DAILY VRLTA UPDATE 4/14/20
It's Takeout Tuesday!

To support your local restaurants, remember to order takeout tonight! Share your images with hashtags #TakeoutTuesdayVA or #VirginiaEatsLocal
LEAD NEWS: Federal CARES Act Update

Launch of the “Main Street Lending Program” announced by the Treasury Department and the Federal Reserve  

  • The Treasury Department and the Federal Reserve announced late last week the launch of the “Main Street Lending Program” (MSLP), which will make available up to $600 billion in financing available to assist employers of all sizes and help state/local governments manage cash flow stresses as they deliver critical services during the crisis. 
  • In accordance with Section 4003 of the CARES Act (Phase 3 legislation), Secretary Mnuchin is using the authority and funding given to him to launch the MSLP. The Department is finalizing the program now and would like to receive feedback/comments by April 16, 2020.  Key highlights of MSLP are listed below, but note our analysis could change based on new information release by Treasury.
  • Geared toward small and mid-size businesses with up to 10,000 employees or with less than$2.5 billion in 2019 annual revenue; must be a business that is created or organized in the U.S. with significant operations and a majority of employees based in the U.S.
  • 4 year loan.
  • Principal and Interest payments will be deferred for 1 year.
  • Lenders and Banks can originate this as a new loan or use this loan to increase the size of existing loans, which means a business which has taken out a PPP loan may also take out a MSLP.
  • Borrowers must commit to make “reasonable efforts” to maintain payroll and retain workers. 
  • Labor neutrality rules (as contained in the CARES Act) do not seem to apply. (Those rules required a business to certify (1) it will not abrogate collective bargaining rights during the term of the loan, and (2) will remain neutral in a union organizing effort for the term of the loan.)
  • However, it is explicitly written that eligible borrowers must follow the compensation, stock repurchase and dividend restrictions as contained in the CARES Act, which limits officers or employees who earned in excess of $3 million in total compensation in calendar year 2019 from earning, in 2020, total compensation, more than the sum of $3 million plus 50 percent of the amount over $3 million of total compensation they received in 2019. (You will recall, both the union organizing rules and compensation restrictions were negotiated by Minority Leader Chuck Schumer and other Democrats as the deal was being finalized.)
  • Adjustable rate of SOFR + 250-400 basis points
  • Minimum loan size of $1 million
  • Maximum loan size that is the lesser of (1) $25 Million, or (2) an amount, when added to the Eligible borrower’s existing outstanding debt, does not exceed 4 times the Borrower’s 2019 earnings before interest and taxes. An upsized tranche is available if certain conditions are met. 
  • Prepayment without penalty.  
  • Borrower is required to make certain attestations regarding the use of loan proceeds, need for financing based on COVID-19 crisis, and more.

Announcement with term sheets:

Comment portal:

The IRS issued new FAQs Today Re: Employer Payroll Tax Deferral through December 31, 2020

Extensions of Tax Filing, Payment, and other Deadlines
 
Net Operating Loss Guidance and Reminder on Electronic Options for Tax Returns

In addition, the U.S. Treasury Department has released additional guidance regarding The Paycheck Protection Program/ SBA. Of note is Q8 on paid sick, Q20 on when the PPP proceeds have to be utilized, Q23 on the affiliation rules and franchisees (which is problematic and will need to be addressed by Treasury/SBA) and Q24 on the waiving of rules under the NAICS Code 72 (for hotels and restaurants) and also includes three separate examples of how Treasury is interpreting the statutory language.  You can view the new FAQ sheet here.
Contact Your Federal Representatives - Phase 4 COVID-19 Relief

As we mentioned last week, we have been working with our federal partners at the National Restaurant Association (NRA) and American Hotel and Lodging Association (AHLA) on addressing many of the issues in the CARES Act. Both the NRA and AHLA have sent letters to Congressional Leadership on what further economic relief and pertaining to how the current programs should be adjusted.

 

In addition, both AHLA and the NRA have launched action alerts in support of these requests. We urge you to contact your legislators and encourage them to back our industries positions on the next phase of COVID-19 relief programs.

Restaurants take action here .

Lodging take action here .
Update on Relief Program from Virginia

As we mentioned in yesterday’s update on the Governor’s proposed amendments to legislation, the Governor has proposed a significant amendment to the legislation dealing with Games of Skill. As passed by the General Assembly HB881 and SB971 both would have banned games of skill in Virginia; however, the Governor has significantly amended both bills to delay the ban until July 1, 2021 and impose a 35% tax on the machines. Of the levy, 84% of tax would be used to help create a COVID-19 relief fund. The ABC would also take over regulation of the machines during the period between July 1, 2020 and July 1, 2021. It also will cap the number of machines at the level that exists as of July 1, 2020.
 
In addition, we have learned that the Governor has made modifications to HB1505 . This legislation dealt with the Department of Small Business and Supplier Diversity and Small Business Grant Funds. The Governor has adjusted the legislation so that rather than shifting these funds into the Small Business Investment Grant Fund that the existing funding would be placed into a COVID-19 Relief Fund. While this grant fund is less than the one that would be financed by taxes on Games of Skill, it would still have about $750,000 and that small businesses could apply for grants up to $5,000. Both of these economic relief program requests were made by VRLTA, so we have been gaining traction from the administration in regards to our requests. 
VRLTA Restaurant State & Federal Guidance Document Updated

We have updated our guidance document for restaurant members to help them understand the COVID-19 federal relief programs that have been enacted, as well as to help provide additional guidance to our restaurants on many frequently asked questions that deal with the actions from the Governor and state agencies. You can view that resource here.
Have you received PPP or EIDL funding?

VRLTA is working to understand if members and others in the hospitality and tourism industries are receiving help . If you applied for either the PPP or EIDL funding, and have received an answer or funds, please send an email to Robert Melvin , VRLTA's Government Affairs Director, sharing the details. Thank you!
National Restaurant Association Launches Grassroots Advocacy Website

The National Restaurant Association is pleased to introduce  Restaurants Act , a new grassroots website for the restaurant industry. This site is a one-stop source for critical information for restaurants, employees, customers, and industry partners. During the COVID-19 crisis, the site will become a go-to resource for the entire industry, providing a comprehensive look at information and resources at the state level. The site will also serve as the launch point for visitors to take action with elected officials directly.
Continue to visit https://www.virginiaisforrestaurantlovers.com for more information about the COVID-19 pandemic and the impact on the tourism and hospitality industries. We are working to add additional resources, links, and news articles as they become available.