How you could benefit from the bailout
30th March 2020 · 0 Comments
As NBC’s quipped Jonathan Allen, the coronavirus bailout is “good for the little guy, but it may be even better for CEOs and investors.”
“For the second time in a dozen years, Congress is giving the Treasury secretary a nearly blank check to rescue imperiled companies in the midst of an economic crisis. This time, there’s little opposition. In part that’s because lawmakers and President Donald Trump are also set to approve unprecedented support for ordinary Americans in the form of direct payments, the extension and expansion of benefits for the unemployed, and a provision forcing companies to keep 90 percent of their workforce on payroll if they accept government assistance.”
Essentially, the $2 trillion bipartisan package grants $250 billion to make unemployment insurance more widely available, providing provide an extra $600 a week for four months and extending the duration of benefits to 39 weeks from the 26 weeks typical in most states. Another $301 billion shall go in direct payments to households. Checks of $1,200 to adults and $500 per child will be structured as tax refunds to allow the Internal Revenue Service to distribute the funds quickly. The direct grants are phased out for upper income brackets, starting with $75,000 of individual income. The payments cap out for individuals without children making more than $99,000 and married couples without children making more than $198,000.
Emergency loans from retirement funds would easier, as Washington reporter Anne Tergesen noted, “The law temporarily loosens the rules on hardship distributions from retirement accounts, giving people affected by the crisis access to up to $100,000 of their retirement savings without a 10 percent penalty. The law doubles the amount 401(k) participants can take in loans from an account for the next six months to the lower of $100,000 or 100 percent of the account balance. (IRAs don’t permit loans.) For retirees, the law suspends for 2020 the mandatory distributions the government requires most to take from tax-deferred 401(k)s and individual retirement accounts starting at either age 70½ or age 72.”
“The law would allow most Americans with federal student loans to suspend their monthly payments through Sept. 30, 2020, without any interest accruing,” said the WSJ’s Josh Mitchell. “It would also enable employers to make tax-exempt contributions toward their workers’ student-loan payments.”
Still, As the Wall Street Journal noted, the vast majority of the bailout legislation goes to businessowners, in the following ways:
• $349 billion in loans to small businesses, with the amount spent on payroll, rent or utilities converting into grants that don’t have to be repaid.
• $500 billion for loans, loan guarantees or other aid to businesses, states and municipalities — including the possibility that the government will take direct equity stakes in distressed companies. Of the total, $29 billion is set aside for cargo and passenger airlines, and $17 billion is for businesses deemed critical to national security, such as Boeing. The remaining $454 billion would go to backstop losses in lending facilities established or expanded by the Federal Reserve.
• $32 billion in grants to cover wages at passenger air carriers, cargo air carriers and contractors.
• $150 billion in direct aid to states, distributed according to population size. A municipality could apply to receive aid directly, reducing the amount available to the rest of the state.
• $221 billion in a variety of tax benefits for businesses, including allowing businesses to defer payroll taxes, which finance Medicare and Social Security, for the rest of the year. It would also temporarily allow businesses to claim deductions using today’s losses against past profits to claim quick refunds for cash infusions.
• $340 billion in supplemental spending, which includes $117 billion for hospitals and veterans’ care. It also includes $25 billion mostly for public transit to make up for revenue lost because of dwindling ridership.
Bankruptcy
“The law ensures that people who file for bankruptcy don’t have to use stimulus checks to repay past debt, and it extends the time that bankrupt people have to repay a portion of their debt as a condition to getting a fresh start,” said expert Katy Stech Ferek. “The current repayment time limit is five years; the bill extends the repayment time frame to seven years.”
Credit Reporting
AnnaMaria Andriotis added, “Consumers who fall behind on their debt payments won’t necessarily take a hit on their credit reports. The bill requires lenders that allow struggling consumers to defer or skip loan payments to report the borrowers as current on their payments, even if they are not. Most consumers who were behind on their debts before the coronavirus crisis will continue to be reported as delinquent.”
Mortgages
Of particular importance, outlined Orla McCaffrey, “The bill requires companies that service federally backed mortgages to grant a forbearance of up to 360 days to borrowers who say they have been harmed by the coronavirus outbreak. Servicers are prohibited from initiating foreclosure and processing foreclosure-related evictions for 60 days beginning March 18. Owners of multifamily properties can request a forbearance of up to 90 days, during which tenants cannot be evicted for nonpayment of rent or other fees.”
Music
“The music industry stands to benefit from the bill’s provisions that expand unemployment and small-business loans to independent contractors and sole proprietors,” explained Anne Steele. “Now, session musicians, songwriters and gig workers at venues and on tours that were postponed or canceled will be eligible to apply for such benefits. Charitable organizations affiliated with the music business could also receive grants from the new funding for the National Endowment of the Arts.”
Postal Service
“The financially strained U.S. Postal Service is getting a $10 billion Treasury loan to help the mail carrier during the pandemic,” Paul Ziobro of the WSJ noted. “That should be welcome news for Amazon.com Inc., United Parcel Service Inc. and, to a lesser extent, FedEx Corp., which rely on postal workers for last-mile delivery in certain places.”
“The Postal Service is only allowed by law to raise its net debt by $3 billion a year, so the bill loosens that restriction. But it does come with some strings attached. Mainly, the Postal Service can only use the financing for operating expenses and not to pay down outstanding debt. The bill also requires the Postal Service to prioritize medical shipments and allows temporary delivery points to protect workers and recipients of mail.”
Energy
No luck for this crucial Louisiana sector of the economy, as reporter Christopher M. Matthews explained. “The bill contains no major provisions to specifically aid the U.S. energy industry. Beleaguered U.S. oil producers had sought a range of remedies, including preferential tax treatment, direct subsidies and a $3 billion purchase of oil by the federal government for the Strategic Petroleum Reserve. The renewable energy industry had sought extensions to tax provisions that would have helped wind-and-solar developers secure valuable tax credits even if there were construction delays. Industry officials expressed disappointment. Democrats were unwilling to support what they considered to be bailouts, and Republicans balked at supporting renewables, say energy industry analysts.”
Taxes
“People who don’t itemize their deductions would be able to claim up to $300 for charitable contributions,” reporter Richard Rubin discovered. “Businesses get the ability to apply losses from 2018, 2019 or 2020 to past years’ profits and claim refunds. Restaurants and retailers would benefit from the fixing of a mistake in the 2017 tax law that curbed their depreciation deductions on renovations. Employers would be able to defer paying their share of 2020 payroll taxes. They could then make half of those payments in 2021 and the other half in 2022. In addition, the bill creates a new tax credit for retaining employees that’s aimed at companies that are too large to benefit from the small-business assistance elsewhere in the bill. Those employers would be able to get a tax credit equal to 50 percent of payroll. That is limited to $10,000 per employee per quarter, and for employers with more than 100 employees, it is available only to those companies and nonprofits that had their businesses limited or closed by government actions.”
This article originally published in the March 30, 2020 print edition of The Louisiana Weekly newspaper.
