SBA releases Interim Final Rule on PPP Treatment of Owners and Forgiveness of Certain Nonpayroll Costs — The interim final rule addresses the ownership percentage that triggers the applicability of owner compensation rules for PPP forgiveness purposes, and addresses limitations on the eligibility of certain nonpayroll costs for forgiveness. The rule says that an owner-employee with less than a 5% ownership stake in a C- or S-Corporation is not subject to the owner-employee compensation rule. Regarding the eligibility of nonpayroll costs for loan forgiveness, the rule says that any amount attributable to the business operation of a tenant or sub-tenant of the PPP borrower is not forgivable. For home-based businesses, household expenses are also not forgivable. The rule also specifies that rent or lease payments to a related party are forgivable up to the amount of mortgage interest owed on the property during the Covered Period, attributable to the space being rented by the business, as long as the lease and mortgage were entered into prior to Feb. 15, 2020.
Deadline for Applying for Paycheck Protection Program Extended to August 8, 2020 — On July 4, 2020, President Trump signed into law S. 4116, which extended the deadline for applying for the Paycheck Protection Program until August 8, 2020. In response to this legislation, the Small Business Association resumed accepting applications on July 6. As of that date, a little over $521 billion had been approved, leaving almost $139 billion available to small businesses and non-profits that have not yet taken advantage of this forgivable loan program.
Click here for S. 4116.
Paycheck Protection Program Flexibility Act Signed into Law — On June 5, 2020, President Trump signed into law H.R. 7010, the Paycheck Protection Program Flexibility Act (the “Flexibility Act”). The Flexibility Act makes it easier for business to meet the conditions necessary for PPP loan forgiveness, extends the minimum payback time for unforgiven loans, and allows the CARES Act payroll tax deferral to apply to those businesses that had forgiven PPP loans.
Specifically, the Flexibility Act does the following:
Lowers the required percentage of PPP loans that must be used for payroll expenses from 75% to 60%.
Extends the “covered period” from 8 weeks to 24 weeks from the loan origination date, with an election available to use the original 8-week period. This means that employers have more time in which to use borrowed money on qualifying expenses.
Changes the date by which laid off employees must be rehired or replaced in order to obtain loan forgiveness from June 30, 2020 to December 31, 2020.
Allows an exception to the requirement for restoring payroll to previous levels for those employers who can document either:
An inability to rehire individuals or to hire similarly qualified individuals by December 31, 2020.
An inability to return to the same level of business activity the business was operating at before February 15, 2020 due to compliance with government health and safety standards during the period from March 1 through December 31, 2020.
Extends the minimum loan maturity (i.e., payback) period for unforgiven loans from 2 years to 5 years.
Extends the loan payment deferral period from what was a minimum of 6 months and a maximum of 1 year, to the date at which the lender is paid the amount of forgiveness determined under section 1106 of the CARES Act.
Requires that an application for loan forgiveness must be submitted by 10 months from the last day of the covered period.
Makes the payroll tax deferral provided by the CARES Act available to those businesses or non-profits that received PPP loan forgiveness. Previously, those with forgiven PPP loans were not eligible for payroll tax deferral.
President Signs Bill to Provide Additional Funding for Paycheck Protection Program (PPP) — The Paycheck Protection Program and Health Care Enhancement Act was signed into law by President Trump on Friday, April 24, 2020. The latest enactment provides additional funding for popular programs offering aid to small businesses, as well as funding for health care providers and COVID-19 testing efforts. It is being considered as an interim bill as Congress begins negotiations on another relief bill.
Specifically, the interim bill does the following:
Provides $310 billion in new money for the Paycheck Protection Program (PPP) that provides forgivable loans to small businesses as well as qualifying restaurant and hotel chains. The original $350 billion was quickly depleted. Of the new money, $60 billion has been set aside to be distributed by small, midsize and community lenders, in hopes this will reach smaller business that were not able to obtain loans from the first tranche of funding.
Provides $60 billion in new money for the SBA’s Economic Injury Disaster Loan (EIDL) program. Included in this is $10 billion for emergency grants. A portion of the new EIDL funding is meant to support small agricultural businesses that were previously overlooked.
