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President Trump Signs an Executive Order and Three Memoranda to Provide or Extend COVID-19 Relief to Individuals and Businesses

On Saturday, August 8, 2020, President Trump issued an Executive Order and three Memoranda to provide or extend COVID-19 relief to individuals and businesses.  Although the Executive Orders are not currently operational, at Tarlow, we feel that it is important for us to communicate this update.

Payroll Tax Deferral

The Executive Order directs the Secretary of Treasury to defer the withholding, deposit, and payment of the employee portion of social security tax, excluding Medicare tax, on wages or compensation paid during the period of September 1, 2020, through December 31, 2020. The deferral applies to any employee whose pre-tax wages or compensation during any biweekly payroll period are generally less than $4,000, calculated on a pre-tax basis, or the equivalent amount during other payroll periods. The tax payments are deferred without penalties, interest, additional amounts, or addition to the tax.

The Executive Order directs the Secretary of Treasury to issue guidance to implement the Memorandum and to identify methods to eliminate the obligation to pay the deferred taxes. It provides only for the deferral of the employee portion of social security tax and, in the event the Secretary of Treasury does not eliminate the deferred tax entirely, an affected employee will be required to pay any remaining deferred tax. We await further guidance; currently, it is not clear how an employee would pay the deferred tax following the end of the deferral period.

Employers have already had 50% of their portion of payroll tax payments due during the period that begins on March 27, 2020, and ends on December 31, 2020, delayed until December 31, 2021, and the other 50% until December 31, 2022, by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136.

The other Executive Orders involve compensation to unemployed individuals, evictions, and student loan relief, as follows:

Disaster Relief/Unemployment Insurance Benefits

The CARES Act provided a $600 per week federally funded unemployment compensation assistance to an eligible unemployed person, in addition to standard state unemployment benefits. This benefit expired on July 31, 2020.

The Disaster Relief Memorandum directs the Federal Emergency Management Agency (“FEMA”) to provide benefits from the Department of Homeland Security’s Disaster Relief Fund. It also directs states to utilize their Coronavirus Relief Fund allocation to provide financial relief to unemployed Americans affected by COVID-19. The maximum amount is $400 per week supplemental unemployment compensation benefit. In comparison to the $600 supplemental benefit under CARES, the Disaster Relief Memorandum calls for two significant changes in eligibility:

  • Individuals must receive at least $100 per week in regular state unemployment compensation assistance, an increase from $1.
  • Individuals must certify that their lost wages are attributable to disruptions caused by COVID-19.

The funding for this new benefit differs from the funding under the CARES Act in that the federal government will only pay for 75% of the costs associated with this benefit. The remaining 25% will be the responsibility of the state governments, subject to an agreement between the federal government and the state in terms of the program and funding.

Eviction Minimization

The Housing Executive Order directs members of the Cabinet to consider, identify, review, and minimize residential evictions and foreclosures during the COVID-19 pandemic. President Trump directs the Secretary of Health and Human Services and the Director of the Centers for Disease Control and Prevention to consider whether any temporary ceasing of evictions for failure to pay rent are reasonably necessary to prevent further COVID-19 spread. President Trump directs the Secretary of the Treasury and the Secretary of Housing and Urban Development to identify Federal funds that could be allocated to provide temporary financial assistance to renters and homeowners struggling to make monthly payments. The President also directs the HUD Secretary to promote the ability of renters and homeowners to avoid eviction or foreclosure, including by providing Federal funds to landlords.

Student Loan Payment Relief

The Education Memorandum directs the Secretary of Education to effectuate waivers of and modifications to the requirements and conditions of economic hardship deferments.  It provides such deferments as necessary to continue the temporary cessation of payments and the waiver of all interest on student loans held by the Department of Education until December 31, 2020. The Education Memorandum also states that student loan borrowers may continue to make payments.

Tarlow is Here to Help – Please Contact Us with Questions

Tarlow Partners and staff members are closely monitoring these Executive Orders, tax-related legislation and regulations, and new guidance from the SBA and the Department of Treasury. We are readily available to assist business owners and will continue to send updates about relevant news and changing guidelines.  If you have any questions about this update or any tax matter, please contact your Tarlow advisor for assistance.

