Coronavirus Resources

Coronavirus Business Center

In these unprecedented times, staying informed on daily changes while still trying to operate a business is overwhelming. Resources will be posted here to help keep you informed.

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PPP Related Expenses Deductibility Update

As many of us are in the midst of tax planning, the overriding hot topic concerns the handling of expense deductibility related to PPP loans. Although the loan forgiveness was expressly stated by Congress not to be included as taxable income, the Treasury/IRS in its April guidance cited a particular section in the Internal Revue Code and stated that the expenses paid from such proceeds are non-deductible. The Treasury has stated that it will not reverse its position until Congress passes a law ruling otherwise.

This was reinforced in the IRS’s release of Rev. Rul. 2020-27 on November 18, stating “A taxpayer that received a covered loan guaranteed under the PPP and paid or incurred certain otherwise deductible expenses listed in section 1106(b) of the CARES Act may not deduct those expenses in the taxable year in which the expenses were paid or incurred if, at the end of such taxable year, the taxpayer reasonably expects to receive forgiveness of the covered loan on the basis of the expenses it paid or accrued during the covered period, even if the taxpayer has not submitted an application for forgiveness of the covered loan by the end of such taxable year.”

As always, we continue to monitor news from Washington and will advise you if Congress acts to override the IRS ruling.

PPP Update for Borrowers with Loans of $2 Million or More

The SBA has developed two questionnaires, one for for-profit businesses and one for non-profit borrowers, that will go to PPP borrowers with loans, together with their affiliates, totaling $2 million or more. These questionnaires are part of the SBA’s review of the program, including review of good-faith certifications and economic need of loan recipients meeting the $2 million threshold.

For-profit: https://arbcpa.com/wp-content/uploads/2020/10/SBA Form 3509 PPP Loan Neces.pdf
Non-profit: https://arbcpa.com/wp-content/uploads/2020/10/SBA Form 3510 PPP Loan Neces.pdf

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PPP Loan Forgiveness Update Effective 10/8/20

On October 8, 2020 the SBA and Treasury issued a new ruling that greatly simplifies forgiveness for borrowers with total PPP loans of $50,000 or less. Note that this ruling is NOT applicable to borrowers that together with their affiliates received loans totaling $2 million or greater. The new ruling details the following:

• A borrower of a PPP loan or $50K or less can use a new form 3508S to apply for forgiveness.
• Eligible borrowers are exempt from reductions in forgiveness amount based on reductions in FTE or reductions in salary/wages that would otherwise apply.
• On the 3508S, the borrower simply inputs the total allowable payroll and non-payroll costs, not to exceed the PPP loan amount; no other calculations are needed.
• The borrower must still make the usual certifications and submit backup documentation such as third-party payroll reports, tax forms, statements, invoices, etc.

As we enter tax planning season, we are still awaiting guidance on other major questions, including the need to maintain FTE if you apply for forgiveness before the end of your loan covered period. There is also the ongoing dispute between the IRS, which stated in April that PPP expenses associated with tax-free income are nondeductible, while Congress has said that was not their intent in the CARES Act.

We are available to assist you with your 2020 projected taxable income and to advise on your loan forgiveness timing as updated guidance becomes available, as you have 10 months to apply for forgiveness once your loan period ends. At the moment, it is likely that there will be two approaches: deduct PPP expenses in 2020 because forgiveness will not be granted until 2021 (and report taxable income in 2021 for amounts forgiven), OR forego deducting PPP expenses in 2020 because you anticipate full forgiveness in 2021. Either way, until further clarification is issued, your planning needs to consider the impact of the potential non-deductible expenses.

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Webinar: PPP – A Roadmap & Strategies to Maximize Use

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Governor Baker Phase-In Plan for Massachusetts Businesses

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Helpful Links for the Paycheck Protection Program

The PPP-Forgiveness-Application can be found at: https://home.treasury.gov/system/files/136/3245-0407-SBA-Form-3508-PPP-Forgiveness-Application.pdf

For Paycheck-Protection-Program-Frequently-Asked-Questions visit: https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Frequently-Asked-Questions.pdf

You can find the US Treasury PPP Loan website at: https://home.treasury.gov/policy-issues/cares/assistance-for-small-businesses

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Webinar: Maximize Loan Forgiveness – How to Track & Spend Your PPP Money

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CARES Act – Paycheck Protection Program Update 4/1/20

• Lenders received initial loan application instructions from the SBA late yesterday and received the application form.
• Secretary Mnuchin stated that he expected to have the program up and running by April 3rd.
• The PPP Act provided that any unspent loan proceeds on the allowable expenses that were defined by the new law would have to be paid back within a maximum of 10 years with a maximum rate of interest of 4%. In yesterday’s guidance to the banks they set the payback period to 2 years and a rate of interest of .5%. (We assume a short time period was selected to ensure that the money is used as intended by the new law.)
• The CARES Act is separate from the Small Business Administration (SBA) Direct Disaster Relief Loan which is maxed out at $2M. Applicants can not apply to both programs.

