President Signs $2 Trillion Phase 3 COVID-19 Response Bill

Published by Michael Novogradac, Peter Lawrence on Wednesday, March 25, 2020 - 12:00am

[Updated March 31, 2020; 9:20 p.m.; originally titled Senate Leadership Agrees to nearly $2 Trillion Phase 3 COVID-19 Response Bill]

Today, President Trump signed the $2 trillion CARES (Coronavirus Aid, Relief, and Economic Security) Act (H.R. 748). The bill contains numerous tax, grant, and loan provisions designed to provide financial aid to individuals, businesses, nonprofits and state and local governments, to help address the tremendous health and economic fallout from the public health emergency.

The bill does not contain any targeted community development-related tax provisions. The blog post begins with a summary of the key provisions as we currently understand them and directly targeted to benefit individuals and businesses. Next, is a summary of additional appropriation funding for select government agencies for specific programs. This blog post focuses on those provisions most directly (and indirectly) relevant to individuals, businesses, nonprofit organizations, and state and local government agencies that focus on affordable housing and community development. This post does not address the numerous, and much needed, health and other provisions contained in the nearly 900-page bill. 

See links to Finance Committee tax and unemployment summaryFinance Committee Health summary, Final bill textAppropriations summary, and Appropriations bill text.


  • 2020 recovery rebates for individuals
    Provides checks of as much as:
    • $1,200 for single taxpayers
    • $2,400 for married joint filers
    • $500 for each dependent child

These checks are based on federal 2018 returns. They are reduced for higher income taxpayers, with phaseouts beginning at $75,000 for single taxpayers and $150,000 for married joint filers, and ending for single taxpayers with incomes exceeding $99,000 and married joint filers with no children and incomes exceeding $198,000.

Taxpayers with little or no income tax liability, but at least $2,500 of qualifying income, would be able to receive:

  • $600 for single taxpayers
  • $1,200 for married joint filers

Qualifying income includes earned income, Social Security retirement benefits and certain compensation and pension benefits paid to veterans. (Section 2201)

  • Unemployment Insurance

Provides expanded unemployment insurance benefits. The bill:

  1. Creates a temporary Pandemic Unemployment Assistance program for those not traditionally eligible for unemployment benefits (self-employed, independent contractors, those with limited work history, and others) who are unable to work as a direct result of the coronavirus public health emergency.
  2. Provides payments to states to reimburse nonprofits, government agencies, and Indian tribes for half of the costs they incur through Dec. 31, 2020 to pay unemployment benefits.
  3. Provides payments to states for an additional $600 per week payment to each recipient of unemployment insurance or Pandemic Unemployment Assistance for up to four months.
  4. Provides funding to states to pay the cost of the first week of unemployment benefits for states that choose to pay recipients as soon as they become unemployed instead of waiting one week before the individual is eligible to receive benefits.
  5. Provides payment to states for an additional 13 weeks of unemployment benefits to help those who remain unemployed after weeks of state unemployment benefits are no longer available.
  6. Provides states with funding to support “short-time compensation” programs, where employers reduce employee hours instead of laying off workers and the employees with reduced hours receive a pro-rated unemployment benefit. This provision would pay 100 percent of the costs states incur in providing this short-time compensation.
  7. Provides funding to support states that begin “short-time compensation” programs. This provision would pay 50 percent of the costs that a state incurs in providing short-time compensation. (Sections 2102-2109)
  • Relaxation of Charitable Deduction Limits

Allowance of $300 above the line deduction for charitable contributions in 2020. (Section 2204)

Suspends the 50 percent of adjusted gross income limitation for 2020. (For corporations, the 10-percent limitation is increased to 25 percent of taxable income.) (Section 2205)

  • Special rules for use of retirement funds

Waives the 10-percent early withdrawal for distributions up to $100,000 for coronavirus purposes. In addition, income attributable to such distributions would be subject to tax over three years and taxpayer may recontribute to an eligible retirement plan within three years without regard to the annual cap. Coronavirus-related distributions include distributions to an individual:

  1. Who is diagnosed with COVID-19
  2. Whose spouse or dependent is diagnosed with COVID-19
  3. Who experiences adverse financial consequences as a result of being quarantined, furloughed, laid off, having work hours reduced, being unable to work due to lack of child care, closing or reducing hours of a business owned or operated by the individual due to COVID-19, or other factors as determined by the Treasury Secretary (Section 2202)
  • Income tax exclusion for student loans

Provide income tax exclusion for individuals who are receiving up to $5,250 in student loan repayment assistance from their employer. (Section 2206)


  • $500 Billion Treasury Exchange Stabilization Fund

Provides $454 billion for loans, loan guarantees and other investments in support of the Federal Reserve’s lending facilities to eligible businesses, states and municipalities. (Sec. 4003) Contains limits on employee compensation.

Provides $46 billion for direct lending to air carriers and ancillary services, and businesses important to maintaining national security.

  • Delay of employer payroll tax payments
    Allows employers and self-employed individuals to defer payments of the employer share of the Social Security tax on behalf of their employees. Deferred payments must be paid over the following two years, with half due by Dec. 31, 2021 and the other half by Dec. 31, 2022. (Section 2302)

The CARES Act presents two alternate workforce-targeting measures, Small Business Administration Forgivable Loans and Grants, and Employee Retention Tax Credits. A taxpayer who participates in the SBA Forgivable Loans and Grants program does not qualify for Employee Retention Tax Credits. We summarize each below, as well as some of the requirements that must be met to qualify. Expect that a taxpayer receiving loans, grants, or credits under these programs will be required to document their compliance with requirements.

  • Small Business Administration Forgivable Loans and Grants
  1. SBA will administer a $349 billion Paycheck Protection Program:
    • Eligible recipients include small businesses, self-employed individuals, nonprofits and Tribal business concerns.
    • The business or organization must not employ more than 500 employees, or exceed the size standard in number of employees for the industry, whichever is greater. More expansive rules apply to qualifying restaurant and hotel businesses.
    • Allowable uses include payroll, rent, mortgage payments, and utility costs. (Sections 1102 and 1107)
    • Borrower eligible for loan forgiveness on amounts spent during an 8-week period after the origination date of the loan on qualifying payroll costs, interest payments on mortgages, rent, and utilities.
      • Amount forgiven is a function of number of employees retained. (Section 1106)
    • In addition to the criteria mentioned above, the business must certify that
      • The uncertainty of current economic conditions makes the loan necessary to support ongoing operations;
      • Funds will be used to retain workers, maintain payroll, or make mortgage, lease, or utility payments; and
      • No application is pending and no amount has been received for the same purpose and duplicative of amounts received.
  2. SBA will administer a $10 billion grant fund for SBA Economic Injury Disaster Loans:
    • Up to $10,000 to provide immediate relief for small business operating costs.
    • Eligible recipients are businesses, sole proprietorships, independent contractors, cooperatives, ESOPs and Tribal small business concerns.
    • Applicants must self-certify their eligibility, including the following criteria:
      • The business must have no more than 500 employees.
      • The business must be eligible for an SBA disaster loan (a section 7(b)(2) loan), but with the following usual requirements waived:
        1. For loans not over $200,000, business owners are not required to personally guarantee the loan;
        2. Applicant are not required to have been in business for at least one year, except businesses must have been in operation on January 31, 2020; and
        3. The applicant need not be unable to obtain credit elsewhere. (Sections 1107 and 1110)
  3. SBA will administer a $17 billion grant fund for SBA to cover 6 months of payments for small businesses with certain existing SBA loans. Generally, these include:
    • a small business concern SBA loan, including a loan made under the Community Advantage Pilot Program;
    • an SBA loan to state and local development companies; and
    • a microloan made by an intermediary Small Business Development Center out of SBA funds to a small business. (Sections 1107 and 1112)
  • Employee Retention Tax Credits

Provides a refundable payroll tax credit for 50 percent of wages paid by employers to employees during the COVID-19 crisis. The credit is available to employers whose (1) operations were fully or partially suspended, due to a COVID-19-related shut-down order, or (2) gross receipts declined by more than 50 percent when compared to the same quarter in the prior year.