Important Reminder from Tarlow: The Deadline to Apply for a Paycheck Protection Program Loan is Saturday, August 8, 2020

The Paycheck Protection Program (PPP) is a loan designed to provide a direct incentive for small businesses to keep their workers on payroll. The PPP resumed accepting applications on July 6, 2020, in response to President Trump signing the program’s extension legislation. As an important reminder from Tarlow, the deadline to apply for a Paycheck Protection Program loan is August 8, 2020. The five-week extension was intended to provide small businesses additional time to apply for the approximately $129 billion in PPP funding remaining. The Small Business Administration (SBA), which oversees the program with the Treasury Department, will forgive loans if all employee retention criteria are met, and the funds are used for eligible expenses.

PPP Loan Forgiveness Details 

PPP loan recipients can have their loans forgiven in full if the funds were used for eligible expenses and other criteria are met. The amount of the loan forgiveness may be reduced based on the percentage of eligible costs attributed to nonpayroll costs, any decrease in employee headcount, and decreases in salaries or wages per employee.  PPP loans will be fully forgiven if the funds are used for payroll costs (at least 60% of the forgiven amount must have been used for payroll), interest on mortgages, rent, and utilities. In addition:

  • PPP loans have an interest rate of 1%.
  • Loans issued prior to June 5, 2020, have a maturity of two years and loans issued after June 5, 2020, have a maturity of five years.
  • Loan payments will be deferred for six months.
  • No collateral or personal guarantees are required.
  • Neither the government nor lenders will charge small businesses any fees.

Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels.  Forgiveness will be reduced if the full-time headcount declines, or if salaries and wages decrease. The loan forgiveness form and instructions include several measures to reduce compliance burdens and simplify the process for borrowers, including:

  • Options for borrowers to calculate payroll costs using an “alternative payroll covered period” that aligns with borrowers’ regular payroll cycles.
  • Flexibility to include eligible payroll and non-payroll expenses paid or incurred during the 24-week period after receiving their PPP loan.
  • Step-by-step instructions on how to perform the calculations required by the CARES Act to confirm eligibility for loan forgiveness.
  • Borrower-friendly implementation of statutory exemptions from loan forgiveness reduction based on rehiring by June 30, 2020.
  • Addition of a new exemption from the loan forgiveness reduction for borrowers who have made a good-faith, written offer to rehire workers that was declined.

Who Can Apply?

The following entities affected by COVID-19 may be eligible:

  • Any small business that meets SBA’s size standards, either the industry-based sized standard or the alternative size standard.
  • Sole proprietors, independent contractors, and self-employed persons.
  • Any business with a NAICS Code that begins with 72 (Accommodations and Food Services) that has more than one physical location and employs less than 500 per location.
  • Any business, 501(c)(3) non-profit organization, 501(c)(19) veterans organization, or Tribal business concern (sec. 31(b)(2)(C) of the Small Business Act) with the greater of:
  • 500 employees, or
  • That meets the SBA industry size standard if more than 500

How Can You Apply?

Entities can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. You should consult with your local lender as to whether it is participating in the program.

If you wish to begin preparing your application, please contact your Tarlow advisor for assistance. You can also download the PPP borrower application form (revised June 24, 2020) to see the information that will be requested from you when you apply with a lender.

Paycheck Protection Small Business Forgiveness Act 

In addition to the five-week extension for the PPP application period, the Paycheck Protection Small Business Forgiveness Act was introduced to streamline forgiveness of PPP loans for small businesses. This bipartisan legislation includes forgiveness for PPP loans of $150,000 or less if the borrower submits a simple, one-page attestation form to the lender. It also ensures the lender will be held harmless from any enforcement action if the borrower’s attestation contained falsehoods.

Tarlow is Here to Help – Please Contact Us with Questions

Tarlow Partners and staff members are closely monitoring tax-related legislation and regulations, and new guidance from the SBA and the Department of Treasury. We are readily available to assist business owners submit Loan Forgiveness applications and will continue to send updates about relevant news and changing guidelines.  If you have any questions about maximizing PPP loan forgiveness, please contact your Tarlow advisor for assistance.

The U.S. Senate Approved a Vote to Extend the Paycheck Protection Program Application Period

On Tuesday, June 30, 2020, the U.S. Senate approved a vote to extend the Paycheck Protection Program (PPP) application period by five additional weeks until August 8, 2020.  The vote was passed by unanimous consent less than four hours before the PPP application window was scheduled to close with more than $130 billion in unspent loan money.

