Category: Uncategorized

Alston & Bird have released their July 20 COVID-19 update, including the latest news on emergency funding, administrative and regulatory actions, workplace and home issues, and many other topics, as well as to links to all their past updates.

Alston & Bird have released their July 13 COVID-19 update, including the latest news on emergency funding, administrative and regulatory actions, workplace and home issues, and many other topics, as well as to links to all their past updates.

Main Street Lending Program is Now Open:  The MSLP has been “baking” for over 3 months and is finally ready for primetime.  Withum has a new article with more details on terms and eligibility here.  The program has garnered some controversy as some have taken the view that it was overly restrictive and not borrower friendly.  Some banks have also indicated they will not participate in the program.  That said, it is now available to borrowers and can be a new source of working capital. 

Reminder Section:  (what should I be doing):

• Talk to your payroll company about claiming the employer payroll tax deferral and employee retention credits (ERC) that were made available in the CARES Act.
• Talk to your payroll company about claiming the qualified sick/family leave refundable tax credits (from FFCRA, passed prior to the CARES Act).
• Consider speaking with your lender to discuss changes to terms of existing debt facilities.
• If you have already received a PPP loan, start forecasting how you intend to spend the funds and how you can qualify for the highest amount of loan forgiveness possible.  If you are not forecasting 100% loan forgiveness, then most likely you should seek assistance regarding your particular situation.  Withum believes the vast majority of borrowers should expect and plan to receive 100% loan forgiveness.

Alston & Bird have released their July 6 COVID-19 update, including the latest news on emergency funding, administrative and regulatory actions, workplace and home issues, and many other topics, as well as to links to all their past updates.

New PPP Bill Passed by House and Senate:  The Bill that was introduced and passed by the Senate on Tuesday, June 30 has now been passed by the House and is headed to the President’s desk for signature.  This Bill extends the application deadline for the PPP an additional 5 weeks (recall that the deadline was June 30, 2020 and they still had about $130 billion in available funds).  It is unclear how valuable this additional time will be since most businesses that wanted funds have already received them.

New Stimulus Package in the Works:  Treasury Secretary Steven Mnuchin told a House panel that the administration would support a new stimulus package if it was put forward. He also indicated that he is in discussions with the Senate about revising the PPP to provide additional support to hard hit industries such as restaurants, hotels, etc.  We are not sure yet how the P4 Bill that was passed by the House (which allows businesses to obtain a second PPP loan under certain circumstances) will fare if the Senate decides to take it up, but there appears to be bipartisan support to find a solution.

Reminder Section:  (what should I be doing):

• Talk to your payroll company about claiming the payroll tax deferrals and employee retention credits that were made available in the CARES Act.
• Talk to your payroll company about claiming the qualified sick/family leave refundable tax credits (from FFCRA, passed prior to the CAREs Act).
• Consider speaking with your lender to discuss changes to terms of existing debt facilities.
• If you have already received a PPP loan, start forecasting how you intend to spend the funds and how you can qualify for the highest amount of loan forgiveness possible. If you are not forecasting 100% loan forgiveness, then most likely you should seek assistance regarding your particular situation. Withum believes the vast majority of borrowers should expect and plan to receive 100% loan forgiveness.

New PPP Bill Introduced in the Senate:  On Tuesday, June 30th, the Senate passed a bill which extends the application deadline for the PPP an additional 5 weeks (recall that the deadline was June 30th and they still had about $130 billion in available funds).  The bill still needs to go through the House and would need to be signed by the President to be passed into law.  It is unclear how valuable this additional time will be as most believe that those businesses who wanted funds have already received them.

When Will Banks Accept Applications?:  Many have inquired regarding when they can apply for forgiveness and when banks will accept applications.  Withum has heard that one bank has reached out to its clients to inform them that if they received their PPP loan in April, the bank will accept a forgiveness application in August.  If the loan was received after April, the date the bank will accept the application is TBD.  This is of course just one bank, but they have generally seen that banks are not in a position to accept applications currently and few have been explicit in how they will manage the process.  They also have not seen any mechanism for a borrower to “declare” that they want to keep their eight-week covered period if they want to.  At this point, borrowers will just have to be patient, they do not believe that there are any proactive steps required on the borrowers side right now other than being in consistent contact with their lender on the process.

