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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 Small Business Administration and the Treasury Department Announce Streamlined Paycheck Protection Program Loan Forgiveness Applications

On Wednesday, June 17, 2020, the Small Business Administration (SBA) and the Treasury Department unveiled a streamlined loan forgiveness application for the Paycheck Protection Program (PPP). The new five-page “borrower-friendly” application, which can be found here, provides more flexibility to small businesses to receive forgiveness on their SBA-backed loans. The original eleven-page application was released in mid-May.

The SBA and the Treasury also released a three-page EZ Version, which applies to borrowers who are self-employed or have no employees; did not reduce the salaries or wages of their employees more than 25 percent and did not reduce the number of hours of their employees; or experienced reductions in business activity as a result of the coronavirus pandemic and did not reduce the salaries or wages of their employees by more than 25 percent.

The PPP was included as part of the CARES Act, the $2.2 trillion program that included economic impact payments to individuals and aid to businesses in response to the novel coronavirus pandemic. The program was initially launched on April 3 with $349 billion in funding to help small businesses remain open and retain employees. The loans would be forgiven if businesses retained their employees for up to eight weeks. Many small businesses had problems accessing or applying for the loans and the funds were quickly depleted. The program resumed on April 27 and Congress provided another $320 billion; however, the rules, eligibility, and forgiveness criteria have constantly changed. The program does not run out until June 30 and as of Tuesday, more than 4.6 million loans worth close to $513 billion had been distributed through the program. Congress allocated about $610 billion to the PPP, leaving approximately $120 billion to $130 billion in the fund.

Earlier this month, Congress provided more flexibility by passing the PPP Forgiveness Act to encourage more businesses to sign-up and to alleviate concerns regarding the loan forgiveness.  This was helpful to businesses such restaurants and the hospitality industry.  It extends the covered period from eight to 24 weeks, amends the requirement that no more than 25 percent of the loan forgiveness amount be attributed to non-payroll costs, and allows up to 60 percent to be used for non-payroll costs. The bill also included several other changes, including extending the deferral of payments of loan principal, interest and fees, from the current six months, until the date when the SBA pays the forgiveness amount to the lender. The new loan forgiveness application from the SBA reflects these changes.

The EZ application requires fewer calculations and less documentation for eligible borrowers. Details about the applicability of the various provisions are available in the instructions accompanying the new EZ application form. Both applications give borrowers the option of using the original eight-week covered period, if their loan was made before June 5, 2020, or the extended 24-week covered period under the new law. According to the SBA and the Treasury, the changes will result in a more efficient process and ease the process for businesses to realize full forgiveness of their PPP loan.

Please view the following applications for more information:

The EZ Forgiveness Application

The Full Forgiveness Application

The SBA’s new Interim Final Rule revises the previous Third and Sixth Interim Final Rules, published on April 14, 2020, and April 28, 2020, respectively. It specifically addresses the amount of employee compensation that may be forgiven under the extended 24-week covered period. While forgivable employee compensation was previously capped at $15,385 per individual, based on the annual covered salary cap of $100,000 and an 8-week covered period, the cap under the new 24-week covered period is $46,154 per individual employee. The annual covered salary cap remains at $100,000 per employee. However, owner compensation is specifically excluded from the $46,154 cap, although the forgivable figure does rise from the previous $15,385 cap under an 8-week covered period to $20,833 (a multiplier of 2.5 months is used for 24-week covered periods).

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: The Paycheck Protection Program (PPP) Flexibility Act Passed the House

The Paycheck Protection Program (PPP) Flexibility Act passed the House on Thursday, May 28, 2020. The PPP Flexibility Act extends the time businesses need to spend funds and alters the rule that they must contribute 75% of the funds on payroll for full forgiveness (that level would be reduced to 60%).

The House bill proposes extending the time in which businesses must use the funds from eight weeks to 24 weeks; amending 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. The bill pushes back the deadline to rehire workers from June 30 to December 31; and extends the two-year term for the loans to five years, among other provisions.

The Senate has its own PPP extension bill that would propose increasing that time frame from eight to 16 weeks, extend the deadline to apply for the PPP, and allow businesses to use funds to purchase protective equipment for employees, among several other amendments.

The first recipients of loans that opened up on April 3 are nearing the end of their eight-week period. Many small businesses and lobbyists have argued the time frame and payroll limits have made it challenging for businesses that remain unable to fully open, (especially restaurants, bars, and salons), to use the funds.