The legislation will require President Donald Trump’s signature for the program to continue. It now heads to the House of Representatives, which had finished voting before the bill was approved by the Senate.  Members of both chambers are expected to adjourn by the end of the week for the Fourth of July holiday and are scheduled to return in two weeks. The House would have to pass the measure and President Trump would have to sign it before the extension would take effect.

As of 5:00 p.m. ET on Tuesday, June 30, 2020, the U.S. Small Business Administration (SBA), which oversees the program with the Treasury Department, had approved nearly 4.9 million loans for a total of more than $520 billion. At midnight on Tuesday, June 30, 2020, the SBA stopped accepting loan applications. The unexpected extension is intended to provide small businesses additional time to apply for the approximately $129 billion in PPP funding remaining.

In early April, Congress created the PPP as part of the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act.  The PPP was launched to aid the U.S. economy and assist small businesses facing economic hardships created by the COVID-19 pandemic. The program provides forgivable loans of up to $10 million per borrower that small businesses and other qualifying entities can use to cover payroll and other select costs, including mortgage interest, rent, and utilities.

PPP loan recipients can have their loans forgiven in full if the funds were used for eligible expenses and other criteria are met. The amount of the loan forgiveness may be reduced based on the percentage of eligible costs attributed to nonpayroll costs, any decrease in employee headcount, and decreases in salaries or wages per employee.

Tarlow is Here to Help – Please Contact Us with Questions

Tarlow Partners and staff members are closely monitoring tax-related legislation and regulations, and new guidance from the SBA and the Department of Treasury. We will continue to send updates and communications about relevant news and changing guidelines.

We are readily available to assist business owners in submitting Loan Forgiveness applications. If you have any questions about interpreting these new requirements and maximizing PPP loan forgiveness, please contact your Tarlow advisor for assistance.

Senate Passes the Paycheck Protection Flexibility Act to Provide Direct Relief to Small Businesses, Proceeds to President Trump to Sign into Law

On the evening of Wednesday, June 3, 2020, the U.S. Senate unanimously approved legislation to fix the Paycheck Protection Program (PPP) by providing direct relief to small businesses affected by the coronavirus pandemic. Senate Majority Leader Mitch McConnell, R-Ky., requested a unanimous consent vote and the vote was nearly unanimous at 417-1.

The bill, which was passed by the House of Representatives on May 28, 2020, now proceeds to President Trump to sign into law. The legislation:

  • gives small businesses more time to use Paycheck Protection Program loans, increasing the deadline from eight weeks to 24 weeks.
  • amends the 75/25 rule for how much businesses must spend on payroll versus non-payroll costs to get full forgiveness of the loan to 60/40. This gives businesses more flexibility to use the loans to pay for expenses other than payrolls.
  • moves the deadline to rehire workers from June 30 to December 31.
  • extends the two-year term for the loans to five years, among other provisions.

Under the PPP program, loans for restaurants, hotels, and other small businesses would convert into federal grants if recipients adhere to conditions, including spending the loan amount within the required time.  The previous eight-week requirement to use the funds to carry out the terms of the loans had been very restrictive to caterers, museums, gyms, and other small businesses.

Many businesses reported an inability to rehire employees because they are making more on unemployment than they made working. The bill extends the deadline to rehire employees to align with the expiration of enhanced Unemployment Insurance. This was created through the CARES Act, and in some cases is higher than the median wage in 44 states.

Negotiations to expand the PPP’s flexibility have been in process for weeks since the Senate’s Memorial Day recess without being able to pass its own version of the House legislation.

Tarlow is here to help!

Our Partners and staff members are closely monitoring tax-related legislation and regulations and will continue to update you by sending communications about relevant news and changing guidelines. If you have any questions, please contact your Tarlow advisor.

Tarlow Update: SBA Announces Additional Guidance on the Paycheck Protection Program Certification Requirement

We would like to provide an update released today, May 13, 2020, by the Small Business Administration (SBA) regarding how the SBA will review borrowers’ required good-faith certification concerning the necessity of their loan request.

According to the SBA, “When submitting a Paycheck Protection Program (PPP) application, all borrowers must certify in good faith that ‘current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.’ SBA, in consultation with the Department of the Treasury, has determined that the following safe harbor will apply to SBA’s review of PPP loans with respect to this issue: Any borrower that, together with its affiliates, received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith.”