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Coronavirus Aid, Relief and Economic Security Act (CARES Act)

Paycheck Protection Program – Small Business Loan Guarantees

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SBA Economic Injury Disaster Loans For Coronavirus Related Economic
Disruptions Webinar Highlights
March 23, 2020

The following are certain highlights of the Covid 19 Virus SBA Loan Assistance Program. Some of which were comments made by Ili Spahiu, the SBA representative conducting the webinar:

• Up to $2M can be borrowed based on not being able to get needed credit elsewhere, current need and repayment ability
• 30 year loan at 3.75% interest (2.75 for non-profits)
• No payments for first 12 months
• Does not go through banks, it’s a direct loan from the Government
• No fees to apply or borrow
• There is no place on the Loan Application to put in a requested loan amount (the SBA will determine that based on financial information submitted)
• Approval of loans still needs to be based on historic cash flow (not the more recent since the crisis hit) to demonstrate ability to pay
• Credit Score of 600 and above
• Credit Scores below 600 will still be considered, but on a case by case basis
• Loans over $25,000 need personal guarantee
• All owners of 20% or more must guarantee loan
• Loan will be secured by real estate if available (2nd lien position)
• If no real estate available, will take pledge of other available assets
• Recommended to use the Electronic Loan Application for faster processing
• Infrastructure was not built for the amount of claims being received so can be very slow
• It is encouraged that you keep trying to get yourself in the process que and try later at night
• Application must match the business name and address exactly as the Federal Income Tax Return filing. Biggest reason for applications being bounced
• When you register, you’ll be asked to set up a password. This will allow you to go back into your file, as needed, to complete the application as you pull together the financial information that’s required.
• Upon final submittal of the application, you’ll get a case number that you can then refer too
• Current loan process time is 4 weeks and is projected to get longer
• If your funding need can’t wait 4 weeks or more, look into getting a bridge loan which you can then pay back from the SBA proceeds

Note: that late Wednesday night, March 25 2020, the Senate passed the Keeping American Workers Paid and Employment Act. The House will vote on it Friday. If it passes as is, there is another Business Relief Loan Program of up to $10M for qualifying businesses. Business owners will have to decide which loan provisions are more favorable to them and choose one to apply to. The law specifically prohibits applying to both. Once the law is passed and signed by the President we will update our resource materials accordingly.

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DOL’s Family First Coronavirus Response Act Q&A

As provided under new legislation, the U.S. Department of Labor will be issuing implementing regulations. Additionally, as warranted, the Department will continue to provide compliance assistance to employers and employees on their responsibilities and rights under the FFCRA.

DEFINITIONS

“Paid sick leave” – means paid leave under the Emergency Paid Sick Leave Act.

“Expanded family and medical leave” – means paid leave under the Emergency Family and Medical Leave Expansion Act.

QUESTIONS & ANSWERS
1.  What is the effective date of the Families First Coronavirus Response Act (FFCRA), which includes the Emergency Paid Sick Leave Act and the Emergency Family and Medical Leave Expansion Act?

The FFCRA’s paid leave provisions are effective on April 1, 2020, and apply to leave taken between April 1, 2020, and December 31, 2020.

2.  As an employer, how do I know if my business is under the 500-employee threshold and therefore must provide paid sick leave or expanded family and medical leave?

You have fewer than 500 employees if, at the time your employee’s leave is to be taken, you employ fewer than 500 full-time and part-time employees within the United States, which includes any State of the United States, the District of Columbia, or any Territory or possession of the United States. In making this determination, you should include employees on leave; temporary employees who are jointly employed by you and another employer (regardless of whether the jointly-employed employees are maintained on only your or another employer’s payroll); and day laborers supplied by a temporary agency (regardless of whether you are the temporary agency or the client firm if there is a continuing employment relationship). Workers who are independent contractors under the Fair Labor Standards Act (FLSA), rather than employees, are not considered employees for purposes of the 500-employee threshold.

