1 1 (June 12, 2020)

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Restrictions on Compensation Under the

CARES Act



June 12, 2020
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act; P.L. 116-136) was enacted to
assist those affected by the economic impact of Coronavirus Disease 2019 (COVID- 19). Akey part of this
assistance is provided to eligible businesses, states, and municipalities in Division A, Title IV of the act.
Section 4003 allocates $500 billion to the Department of the Treasury (Treasury) to make loans or loan
guarantees to certain industries and to support Federal Reserve lending facilities. Section 4112 allocates
$32 billion to Treasury to provide financial assistance to the aviation industry for employee wages,
salaries, and benefits. Some have characterized these provisions as a bailout of private industry; others
assert they are necessary to avoid employment losses and maintain economic stability. For more
information, see CRS Report R46329, Treasury and Federal Reserve Financial Assistance in Title IV of
the CARES Act (P.L. 116-13 6), coordinated by Andrew P. Scott.
Recipient firms of this financial assistance must meet a number of requirements. In some cases, these
include restrictions on c ompensation at firms receiving assistance under Title IV of the act. This Insight
gives an overview of those restrictions.


Treasury and Federal Reserve Programs Subject to

Compensation Restrictions

In Section 4003, Congress made direct Treasury support available to three scctors that it deemed
particularly in need of such support. This provision makes available up to $46 billion for federal loans and
loan guarantees directly from Treasury to the aviation sector and to businesses critical to maintaining
national security. The $46 billion is apportioned as follows:

    *  up to $25 billion available to passenger airlines,
    *  up to $4 billion to cargo airlines, and
    * up to $17 billion to businesses critical to maintaining national security.
This assistance is subject to the compensation restrictions prescribed in Section 4004.


                                                              Congressional Research Service
                                                                https://crsreports.congress.gov
                                                                                   INI 1422

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