CARES Act: other key business provisions

The Coronavirus Aid, Relief, and Economic Security (CARES) Act, signed into law on March 27, 2020, contains many provisions that impact local businesses. Three of the most significant provisions impacting farms and other local businesses are the Paycheck Protection Program, Employee Retention Credits, and Economic Injury Disaster Loans (currently available only to non-farms). However, there are a range of other CARES Act provisions that also may provide some economic relief to local businesses. Several of these are described below, and we will continue to update this page as we get more information.

Pandemic Unemployment Assistance

New federal and state regulations have temporarily expanded access to unemployment assistance in many ways. One key thing to note is that the CARES Act’s new Pandemic Unemployment Assistance program makes unemployment assistance available for the first time to self-employed farmers and other business owners who are out of work or facing pay reductions, not only to their employees. See more information on unemployment insurance expansions here.

Penalty-free early retirement withdrawal

The CARES Act waives the 10% early withdrawal penalty on retirement savings from an IRA, 401(k) or other retirement account that are withdrawn by “qualifying individuals” in 2020. Exact eligibility requirements are determined by the retirement plan sponsor, but you would generally qualify for a penalty-free withdrawal it you have experienced financial hardship because of COVID-19 or if you or your spouse or dependent contract the virus. Withdrawals are capped at $100,000 and will be treated as income, though income tax payments can be spread over a three-year period. Contact your plan sponsor for more information.

Net operating losses can now be carried back five years

The CARES Act allows business owners to carry back net operating losses five years instead of two years. This is retroactive to 2018 and applies through 2020. Additionally, the net operating loss is no longer limited to 80% of taxable income for purposes of carry back.

Deferral of payroll taxes

Employers and those who are self-employed may defer payment of the social security taxes they owe for 2020 (which are equal to 6.2% of payroll), and may instead pay the first half in 2021 and the second half in 2022. Note that this option is not available to businesses receiving PPP loans. See more details here.

Increase in allowable deduction for food donations

The CARES Act raises the limit on the amount of the allowed deduction for food inventory from 15% to 25% for 2020 so as to incentivize increased food donations to organizations providing food to those in need.