Status of the P4 Bill:  The P4 bill that was introduced by the House two weeks ago has not moved since it first came into play.  This bill would allow certain borrowers to obtain a second PPP loan if they meet certain criteria (less than 100 employees, 50%+ reduction in revenue).  There is not much information on the probability of this passing or how it will interplay with the PPP extension bill noted above. 

Main Street Lending Programs:  Withum reported on the general parameters of the MSLPs previously, at this point the program is still not available to the public.  Anecdotally there have been mixed reviews from banks, many of which have indicated that they do not intend to participate in the program. 

New FAQs:  It has been rumored for several weeks that a multitude of new FAQs are coming out in the near future to cover current open questions and to provide clarification.  Withum believes this is correct but do not have insight as to when they are coming, it could be as soon as this week. 

Reminder Section:  (what should I be doing):

• Talk to your payroll company about claiming the payroll tax deferrals and employee retention credits that were made available in the CARES Act.
• Talk to your payroll company about claiming the qualified sick/family leave refundable tax credits (from FFCRA, passed prior to the CAREs Act).
• Consider speaking with your lender to discuss changes to terms of existing debt facilities.
• If you have already received a PPP loan, start forecasting how you intend to spend the funds and how you can qualify for the highest amount of loan forgiveness possible. If you are not forecasting 100% loan forgiveness, then most likely you should seek assistance regarding your particular situation. Withum believes the vast majority of borrowers should expect and plan to receive 100% loan forgiveness.

The IRS has released Notice 2020-50, which offers added guidance and relief for retirement plan participants taking pandemic-related distributions and loans under the CARES Act. Notice 2020-50 expands the definition of qualified individuals under the Act and provides guidance regarding coronavirus-related distributions and loans. Lindabury, McCormick, Estabrook & Cooper, P.C. have prepared a summary outlining the details, including the criteria for eligibility.

Alston & Bird have released their June 29 COVID-19 update, including the latest news on emergency funding, administrative and regulatory actions, workplace and home issues, and many other topics, as well as to links to all their past updates.

New Safe Harbor from the FTE Reduction Rule:  In the latest IFR, the SBA discussed the new safe harbors to the FTE reduction rule in a manner that appears to be very borrower friendly.  As you know, PPP loan forgiveness is reduced if you reduce your FTE count during your covered period (when compared to your reference period).  The second of the two new safe harbors allows companies to ignore any FTE reductions after February 15, 2020 if they relate to an “inability to return to the same level of business activity” before February 15, 2020 as a result of guidance issued by a variety of agencies (including state and local government) that inhibits such business activity. Examples are closing non-essential businesses and reductions in businesses volume due to social distancing or sanitation guidelines, but the safe harbor can apply to a much broader set of circumstances. 

Withum has included below both an excerpt from the IFR as well as an example provided in the IFR.  This safe harbor does not require the business interruption to cover the entire covered period, meaning that borrowers just need to establish that a disruption occurred for some meaningful period of time during the covered period.  It also does not narrowly define a disruption, allowing borrowers to potentially rely on a broad variety of different “disruptions” caused by the requirements established by these agencies. Therefore Withum believes this new safe harbor has broad applicability, including in the auto, restaurant and hospitality industries, for example, as well as in a variety of professional service industries like law and medicine.

Withum believes the safe harbor is extremely broad, and unless it is pared back by the SBA, a large number of borrowers should be able to avail themselves of it.  If you have an FTE reduction during your covered period, Withum recommends that you closely review this safe harbor from the PPP Flexibility Act, as interpreted by the new IFR, to see if you can fall within it.  The forgiveness application requires that you maintain documentation of the business disruption that took place and what requirement or guidance created it.

