Education, Health, Research and Tax Provisions in the CARES Act

On March 27, President Trump signed into law a nearly $2 trillion emergency relief package, the largest economic relief package in American history. The package, the Coronavirus Aid, Relief, and Economic Security (CARES) Act (H.R. 748), includes direct payments to Americans, loan and grant assistance to corporations and small businesses, and supplemental appropriations for state and local governments, hospitals and health centers, and the education sector, among other items. 

This memo, which is a follow-up to the Office of Federal Relations' first CARES Act memo, contains more in-depth analysis of the education, health, research and tax provisions in the law.

EDUCATION FUNDING

The CARES Act includes $30.75 billion for an Education Stabilization Fund for states, school districts and institutions of higher education (IHE) for costs related to coronavirus. The breakdown of the funding is as follows:

  • $14 billion specifically designated to higher education;
  • $13.2 billion for elementary and secondary education; and
  • $2.95 billion provided to governors for use at their discretion.

For the higher education funding pot:

  • 90 percent ($12.56 billion) will be distributed to IHEs via a formula that is based on 75 percent full time equivalent (FTE) Pell enrollment (excluding those students who are exclusively online) and 25 percent FTE non-Pell enrollment (excluding those students who are exclusively online);
  • 7.5 percent ($992 million) is reserved for historically black colleges and universities (HBCU) and minority-serving institutions (MSI), such as Rutgers–Newark; and
  • 2.5 percent ($331 million) can be used at the discretion of the Department of Education (ED) for IHEs that have the greatest unmet need relative to coronavirus.

IHEs are required to use at least 50 percent of their allocations to provide emergency financial aid to students. This can include emergency financial aid and expenses related to the disruption of campus operations due to coronavirus (including eligible expenses under a student’s cost of attendance, such as food, housing, course materials, technology, healthcare, and childcare). IHEs are prohibited from using funds for payment to contractors for the provision of pre-enrollment recruitment activities; endowments; or capital outlays associated with facilities related to athletics, sectarian instruction, or religious worship. And there is a requirement that states not cut any previous support (covering the past three fiscal years) to IHEs or need-based grant programs for students unless the Department of Education (ED) issues the state a waiver for extraordinary economic loss.

EDUCATION POLICY

The CARES Act provides most of the regulatory flexibilities important to the higher education community, including flexibility to transfer funds from the Federal Work Study (FWS) program to the Supplemental Educational Opportunity Grant (SEOG) program; use excess SEOG funds for emergency grant aid; disburse FWS dollars to students who are not working; provide institutions relief from return to Title IV (R2T4) requirements; prevent student withdrawal from courses due to an emergency from impacting federal loan limits or Pell eligibility; provide relief from SAP provisions; and more.

Further, the CARES Act provides relief to student borrowers by halting all student loan payments for six months and pausing interest accrual on those loans. During those six months of non-payment, each month will still count toward a qualifying payment toward an authorized loan forgiveness program, including income-driven repayment plans and public service loan forgiveness (PSLF) program. Finally, it will suspend involuntary collections during this six-month period, including wage garnishment, reductions on tax refunds, and reductions of any other federal benefits including Social Security payments.

RESEARCH FUNDING AND POLICY

Health Research and Delivery

The CARES Act creates a new $100 billion Marshall Plan-like fund to ensure hospitals and healthcare providers continue to receive the support they need for COVID-19 related expenses and lost revenue. Grants will be given to hospitals, public entities, not-for-profit entities, and Medicare and Medicaid enrolled suppliers and institutional providers to cover unreimbursed health care related expenses or lost revenues attributable to the public health emergency resulting from the coronavirus.

It also provides more than $27 billion for the Biomedical Advanced Research and Development Authority (BARDA) to support research and development of vaccines and therapeutics for COVID-19. Included in this pot is $16 billion for the Strategic National Stockpile for critical medical supplies, personal protective equipment (PPE), and life-saving medicine as well as $3.5 billion for manufacturing and purchasing vaccines and therapeutics to combat the virus.

There is also $4.3 billion for the Centers for Disease Control and Prevention (CDC) to support federal, state, and local public health agencies to prevent, prepare for, and respond to the coronavirus.

  • $1.5 billion in flexible funding for the CDC to address COVID-19 pandemic;
  • $1.5 billion to state and local governments for items ranging from purchasing PPE to laboratory testing;
  • $500 million for global disease detection;
  • 500 million for public health data surveillance; and
  • $300 million for rapid response during outbreaks.

This package also has $80 million for the Food and Drug Administration and $415 million for the Department of Defense’s Defense Health Program for coronavirus activities. In addition, the National Institutes of Health will receive $945 million to expand on prior COVID-19 research, including developing an improved understanding of the prevalence of COVID-19, its transmission and the natural history of infection as well as developing countermeasures for the prevention and treatment of its various stages. Nearly 75 percent of this pot is directed to the National Institute of Allergy and Infectious Diseases, which is led by White House Coronavirus Task Force member, Dr. Anthony Fauci.

Finally (and of note to Rutgers Biomedical and Health Sciences), the CARES Act reauthorizes Title VII (health professions workforce programs) and Title VII (nursing workforce development) of the Public Health Service Act through FY 2025.

Other Research

The CARES Act also appropriates funds for scientific research at various departments and agencies. This includes:

  • $75 million for the National Science Foundation for RAPID Response Grants to prevent, prepare for, and respond to coronavirus, domestically or internationally. Funds can be used to reimburse costs associated with coronavirus research activities starting January 20.
  • Nearly $100 million for the Department of Energy’s Office of Science for coronavirus activities.
  • $75 million for the National Endowment for the Humanities.  60 percent of funds will go to direct grants for recipients and 40 percent will go to state humanities councils. In addition, matching requirements may be waived for grant recipients.
  • $66 million for the National Institute of Standards and Technology, of which $10 million is for the National Institute for Innovation in Manufacturing Biopharmaceuticals and $6 million is for supporting viral testing and biomanufacturing.
  • $12.5 million for the Agency for Toxic Substances and Disease Registry, of which $7.5 million is for spatial analysis and geographic information system mapping of infectious disease hot spots.
  • $2.25 million for EPA’s Science and Technology program, of which $1.5 million is for research on methods to reduce the risks from environmental transmission of coronavirus via contaminated surfaces or materials

TAX POLICY

The CARES Act makes changes on two tax-related items of importance to universities. First, the law allows for a partial above-the-line deduction for charitable contributions. This provision encourages individuals to contribute to charitable organizations in 2020 by permitting them to deduct up to $300 of charitable contributions, whether they itemize their deductions or not. Another provision increases the limitations on deductions for charitable contributions by individuals who itemize, as well as corporations. For individuals, the 50 percent of adjusted gross income limitation is suspended for 2020. For corporations, the 10-percent limitation is increased to 25 percent of taxable income. This provision also increases the limitation on deductions for contributions of food inventory from 15 percent to 25 percent.

The second tax law change of note expands Section 127 employer provided education assistance to include student loan repayment made by an employer to the employee or to a lender of principal or interest on any qualified education loan as a tax-free benefit. To qualify, payments must be made before January 1, 2021.

In addition, the CARES Act also defers payments of employer payroll taxes through January 1, 2021. Employers will be required to pay 50 percent of the amount due by December 31, 2021, and the remaining 50 percent by December 31, 2022.