COVID-19 FEDERAL RESPONSE€¦ · PPP loans will be available through June 30, 2020. Paycheck Protection Program Loan. Payroll Costs Include The sum of payments of any compensation

COVID-19 FEDERAL RESPONSELeveraging federal programs for immediate relief and long-term stabilization in the wake of COVID-19

This presentation is provided for general informational purposes. Because every situation is unique, this summary is no substitute for legal or tax advice. No representation is made that the quality of legal services performed by Fortif Law Partners, LLC is greater than the quality of legal services provided by other lawyers. This information is current as of April 3, 2020.

Action ItemsPPP Expanded

Paid Leave & FMLA

Refundable Employee Retention

Credit

Payroll Tax Deferral EIDL

Mid-Sized Businesses

Loan Program

Expanded Unemployment

InsuranceOther

Small Business

Large Business

Nonprofit

Individual

1 2 3 4 5 6 7 8

Summary of Federal ToolsPaycheck Protection Program (PPP) Loan

Refundable Employee Retention Credit

123

Expanded Paid Leave & FMLA

4 Payroll Tax Deferral

Forgivable Loan Program

Employee Relief

Tax Relief

Tax Relief

5Mid-sized Business

Loan Program6

Economic Injury Disaster Loan (EIDL)

Summary of Federal ToolsSummary of Federal Tools

7Other8


Insurance

Loan and Grant Program

Loan Program

Employee Relief

A variety of federal tools intended to counteract the effects of COVID-19

https://home.treasury.gov/system/files/136/PPP%20--%20Overview.pdf https://www.sbc.senate.gov/public/_cache/files/9/7/97ac840c-28b7-4e49-b872-d30a995d8dae/F2CF1DD78E6D6C8C8C3BF58C6D1DDB2B.small-business-owner-s-guide-to-the-cares-act-final-.pdf

Applicants can apply and accept EIDL

AND

Small Business Debt Relief, in addition to the PPP loan, as long as there is no duplication in the uses of funds.

Loans can be

fully forgiven

when used to pay:

• payroll costs, • interest on mortgages, • rent, • and utilities

All businesses operating as of Feb. 15, 2020 with

500 or fewer employees-

including: • nonprofits (501(c)(3)s and churches

with or without tax-exempt status as long as they satisfy the requirements of 501(c)(3)),

• veterans organizations (501(c)(19)), • tribal concerns, • self-employed individuals, • sole proprietorships, and • independent contractors.

Businesses in certain industries are eligible even if they have more than 500 employees (NAICS Codes beginning with ’72’ use 500/location).

SBA will require that 75% of the forgiven amount be used for payroll. Forgiveness reduced if FTE headcount declines or salaries and wages decrease.

Businesses and sole proprietors can apply as of:

April 3, 2020

Independent contractors and self-employed individuals can apply as of:

April 10, 2020 PPP loans will be available through June 30, 2020.

Paycheck Protection Program Loan

Payroll Costs Include

The sum of payments of any compensation with respect to employees that is:

• Salary, wage, commission, or similar compensation;

• Payment of cash tip or equivalent; • Payment for vacation, parental,

family, medical, and sick leave; • Allowance for dismissal or

separation; • Payment required for the provisions

of group health care benefits, including insurance premiums;

• Payment of any retirement benefits; or

• Payment of state or local tax assessed on the compensation of employees.

https://www.sbc.senate.gov/public/_cache/files/9/7/97ac840c-28b7-4e49-b872-d30a995d8dae/F2CF1DD78E6D6C8C8C3BF58C6D1DDB2B.small-business-owner-s-guide-to-the-cares-act-final-.pdf https://home.treasury.gov/system/files/136/PPP%20--%20Overview.pdf


Payroll Costs DO NOT Include

• Compensation of an individual employee in excess of an annual salary of $100,000, as prorated for the covered period

• Taxes imposed or withheld under chapters 21, 22, or 24 of the Internal Revenue Code (EXPLAIN)

• Any compensation of an employee whose principal residence is outside of the United States

• Qualified Sick leave for which a credit is allowed under the Families First Coronavirus Response Act

• Qualified Family leave where a credit is allowed under section 7003 of the Families First Coronavirus Response Act



How much can I borrow?

Maximum loan is the lesser of X and D.

X= (A*B)+C

A) The average monthly payroll costs incurred over the year preceding the date on which the loan is made.