Excerpt from IFR:

Borrowers are also exempted from the loan forgiveness reduction arising from a reduction in the number of FTE employees during the covered period if the borrower is able to document in good faith an inability to return to the same level of business activity as the borrower was operating at before February 15, 2020, due to compliance with requirements established or guidance issued between March 1, 2020 and December 31, 2020 by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention (CDC), or the Occupational Safety and Health Administration related to the maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID-19 (COVID Requirements or Guidance). 

The Administrator, in consultation with the Secretary, is interpreting the above statutory exemption to include both direct and indirect compliance with COVID Requirements or Guidance, because a significant amount of the reduction in business activity stemming from COVID Requirements or Guidance is the result of state and local government shutdown orders that are based in part on guidance from the three federal agencies. 

Example provided in the IFR:

A PPP borrower is in the business of selling beauty products both online and at its physical store. During the covered period, the local government where the borrower’s store is located orders all non-essential businesses, including the borrower’s business, to shut down their stores, based in part on COVID-19 guidance issued by the CDC in March 2020. Because the borrower’s business activity during the covered period was reduced compared to its activity before February 15, 2020 due to compliance with COVID Requirements or Guidance, the borrower satisfies the Flexibility Act’s exemption and will not have its forgiveness amount reduced because of a reduction in FTEs during the covered period, if the borrower in good faith maintains records regarding the reduction in business activity and the local government’s shutdown orders that reference a COVID Requirement or Guidance as described above.

Reminder Section:  (what should I be doing):

• Call your payroll company about claiming the payroll tax deferrals and employee retention credits that were made available in the CARES Act.
• Talk to your payroll company about the qualified sick/family leave legislation (FFCRA, passed prior to the CAREs Act).
• Consider speaking with your lender to discuss changes to terms of existing debt facilities. The banking system remains strong.
• If you have already applied for the PPP, start forecasting how you intend to spend the funds and how to qualify for the highest amount of forgiveness possible.

Alston & Bird have released their June 25 COVID-19 update, including the latest news on emergency funding, administrative and regulatory actions, workplace and home issues, and many other topics, as well as to links to all their past updates.

Change to Forgiveness Process: As we all know, the Covered Period was recently changed to be either 8 weeks or 24 weeks, at the borrower’s election if the loan was issued before June 5th. This has opened the door to many companies obtaining full forgiveness of their loan. An issue that has often come up is that many borrowers are able to incur enough expenses to obtain full forgiveness within a period that is longer than 8 weeks but perhaps far shorter than 24 weeks. This has led to the question:  Do I need to wait the full 24 weeks before we apply for forgiveness?  

Up until now the answer was yes, however the IFR release has clarified that a borrower can apply for forgiveness at any time after or DURING their covered period. This will allow borrowers to get the process rolling and perhaps allow them to wrap up the forgiveness process prior to the end of the year.  

Update on Salary and Wage Reduction Rule: The IFR also indicates “If the borrower applies for forgiveness before the end of the covered period and has reduced any employee’s salaries or wages in excess of 25 percent, the borrower must account for the excess salary reduction for the full 8-week or 24-week covered period.”

This is meaningful because it indicates that you will need to account for salary reductions through your full covered period even if you apply for forgiveness early. As an example, if you reduced an employee’s salary in excess of 25% for the first 12 weeks of your covered period, when applying for forgiveness you need to assume that reduction will have been in place for all 24 weeks for purposes of the forgiveness calculation. No guidance was issued about what to do if there are FTE reductions during the covered period. 

The new IFR clarified many other points regarding the loan forgiveness process, and all of the salient ones are included in Withum’s 06/20/2020 webinar on loan forgiveness.  It will be posted on Withum’s website afterwards.

Reminder Section:  (what should I be doing):

• Call your payroll company about claiming the payroll tax deferrals and employee retention credits that were made available in the CARES Act.
• Talk to your payroll company about the qualified sick/family leave legislation (FFCRA, passed prior to the CAREs Act).
• Consider speaking with your lender to discuss changes to terms of existing debt facilities. The banking system remains strong.
• If you have already applied for the PPP, start forecasting how you intend to spend the funds and how to qualify for the highest amount of forgiveness possible.