The CARES Act

Be sure to read the special COVID-19 digital-only issue of Massage & Bodywork magazine.

By Les Sweeney, ABMP President, and Bob Benson, ABMP Chairman

On March 27, Congress completed its approval of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, a $2.2 trillion deal to provide economic relief to those most affected by COVID-19, and the President signed the bill into law.

Your ABMP staff was fully engaged, educating Congress about the nature of your work, the structure of your profession, and how relief needed to be tailored to be effective for you, and thousands of members joined us in our lobbying efforts.

The CARES Act marks the third and largest piece of COVID-19 relief legislation developed by Congress, and even more COVID-related legislation may be on the horizon. It will take some time to fully implement the 880-page bill, but the following analysis will help ABMP members get a head start on seeking relief.

Direct Payments

To begin, the CARES Act calls for no-strings-attached, direct-dollar payments to most individuals. If you make $75,000 a year or less, regardless of whether you are still working or are unemployed, you will receive $1,200 from the federal government. If your adjusted gross income is a bit higher—up to $99,000—you will receive a lesser amount, based on a sliding scale. If you are a single parent head of household, your eligibility ceiling is a bit higher. For families who file taxes jointly, the comparable amounts are $150,000 and $198,000. Eligible individuals will also receive $500 per dependent child who are under the age of 17.

You do not have to lift a finger to receive this benefit. If the US Treasury has your bank account number through your past payment of taxes to the IRS or because you receive Social Security directly into your bank account, you most likely will receive your funds in the last half of April or early May. If the Treasury needs to issue a paper check, you will be waiting longer. Here is an April Washington Post article that lays out payment priorities and the plans in detail.

Unemployment Benefits

The United States has an unemployment insurance compensation system with responsibilities split between the federal and state governments. Individuals relate to the system at the state level. While the federal government dictates general parameters and contributes part of the system costs, states have flexibility as to payment amounts and day-to-day administration of the program.

A massage therapist who works full time for an employer, such as LoDo Massage or Hand & Stone, and is laid off is eligible to file with their state for unemployment compensation. The amount of such compensation typically is some fraction of that individual’s recent compensation, no unemployment compensation is paid for the initial week after filing, and each state has limits on the duration of payments. Part-time employees and self-employed individuals in massage therapy, esthetics, hair, and nails have not historically been eligible for unemployment compensation.

However, in response to the devastating elimination of people’s ability to work at these professions because of coronavirus restrictions, the CARES Act has temporarily loosened some of those restrictions. The enhanced benefits run through June 30, 2020.

As is always the case with unemployment benefits, they cease when an individual finds new employment or is able to return to previous work. The new act is vague about what constitutes a return to work (A full client load? Seeing two clients?). Each state may have perspective on this matter.

Under the CARES Act, unemployment insurance benefits will temporarily be available to “an eligible self-employed individual” . . . “an individual who regularly carries on any trade or business” within the meaning of a specified section of the Internal Revenue Code of 1986. It appears that this expanded eligibility applies to individuals who work “part time,” a government definition that would cover a large proportion of massage therapists, estheticians, hair stylists, and nail professionals.

Individual states are in charge of deploying unemployment benefits, and states are in the process of creating language that would lay out the requirements for what counts as wages for those who are self-employed or independent contractors. We expect this will be in place some time during the week of April 13, 2020. We encourage you to visit your state unemployment website for the most updated information.

You have to take the initiative to apply for unemployment insurance. In the short-term, the application process is likely to be daunting. Literally 10 million people filed for unemployement benefits in just the past two weeks. State unemployment offices are swamped; this is frustrating, but you simply have to file in order to receive benefits. The carrot: in many states you could be eligible in total for around $1,000/week for up to 39 weeks if you remain unemployed that long.

If your state unemployment insurance agency determines you are eligible, you will receive weekly two amounts:

• the amount the state calculates under existing rules, which will be some fraction of your recent earned income from your trade or profession; and
• an additional $600 per week, constituting special coronavirus relief, courtesy of the federal government.

States have a choice whether to lump these two amounts together in a single check or to issue two checks.

In addition, under the current unemployment system, approved applicants receive no payment for the first week of eligibility. The CARES Act waives this provision. The federal government will be reimbursing states to enable them to begin unemployment payments right away.

