PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

The Latest from SBA and U.S. Treasury on “Paycheck Protection Program” Loans – (Updated May 23)

By at 19 May, 2020, 9:25 am

UPDATED May 23, 2020

by Karen Kerrigan-

New on May 22: Interim Final Rules on Loan Forgiveness

The rules cover what is forgivable under PPP, the forgiveness process, and other procedures in a Q&A format.

New on May 22: SBA Loan Review Procedures and Related Borrower and Lender Responsibilities.

The rules, provided in a Q&A format, cover additional procedures and criteria through which SBA will review whether an action by the borrower has resulted in its receipt of a PPP loan that did not meet program requirements.

New on May 19: Over the past week, the SBA updated its PPP FAQs document twice. Click here for the May 19 update of the document, which includes Q&A #48 relating to deadline information for lenders to complete SBA Form 1502. It also includes an update from the May 13 guidance (Q&A’s #46 and #47) that address a PPP borrower’s required good-faith certification concerning the necessity of their loan request, a safe-harbor from loans under $2 million, and the extension of full loan repayment from May 14 to May 18 in order for PPP recipients an opportunity to review and consider FAQ #46 regarding their certification.

New on May 15 – PPP LOAN FORGIVENESS APPLICATION: In the early evening of May 15, the Small Business Administration released the PPP Loan Forgiveness Application. It’s a little complex (at least my read of it) and as loan recipients begin to review and absorb the content, do keep in mind that guidance will be forthcoming on the application. As noted by SBA in a news release announcing the application: “SBA will also soon issue regulations and guidance to further assist borrowers as they complete their applications, and to provide lenders with guidance on their responsibilities.” In other words, stay tuned.

The application includes the following: (1) the PPP Loan Forgiveness Calculation Form; (2) PPP Schedule A; (3) the PPP Schedule A Worksheet; and (4) the (optional) PPP Borrower Demographic Information Form. All Borrowers must submit (1) and (2) to their Lender.

New on May 13: In the latest guidance, Questions 46 and 47 address a PPP borrower’s required good-faith certification concerning the necessity of their loan request, a safe-harbor for loans under $2 million, and the extension of full loan repayment from May 14 to May 18 in order for PPP recipients an opportunity to review and consider FAQ #46 regarding their certification.

New on May 6: On May 3 and May 6, additional Q&As were added to SBA/Treasury’s core guidance document, which brings the total number of questions and answers on PPP rules to forty-five.

Question #40 addresses efforts at employee retention and whether PPP loan forgiveness will be reduced “if the borrower laid off an employee, offered to rehire the same employee, but the employee declined the offer?”

The answer is “No,” and to qualify for the exception “the borrower must have made a good faith, written offer of rehire, and the employee’s rejection of that offer must be documented by the borrower. Employees and employers should be aware that employees who reject offers of re-employment may forfeit eligibility for continued unemployment compensation.”

Question #41 offers additional guidance for seasonal employers regarding calculation of maximum PPP loan amounts.

Question #43 reminds borrowers to carefully review the required certification on the application form, and the safe harbor for loan repayment.

Questions #45 answers the question: “Is an employer that repays its PPP loan by the safe harbor deadline (May 14, 2020) eligible for the Employee Retention Credit?” The answer is yes.

New on May 3: New SBA/Treasury guidance increased their Q&A document to 42 questions and answers on PPP rules. Of interest is question #40 regarding whether PPP loan forgiveness will be reduced “if the borrower laid off an employee, offered to rehire the same employee, but the employee declined the offer?” The answer is “No,” and to qualify for the exception “the borrower must have made a good faith, written offer of rehire, and the employee’s rejection of that offer must be documented by the borrower. Employees and employers should be aware that employees who reject offers of re-employment may forfeit eligibility for continued unemployment compensation.” Question #41 offers additional guidance for seasonal employers regarding calculation of maximum PPP loan amounts.

NEW on April 24: HOW TO CALCULATE MAXIMUM PPP LOAN AMOUNTSNew guidance from the SBA in consultation with U.S. Treasury (released on the evening of April 24) will, according to the document, “assist businesses in calculating their payroll costs for purposes of determining the amount of a Paycheck Protection Program (PPP) loan businesses can apply for.”

The guidance, formatted in a Q&A format, provides information and steps for a variety of small businesses including: self-employed with no employees; self-employed with employees; documentation  business owners will provided depending on how they report their income; how partnership should apply for PPP loans; how is the maximum PPP loan amount is calculated for S corporations and C corporations; how it is calculated for eligible nonprofit organizations, nonprofit religious institutions, veterans organizations, and tribal businesses; and what other documentation can be provided for the purpose of substantiating the applied-for PPP loan amount.