B) 2.5 C) The outstanding amount of a loan

under subsection (b)(2) that was made during the period beginning on 1/30/20 and ending on the date on which the covered loans are made available to be refinanced under the covered loan.

D) $10,000,000

If your entity was not in business between February 15, 2019 - June 30, 2019 your calculation will differ slightly



How do I Apply?

• Applications can be submitted through: • any existing SBA 7(a) lender or any

federally insured depository institution; • federally insured credit union; • Farm Credit System institutions; and • any other Treasury-approved to

participate in the PPP program.

• Requires certifications from business and each 20% or greater owner that: • Loan is necessary in light of COVID-19; • Funds will be used for appropriate

purposes; • Documentation of number of FTEs

and costs will be provided to lender; and

• During the period beginning 2/15/20 and ending on 12/31/20 the applicant has not and will not receive another loan under this program



Forgiveness

Borrowers must apply through their lender for forgiveness. Forgiveness will be calculated as follows:

• During 8-week period after origination of loan, qualified expenses will be forgiven:

• Payroll costs, • Interest on Mortgage obligation, • Rent, and • Utilities.

• SBA will require that 75% of the forgiven amount be used for payroll.

• Forgiveness reduced if FTE headcount declines or salaries and wages decrease.

NOTE that the loan funds can be used for a variety of business purposes but using the loan funds for such purposes will reduce the amount forgiven. Additionally, inappropriate uses can lead to criminal fraud charges.

For any amounts not forgiven, the maximum term is 10 years, the maximum interest rate is 4 percent, zero loan fees, zero prepayment fee.



PPP Loan Eligibility & ApplicationApplication is available here: https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Application-3-30-2020-v3.pdf

https://home.treasury.gov/system/files/136/PPP%20--%20Overview.pdf

https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Application-3-30-2020-v3.pdf



PPP Loan Eligibility & ApplicationApplication is available here: https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Application-3-30-2020-v3.pdf

https://home.treasury.gov/system/files/136/PPP%20--%20Overview.pdf




Expanded FMLA & Paid Leave

https://www.dol.gov/agencies/whd/pandemic/ffcra-employer-paid-leave#_ftnref3

Expands Family Medical Leave Act (FMLA) to nearly all employers with

less than 500 employees Includes FTE, PTE, and temporary employees over the past 12 months)

Requires nearly all companies with 500 employees or less to

provide paid leave for use during COVID-19 pandemic (full- and part-time).

Effective as of

April 1, 2020 and scheduled to sunset on

December 31, 2020

An exemption to providing leave for child care exists for companies with less than

50 employees if it would jeopardize the viability of the business.

Creates six qualifying reasons requiring paid leave:

(1) If the employee is subject to a federal, state, or local quarantine or isolation order related to COVID-19;

(2) If the employee has been advised by a healthcare provider to self-quarantine due to concerns related to COVID-19

(3) If the employee is experiencing; symptoms of COVID-19 and seeking a medical diagnosis;

(4) If the employee is caring for another person who fits into the categories above;

(5) If the employee is caring for a child whose school or daycare is closed due to COVID-19; and

(6) Similar reasons which will be defined through regulations.



Qualifying Reasons


What employers are covered by the required paid leave provisions?

• Nearly all private employers with fewer than 500 employees; and

• Nearly all public employers.

What pay rate do employers have to pay during paid leave?

• If an employee takes paid leave for reasons (1), (2), or (3) from the previous slide, employer must pay the employee's regular rate, capped at $511/day and $5,110 in the aggregate;

• If an employee takes paid leave for reasons (4), (5), or (6) from the previous slide, employer must pay 2/3 of the employee's regular rate, capped at $200/day and $2,000 in the aggregate; and

• If an employee, who has been employed for at least 30 days (or was let go and re-hired since March 1, 2020), takes paid leave for FMLA reasons, employer must pay 2/3 of the employee's regular rate, capped at $200/day and $10,000 in the aggregate.


Covered Employers &

Employee Pay Rate

How much paid leave may an employee take?

• Generally, up to two weeks; but • An employee who has worked with the

employer for at least 30 days and who needs to care for a child whose school or daycare is closed due to COVID-19 may take up to twelve weeks of paid leave (as a maximum, not in addition to existing FMLA allowances; also reduced by FMLA leave already taken).