The unemployment system requires recipients to be “actively seeking work.” One has to register with the state, actively search for employment commensurate with one’s particular skills and capabilities, and keep a record of such job search efforts. However, the CARES Act commands the states to “provide flexibility in meeting such requirements in case of individuals unable to search for work because of COVID-19, including because of illness, quarantine, or movement restriction.”         

Small Business Loans

To help small businesses get established and compete effectively, the US Small Business Agency (SBA) has for decades mounted a series of support programs. For the most part, SBA has been a lender of last resort; applicants have had to show they tried and failed to line up general business funding from other sources. General business lending has been through the 7(a)-loan program. SBA has also operated a Disaster Loan program—one that springs into action after major catastrophes such as tornadoes, hurricanes, and earthquakes.

The CARES Act makes significant expansion in eligibility for, and establishes much more generous terms for, both these lending programs in direct response to the economic fallout from the coronavirus. (Massage therapy and cosmetology businesses qualify as “small” so long as their annual revenues are less than $8 million.)

Eligibility for Disaster Loans has been expanded to include sole practitioners and independent contractors as well as more traditional businesses with employees. All 50 states are considered a disaster area with regard to COVID-19 impacts. Disaster loans are long-term and carry an interest rate of 4 percent.

Under the ongoing 7(a)-loan program, businesses work with a local bank to make a case for a loan, providing financial projections and reams of business information. The bank packages the application and sends it to the SBA. If the SBA approves the loan, that agency will guarantee 75 percent–85 percent of the loan. The local bank retains the remaining 15 percent–25 percent of the risk.

Of likely greatest interest to massage therapy and cosmetology businesses is an expansion of the 7(a) program through creation of the COVID-19-specific Paycheck Protection Program (PPP). This loan program is designed with the specific purpose of incentivizing employers to preserve jobs. Its watchwords are to expand eligibility (again, sole practitioners and independent contractors are eligible), cut red tape (few eligibility hoops), and move quickly. In government-speak, “This program gives small business access to short-term cash-flow assistance aimed to help deal with the immediate global impact caused by the COVID-19 pandemic.”

These loans are made by approved lenders, certified by the SBA, and are 100 percent guaranteed by the US government. Set formulas determine how large a loan you can seek, but these terms, which relate to payroll and occupancy costs, are generous. While interest rates on these PPP loans can be as high as 4 percent, the initial interest rate is going to be just 1 percent. Best of all, the principal amounts borrowed to cover eight weeks of payroll, rent, mortgage, and utility payments can be completely forgiven if the loan recipient keeps their group of employees on the payroll.

PPP loan terms, other than adjusting for business size, will be the same for all applicants. SBA loan decisions, and resulting funding, will flow quickly. Loan packages will be processed in the order received—first-come, first-served—until the $349 billion set aside for this program is exhausted.

To pursue a PPP loan, DO NOT apply directly to the SBA. That will slow you down. Instead go to a local bank where you have a relationship and inquire whether that bank is an SBA-approved lender. If that isn’t the case, ask that banker to refer you to another community bank that is so qualified. The SBA is looking to local banks to perform most of the loan eligibility screening. You should expect a warm reception from your local bank; though the interest rate is low, making loans that are 100 percent guaranteed by the US government means no worries about bad debts. Further, local banks prosper when their communities are economically healthy. They want you to stay in business.

For more detailed information about SBA loan programs, here is another concise, helpful article from The Washington Post discussing how to obtain a small business loan under the CARES Act.
Our recommendation to members interested in these loan options is to use the information available from the SBA to determine your eligibility and then to move quickly on applying if you fit both the eligibility requirements and the qualifying categories of business expenses for which you propose to spend loan dollars received.

Income Tax Deadlines Extended

Federal Tax Deadlines:

All individual and business income tax filings at the federal level have extended deadlines from April 15, 2020, to July 15, 2020.
State Tax Deadlines: As of April 1, 2020, all states but Idaho, Mississippi, and Virginia have extended state filing deadlines to July 15, 2020.

Student Loans

Federal student loan payments can be suspended through September 2020. While this does not apply to private student loans, it may be possible to call private lenders for more information about the possibility of suspending your student loan payment.

We invite you to stay up to date on this and other related issues by continuing to visit www.abmp.com/covid-updates. There, we will post all of our news, blogs, and relevant information on the virus and resolutions for your practice.

Helpful Links:

“Calculate How Much You’ll Get from the $1,200 (or More) Coronavirus Checks”
“Your Money: A Hub for Help During the Coronavirus Crisis”
Filing for Unemployment in Your State
Small Business Administration COVID-19 information