The credit is generally provided for the first $10,000 of compensation, including health benefits, paid to an eligible employee. The credit is provided for wages paid or incurred from March 13, 2020 through Dec. 31, 2020. (Section 2301)

  • Modification of limitation on business interest
    • For non-partnerships: At the taxpayer’s option, temporarily increases the limitation on the ability to deduct interest expenses from 30 percent to 50 percent of taxable income for 2019 and 2020. (This may necessitate filing amended or superceded 2019 returns.) In calculating this limit for 2020, businesses have the option of using their adjusted taxable income from 2019.
    • For partnerships: At the partnership’s option, temporarily increases the limitation on the ability to deduct interest expense from 30 percent to 50 percent only for the 2020 taxable year. The partnership may elect to calculate the limit using adjusted taxable income from 2019. Unless the partner elects otherwise, 50 percent of 2019 excess interest is treated as accrued by the partner in 2020, without limit to deductibility. The remaining 50 percent of 2019 excess interest remains suspended until allocations to the partner allow deduction under the normal interest limitation rules. (Section 2306)
  • Technical amendment on qualified improvement property
    Enables businesses to immediately write off costs associated with improving facilities instead of depreciating them over the life of the building. Would allow amending a prior year return to take advantage of this provision and correct a drafting error in the 2017 tax reform law. (Section 2307)
  • Modifications for net operating losses
    Provides that a net operating loss (NOL) from 2018, 2019 or 2020 can be carried back five years, and temporarily removes the taxable income limitation to allow a NOL to fully offset income. (Section 2303)
  • Modification of loss limitation for taxpayers other than corporations
    Allows pass-throughs and sole proprietors to benefit from the relaxed NOL carryback. (Section 2304)
  • Modification of AMT credits
    Accelerates the ability for companies to claim eligible alternative minimum tax (AMT) credits now instead of as originally expected through 2021. (Section 2305)
  • Limitations on Paid Leave
    Limitations on mandated family and sick leave, enacted in the phase 2 coronavirus legislation. (See Novogradac Client Alert: Highlights from H.R.6201 - Families First Coronavirus Response Act.) (Secs. 3601 and 3602)
  • Forbearance of Residential Mortgage Loan Payments for Multifamily Properties with Federally Backed Loans.
    Provides up to 90 days of forbearance for multifamily borrowers with a federally backed multifamily mortgage loan who have experienced a financial hardship. Borrowers receiving forbearance may not evict or charge late fees to tenants for the duration of the forbearance period. Applicable mortgages include loans to real property designed for five or more families that are purchased, insured or assisted by Fannie Mae, Freddie Mac or HUD. (Section 4023)
  • Temporary Moratorium on Eviction Filings.
    For 120 days beginning on the date of enactment, landlords are prohibited from initiating legal action to recover possession of a rental unit or to charge fees, penalties or other charges to the tenant related to such nonpayment of rent where the landlord’s mortgage on that property is insured, guaranteed, supplemented, protected, or assisted in any way by HUD, Fannie Mae, Freddie Mac, the rural housing voucher program or the Violence Against Women Act of 1994. (Section 4024) (This applies to a low-income housing tax credit (LIHTC) property by virtue of the fact the property is eligible for LIHTCs.)

Overview of selected fiscal year (FY) 2020 supplemental appropriations

  • Coronavirus Relief Fund

Provides $150 billion to states territories and tribal governments to use for expenditures incurred due to the public health emergency with respect to COVID-19 in the face of revenue declines, allocated by population proportions, with a minimum of $1.25 billion for states with relatively small populations.

