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CARES Act: Guidance for Large Businesses

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By: Stephen Zaharias, William Reddington, Pierre Chabot, and Kathleen Peahl

April 2, 2020

This is the third installment in Wadleigh, Starr & Peters’ whitepaper series on the  “Coronavirus Aid, Relief, and Economic Security Act,” or “CARES Act,” the 880-page legislation signed into law this past Friday to provide emergency financial support to individuals and businesses across the country. This whitepaper will focus on the ways that larger business entities – those with over 500 employees – may tap into the funds allocated under the CARES Act, hopefully putting them in a better position to continue operating and retain employees through this unprecedented economic downturn. 

This publication is a summary of key portions of the CARES Act as it relates to larger businesses; it does not include all of the details and specifics found in the many hundreds of pages of legislative text, or seek to predict the contents of the significant regulatory guidance that is forthcoming. If you have any specific questions, you should consult with counsel. Of course, the attorneys at Wadleigh, Starr & Peters, PLLC are available to help you navigate, and take advantage of the assistance offered through, the CARES Act. 

Employee Retention Tax Credit

Some large businesses will be eligible for an employee retention credit against payroll taxes, which is equal up to 50% of qualified wages paid after March 12, 2020 and before January 1, 2021, up to $10,000 per employee.[1]

To be eligible, the employer must have carried on a trade or business during 2020, and (1) in any calendar quarter, had its business fully or partially suspended due to orders from an appropriate governmental authority as a result of the coronavirus, or (2) had a significant decline in gross receipts of at least 50% percent, as compared to the gross receipts of the same quarter in 2019.[2] As to the requirement concerning business being fully or partially suspended due to orders from an appropriate governmental authority, it is highly likely that orders from various state governors – including those from Governor Sununu in New Hampshire – that have limited commerce, travel, and/or group meetings due to the coronavirus will  satisfy this portion of the requirement.[3] Additional guidance on this requirement and other requirements will likely be forthcoming in the next few weeks.

It appears that any size business is eligible for the employee retention tax credit, so long as the other requirements noted above are met. However, businesses with more than 100 employees appear ineligible to claim a credit for “qualified wages” paid for providing services due to the coronavirus, an apparent nod to the reality that a small number of employers have the wherewithal to retain their workforce without government incentives during this crisis.[4]   

Thus, depending upon the circumstances, a larger business might be able to take advantage of this tax credit, which could provide some necessary economic assistance in these uncertain times. Of course, if you have any questions, please consult with counsel.

Delay of Payment of Employer Payroll Tax

Larger businesses may also be entitled to a deferral of  payroll taxes for 2020, spreading the payment out over the following two years.[5] This deferral covers payroll taxes owed between March 27, 2020 and January 1, 2021.[6] Eligible employers – which would include larger businesses, as there does not appear to be a cap on the size of a business eligible for this tax deferral – will have until December 31, 2021 to pay 50% of their 2020 payroll taxes, and until December 31, 2022 to pay the remaining 2020 payroll taxes.[7]

Businesses should be aware, however, that deferral under this program may make the business ineligible to participate in certain other relief provided by the CARES Act, thereby highlighting the importance of careful planning and advice from counsel before taking any action with respect to the CARES Act.[8]

Tax Matters

The CARES Act includes several tax-related relief efforts that are geared towards helping businesses of all sizes. These provisions include modifications to the net operating loss rules, modification of the alternative minimum tax credit, modifications to the interest limitation rules, and more.[9] Additionally, the CARES Act provides some tax changes to incentivize charitable giving. For example, the charitable deduction limitation for corporations has been increased from 10% to 25%.[10]

A qualified attorney or certified public accountant can help a business navigate these complex tax-related provisions. 

Economic Stabilization Loans

Although much of the relief provided by the CARES Act aims to assist small businesses, larger businesses may qualify for certain economic stabilization loans.

