CARES Act Questions for the Technology Industry (Updated 06/15/2020)
Congress recently passed the economic stimulus package referred to as the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), the Paycheck Protection Program and Health Care Enhancement Act (“PPPHCE Act”), and the Paycheck Protection Program Flexibility Act (“PPP Flexibility Act”). Ttogether, the CARES Act1, PPPHCE Act, and PPP Flexibility Act are called the “CARES Act”. The CARES Act is important to certain technology businesses because it offers necessary financial relief during this unprecedented time.
Understanding the available loans and grants, tax provisions, and employment considerations available under the CARES Act could have a tremendous impact on technology-related businesses as they make business-critical decisions about their workforces and the continuation of their businesses. As further information becomes available about financial relief offered under the CARES Act, we will update this post.
What are the key provisions in the CARES Act that impact the technology sector?
The CARES Act establishes a new temporary lending program for small businesses, extends the Economic Injury Disaster Loan (“EIDL”) program and allows for advances, amends the tax code, and includes new items relevant to unemployment insurance. The Small Business Administration’s (“SBA”) affiliation rules may restrict CARES Act appropriated funds available to technology businesses controlled by venture capital or private equity firms. Certain technology businesses, such as some online retailers, may not qualify for specific programs established by Congress through the CARES Act to support small businesses. In addition, technology-focused trade organizations exempt from taxation under Section 501(c)(6) of the Internal Revenue Code are eligible to receive EIDLs and emergency EIDL grants, but these tax-exempt trade organizations are ineligible for Paycheck Protection Program loans.
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