Alston & Bird have released their May 18 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.
Can I re-apply for a loan if I returned it? – Last week (May 15), the SBA confirmed that a safe harbor exists for borrowers whose loan is less than $2M. The SBA will not question eligibility as all borrowers in this population will be deemed to have made the application in good faith. This was a significant development as many borrowers returned their loans because, while they believed they were eligible, they were uncomfortable with the amount of ambiguity relating to the “eligibility” standards in place and the threat of criminal action. Based on a discussion with a bank this week, we learned that borrowers could re-apply if they returned their original loan and wish to obtain a new one. We recommend discussing with your bank if this applies to you.
How do you treat furloughed employees with respect to loan forgiveness – We have been getting this question quite a bit over the last few weeks: Is a furloughed employee still and employee or considered laid off for purposes of the forgiveness calculation? Why does this matter? It matters because when you calculate forgiveness you start with determining a ratio of FTEs during the covered period to FTEs during a base period (see forgiveness calculation). If a furloughed employee is considered laid off, then they represent a reduction in FTEs which reduces overall forgiveness. If they are considered an employee, you need to consider whether they add to the FTE count (based on hours worked) and whether they also have a “salary reduction in excess of 25% of compensation” if they make less than $100,000 a year annually. The current guidance does not address this directly, but it is something we are monitoring closely because the forgiveness impact is different under each scenario. Regardless, we believe that if an employee is furloughed, and the company is still covering benefits, then those benefits would be includable as a forgivable expense.
Partnerships can increase their PPP loans – On May 14, the SBA issued an interim final rule that confirmed partnerships can increase their PPP loans if their initial loan amount did not include partner compensation. During the application process there was a lot of confusion regarding what constituted “payroll costs.” Partners in partnerships are technically not considered employees and many lenders excluded the income allocated to partners from the payroll cost definition. This resulted in a significant decrease in their loan amount and also left partners out in the cold when it came to getting compensated from the PPP loan proceeds during the covered period. This clarification allows partnerships to go back to their lender and to request an increase in the loan amount, which is a welcome change for many especially since it appears that funds continue to remain available for borrowers.
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Paige Taylor, a 2018 Construction Engineering graduate from Iowa State University, is building her career as a project manager at MMC Contractors, an MCA of Iowa, Inc. member. She initially connected with MMC at a career fair hosted by her MCAA Student Chapter in 2017.
“Over the summer, I interned with the company in Des Moines and learned the service side of the business,” she says. “I returned to ISU for my senior year, then after graduation, I joined the construction department full-time.”
As a part of the construction team in Des Moines, Paige has worn many hats, facing a different challenge every week. Her responsibilities have included:
“Overall, it has been a blast to get to be a contributor to the growth of the company in the Des Moines market,” she explains.
In June, Paige will be relocating to Nashville, Tennessee to pursue a new opportunity in her career with MMC Contractors.
“In an industry that is all about relationships, MCAA and the Iowa State University student chapter gave me opportunities to start building them even before my first day full-time on the job.”
Paige served as the event coordinator for the chapter, organizing job site tours and helping coordinate their industry networking event hosted each semester. She attended the 2018 MCAA Annual Convention, where she was part of the Women in the Mechanical Industry (WiMI) kickoff event.
She is still actively involved at Iowa State, where she serves as an industry mentor for the construction engineering learning community, working with a group of four to five new students each semester. Paige has also hosted job tours for the Iowa State Student Chapter members and attends the chapter’s “Industry Social” every year.
Paige had the opportunity to attend the 2019 Women in the Mechanical Industry Conference in Chicago. She joined the WiMI Mentor Program in January 2020. She says of the experience, “I was paired with an accomplished mentor who acts as a sounding board and provides advice backed by knowledge from her time in the industry. A great resource from WiMI!”
As she continues her career in mechanical contracting, Paige offers advice to current students. “Network as much as you study. Do not be afraid to ask for what you want in your career and reach a little. Interviews are a two-way street, it’s a chance for you to get to know the company and people who drive its success.”
