The CARES Act changes the financial rules: What you need to know
Chris Burns, CEO of Dynamic Money, explains how the $2.2T stimulus impacts your wallet.
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For the first time in our nation’s history, a pandemic has closed the economy, shutting down businesses, schools and our way of life.
Congress acted swiftly to respond to the public health emergency and triage the economic fall-out. The $2.2 trillion Coronavirus Aid, Relief and Economic Security (CARES) Act won unanimous passage in the U.S. Senate. It provides emergency relief to families, workers and businesses to weather the COVID-19 crisis.
The American people deserve political leadership driven by integrity, not partisanship. As chairman of the Senate Finance Committee, I led a bipartisan group of lawmakers who negotiated in good faith to hammer together a broad range of tools to help Americans and employers stay afloat. The result was a major part of the CARES Act.
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The CARES Act includes direct payments to individuals and families, expanded unemployment insurance benefits for jobless workers, and lending programs for businesses of all sizes.
Americans who have lost their job through no fault of their own shouldn’t be left behind, no matter if they worked for a small business or a larger one. The same goes for employers.
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Our bipartisan package developed targeted, temporary tax relief to help businesses continue operations and keep workers on payrolls. It wasn’t necessary to reinvent the wheel. As we drafted the CARES Act, we modified existing provisions of the tax code so that businesses could apply them easily and quickly.
We didn’t pick winners and losers. The tools included in the CARES Act recognize all types and sizes of businesses – from farmers and sole proprietors, to pass-through businesses like partnerships, LLCs and S corporations, to larger corporations.
One-size-fits-all is not the way the U.S. economy operates. But nearly every sector is bearing the burden of social distancing and stay-at-home orders across the country.
We tapped bipartisan tax measures that were deployed in previous economic crises. For example, we expanded the ability of businesses to use net operating losses or NOLs, just like we did in 2002 after the 9/11 terrorist attacks, in 2005 for taxpayers affected by Hurricane Katrina, and yet again in 2009 after the financial crisis.
These proven, effective tax tools were enacted in the CARES Act with bipartisan support, allowing businesses to use losses to offset income earned in prior years. Combined with the broader relief measures in the CARES Act, they will help millions of American families and businesses survive.
Unfortunately, while countless heroes across the nation are putting their lives and livelihoods on the line for the health and welfare of their neighbors to fight the coronavirus pandemic, others are simply pandering for votes in the November election.
Driven by class warfare, they’re taking aim at pass-through businesses. Never mind that more than 90 percent of American businesses operate as pass-through entities, according to the Tax Foundation. This includes many of those hardest hit by the pandemic, like farmers, restaurants, manufacturers, retailers and health care providers.
These businesses are facing cash-flow catastrophes. What’s more, they employ more than half of the U.S. workforce. And yet, the partisan critics don’t want to allow some Main Street businesses to get a tax break for their losses if the losses are too great.
Shouldn’t these employers who are seeing enormous losses as a result of the economic crisis our nation is experiencing be able to carry the losses back to the fullest extent, just like big corporations, to help keep their doors open and their employees paid?
This partisan attack threatens the relief intended for businesses in every industry across America. The attempt to paint this tax provision as a boon for real estate and hedge fund investors completely misses the mark. Notably, the CARES Act did not change the longstanding limits on investors being able to benefit from passive investment losses.
Instead, critics of fair treatment for businesses in distress want voters to believe the pass-through provision is a tax loophole for the rich. This misleading talking point ignores the unimaginable economic losses that are painfully occurring across my state of Iowa and the rest of America.
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The magnitude of lost revenue threatens to pull under our farmers, restaurant owners, S corporation manufacturers, and too many other businesses up and down Main Street.
And even worse, what’s to stop anyone from going after other important relief measures in the CARES Act, like the employer retention credit or the Paycheck Protection Program, if relief measures help a business that critics now deem to be of the wrong size, type or industry?
The CARES Act threw a much-needed financial lifeline to businesses of all sizes, types and industries so they have the best chance to survive, preserve jobs of their workers, and join the recovery that’s on America’s horizon.
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Instead of working together to help the business community support their employees and regain their financial footing, partisan spoilers are using the pandemic to score political points. We shouldn’t let these theatrics distract us from the important work of securing a strong economic recovery.
That’s where I will focus my efforts.