For businesses between 500 and 10,000 employees, Section 4003 of the CARES Act provides that the Secretary of the Treasury should endeavor to make loans and investments available to such businesses.[11] Interest rates on these loans would be capped at 2% and no principal or interest would be due in the first 6 months.[12] To be eligible, an appropriate entity must certify that the uncertainty of economic conditions makes the loan necessary to support its ongoing operations, and that the funds will be used to retain at least 90% of the entity’s workforce at full compensation and benefits until September 30, 2020.[13] Other certifications must be made as well, including that the recipient: (1) intends to restore not less than 90 percent of the workforce that existed as of February 1, 2020 and to restore all compensation and benefits to employees no later than 4 months after the termination date of the public health emergency declared by the Secretary of Health and Human Services in January 2020 due to the coronavirus; (2) is organized and domiciled in the United States with significant operations and employees located in the United States; (3) is not a debtor in a bankruptcy proceeding; (4) will not pay dividends with respect to the common stock of the eligible business, or repurchase an equity security that is listed on a national securities exchange of the recipient or any parent company of the recipient while the direct loan is outstanding, except to the extent required under a contractual obligation that is in effect as of the date of enactment of the CARES Act; (5) will not outsource or offshore jobs for the term of the loan and 2 years after completing repayment of the loan; (6) will not abrogate existing collective bargaining agreements for the term of the loan and 2 years after completing repayment of the loan; and (7) will remain neutral in any union organizing effort for the term of the loan.[14] The CARES Act is silent as to whether loans under this program will be capped at a certain amount; however, we expect additional guidance regarding this program and any limitations thereof to be forthcoming in the next few weeks.[15]

Businesses with 10,000 employees or more may also qualify for a loan or loan guarantee, as determined by the Treasury Department.[16] Eligibility will turn on whether other credit is reasonably available to the business.[17] There are significant underwriting provisions that are not present with CARES Act loans to smaller businesses.[18] The loan terms must be of as short a duration as practicable, and no longer than five years.[19] Recipients will be forbidden from issuing dividends or engaging in stock buybacks.[20] The borrower must also maintain its existing levels of employment, or at least not reduce it by more than 10%, between March 24 and September 30, 2020.[21] There are also limitations on these loans related to compensation levels for employees.[22] Additional requirements and further details of this loan program are likely to be defined by Treasury in the coming weeks.[23]

Other Provisions

            The CARES Act contains some miscellaneous provisions intended to benefit large businesses. Some provisions are focused on assisting the airline and healthcare industries, as well as the workers in those industries.[24] Additionally, state governments may be eligible to receive block grants from the federal government pursuant to the CARES Act, which could be used to assist larger businesses.[25]

Seek Counsel for Your Business

This publication is meant to serve as a summary of the more significant aspects of the CARES Act, as it relates to larger businesses. It is not intended to provide a comprehensive explanation of the CARES Act and does not constitute legal advice. You should consult an attorney with respect to your business’s unique situation.  

This publication also does not account for any of the regulatory guidance on the CARES Act that is likely forthcoming in the next few weeks. Nonetheless, the attorneys at Wadleigh, Starr & Peters, PLLC are carefully monitoring any additional requirements that may be announced by the Treasury Department and other agencies in the upcoming weeks. We would be happy to speak with you to address any other questions or concerns you have about the assistance that the CARES Act may offer your business. 


[1] Sec. 2301(a)-(b)(1).

[2] Sec. 2301(c)(2)(A)-(B).

[3] Sec. 2301(c)(2)(A)-(B).

[4] Sec. 2301(c)(3)(A).

[5] Sec. 2302.

[6] Sec. 2302(d)(2).

[7] Sec. 2302(a)(1)-(d)(3).

[8] Sec. 2302(a)(3).

[9] Sec. 2303-2306.

[10] Sec. 2205(a)(2)(B).

[11] Sec. 4003(c)(3)(D)(i).

[12] Sec. 4003(c)(3)(D)(i).

[13] Sec. 4003(c)(3)(D)(i)(I)-(X).

[14] Sec. 4003(c)(3)(D)(i)(I)-(X).

[15] Sec. 4003(c)(1)(B).

[16] Sec. 4003(a).

[17] Sec. 4003(c)(2)(A)

[18] Sec. 4003(c)(2)(B)-(C)

[19] Sec. 4003(c)(2)(D).

[20] Sec. 4003(c)(2)(E)-(F).

[21] Sec. 4003(c)(2)(G)

[22] Sec. 4004. 

[23] Sec. 4003(c)(1)(B).

[24] See, e.g., Secs. 3211, 3401 et seq., 4005, 4007, 4112.

[25] Sec. 5001.