CARES ACT OF 2020
Si necesita ayuda en español, por favor de preguntar
The bill has passed. During the course of the next 10 days, interpretations and regulations are expected to be released by the Treasury, so please be patient and understanding when things change.
EMERGENCY GRANT – If you are applying for a loan under this law, you may request that the Administrator provide an advance of up to $10,000 that is payable within 3 days after the Administrator receives an application. The Administrator shall verify that the applicant is an eligible entity by accepting a self-certification from the applicant under penalty of perjury. The advance may be used to address any allowable purpose for a loan detailed in (3) above. You are NOT required to repay any amounts of an advance provided under this subsection, even if subsequently denied a loan. PLEASE NOTE: if you receive an advance under this subsection and then transfers into, or is approved for, the loan program under section 7(a) of the Small Business Act (15 U.S.C. 636(a)), the advance amount shall be reduced from the loan forgiveness amount for a loan for payroll costs made under such section 7(a).
Clients looking for SBA Disaster Assistance Loans and Emergency Grant – This website will have more information about the program as it develops: https://www.sba.gov/funding-programs/disaster-assistance
As part of the initial process, you are asked for Gross Revenue for the twelve months ending on the date of the disaster, not payroll info. I presume this is to get initial approval and then once done, I guess then you will be asked additional info about payroll to calculate the loan amount. PLEASE do not forget to check the box to apply for the $10,000 grant and input your banking info to receive the money.
PAYROLL PROTECTION LOANS
1) Payroll protection loans are established for the period of 2/15/20 – 6/30/20 to assist businesses & self-employed, with 500 employees or less, to keep US domestic workers on payroll. These loans will be administered by the banks with SBA guarantees to cover payroll costs. The annual salary limit for this loan is $100,000 per employee which is prorated over the above covered period.
a) payroll costs are 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, or sick leave; allowance for dismissal or separation;
b) payment required for the provisions of group health care benefits, including insurance premiums; payment of any retirement benefit; or payment of State or local tax assessed on the compensation of employees;
c) and the sum of payments of any compensation to or income of a sole proprietor or independent contractor that is a wage, commission, income, net earnings from self-employment, or similar compensation and that is in an amount that is not more than $100,000 in 1 year, as prorated for the covered period. An eligible self-employed individual, independent contractor, or sole proprietorship seeking a covered loan shall submit such documentation as is necessary to establish such individual as eligible, including payroll tax filings reported to the Internal Revenue Service, Forms 1099–MISC, and income and expenses from the sole proprietorship
2) Loan details:
a) Maximum loan amount is 2.5 times the average month payroll for the past 12 months.
b) SBA will waive their normal fees, defer payments for no less than 6 months but no longer than 1 year and no interest accrues on the loan for 1 year.
c) There will be NO personal guarantees for loans under $200,000.
d) Loan duration for any unforgiven amount is 10 years.
e) Interest rate NOT to exceed 4%
3) The proceeds of the loans can be used for the following purposes:
costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums
employee salaries, commissions, or similar compensations
payments of interest on any mortgage obligation (which shall not include any prepayment of or payment of principal on a mortgage obligation)
rent, utilities; and interest on any other debt obligations that were incurred before the covered period.
Now that you have the loan to ensure operations/employee wages continue, the bill provides the following economic incentives:
1) Loan Forgiveness of the amount of principal that a lender reasonably expects a borrower to expend during the covered period on the sum of any payroll costs; payments of interest on any covered mortgage obligation (which shall not include any prepayment of or payment of principal on a covered mortgage obligation); payments on any covered rent obligation; and covered utility payments.
a) the amount of loan forgiveness, not to exceed the principal, will be reduced if:
(i) you reduce your workforce during the coverage period of 2/15 – 6/30/20 by the following formula:
avg # of FTE’s (full-time employee) from covered period / Avg # of FTE over the same period last year. So if you had an average of 20 full-time equivalent employees from 2/1/19 – 6/30/19 and you have 15 FTE’s for 2/15/20 – 6/30/20; the reductions of the loan forgiveness is 25%. 15/20 = 75% loan forgiveness
(ii) you reduce your salary or wages of employees by over 25% from the most recent completed quarter (3/31/20). If there was a reduction in workforce after 2/15/20 through 3/14/20 but that reduction is corrected (i.e. rehires) by 6/30/20; there will be no reduction in loan forgiveness amount
b) The amount of the forgiven principal will NOT be taxable.