Borrowers with loans greater than $2 million that do not satisfy this safe harbor may have an adequate basis for making the required good-faith certification, based on their individual circumstances. The SBA previously stated that all PPP loans in excess of $2 million will be subject to review by SBA for compliance with the program requirements as set forth in the PPP Interim Final Rules and in the Borrower Application Form. If, during the course of the SBA’s review, it is determined that a borrower lacked an adequate basis for the required certification regarding the necessity of the loan request, SBA will seek repayment of the outstanding PPP loan balance and will inform the lender that the borrower is not eligible for loan forgiveness.  If, after receiving notification from SBA, the borrower repays the loan, SBA will not pursue administrative enforcement with respect to the certification regarding the necessity of the loan request. In addition, SBA’s determination concerning the certification will not affect SBA’s loan guarantee.

Tarlow is here to help!

Our Partners and staff members are closely monitoring tax-related legislation and regulations and will continue to update you by sending communications about relevant news and changing guidelines. If you have any questions, please contact your Tarlow advisor.

Tarlow COVID-19 Update: President Trump Signs $484 Billion Coronavirus Relief Bill to Deliver Aid to Small Business and Hospitals and Expand Testing

Today, Friday, April 24, 2020, President Trump signed a $484 billion coronavirus relief package into law to provide aid to small businesses and hospitals and expand COVID-19 testing. The relief package allocates $370 billion to small businesses to help keep employees on payroll, $75 billion to aid hospitals struggling to cover costs during the crisis, and $25 billion to increase testing. The bill is Washington’s latest attempt to mitigate the devastating impact of the pandemic and rescue the economy and healthcare system.

The legislation includes:

  • $310 billion in new funds for the Paycheck Protection Program, which provides small business loans that can be forgiven if used for wages, benefits, rent, and utilities. $60 billion is set aside for small lenders.
  • $60 billion for Small Business Administration disaster assistance loans and grants.
  • $75 billion in grants to hospitals dealing with a tremendous number of patients.
  • $25 billion to increase coronavirus testing, a key element in reopening the economy.

The bill includes more than $320 billion for the Paycheck Protection Program (PPP), created by the CARES Act, which was passed late last month. The program that provides forgivable loans to small businesses that keep their employees on payroll quickly ran out of money due to heavy demand.

The bill passed the Senate earlier this week by voice vote and was approved by the House on Thursday, April 23, 2020, on a 388-5-1 bipartisan vote.

Tarlow is here to help!

Our Partners and staff members are here to provide coronavirus loan support and capital assistance and guide you through the Paycheck Protection Program (PPP) loan forgiveness process. To get started:

– For assistance with SBA loans, click here and complete and submit this form; and

– If you’ve already secured funding, for assistance with loan forgiveness planning, click here.

We are closely monitoring tax-related legislation and regulations and will continue to update you by sending communications about relevant news and changing guidelines. If you have any questions, please contact your Tarlow advisor.

COVID-19 Update: Paycheck Protection Program – Initial Guidance Issued

On Tuesday evening, March 31, 2020, the U.S. Treasury and Small Business Administration (“SBA”) released their initial Information Sheet (“Fact Sheet”) as well as the Application Form for the Paycheck Protection Program (the “PPP”).   As mentioned in previous email alerts, the PPP is part of The CARES Act, which appropriated $349 billion to enable eligible businesses to apply for loans from approved lenders, which are guaranteed by the SBA.  Proceeds from these loans are intended to be used to cover operational costs such as payroll, benefits, rent, utilities, and mortgage interest payments.

The Fact Sheet provides important guidance for the PPP, including the dates that applicants can begin to apply for PPP loans through participating SBA Lenders:

  • Business and sole proprietors as soon as April 3, 2020; and
  • Independent contractors and self-employed individuals as soon as April 10, 2020.

The guidance issued and the Fact Sheet are similar to the provisions in the CARES Act; however, there are some important differences to the initial guidance issued, which we have highlighted below.  We should note that it is still possible the SBA issues additional rules and regulations regarding the PPP, and we will keep you informed immediately if that occurs.

Maximum Loan Amount 

The CARES Act provides that the maximum PPP loan a borrower can receive is equal to the lesser of (i) 2.5x TTM average monthly payroll costs and (ii) $10 million.   The sample application indicates that (non-seasonal) business applicants will use the average monthly payroll for 2019 (rather than include January or February 2020 in the calculation).