Provides $75 billion in funding for hospitals and health care providers, on top of as-yet-unpaid funding that was approved as part of the earlier CARES Act.
Provides $25 billion to expand COVID-19 testing in the U.S. The bulk of this money will go toward the manufacturing and purchasing of testing equipment and personal protective equipment (PPE) to allow medical personnel to administer these tests. A portion is being set aside for the CDC to perform public health data surveillance, and another set-aside is the NIH for research and development related to the improvement of tests and supplies.
IRS Allows Employee Retention Credit for Furloughed Employees that still Receive Health Benefits — The Employee Retention Credit was established as part of the CARES Act enacted on March 27th. This credit is allowed to an employer who either suspended operations (partially or fully) during the calendar quarter due to a government order limiting activities due to COVID-19, or experienced a decline in quarterly gross receipts of 50% or more compared with the prior quarter. The credit is taken against employment taxes and equals 50% of the amount paid to an employee during a quarter in which the business qualifies, up to a maximum of $10,000 in wages or benefit payments allocated to that employee. This provides a maximum credit of $5,000 per qualifying employee.
The IRS, in its published Frequently Asked Questions, initially took the position that the credit was not available on employees who were not paid any wages during their furlough. However, after being informed by members of Congress that the intent of the legislation was to allow the credit as long as employers continue to provide health benefits to furloughed employees, the IRS updated its FAQs #64 and #65 to provide that health benefits allocable to the time the employees were not providing services are eligible regardless of whether the employer pays wages to the employees for this time. Please click the following link for the FAQs:
Special IRS Procedures for Refunds under Sections 2303 and 2305 of the CARES Act — In the CARES Act, the federal government provided qualifying taxpayers an accelerated means of turning certain net operating losses and prior year minimum tax liability credits into cash. In short, these attributes can now be carried back rather than claimed on the 2020 or 2021 taxable year return.
To get quick refunds resulting from these provisions, taxpayers may file an Application for Tentative Refund on Form 1139 (for corporations) or Form 1045 (for individuals, estates, or trusts). Starting on April 17, 2020, the IRS is accepting eligible refund claims on these forms via fax and recommends using this system even for those taxpayers who have already mailed in these forms.
The fax numbers, which start operation on April 17, are:
Form 1139 – 844-249-6236
Form 1045 – 844-249-6237
These numbers cannot be used for any other forms. The use of this fax service is a temporary measure to assist taxpayers to receive these CARES Act refunds as quickly as possible. Visit https://www.irs.gov/newsroom/temporary-procedures-to-fax-certain-forms-1139-and-1045-due-to-covid-19 for more information.
New IRS Tool for Non-Filers to Receive Economic Impact Payments — The IRS has a new tool to help non-tax return filers register for the Economic Impact Payments that are being issued due to the COVID19 pandemic. Note that this does not impact the payments to Social Security recipients, who will receive their payments in the same manner that they receive their Social Security income. Click here to access the IRS tool.
Paycheck Protection Program Loans Frequently Asked Questions (FAQs) — U.S. Treasury Department issued frequently asked questions relating to the Paycheck Protection Program Loans effective April 8, 2020. Here are the FAQs:
Treasury Issues Interim Final Regulations on Paycheck Protection Program Loans — U.S. Treasury Department issued interim final regulations to provide guidance to borrowers and lenders of the Paycheck Protection Program loans. This guidance was issued very late in the day on April 2, 2020. Every small business should consider applying for the Paycheck Protection Program loans that became available under the CARES Act. Starting April 3, 2020, small businesses and sole proprietorships can apply for and receive loans to cover their payroll and other certain expenses through existing SBA lenders. Starting April 10, 2020, independent contractors and self-employed individuals can apply for and receive loans to cover their payroll and other certain expenses through existing SBA lenders. Here are Treasury’s Rules:
Guidance on Paycheck Protection Program Issued — The Government issued guidance on the Paycheck Protection Program recently enacted by the CARES Act, including the following:
U.S. Small Business Administration: Paycheck Protection Program (PPP)
U.S. Department of the Treasury: Assistance for Small Businesses
Senate Finance Committee Issues FAQs on Employee Retention Credit under the CARES Act — Senator Grassley, Chair of the Senate Finance Committee issued a series of Frequently Asked Questions to provide guidance regarding the employee retention credit that was enacted by the CARES Act: Senate FAQs
Individual Federal Income Tax Filing & Payment Dates Automatically Extended — Taxpayers may defer payment of income tax from April 15, 2020 until July 15, 2020. This includes 2019 taxes and 1st quarter estimated taxes. Penalties and interest will be waived. Note, taxpayers who need more time beyond July 15th to file must still apply for an automatic extension to file (Form 4868 or Form 7004) if the taxpayer will not file by the new July 15th deadline. Also, no provision has yet been made for 2nd quarter estimates—stay tuned. See: IR-2020-58.
