clearly limited to the amounts covered by the tax credits. The bill also clarified that for Emergency Family Medical Leave, a rehired employee must have 30 days of service during the previous 60 calendar days before rehiring to be eligible.
Advance Credits to Cover Emergency Sick and Family Leave: Subject to rule-making, the secretary of the treasury is authorized to provide loans and/or credits to companies to cover the cost of paying for emergency sick and family leave.
Continuation of Business Loans: FMI notes that under Title IV the grocery industry will be eligible for money under several provisions.
Limitations on Employee Compensation: The compensation for highly paid employees (more than $425,000) is sharply limited for companies that accept bailout money or federal loans related to this bill.
Recovery Rebates: The bill directs the IRS to issue what are called “Recovery Rebates.” The rebates would be direct payments to individuals and families based on their 2018 or 2019 tax filings. Individual filers making up to $75,000 and head of households making less than $115,000 will receive $1,200. Joint filers with less than $150,000 in income will receive $2,400. Families will also receive a $500 rebate for each dependent child, so a family of four could receive up to $3,400. The bill also grants rebates for higher earners but at a reduced rate relative to their income. The IRS has the ability to issue rebates electronically to households who filed taxes electronically in 2018 and 2019.
Inclusion of Menstrual Products as Qualified Over-the Counter Purchases for HSA/FSA Purposes: One of the most notorious "pink taxes" is addressed by allowing menstrual products to be considered as qualified over-the-counter expenses for the purpose of HSA/FSA reimbursement.
The Consumer Brands Association also issued a recap of the bill that includes several provisions relating to supply-chain needs. Under the CARE Act, states will be allowed to issue permits to lift truck weight requirements to increase the flow of essential goods for coronavirus relief through the rest of the fiscal year, and the bill provides funds and resources to the U.S. Environmental Protection Agency for expedited registration of disinfecting products essential to stopping the spread of COVID-19.