Remember – the lender handles the documents required for forgiveness and deals with the provisions so work with your lender on requirements for loan forgiveness. The Sec. of the Treasury has 30 days to enact regulations and guidance so your lender may be as knowledgeable as you are to this part of the law for the moment.
2) The below credit can be taken by any eligible employer (i.e. the operation of the trade or business described is fully or partially suspended during the calendar quarter due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings (for commercial, social, religious, or other purposes) due to the coronavirus disease 2019 OR has gross revenues reduction of 50% when compared to same quarter last year).
a) A refundable employer retention credit equal to 50% of qualified wages which would include health insurance premiums, up to $10,000 of wages paid to each employee of such employer for such calendar quarter, against quarterly employment taxes for wages paid or incurred from 3/13 – 12/31/20
Paid Sick Leave provisions applying 4/1/20 – 12/31/20
There are two provisions for employers to give eligible employees paid sick leave. An eligible employee means an employee who has been employed for at least 30 calendar days by the employer or an employee who was laid off by an employer March 1, 2020, or later to have access to paid family and medical leave in certain instances if they are rehired by the employer. The employee would have had to work for the employer at least 30 days prior to being laid off.
Emergency Paid Sick Leave Act
Full-time employees are entitled to 80 hours of paid leave, and part-time employees are entitled to the number of hours they work on average over a two-week period if the employee is unable to work, including unable to telework. Depending on the reason for the leave, the amount of sick pay will be the employee’s regular rate of pay, subject to a maximum of $511 per day, or $5,110 in the aggregate or two-thirds their regular rate of pay, subject to a maximum of $200 per day, or $2,000 in the aggregate.
100% of employee pay subject to a maximum of $511/day
1. is subject to a Federal, State, or local quarantine or isolation order related to COVID-19
2. has been advised by a health care provider to self-quarantine related to COVID-19
3. is experiencing COVID-19 symptoms and is seeking a medical diagnosis
Two-thirds of employee pay subject to a maximum of $200/day
1. is caring for an individual subject to an order described in (1) or self-quarantine as described in (2)
2. is experiencing any other substantially-similar condition specified by the U.S. Department of Health and Human Services.
Emergency Family and Medical Leave Expansion Act
The federal Emergency Family and Medical Leave Expansion Act (“FMLA Expansion”) requires most employers with less than 500 employees to provide employees with at least 30 calendar days of service to take up to 12 weeks of leave under the Family and Medical Leave Act (FMLA) to care for a child under the age of 18 if their school or place of care has been closed, or the child care provider of such child is unavailable, due to a COVID-19 related emergency, as follows:
The first 10 days of this leave may be unpaid. An employee may substitute any accrued vacation leave, personal leave, or medical or sick leave for unpaid leave, including EPSLA leave, but cannot be required to do so.
After 10 days, the employee is entitled to be paid two-thirds their regular rate of pay for the number of hours they would otherwise be normally scheduled to work, up to a maximum of $200 per day or $10,000 in the aggregate.
The government tax credit is 100% of the paid leave of the above provisions subject to the same caps per employee depending on length of employment. This is a refundable payroll tax credit. Similar to the other credits in the act, no failure to deposit penalty if the employer reasonably anticipated the credit.
Other Business Tax provisions
The delay of employer portion of payroll tax deposits for 2020 (50% due by December 31, 2021, and 50% due by December 31, 2022)
No failure to deposit penalty of payroll taxes if employer anticipated a refundable credit.
The reinstatement of NOL carrybacks for the 2018–2020 taxable years, and repeal of the 80% taxable income limitation for the 2018–2020 taxable years
A TCJA technical correction that classifies qualified improvement property as 15-year recovery period, allowing the bonus depreciation deduction to be claimed for such property retroactive as if it was included in the TCJA at the time of enactment
As we learn more, we will send further communication. Please contact us with any questions and we will try to advise.
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