What notices are required? • The U.S. Department of Labor

requires that the following be posted by private employers:

• Employee Rights: Paid Sick Leave and Expanded Family and Medical Leave under The Families First Coronavirus Response Act (FFCRA) (PDF)



Paid Leave Duration &

Required Notice

https://www.dol.gov/sites/dolgov/files/WHD/posters/FFCRA_Poster_WH1422_Non-Federal.pdf





Required Notice



Tax Credits

Tax Credits for Paid Sick and Family Medical Leave:

• Credit of 100% of qualified wages up to $511 per day up to $5,110 per employee or $200 per day up to $10,000 per employee (depending on reason for leave);

• Credit is refundable to the extent it exceeds employer tax liability;

• Credits are also provided for employer's qualified health plan expenses allocated to qualified sick leave wages; and

• Credit is available to self-employed individuals.

Wages paid under these provisions are not subject to employer side Social Security tax.

Employers retain an amount of the payroll taxes equal to amount of qualifying sick and child care leave paid rather than depositing with IRS.




https://www.irs.gov/newsroom/faqs-employee-retention-credit-under-the-cares-act

The tax credit is designed to encourage Eligible Employers to

keep employees on their payroll,

despite experiencing economic hardship related to COVID-19.

The Employee Retention Credit provides a

refundable tax credit for employers equal to

50% of qualified wages (including allocable qualified health plan expenses) that eligible employers pay their employees.

Eligible Employers include those that carry on a trade or business during calendar year 2020, including a tax-exempt organization, that either:

• Suspends operations fully or partially during any calendar quarter in 2020 due to COVID-19; or

• Experiences a significant decline in gross receipts during the calendar quarter.

Companies with 500 or less employees will need to choose either the Employee Retention Credits

OR the forgivable PPP loan.


• The Employee Retention Credit applies to qualified wages paid after March 12, 2020, and before January 1, 2021.

• The maximum amount of qualified wages taken into account with respect to each employee for all calendar quarters is $10,000, so that the maximum credit for an Eligible Employer for qualified wages paid to any employee is $5,000.

What are qualified wages?


Payroll Tax Deferral


• 50% of employer-side Social Security taxes and Railroad Retirement Tax Act (6.2%) and 50% self-employment taxes (6.2%) collected during 2020 are not due until December 31, 2021.

• Remaining 50% is due December 31, 2022.

• Doesn't apply to companies who had a debt forgiven under paragraph (36) of SBA Section 7(a) (PPP Loans)

• If companies utilize Certified Professional Employer Organizations (CPEO), companies may direct CPEO to delay payment but company is liable for ultimate payment of employer payroll taxes (shifting of liability)

• Companies with 500 or less employees will need to decide between the credits and the forgivable PPP loan.

• Companies with more than 500 employees should carefully review this opportunity since it is likely to apply to them.

Essentially an

Interest-Free Loan

You can apply for and receive both the EIDL and PPP Loans as long as you use the funds from each loan for different purposes.

The maximum term is 30 years. However, the law restricts businesses with credit available elsewhere to a maximum 3-years term.

Economic Injury Disaster Loan

The EIDL can include an advance of

$10,000

within three days of applying for an EIDL loan.

To access the Emergency Economic Injury Grant an entity must apply for an EIDL and then request the advance which does not have to be repaid.

So long as they have 500 or fewer employees or less than $35 million in annual revenue the following entities

are Eligible

• Sole proprietorships, with or without employees;

• Independent contractors, • Cooperatives and employee

owned businesses; • Tribal small businesses; and • Nonprofits that are exempt

under 501(c), (d), or (e) (includes churches with or without tax-exempt status as long as they satisfy the requirements of 501(c)(3)) OR validly organized and operating under State law.

Apply

IMMEDIATELY for up to

$2,000,000

https://www.sba.gov/sites/default/files/articles/EIDL_Information_and_Documentation_-_3-30-2020_FINAL_2_pm.pdf https://www.sba.gov/sites/default/files/2020-04/SBA%20Faith-Based%20FAQ%20Final.pdf

Economic Injury Disaster Loan

• Apply through the Small Business Administration.

• Loans are only available for businesses in operation prior to January 31, 2020.

• Interest rates for businesses are 3.75% and 2.75% for nonprofits.

• Can pay for expenses that could have been met had the disaster not occurred, including payroll and other operating expenses.