The House’s legislation has been widely endorsed by various outside groups, including the U.S. Chamber of Commerce and the National Restaurant Association, among others. 

The House bill now heads to the Senate for a vote. The bill must be signed by the President to become law.

 

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.

Webinar on Tuesday, May 5, at 3 PM (ET): Unpacking the New Main Street Lending Program Loans and Expanded Eligibility Requirements

Tarlow Invites You: COVID-19 Webinar

Unpacking the New Main Street Lending Program Loans and Expanded Eligibility Requirements

On Tuesday, May 5, 2020, at 3:00 PM (ET), our CPA channel affiliate partner, Aprio, will host a complimentary webinar to unpack the new Main Street Lending Program loans and expanded eligibility requirements.

The Federal Reserve announced new guidance on Thursday, April 30, 2020, that expanded the reach of the Main Street Lending Program (MSLP) to extend support to even more small-and-medium-sized businesses. Learn if you are eligible and how you can benefit.

Speakers on the panel include: 

  • Michael Levy, Partner-in-Charge, Transaction Advisory Services, Aprio
  • Bill Dupee, Director, Transaction Advisory Services, Aprio
  • David Abee, Director, Middle Market Services, Synovus

Participants will earn 1.0 hour of CPE credit. 

Register Today

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.

After Receiving Your Paycheck Protection Program Loan Funds, What’s Next?

If you are a small business that applied for a Paycheck Protection Program (PPP) loan and received the PPP loan funds, that is good news; however, what should you do next? Now is the time to develop a plan to properly allocate the money and prepare what you will do after the loan money runs out eight weeks from now.

PPP funding needs to be primarily allocated to pay your employees. In fact, in order to qualify for forgiveness, you are required to spend 75% of the proceeds on payroll costs. It is important to note that if you use the loan for expenses outside the 75/25 ratio, the amount that is not forgiven will be rolled into an SBA two-year loan at 1%.

Some essential questions that need to be addressed:

  • What will the economy and business environment look like in the near future?
  • To what extent will your business be impacted?
  • How will you re-hire all, some, or none of the employees you laid off?
  • Should you bring furloughed staff back on active payroll?
  • Should you reinstate salaries that you reduced?
  • If you decide to only re-hire some of the furloughed or laid off employees, which ones do you bring back? How is this done while staying compliant with labor laws?
  • What happens if you fail to comply with the 75% payroll costs threshold?
  • If you carry some of the PPP loan proceeds over into a two-year note at 1%, how much should you carry over and how should you allocate it? Also, what is your ability to repay that money?

Every business is unique, has unprecedented challenges, and will have different answers to these questions. The common denominator is that every borrower needs to develop a well-thought-out and strategic financial plan.

The Survival Plan

Now it’s time to develop a strategic survival plan! Your plan should prioritize the immediate, near, and longer-term goals, along with Plans B and C, in case certain unpredicted obstacles arise. Most importantly, your plan must include metrics, especially future considerations, that will enable you, and other interested parties, such as your attorney and banker, to track performance and give everyone visibility into your business operations.

Any survival plan will involve many hard decisions. Be prepared to make them, as difficult as they may seem. Negotiations with lenders, vendors, and investors may be necessary; remember, they also want your business to survive.

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 Webinar on Monday, April 20, at 3 PM (ET) – How to Plan for PPP Loan Forgiveness

Tarlow Invites You: COVID-19 Webinar
How to Plan for PPP Loan Forgiveness

On Monday, April 20, 2020, at 3:00 PM – 4:00 PM (ET), our CPA channel affiliate partner, Aprio, will host a complimentary webinar on how to effectively plan for Paycheck Protection Program (PPP) loan forgiveness. With PPP loan payments starting to be disbursed to approved borrowers, now is the time to begin planning how you will spend the funds, and document that spending over the next eight weeks to ensure you receive the full loan forgiveness you are entitled to.

Regulations continue to evolve and be published. During this webinar, we will cover the latest developments including:

  • Allowable expenditures under the PPP loan;
  • Strategies for allocating funds to boost your balance sheet and cash flow;
  • Documentation of best practices; and
  • Third-party verification to ensure spending meets PPP loan forgiveness requirements.

Speakers on the panel include:

  • Tommy Lee, Partner-In-Charge of Retail, Franchise, and Hospitality at Aprio
  • Matt Wise, Partner-In-Charge of Assurance Services at Aprio
  • Jonathan Crumly, Principal with Taylor English Duma

Register Today