Typically, a corporation (including its separate establishments or divisions) is considered to be a single employer and its employees must each be counted towards the 500-employee threshold. Where a corporation has an ownership interest in another corporation, the two corporations are separate employers unless they are joint employers under the FLSA with respect to certain employees. If two entities are found to be joint employers, all of their common employees must be counted in determining whether paid sick leave must be provided under the Emergency Paid Sick Leave Act and expanded family and medical leave must be provided under the Emergency Family and Medical Leave Expansion Act.

In general, two or more entities are separate employers unless they meet the integrated employer test under the Family and Medical Leave Act of 1993 (FMLA). If two entities are an integrated employer under the FMLA, then employees of all entities making up the integrated employer will be counted in determining employer coverage for purposes of expanded family and medical leave under the Emergency Family and Medical Leave Expansion Act.

3.  If I am a private sector employer and have 500 or more employees, do the Acts apply to me?

No. Private sector employers are only required to comply with the Acts if they have fewer than 500 employees.[1]

4.  If providing child care-related paid sick leave and expanded family and medical leave at my business with fewer than 50 employees would jeopardize the viability of my business as a going concern, how do I take advantage of the small business exemption?

To elect this small business exemption, you should document why your business with fewer than 50 employees meets the criteria set forth by the Department, which will be addressed in more detail in forthcoming regulations.

You should not send any materials to the Department of Labor when seeking a small business exemption for paid sick leave and expanded family and medical leave.

5.  How do I count hours worked by a part-time employee for purposes of paid sick leave or expanded family and medical leave?

A part-time employee is entitled to leave for his or her average number of work hours in a two-week period. Therefore, you calculate hours of leave based on the number of hours the employee is normally scheduled to work. If the normal hours scheduled are unknown, or if the part-time employee’s schedule varies, you may use a six-month average to calculate the average daily hours. Such a part-time employee may take paid sick leave for this number of hours per day for up to a two-week period, and may take expanded family and medical leave for the same number of hours per day up to ten weeks after that.

If this calculation cannot be made because the employee has not been employed for at least six months, use the number of hours that you and your employee agreed that the employee would work upon hiring. And if there is no such agreement, you may calculate the appropriate number of hours of leave based on the average hours per day the employee was scheduled to work over the entire term of his or her employment.

6.  When calculating pay due to employees, must overtime hours be included?

Yes. The Emergency Family and Medical Leave Expansion Act requires you to pay an employee for hours the employee would have been normally scheduled to work even if that is more than 40 hours in a week.

However, the Emergency Paid Sick Leave Act requires that paid sick leave be paid only up to 80 hours over a two-week period. For example, an employee who is scheduled to work 50 hours a week may take 50 hours of paid sick leave in the first week and 30 hours of paid sick leave in the second week. In any event, the total number of hours paid under the Emergency Paid Sick Leave Act is capped at 80.

If the employee’s schedule varies from week to week, please see the answer to Question 5, because the calculation of hours for a full-time employee with a varying schedule is the same as that for a part-time employee.

Please keep in mind the daily and aggregate caps placed on any pay for paid sick leave and expanded family and medical leave as described in the answer to Question 7.

Please note that pay does not need to include a premium for overtime hours under either the Emergency Paid Sick Leave Act or the Emergency Family and Medical Leave Expansion Act.

7.  As an employee, how much will I be paid while taking paid sick leave or expanded family and medical leave under the FFCRA?

It depends on your normal schedule as well as why you are taking leave.

If you are taking paid sick leave because you are unable to work or telework due to a need for leave because you (1) are subject to a Federal, State, or local quarantine or isolation order related to COVID-19; (2) have been advised by a health care provider to self-quarantine due to concerns related to COVID-19; or (3) are experiencing symptoms of COVID-19 and are seeking medical diagnosis, you will receive for each applicable hour the greater of:
◦ your regular rate of pay,
◦ the federal minimum wage in effect under the FLSA, or
◦ the applicable State or local minimum wage.

In these circumstances, you are entitled to a maximum of $511 per day, or $5,110 total over the entire paid sick leave period.

If you are taking paid sick leave because you are: (1) caring for an individual who is subject to a Federal, State, or local quarantine or isolation order related to COVID-19 or an individual who has been advised by a health care provider to self-quarantine due to concerns related to COVID-19; (2) caring for your child whose school or place of care is closed, or child care provider is unavailable, due to COVID-19 related reasons; or (3) experiencing any other substantially-similar condition that may arise, as specified by the Secretary of Health and Human Services, you are entitled to compensation at 2/3 of the greater of the amounts above.

Under these circumstances, you are subject to a maximum of $200 per day, or $2,000 over the entire two week period.

