Checks Will Take Weeks to Reach Americans. Also, No Bailout for Cruise Lines?

The $6 trillion bailout currently being debated in Congress will ensure that more than 90% of American taxpayers will receive a check from the United States government.

Here are the main provisions of the proposed bailout:

  • INDIVIDUALS:
    • Single adults with taxable income inferior to $75K will receive $1.2K
    • This amount is scaled down for individuals with taxable income superior to $75K, with 5% of the amount over that threshold deducted from the $1.2K,
    • Individuals with income above 99K receive nothing
    • Individuals with children who file as head of household will receive full payment if their taxable income is inferior to $112.5K
    • As for individuals without kids, single parents will receive scaled down payment if they earn more than $112.5K per annum.
  • FAMILIES:
    • Couples who jointly declared up to $150K will receive $2.4K
    • Couples declared more than $198K will not receive anything
    • Families with children will receive $500 per child.
  • OTHERS:
    • The bill allows payments to individuals who did not earn sufficient income to file taxes
    • Individuals receiving Social Security retirement and disability payments will qualify for payments
    • The unemployed also qualify for payments
    • Permanent residents qualify
    • Other immigrants in the US do not qualify.

In sum, an estimated 94% of Americans qualify for full or partial checks.

Initially, Democrats argued against the Republican’s proposal of direct payments, claiming it was preferable to beef up unemployment benefits.

The final version of the bill reflects the compromise reached on Capitol Hill, with the direct cash payments and the extended unemployment benefits both included.

How long will it take for checks to arrive?

The bad news is that the bailout checks could take weeks to reach their destined recipients. Indeed, the IRS has to analyze each individual’s tax returns to calculate the amount they will receive and then verify their bank and mailing information.

For individuals who file their taxes electronically and authorized direct deposits into their bank accounts, the check will take roughly three weeks to arrive. Individuals who file their taxes through the mail and those who have not provided their bank information will have to wait longer.

No bailout for cruise companies?

In other news, cruise companies will be disappointed to learn that the bailout being debated in Congress appears to exclude them from receiving federal aid.

Indeed, the bill states that companies receiving aid must be “created or organized in the United States or under the laws of the United states and […] have significant operations in and a majority of its employees based in the United States“.

This position echoes the many calls issued by journalists and citizens alike who have argued against bailing out cruise companies on that basis.

Not only are cruise companies incorporated in foreign countries to minimize tax burdens, the majority of their employees are not US citizens: Carnival Cruise Lines (NYSE: CCL) is incorporated in Panama, Norwegian Cruise Line (NYSE: NCLH) is incorporated in Bermuda and Royal Caribbean (NYSE: RCL) is incorporated in Liberia.

Cruise companies still have hope

However, despite being apparently left out of the bailout bill, cruise companies still have a slim chance of receiving some type of aid either in this bailout or later down the line.

Indeed, US President Donald Trump has reiterated that he is a fan of the industry and that his administration will “work very hard on the cruise line business and try to work something in“, while admitting that “it’s very tough to make a loan to a company when they’re based in a different country“.

The Wall Street Journal reported that Trump is supposedly entertaining the idea of convincing the cruise companies to incorporate in the USA in order to receive bailout money.

If true, this is a highly ambitious proposal that cruise companies would probably reject: Indeed, they will probably conclude that it’s preferable to incur debts to see off this difficult period rather than incorporate in the US and have to pay corporate income taxes forever.

For now, the Cruise Line International Association (CLIA) claims that the industry has not requested a federal bailout.

However, at the same time, CLIA presented data highlighting the cruise companies’ contribution to the US economy: They claim that cruise companies pay out $23 billion in wages and salaries and contribute more than $50 billion to the economy every year.

What is the likely outcome?

It appears that the government and cruise companies are subtly initiating negotiations, with each side stating their case.

Aware that they may not receive bailout money, the cruise companies are increasing their debt burdens in order to generate liquidity. Royal Caribbean, for example, recently announced a $2.2 secured loan term facility.

Their principal concern is the ban on all cruises, which completely dries up their cash flow. Their main objective is the reopening of cruise lines as soon as possible. However, the coronavirus crisis if far from being under control and the ban on all cruises may continue for several months.

This outcome would be dramatic for the cruise companies’ long term survival and could result in massive layoffs. This scenario could force the government’s hand into providing them with enough aid to stay afloat while the outbreak and quarantines are dealt with.

In any case, this situation could drag on for weeks, even months.

What is the market’s reaction?

At writing, premarket data suggests that we are heading for an off day:

  • S&P 500 futures are down 76 points
    • Dow futures are down 679 points
    • NASDAQ futures are down 209 points
    • Russell is down 39 points
  • Cruise stocks are in the red
    • RCL stock is down 10%,
    • CCL stock is down 13% and
    • NCLH stock is down 11%.

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