  • Federal Emergency Management Agency (FEMA) Disaster Relief Fund

$45 billion in supplemental funding for the Disaster Relief Fund to provide financial assistance to state, local, tribal and territorial governments, as well as private nonprofits providing critical and essential services. Some of this funding could be used for housing assistance.

  • HUD Supplemental Funding ($15.4 billion total)

The following supplemental funding amounts are designed to meet increased demand for funding because of the COVID-19 public health emergency, both in terms of increased operating costs and decreased tenant incomes.

  • $5 billion Community Development Block Grants (CDBG).
  • $4 billion McKinney-Vento Homeless Emergency Solutions Grants.
  • $1.25 billion Tenant-Based Rental Assistance (TBRA)/Housing Choice Vouchers (HCV).
  • $1 billion Project-Based Rental Assistance (PBRA).
  • $685 million Public Housing Operating Fund.
  • $300 million Native American Programs.
    • $200 million Native American Housing Block Grants, and
    • $100 million for Indian Community Development Block Grants.
  • $50 million Section 202 Supportive Housing for the Elderly Program.
  • $65 million Housing Opportunities for Persons With AIDS (HOPWA).
  • $15 million Section 811 Supportive Housing for Persons with Disabilities.
  • Treasury Supplemental Funding
    • $250 million IRS funding to support extended filing season and cost of implementing the bill.

Next Steps

At the time of this writing, the Senate is recessed for a state work period, and the House is expected to remain in a district work period until at least after the originally planned Easter recess, which is currently scheduled to end on April 20. Depending on the extent of the public health emergency, it is possible that Congress will extend the home work period and not return to Washington, D.C. for a few weeks past April 20.

Despite this extended recess period, Congress has already started working on a Phase 4 COVID-19 response bill, which is likely to include provisions addressing both continuing immediate needs, as well as more stimulus provisions to go beyond the short term economic needs. Many of these measures will focus on medium and longer-term economic recovery issues. As such, this Phase 4 bill will likely be a better legislative vehicle for community development tax provisions, such as the low income housing tax credit (LIHTC), new markets tax credit (NMTC), historic tax credit (HTC), and renewable energy tax credits (RETC).

In particular, the ACTION Campaign has urged Congress extend the following LIHTC statutory deadlines in response to disruptions caused by the COVID-19 pandemic:

  • Amend Internal Revenue Code (IRC) Section 42 to temporarily extend the placed in service deadline to the end of the third year after the calendar year of allocation for properties that received LIHTC allocations between Dec. 31, 2016 and Jan. 1, 2022;
  • Amend IRC Section 42 to temporarily extend the 10 percent rule to be met within the second year of the allocation for properties that received LIHTC allocations between Dec. 31, 2016 and Jan. 1, 2022; and,
  • Amend IRC Section 42 to temporarily extend the rehabilitation expenditures deadline to be met at the close of any 36-month period.

Furthermore, given the historic all-time record low 4 percent LIHTC rate of 3.12 percent in April 2020, which is likely to be even lower in May, ACTION has urged Congress establish a permanent minimum 4 percent rate. More than half of the House has already endorsed such a provision in the Affordable Housing Credit Improvement Act (AHCIA, H.R. 3077/S. 1703).

Similarly, the NMTC Coalition and the Partnership for Job Creation have urged Congress provide a special $1.5 billion NMTC allocation to the pending 2019 round, which is expected to be awarded this summer. Congress has twice provided such a special NMTC allocation to a pending round:

  • In 2006, the GO Zone Act provided a total of $1 billion in NMTC allocation authority, of which $400 million was added to the pending 2005 round, and
  • In 2009, the American Reinvestment and Recovery Act (ARRA) provided a total of $3 billion, of which $1.5 billion was added to the pending 2008 round.

Stay tuned for further updates to this post, and more information on the Phase 4 bill on Novogradac’s COVID-19 Resources for the Affordable Housing, Community Development and Renewable Energy Communities web page as details become available.