NEW on April 24: SBA updated their PPP Loan FAQ’s on April 24 (Q&A 31-35 added), which can be accessed here. This latest Q&A supercedes the Q&A documents of April 8 and April 13. 

NEW on April 14: Supplemental PPP Guidance (April 14): Additional Eligibility Criteria and Requirements, and Calculating Self-Employment Income

On April 14, the U.S. Treasury and Small Business Administration issued supplemental guidance on several issues, including clarification for the self-employed regarding the calculation of net income and payroll for Paycheck Protection Program (PPP) loans and related guidance on forgivable expenses. Access the guidance here.

“Final” Guidance and Rules

As expected, U.S. Treasury released Interim “Final” Rules on the CARES Act “Paycheck Protection Program” (PPP) in the early evening of April 2.  SBE Council has reviewed the rules which can accessed here, and will have forthcoming comments and analysis on them.

Borrower Application: This is Final borrower form for PPP loans (which is submitted to a PPP participating lender participating).

Final Lender Application: Here is the final application form that lenders use for each borrower.

The U.S. Treasury and SBA have launched CARES Act “Paycheck Protection Program” (PPP) webpages, which include information for borrowers, lenders and a sample application form that small businesses will use once SBA-approved 7(a) lenders, banks, or credit unions begin taking applications on April 3 (according to U.S. Treasury).

See the SBA’s PPP page here, and the U.S. Treasury’s CARES Act page here.

The SBA also launched a new guidance page here.

According to the U.S. Treasury: “Starting April 3, 2020, small businesses and sole proprietorships can apply. Starting April 10, 2020, independent contractors and self-employed individuals can apply. We encourage you to apply as quickly as you can because there is a funding cap.”

Here are some key links for small businesses provided by U.S. Treasury:

ABOUT CARES ACT: Eligibility and “the rules.” For a top-line overview of the program, please click CLICK HERE.

SMALL BUSINESS BORROWERS: If you’re a borrower the information provided HERE is useful in filling out your PPP application, determining eligibility, etc.

As noted within the documents above, the network of lenders (above and beyond those already approved under the SBA 7(a) lending program) will be expanded to accept and process applications for the PPP loans. The U.S. Treasury will approve new lenders and make this list available as they approve additional lenders.

SCAMS: You knew it was going to happen. The scammers and shysters are out in full force. So beware of anyone, any website or solicitation that says you have to provide upfront capital or a credit card to apply for an SBA “economic injury disaster loan” (EIDL) or Paycheck Protection Program loan under the 7(a) loan program.

● There is no fee to apply

● No credit card information is needed

I am getting a lot of good questions from small business owners regarding the CARES Act, and hope to compile them in the next couple of days with answers. We’ve been getting a lot of questions from the self-employed and independent contractors who are not familiar with how to apply for unemployment insurance, which they now qualify for under the CARES Act.

We’ve been fielding a lot of these questions (as well as whether the self-employed and independent contractors can participate in EIDL and PPP programs – the answer, again, is yes!). As an FYI, each state administers its own unemployment insurance program, which has received a significant boost from the CARES Act.  Go to the DOL page here and it will prompt you to enter your home state.

The House Ways and Means Committee Republican Team also released this very helpful “CARES Act: Unemployment Questions Answered” blog post. Share it with friend, family members, employees and colleagues.

 

Senate Small Business Committee FAQs

In addition to their Guide for Small Business Owners on the CARES Act, the Senate Small Business Committee on Small Business and Entrepreneurship has also developed a very helpful “Frequently Asked Questions (FAQ) document. Read the FAQ here.  Today we recorded a podcast with Senator Marco Rubio (R-FL), Chairman of the Committee, which will go live on social media and www.sbecouncil.org tomorrow.

I read a lot of information and expert blog posts about the CARES Act to figure out how to better convey the provisions and how they work together. I am sharing this blog post by Ascend Consulting LLC, which is run by our good friend Jacob Schroeder, CPA, the Founder & CEO of the firm. As more information and guidance becomes available about the CARES Act, we will be counting on people like Jacob and our small business advisers to more concisely inform small businesses about complex issues.

The small business community is facing its toughest challenge ever, as portrayed in this March 30 CNBC story featuring business owners and leaders Jason Duff and Adam Rammel, who are also SBE Council members. Both Jason and Adam, besides saving their own businesses, are helping other small business owners cope with the devastating economic effect of COVID-19. They are true heroes.

By the way, we are hearing from our members that the new “economic injury disaster loan” (EIDL) application is indeed streamlined. This is the new application that puts your business in the system to receive an immediate $10,000 advance (in 3 days at the most, according to the CARES Act legislation), and small businesses that have already applied for an EIDL before the CARES Act passed should go back and apply for the advance using this new application.