If you are taking expanded family and medical leave, you may take paid sick leave for the first ten days of that leave period, or you may substitute any accrued vacation leave, personal leave, or medical or sick leave you have under your employer’s policy. For the following ten weeks, you will be paid for your leave at an amount no less than 2/3 of your regular rate of pay for the hours you would be normally scheduled to work. The regular rate of pay used to calculate this amount must be at or above the federal minimum wage, or the applicable state or local minimum wage. However, you will not receive more than $200 per day or $12,000 for the twelve weeks that include both paid sick leave and expanded family and medical leave when you are on leave to care for your child whose school or place of care is closed, or child care provider is unavailable, due to COVID-19 related reasons.

To calculate the number of hours for which you are entitled to paid leave, please see the answers to Questions 5-6 that are provided in this guidance.

8.  What is my regular rate of pay for purposes of the FFCRA?

For purposes of the FFCRA, the regular rate of pay used to calculate your paid leave is the average of your regular rate over a period of up to six months prior to the date on which you take leave.[2] If you have not worked for your current employer for six months, the regular rate used to calculate your paid leave is the average of your regular rate of pay for each week you have worked for your current employer.

If you are paid with commissions, tips, or piece rates, these wages will be incorporated into the above calculation.

You can also compute this amount for each employee by adding all compensation that is part of the regular rate over the above period and divide that sum by all hours actually worked in the same period.

9.  May I take 80 hours of paid sick leave for my self-quarantine and then another amount of paid sick leave for another reason provided under the Emergency Paid Sick Leave Act?

No. You may take up to two weeks—or ten days—(80 hours for a full-time employee, or for a part-time employee, the number of hours equal to the average number of hours that the employee works over a typical two-week period) of paid sick leave for any combination of qualifying reasons. However, the total number of hours for which you receive paid sick leave is capped at 80 hours under the Emergency Paid Sick Leave Act.

10.  If I am home with my child because his or her school or place of care is closed, or child care provider is unavailable, do I get paid sick leave, expanded family and medical leave, or both—how do they interact?

You may be eligible for both types of leave, but only for a total of twelve weeks of paid leave. You may take both paid sick leave and expanded family and medical leave to care for your child whose school or place of care is closed, or child care provider is unavailable, due to COVID-19 related reasons. The Emergency Paid Sick Leave Act provides for an initial two weeks of paid leave. This period thus covers the first ten workdays of expanded family and medical leave, which are otherwise unpaid under the Emergency and Family Medical Leave Expansion Act unless the you elect to use existing vacation, personal, or medical or sick leave under your employer’s policy. After the first ten workdays have elapsed, you will receive 2/3 of your regular rate of pay for the hours you would have been scheduled to work in the subsequent ten weeks under the Emergency and Family Medical Leave Expansion Act.

Please note that you can only receive the additional ten weeks of expanded family and medical leave under the Emergency Family and Medical Leave Expansion Act for leave to care for your child whose school or place of care is closed, or child care provider is unavailable, due to COVID-19 related reasons.

11.  Can my employer deny me paid sick leave if my employer gave me paid leave for a reason identified in the Emergency Paid Sick Leave Act prior to the Act going into effect?

No. The Emergency Paid Sick Leave Act imposes a new leave requirement on employers that is effective beginning on April 1, 2020.

12.  Is all leave under the FMLA now paid leave?

No. The only type of family and medical leave that is paid leave is expanded family and medical leave under the Emergency Family and Medical Leave Expansion Act when such leave exceeds ten days. This includes only leave taken because the employee must care for a child whose school or place of care is closed, or child care provider is unavailable, due to COVID-19 related reasons.

13.  Are the paid sick leave and expanded family and medical leave requirements retroactive?

No.

14.  How do I know whether I have “been employed for at least 30 calendar days by the employer” for purposes of expanded family and medical leave?

You are considered to have been employed by your employer for at least 30 calendar days if your employer had you on its payroll for the 30 calendar days immediately prior to the day your leave would begin. For example, if you want to take leave on April 1, 2020, you would need to have been on your employer’s payroll as of March 2, 2020.

If you have been working for a company as a temporary employee, and the company subsequently hires you on a full-time basis, you may count any days you previously worked as a temporary employee toward this 30-day eligibility period.

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Summary Key Provisions – Keeping American Workers Paid and Employment Act

Note: Late Wednesday night, March 25 2020, the Senate passed the Keeping American Workers Paid and Employment Act. The summary of key provisions is based on provisions that the Senate passed. The House approved and the President signed it into law Friday. Upon review we will be updating our resource materials accordingly.