Alston & Bird have released their May 15 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.
Guidance on Eligibility – FAQ 46 was released on May 13 (full text below) which provided additional guidance on eligibility. Withum has released an article on this FAQ as well given its importance. Shortly after that, FAQ 47 was released which extended the deadline for those who wish to return their PPP funds to May 18th.
So what are the highlights?
“If SBA determines in the course of its review that a borrower lacked an adequate basis for the required certification concerning 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 the borrower repays the loan after receiving notification from SBA, SBA will not pursue administrative enforcement or referrals to other agencies based on its determination with respect to the certification concerning necessity of the loan request”
46. Question: How will SBA review borrowers’ required good-faith certification concerning the necessity of their loan request?
Answer: When submitting a PPP application, all borrowers must certify in good faith that “[c]urrent 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,20 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. SBA has determined that this safe harbor is appropriate because borrowers with loans below this threshold are generally less likely to have had access to adequate sources of liquidity in the current economic environment than borrowers that obtained larger loans. This safe harbor will also promote economic certainty as PPP borrowers with more limited resources endeavor to retain and rehire employees. In addition, given the large volume of PPP loans, this approach will enable SBA to conserve its finite audit resources and focus its reviews on larger loans, where the compliance effort may yield higher returns. Importantly, borrowers with loans greater than $2 million that do not satisfy this safe harbor may still have an adequate basis for making the required good-faith certification, based on their individual circumstances in light of the language of the certification and SBA guidance. SBA has previously stated that all PPP loans in excess of $2 million, and other PPP loans as appropriate, will be subject to review by SBA for compliance with program requirements set forth in the PPP Interim Final Rules and in the Borrower Application Form. If SBA determines in the course of its review that a borrower lacked an adequate basis for the required certification concerning 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 the borrower repays the loan after receiving notification from SBA, SBA will not pursue administrative enforcement or referrals to other agencies based on its determination with respect to the certification concerning necessity of the loan request. SBA’s determination concerning the certification regarding the necessity of the loan request will not affect SBA’s loan guarantee.
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The HEROS Act: We now have new legislation that is in play, the Health and Economic Recovery Omnibus Emergency Solutions (“HEROES”) Act. This was introduced by the House yesterday, you can find expanded text here. This is obviously a first draft of new legislation and it needs to go through the legislative process. Right now we believe this was a bill largely authored by Democrats in the House, thus it needs to get Republican support, go through the Senate and get congressional committee level support as well. So what does that mean? At a minimum, expect changes, and it is possible this never actually makes its way into law – e.g., some Republicans have announced that the bill is “dead on arrival”.
There is no way to cover everything from the bill in one email, but for now, let’s break down cover what is most impactful to the middle market:
Massive costs: The Act is a $3 Trillion stimulus package, much larger than the CARES Act ($2.2T) which introduced the PPP to the business community.
Proposed changes to the PPP:
There are several changes suggested in Section 90004 of the Act, here are the most impactful to borrowers:
Additional direct payments to individuals: This means a second round of economic impact payments of $1,200 per family member, up to $6,000 per household.
Enhanced ERC and payroll credits for first responders: The bill would provide an enhanced employee retention tax credit that encourages employers to keep employees on payroll. There is also a section that introduced tax credits for companies that employ “first responders”.
Enhanced tax credits/deductions: Individual tax credits like the Child Tax Credit and Earned Income Credit would be enhanced. Also additional tax deductions would be introduced for “first responders”.
More EIDL money: $10B would be set aside for the EIDL program to continue to fund businesses.
Business interruption credit for the self-employed: The bill would provide a 90% refundable individual income tax credit for certain self-employed individuals who have experienced a significant loss of income.
Restoration of the state tax deduction: Individuals have a cap on how much they can deduct on their personal tax returns for state taxes paid relating to income and real estate taxes – the so-called SALT limitation, which is $10k, that was introduced in the 2017 Tax Cuts and Jobs Act. This bill looks to restore individuals ability to take a “full” deduction for all state taxes paid on their returns.