U.S. Chamber of Commerce Guidance on Small Business Loans — The U.S. Chamber of Commerce has issued significant guidance to help small businesses understand the recently enacted laws in light of the COVID-19 pandemic, including a Coronavirus Small Business Guide. See:
Coronavirus Aid, Relief, and Economic Security Act (CARES Act) Enacted — The CARES Act (“the Act”) (click here to review the Act) was signed into law by President Trump on Friday, March 27, 2020. The Act provides valuable benefits to businesses and employees designed to support both during the COVID-19 pandemic, including:
Cash Payments to Individuals: The Act provides for cash payments to individuals. The money would be sent by EFT direct to people's bank accounts. It includes a one-time payment of $1,200 to each American with A.G.I. up to $75,000 (or $150,000 if filing MFJ). Individuals or couples will receive an additional $500 per child. The amounts will phase out by $5 for each $100 of income over the threshold. IRS Information - IR-2020-61
Forgivable Loans to Small Businesses: The Act authorizes $350 billion in loans to small businesses. Loan money used to cover payroll expenses, rent, interest on mortgage obligations and utilities during the covered period are forgivable to the extent the workforce is not reduced. See: SBA Loan Resources; See also U.S. Chamber of Commerce - Small Business Loan Guide
Corporate Aid: The Act calls for $500 billion in corporate aid, much of it for backstopping loans from the Federal Reserve. The Treasury Secretary will have authority to directly lend a portion of the funds. A new inspector general and oversight board would be created to monitor the aid. The corporate aid would also include: $17 billion for assistance to companies deemed crucial to national security; $25 billion in grants to passenger air carriers; $4 billion for air cargo carriers; and $3 billion for contractors.
Important Support for Health Care Providers and Care: The Act provides a new grant program of $100 billion to health-care providers and $16 billion toward the stockpiling of medical equipment, including personal protective gear. The bill also includes expanded telehealth, higher Medicare reimbursement for doctors and hospitals, and a delay in some Medicaid cuts to hospitals.
Tax Credit for Employers Paying Qualified Family Leave and Sick Leave Under Families First Coronavirus Response Act — Employers may receive a refundable tax credit for the amount of qualified family leave wages paid, or the amount of qualified paid sick leave wages paid. The credit is applied to the tax the employer pays for its portion of the employees' social security. If the costs exceed that amount, the excess will be refunded. This Act become effective on April 2, 2020. See: IR-2020-57.
Small Business Sick Leave Requirement Imposed Under Families First Coronavirus Response Act — Full-time employees of businesses with fewer than 500 employees must be given 80 hours of paid sick leave, and part-time employees be given the number of hours that employee works, on average, over a two week period. Upon application and approval, businesses with fewer than 50 employees can be exempted from the requirement, at the discretion of the Secretary of Labor, if the requirements would jeopardize the viability of the business. Employees see: Employee Rights; Employers see: Employer Requirements; FAQ and Other DOL Information: Dept of Labor Info
Federal Reserve Bank Actions — The U.S. Federal Reserve has taken various steps to support markets and lending. It has also proposed a Main Street Business Lending Program that would support lending to eligible small and midsize businesses. To track and learn more: Federal Reserve COVID-19 Developments