• Payments of principal and interest can be waived for the rest of 2020 (interest will accrue during this period).

• No loan forgiveness (though the emergency advance or “grant" of $10,000 does not have to be repaid).

• Loan applications could take 2-3 weeks for the SBA to review.

Details

https://www.sba.gov/sites/default/files/articles/EIDL_Information_and_Documentation_-_3-30-2020_FINAL_2_pm.pdf https://www.sba.gov/sites/default/files/2020-04/SBA%20Faith-Based%20FAQ%20Final.pdf

Mid-Sized Businesses Loan Program

Borrowers must certify that the funding is necessary in order to continue operations and that the funds will be used to retain and restore at least

90% of the recipient's workforce as it existed February 1, 2020at full compensation and benefits through September 30, 2020 (among other certifications).

Treasury was authorized to provide financing to banks and other lenders that make direct loans to eligible businesses (not adequately served under CARES Act) including, to the extent practicable, nonprofit organizations, with between

500 and 10,000 employees.

These loans would have an interest rate that is not higher

2%

per annum.

No payments on the loan due for at least the first

6 months.

Expanded Unemployment Insurance

https://www.dol.gov/newsroom/releases/eta/eta20200312-0

• Under the CARES Act, you can receive unemployment benefits if you are

unable to work or are working reduced hours

as a result of the coronavirus. • Includes people who are directly impacted by the virus (those who have

symptoms, are quarantined or are caring for someone who has COVID-19, the disease caused by the coronavirus).

• The CARES Act also extends benefits to people who are self-employed (including gig and contract workers), work part-time or who normally wouldn’t qualify for unemployment benefits because they lack sufficient work history.

• Entitled to the benefit amount allowed in your state

PLUS a $600/week increase in unemployment benefits for all workers claiming them, as long as the worker qualified under state law

• States cannot diminish their current state unemployment insurance.

Details

Other: Coronavirus Relief Fund

The fund will provide

$150 Billion

total, with

$1.25 Billion minimum going to each state

Alabama expects to receive

$1,901,000,000

The state funds can then be allocated to local governments with

populations over 500,000 To calculate their allocation, take 45 percent of the state’s total allocation. Multiply that by the local government’s share of the state population.

This program will provide immediate relief to small businesses with

non-disaster SBA loans in particular 7(a), 504, and microloans. Under it, SBA will cover all loan payments on these SBA loans, including principal, interest, and fees,

for six months.

This debt relief will also be available to

new borrowers who take out 7(a) loans within

six months of March 28, 2020

Other: Small Business Debt Relief

• This Small Business Debt Relief program is applicable to SBA loans (excluding loans made under the PPP or EIDL).

Disaster loans are not eligible• Borrowers may separately apply for and take out a PPP loan, but

debt relief under this program will not apply to a PPP loan.

Other:• Rebates will automatically be provided as follows: $1,200 for individuals, or $2,400 for married

couples who filed jointly (MFJ) – individuals and couples will receive $500 for each qualifying dependent child under the age of 17. Amounts will be decreased based on income restrictions.

• Payments due on federal student loan are suspended through September 30, 2020. Interest shall not accrue on federal student loans during the suspended payment period. Non-payment will not result in ineligibility for loan forgiveness or loan rehabilitation programs.

• Additional Minority Business Development Agency funding has been made available. • CNCS educational award eligibility will be preserved even if required to limit or leave position due

to COVID-19. • CNCS terms can be extended to allow for continued service related to addressing COVID-19. • Workforce Innovation Opportunity Funds received by States that remain unobligated may be used

for a statewide rapid response activity or released to local boards most impacted by COVID-19 for rapid response activities.

• Treasury is authorized to make loans, loan guarantees, and other investments in support of air carriers, businesses who have not received adequate relief under the CARES Act, States, and municipalities that do not, in the aggregate, exceed $500,000,000,000

Action ItemsPPP Expanded

Paid Leave & FMLA

Refundable Employee Retention

Credit

Payroll Tax Deferral EIDL

Mid-Sized Businesses

Loan Program


InsuranceOther

Small Business

Large Business

Nonprofit

Individual

1 2 3 4 5 6 7 8

Documents

COVID-19 FEDERAL RESPONSE€¦ · PPP loans will be available through June 30, 2020. Paycheck Protection Program Loan. Payroll Costs Include The sum of payments of any compensation