Extension of unemployment benefits: This would extend the federal unemployment benefit program to ensure the weekly $600 federal unemployment payments continue through January 2021. The CARES Act provided for 4 months of this benefit.
Assisting in rent and mortgage payments: $175B would be set aside to assist renters and homeowners make monthly rent, mortgage and utility payments.
Multi-Employer plans get support: Plans would receive financial assistance to keep them solvent for thirty years—with no cuts to the earned benefits of participants and beneficiaries.
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Alston & Bird have released their May 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.
Cohen Seglias’ Labor & Employment Group have released a Q&A on the PPP program with an eye towards using and tracking the proceeds.
The MCA of Omaha, Inc. and UA Local 464 have partnered to distribute hand sanitizer to their members in the field. Together, Brad Bird, the Business Manager of UA Local 464, and Kelsey Johnson, the Executive Vice President of the MCA of Omaha, developed a distribution plan for 225 gallons of hand sanitizer donated through the Nebraska Ethanol Board.
The hand sanitizer was manufactured by the University of Nebraska–Lincoln in a collaborative project between several partners on the campus, including the College of Engineering, the Institute of Agriculture and Natural Resources, the Food Processing Center, and the Nebraska Innovation Campus.
On Tuesday, April 28, each of the contractors that requested hand sanitizer sent one representative to pick up the sanitizer from the union hall.
Kelsey Johnson and the MCA of Omaha feel fortunate to be able support their members in a safe way. “This was an incredible effort by us and Local 464. Now more than ever, we all need to work together with our labor partners to keep our members safe and informed.”
The Labor Management Cooperation Committee (LMCC) has made a $5,000 donation to the University of Nebraska Foundation to help keep the hand sanitizer project going.
“We are lucky to have the hand sanitizer donated to us, and to have a great relationship with our [UA] local. As more [hand sanitizer] comes in, we will continue to distribute it out to our contractors and their essential workers, who are having a really hard time finding any hand sanitizer.”
The law firm of Cohen and Seglias has put together the following “COVID-19” 3.0 package for contractor members to use as the situation dictates for protection and to ensure relief — time, money, etc. This packet is for the use of our members. These forms will need to be edited to a given project’s specific circumstances. This information is not an endorsement, simply a resource as we navigate these uncertain times as an industry.
With states re-opening, many jobs, including construction will have a new normal on jobsites. The CDC, OSHA, and local and state governments have issued requirements and recommendations for returning to work. In taking the proper precautions, the impact on costs and schedules is inevitable. Questions have come up, but there is no clear answer.
Cohen Seglias’ Construction Contracts & Risk Management Group prepared sample notice letters for use on jobs where construction has or is about to resume under pre-existing contracts. Also included in this packet is sample language to add to change orders and monthly releases.
Additionally, with many companies still bidding and entering into contracts for new work, sample language to include in your proposal to help protect you in the event of a future shutdown or new guidelines is also included in this package. When bidding, remember that COVID-19 is not likely going to be considered a force majeure event due because it should be anticipated when developing your proposal. We suggest that the parties on a project discuss the use of an allowance to cover these costs. A letter to that effect is also enclosed. These forms may need to be revised to fit particular circumstances.
WASHINGTON, DC – On May 11, the U.S. Department of Labor launched its Industry-Recognized Apprenticeship Program (IRAP) Standards Recognition Entities (SREs) online application and updated resources, the same day that the IRAP rule goes into effect.
In June 2017, President Donald J. Trump signed an Executive Order on Expanding Apprenticeships in America. Section 4 of the order, “Establishing Industry-Recognized Apprenticeships,” directs the Secretary to consider proposing regulations that promote the development of apprenticeship programs by third parties. The Task Force on Apprenticeship recommended the establishment of Industry-Recognized Apprenticeship Programs to address America’s skills gap and to rapidly increase the availability of high-quality apprenticeship programs in sectors where apprenticeship opportunities are not widespread.
