SEVEN12 Management has pooled together this collection of resources for our member associations to access the information required to navigate these difficult times. We highly recommend you consult an attorney to ensure you take maximum advantage of relief programs, at the state and federal level, that have been instituted to assist businesses across the country. The page will be continuously updated as additional details, resources, and information become available.
President Trump recently released federal guidelines for re-opening America. He indicated that many states may be able to re-open as early as May 1, however, there are state-specific guidelines and staggered starts as individual state governors make the decision for their state. Additionally, as each state, and often each county, have varying levels of restrictions, the law firm AkinGump has created an interactive map where individuals can view state and county level orders.
The CARES Act has multiple government programs businesses may be able to take advantage of in the coming weeks. Many of the business-specific component parts of the CARES Act interact, overlap, or conflict with one another. The S-Corp Association, has put together a useful slide exhibiting the interaction between all these programs.
Paycheck Protection Program - for employers with 500 or fewer employees.
This is a loan program for smaller businesses to be administered by the current Small Business Administration lending program with additional lenders to be quickly approved to participate. In general, eligible small businesses may borrow 250% of their average monthly payroll up to a maximum of $10 million; part of all of the loan may be forgiven if the business meets certain conditions; the loan can be used to cover payroll and most usual operating expenses; an employer may not take out both a PPP loan and an SBA Economic Injury Disaster Loan (EIDL) for the same purpose.
On May 15, 2020, Treasury and the Small Business Administration issued a press statement and released the PPP loan forgiveness application. Of note in the press release, it states that the “SBA will also soon issue regulations and guidance to further assist borrowers as they complete their applications, and to provide lenders with guidance on their responsibilities.”
The Senate is expected to vote on legislation to loosen restrictions on small businesses receiving billions in federal aid from the Paycheck Protection Program. The House voted 417 to 1 to give small businesses financially strapped by the COVID-19 crisis more flexibility to spend forgivable loans for payrolls and expenses from the Paycheck Protection Program.
The current PPP program allows partial loan forgiveness if a company uses less than 75% of a loan for payroll, but the House bill appears to state that none of the loan would be forgiven if the 60% threshold isn’t met. Differences over these matters could lead the Senate to amend the bill and send it back for further House action.
To access the PPP forgiveness application, click here.
Deductibility of business expenses: The IRS issued guidelines making non-deductible an employer’s normally tax-deductible business expenses to the extent those expenses are included in PPP loan forgiveness. This IRS action effectively reverses the CARES Act provision that any amounts forgiven by a PPP loan “shall be excluded from gross income (emphasis added).”
New SBA FAQ: The SBA/Treasury Department have updated their FAQ document which you can access here.
Click here for a recent update on the PPP.
The application and information for borrowers are available here:
Federal Reserve Announces Launch of the “Main Street Lending Program”
The Federal Reserve has finally released detailed information on the launch of the MSLP. Fed Chairman Powell did an interview and Q&A session on a wide range of economic issues, including the MSLP. To listen to the Chairman’s entire 45-minute interview, click here.
Significantly, the Boston Fed conducted a “Mainstreet Lending Program Webinar for Borrowers.” This was a comprehensive, hour-long webinar specifically designed to provide information to potential MSLP borrowers. To view, click here.
In addition to providing detailed information on how the program will work, they covered the timing of the launch of the program. In the Q&A at the end of the webinar, they said that they are very close to opening the facility; first to register eligible lenders and shortly thereafter they will begin purchasing loans. This program is for companies with 500-10,000 employees, with less than $2.5 billion in revenue.
Business Tax Relief: The law has several tax provisions designed to increase liquidity and cash flow for businesses, including deferral of tax payments and a temporary net operating loss carryback. The McGuire Woods law firm has prepared a good summary of the tax provisions.
Some key items to note:
Delay of payment of employer payroll taxes. The bill allows employers to delay paying the employer share of Social Security tax (typically 6.2% of wages) they would otherwise owe for the rest of this year. Half of the delayed amount would be due on December 31, 2021, and the other half would be due on December 31, 2022. This provision will provide significant cash flow help for companies. The Joint Committee on Taxation has estimated it will result in temporary deferral of approximately $350 billion of tax liability.
