Legislative Alert
Dear Clients and Friends of the Firm:

We are pleased to report that yesterday (March 27, 2020) President Trump signed into law the Coronavirus Aid Relief and Economic Security Act ("CARES Act"). This law is an enormous ($2.2 Trillion) basket of economic stimulus packages to help ordinary citizens, states and businesses throughout our country. 

In today’s message we will discuss four aspects of this new law; those are

  • loans under the Paycheck Protection Program,
  • some modifications for the SBA Disaster Loan Program,
  • a brief summary of about new Employee Retention Credits dealing with payroll, and
  • an even briefer discussion of Deferred Payroll Tax provisions.  

Paycheck Protection Program

This part of the CARES Act provides $349 Billion to allow the Small Business Administration (SBA) to expand its existing 7(a) loan program. Any bank that is an SBA lender can issue these loans and the Treasury will be instituting a program to expand the number of authorized lenders. There is no cost to apply and many businesses will qualify. Eligible businesses, including 501(c)(3) nonprofits, sole proprietorships and self-employed individuals, can borrow up to $10 million. The amount borrowed is tied to a business’s payroll costs.  It is more extensive than SBA disaster loans.  
Comparison Chart of SBA Loans
What we know right now is that eight weeks after signing the Paycheck Protection Program loan documents you can apply to have a portion of the loan forgiven based upon eligible expenses you have incurred or paid over that 8-week period. The CARES Act itself is 880 pages long and the SBA is required to issue more guidelines about the forgiveness process within 30 days of enactment. In the meantime, we recommend that if you think you qualify then apply with your chosen bank soon. We can help you with a list of some of the documentation that you will need when you apply for forgiveness and contact us if you have questions about the application after you contact the bank for their forms.
SBA Disaster Loans

The Small Business Administration (SBA) will be coordinating with state governors to submit requests for Economic Injury Disaster Loan assistance. To be eligible you must be a business or nonprofit of a certain size experiencing a loss related to COVID-19, even if you have not suffered a property damage as in most other types of declared disasters. These funds can be used to cover operating expenses and working capital needs as you recover from the impact of this pandemic. In determining the size of the business, certain affiliation rules have been waived. If you had a previous or current SBA loan and are in good standing with the SBA you will still be eligible to make a new SBA Disaster loan application. Many other details about this type of SBA loan were mentioned above. The fastest way to apply is online at https://www.sba.gov/funding-programs/disaster-assistance Recent returns and certain additional financial information may be required.

Employee Retention Credits

The CARES Act created a refundable payroll tax credit for 50 percent of wages paid by employers to employees during the COVID-19 crisis. The credit is available to employers whose (1) operations were fully or partially suspended, due to a COVID-19-related shut-down order, or (2) gross receipts declined by more than 50 percent when compared to the same quarter in the prior year.

The credit is based on qualified wages paid to the employee. For employers with greater than 100 full-time employees, qualified wages are wages paid to employees when they are not providing services due to the COVID-19-related circumstances described above. For eligible employers with 100 or fewer full-time employees, all employee wages qualify for the credit, whether the employer is open for business or subject to a shut-down order. The credit is provided for the first $10,000 of compensation, including health benefits, paid to an eligible employee. The credit is provided for wages paid or incurred from March 13, 2020 through December 31, 2020. 

Delay of Employer Payroll Taxes

Employers generally are responsible for paying a 6.2-percent Social Security tax on employee wages, and the bill allows employers and self-employed individuals to defer payment of the employer share of the Social Security tax they otherwise are responsible for paying to the federal government with respect to their employees.

The provision requires that the deferred employment tax be paid over the following two years, with half of the amount required to be paid by December 31, 2021 and the other half by December 31, 2022.  

Our COVID-19 Response Team is working to provide you with the most current developments that impact you and your business during this crisis. We are here to help you plan and implement the new legislation and strategies to weather this pandemic storm. Please see our COVID-19 Resource Page for a collection of client alerts and other beneficial resources. We are here to assist you as your trusted advisors.
This information has been provided for informational purposes only and not actual professional tax and/or accounting advice. Before making any decision or taking any action you should consult with your professional advisor about your specific situation.
Please contact your engagement shareholder or manager directly if you have any questions.