Hang in there and keep providing us with feedback, intelligence and information on how these programs are working, and how you are coping during this challenging period.

Karen Kerrigan, President & CEO

UPDATED

SBE Council’s COVID-19 Small Business Resource Center

 

CARES Act – Summary of Tax Provisions

Foley has put together a solid summary of the tax provisions in the CARES Act. As SBE Council noted in our previous editions of Small Business Insider, there are significant provisions that will be helpful to small businesses.

In addition to relief announced by U.S. Treasury regarding extension of time to file and pay taxes, the CARES Act includes additional relief and reform measures:

● Delay of payment of employer-side payroll taxes (tax payments may be delayed until January 1, 2021, with 50 percent owed on Dec. 31, 2021 and the other half owed on Dec. 31, 2022.)

● Employee Retention Credit: A refundable payroll tax credit equal to 50 percent of up to $10,000 in wages per employee (including health benefits) paid by certain employers during the coronavirus crisis.

● Five-year carry back and expansion of NOLs. Firms may take net operating losses (NOLs) earned in 2018, 2019, or 2020 and carry back those losses five years.

● Loosening of business interest deduction from 30 percent of EBITDA to 50 percent of EBITDA.

● Technical correction to Qualified Improvement Property (QIP) depreciation treatment.

● Waives the 10 percent early withdrawal penalty on retirement account distributions for taxpayers facing virus-related economic challenges. Withdrawn amounts are taxable over three years, but taxpayers can recontribute the withdrawn funds into their retirement accounts for three years without affecting retirement account caps. Minimum distribution rules for certain retirement plans in calendar year 2020 are waived.

● Health savings accounts (HSA) changes related to OTC purchases of coronavirus treatments and other changes.

The Foley blog post covers these items in more detail.

 

Latest Guidance from Department of Labor on Emergency Paid Sick Leave and FMLA Expansion in Phase II Coronavirus Response Legislation

On March 28, the U.S. Department of Labor’s Wage and Hour Division (WHD) published additional guidance about the paid sick leave and medical leave expansion within the Families First Coronavirus Response Act (FFCRA), which was the Phase II response legislation, when it goes into effect on April 1, 2020.

SEE SBE Council’s blog post on the first round of guidance, including important information about the tax credits.

The latest round of guidance includes 59 questions and answers addressing critical issues such as the definition of a “health care provider,” and the scope of the small business exemption for purposes of exclusion from the provisions of the Emergency Paid Sick Leave Act and Emergency Family and Medical Leave Expansion Act. WHD recently released posters and fact sheets in Spanish on its COVID-19 website.

Questions 58 and 59 provide guidance on the exemption for small businesses from the paid leave mandate:

When does the small business exemption apply to exclude a small business from the provisions of the Emergency Paid Sick Leave Act and Emergency Family and Medical Leave Expansion Act?

An employer, including a religious or nonprofit organization, with fewer than 50 employees (small business) is exempt from providing (a) paid sick leave due to school or place of care closures or child care provider unavailability for COVID-19 related reasons and (b) expanded family and medical leave due to school or place of care closures or child care provider unavailability for COVID-19 related reasons when doing so would jeopardize the viability of the small business as a going concern. A small business may claim this exemption if an authorized officer of the business has determined that:

● The provision of paid sick leave or expanded family and medical leave would result in the small business’s expenses and financial obligations exceeding available business revenues and cause the small business to cease operating at a minimal capacity;

● The absence of the employee or employees requesting paid sick leave or expanded family and medical leave would entail a substantial risk to the financial health or operational capabilities of the small business because of their specialized skills, knowledge of the business, or responsibilities; or

● There are not sufficient workers who are able, willing, and qualified, and who will be available at the time and place needed, to perform the labor or services provided by the employee or employees requesting paid sick leave or expanded family and medical leave, and these labor or services are needed for the small business to operate at a minimal capacity.

If I am a small business with fewer than 50 employees, am I exempt from the requirements to provide paid sick leave or expanded family and medical leave?

A small business is exempt from certain paid sick leave and expanded family and medical leave requirements if providing an employee such leave would jeopardize the viability of the business as a going concern. This means a small business is exempt from mandated paid sick leave or expanded family and medical leave requirements only if the:
employer employs fewer than 50 employees;

● leave is requested because the child’s school or place of care is closed, or child care provider is unavailable, due to COVID-19 related reasons; and

● an authorized officer of the business has determined that at least one of the three conditions described in Question 58 is satisfied.

Visit the Department of Labor WHD COVID-19 resource page here.

 

Karen Kerrigan is president & CEO of the Small Business & Entrepreneurship Council.

 

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