Net operating loss changes. The 2017 tax reform law eliminated net operating loss carrybacks and imposed taxable income limits on the use of such losses. The CARES Act allows losses from 2018, 2019, or 2020 to be carried back five years, thus potentially making available tax refunds from prior years in which companies paid taxes. The CARES Act also temporarily removes the taxable income limitation to allow NOLs to fully offset income. This change will provide critical cash flow and liquidity. The Joint Committee on Taxation has estimated this change will provide $89 billion of near-term tax savings for companies and $25 billion of net savings over the next ten years.
Credit for Prior Year Minimum Tax Liability of Corporations. The 2017 tax reform law repealed the corporate alternative minimum tax (AMT) and made available refundable credits for past AMT liability over several years ending in 2021. The CARES Act accelerates the availability of these credits and will result in $3.2 billion of credits being made available this year. This acceleration of credits will help the cash flow of affected companies that have past AMT credits.
Modification of limitation on business interest deduction. The 2017 tax law generally limited business interest deductions to 30% of adjusted taxable income. The CARES Act increases that limit to 50% for 2019 and 2020. For companies with significant borrowings, this change could result in meaningful tax savings. The Joint Committee on Taxation has estimated this change will result in a cumulative $13.3 billion of tax savings over the next ten years.
The U.S. Department of Labor’s Occupational Safety and Health Administration (OSHA) recently released an alert listing safety tips that employers can follow to help protect manufacturing workers from exposure to the coronavirus. This follows OSHA issuing guidance for the package delivery workforce, retail workers, ten steps all workplaces can take to reduce risk of exposure to coronavirus, and OSHA Guidance on Preparing Workplaces for COVID-19. These alerts, guidance materials, and other OSHA resources relating to COVID-19 can be found here.
The law firm McGuireWoods has released a brief document entitled “Preventing COVID-19 Exposure, and Employer Liability, in the Workplace,” which can be found here.
Family/Medical Leave and Sick Leave Mandate: The first COVID-19 relief bill, the Families First Coronavirus Response Act (FFCRA), imposed family and sick leave mandates on employers with 500 or fewer employers; the CARES Act modified those mandates by putting caps on the amount employers would be required to pay.
The U.S. Department of Labor recently announced new action regarding how American workers and employers will benefit from the protections and relief offered by the Emergency Paid Sick Leave Act and Emergency Family and Medical Leave Expansion Act, both part of the Families First Coronavirus Response Act (FFCRA). The department’s Wage and Hour Division (WHD) posted a temporary rule issuing regulations pursuant to this new law, effective April 1, 2020.
Employers can be reimbursed immediately by reducing their federal employment tax deposits. If there are insufficient federal employment taxes to cover the amount of the credits, employers may request an accelerated payment from the IRS.
Click here to read more information on small and mid-size business tax credits for paid sick and family leave.
The guidance – provided in a Fact Sheet for Employees, a Fact Sheet for Employers and a Questions and Answers document – addresses critical questions, such as how an employer must count the number of their employees to determine coverage; how small businesses can obtain an exemption; how to count hours for part-time employees; and how to calculate the wages employees are entitled to under this law.
WHD provides additional information on common issues employers and employees face when responding to COVID-19, and its effects on wages and hours worked under the Fair Labor Standards Act and job-protected leave under the Family and Medical Leave Act.
Unemployment Insurance: The CARES Act includes a massive expansion of UI, including increased benefits and extending coverage to employees not normally eligible. A good summary of the UI and other employee benefit programs has been prepared by the Akin Gump law firm.
Essential Workforce: The Cybersecurity and Infrastructure Security Agency (CISA) has updated their Memorandum on Identification of Essential Critical Infrastructure Workers During COVID-19 Response. This updated guidance reaffirms that wholesaler-distributor personnel, truck drivers and warehouse workers, among other industries SEVEN12 members represent, are deemed essential workers.
The CISA guidance is meant to help state and local officials determine how to protect their communities while also ensuring the security and resiliency of critical infrastructure. Ultimately state governors and local official guidance will vary based on state and region. The National Governors Association (NGA) has created a COVID-19 resource page of state and territorial actions.
Here is a template letter to provide to your drivers and employees that they can use to get to work and conduct work as employees, drafted by NAW, the National Association of Wholesaler-Distributors. Please be aware that this letter is self-certifying and not an official federal document. You should review any document that you provide to your employees with your own counsel. Click here to see the letter.