Loan Forgiveness

The CARES Act provided that loans will be eligible for forgiveness in an amount not to exceed the sum of payments for permitted payroll costs, interest payments on mortgages, rent, and utilities paid within 8 weeks from the origination of the PPP Loan.  The Fact Sheet indicates that “due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs.” This factor needs to be considered if you were planning on applying for PPP loans to cover non-approved costs as a portion of such costs may not be subject to loan forgiveness.

Payroll Costs

In addition to employee compensation, certain paid vacation and leave, cash tips, severance payments, group healthcare benefits, retirement benefits, and payroll taxes, the CARES Act also seemed to define “payroll costs” to include payments to independent contractors as noted in our previous correspondences.  The description of payroll costs in the Fact Sheet suggests that compensation to independent contractors will be considered “payroll costs” (i.e., for purposes of calculating PPP loan size and loan forgiveness amounts) if the applicant is the independent contractor.  This could imply that businesses that pay independent contractors will not be able to include such compensation in the calculation of payroll costs.  We will be reviewing this in-depth to get additional guidance for you.

 

Interest Rate, Maturity Date and Payment Deferral Provisions

Initial guidance was that the interest rate on the PPP loans would be set at 4% and have a 10-year term.  Additionally, it was widely believed there would be no payments on PPP loans due for one year from origination.  Based on the Fact sheet, the interest rate will be set at 0.5%, and the term of the loan will be 2 years from maturity. Additionally, payments will be deferred for six months from origination; however, interest will accrue during these six months.

Foreign Ownership

It was widely believed that foreign ownership would not be an issue for eligibility for a PPP loan.  The application form indicates that if any 20% or greater owner answers no to whether or not they are “a U.S. Citizen” OR “have Lawful Permanent Resident status, “the application will be denied indicating that businesses with foreign ownership may be ineligible for the PPP loan.” We are still reviewing this and will have additional guidance shortly.

The application also makes it clear that for businesses seeking PPP loans each greater than 20% owner will need to complete an application and make certain certifications including: (i) that current economic uncertainty makes the loan request necessary to support the ongoing operations of the applicant business; and (ii) that the loan proceeds will be used to retain workers and maintain payroll or make mortgage payments, lease payments, and utility payments.

COVID-19 Webinar on Friday, April 3, at 1 PM (ET) – Unpacking the Economic Stimulus Plan: Impacts on Your Dental Practice

Tarlow Invites You: COVID-19 Webinar
Unpacking the Economic Stimulus Plan: Impacts on Your Dental Practice

On Friday, April 3, 2020, at 1:00 PM to 2:00 PM (ET), our CPA channel affiliate partner, Aprio, will host a complimentary webinar to unpack the historic $2 trillion Coronavirus Aid, Relief, and Economic Security Act and what it means to dental practices and their owners.

During the webinar, you will learn about the following topics: 

  • Final interpretations of legislation and how they affect your practice
  • Leveraging SBA loan opportunities to reopen your business
  • Understanding 15-year qualified improvement property options
  • Breaking down 401k clauses and options
  • Steps you can take today to maximize your tomorrow

Speakers on the panel include: 

  • Brad Mckeiver, Partner and Dental Accounting Expert at Aprio
  • Tommy Lee, Partner-In-Charge of Retail, Franchise, and Hospitality at Aprio
  • Andrew Shaul, Dental Legal Counsel at The Shaul Law Firm, PC
  • Evelyn Horne, Dental Practice Management Expert at Evelyn Home, Inc.

Register Today

COVID-19 Webinar on April 2, 2020 at 3:00 PM (ET) – Get Your SBA Loan Questions Answered

Tarlow Invites You: COVID-19 Webinar
Get Your SBA Loan Questions Answered

On Thursday, April 2, 2020, at 3:00 PM to 4:00 PM (ET), our CPA channel affiliate partner, Aprio, will host a complimentary webinar to address your most pressing questions related to SBA loans amid the COVID-19 crisis and the steps you can take to get your refunds faster.

Panelists will discuss:

  • SBA Disaster Relief Loans vs. Payroll Protection Program vs. traditional SBA loans;
  • Eligibility for each loan type and how/if you can benefit from each;
  • How funds from each loan type can be used; and
  • How we can help you get your money faster.

Experts on the panel include:

  • Tommy Lee, Partner-In-Charge of Retail, Franchise, and Hospitality at Aprio
  • Saeed Moghadam, Partner, Aprio Strategic Partners, LLC

Register here