“As workers seek to reenter the workforce following the economic disruption caused by coronavirus, Industry-Recognized Apprenticeship Programs and the SREs that recognize them will provide new opportunities for Americans to earn a living while learning the skills needed in a changing job market,” said U.S. Secretary of Labor Eugene Scalia. “I encourage industry leaders, educators, and others to consider forming SREs to help drive the expansion of apprenticeships and assist in the economic rebound. In these challenging times, the new apprenticeship opportunities created by IRAPs can open doors to good-paying jobs in industries such as telecommunications, health care, cybersecurity, and other sectors.”
IRAPs are high-quality apprenticeship programs recognized by third-party entities – SREs – under standards established by the department’s recently issued Final Rule. As described in the Final Rule, the department may recognize various types of organizations as SREs, including trade groups, companies, educational institutions, state and local governments, non-profits, unions, joint labor-management organizations, and certification and accreditation organizations.
“Industry-Recognized Apprenticeship Programs provide an additional apprenticeship pathway that is industry-led and market-driven,” said Assistant Secretary for Employment and Training John P. Pallasch. “Through these programs, individuals will be able to obtain valuable workplace-relevant training and learn progressively advancing skills, resulting in an industry-recognized credential, all while getting paid for their work. Now that we are accepting applications to serve as Standards Recognition Entities, we encourage eligible workforce stakeholders, through applying and forming an SRE, to play a large role in the way industries and regions train future workers.”
Over the coming weeks, the department plans to host virtual forums to share how industry and workforce stakeholders are taking advantage of this new opportunity.
Entities interested in evaluating and recognizing high-quality IRAPs, consistent with the department’s standards, should follow the process outlined in the Final Rule to become SREs and submit an application online. Following its evaluation, the Department’s Office of Apprenticeship will notify the applicant. Once recognized by the Department, SREs will work with employers and other entities to establish, recognize and monitor high-quality IRAPs that provide apprentices with industry-recognized credentials. SRE recognition is valid for five years.
In addition to technical assistance available from the Office of Apprenticeship, the department has developed several digital resources on www.apprenticeship.gov for those interested in becoming an SRE or starting an IRAP, including:
The department remains committed to fulfilling critical workforce needs and addressing the workforce-related impacts of the coronavirus pandemic. Strategies like apprenticeship that are innovative, flexible, and responsive to the needs of American employers and workers will be essential to addressing the workforce-related impact of this pandemic. IRAPs will serve as a complement to the successful registered apprenticeship program that has been in place for over 80 years.
The mission of the Department of Labor is to foster, promote and develop the welfare of the wage earners, job seekers and retirees of the United States; improve working conditions; advance opportunities for profitable employment; and assure work-related benefits and rights.
With anticipation of additional guidance being released by the SBA, Withum invites you to join the SBA and Federal Tax Policy experts for a discussion regarding the PPP loan forgiveness process. This webinar will address the new up to the minute guidance in detail, focusing on the knowns, the unknowns, and the strategies for borrowers to make sure they are maximizing their forgiveness through their 8-week covered period.
When: Thursday, May 21, 11:00 AM – 12:15 PM EST
Demand for the PPP may be fading: There were a few articles that came out on May 11 (example CBS and Business Insider) indicating that the demand for PPP loans seem to be slowing, one article indicated that as much as 40% of the second tranche of funds remain available. This is likely the result of the recent surge of comments from various sources (Mnuchin, Treasury, etc.) which have led companies to question eligibility, but also an indicator that general demand is finally being met. For those who are still attempting to attain a loan, it appears there is still time.
Comments from the SBA Inspector General: The Office of Inspector General’s mission is to “provide independent, objective oversight to improve the integrity, accountability, and performance of the SBA.” This group authored an analysis of the PPP implementation process and also outlined some concerns regarding the forgiveness process and the term of the loans. There is a lot to unpack with respect to the document but here are some thoughts that were drawn from and important expert (below). We don’t yet know if this document will somehow influence changes in the program, given the nature of the covered period, there is very limited time to do so. It is possible that it will only be informational, we will see:
“In addition to the 75-percent payroll criteria, the maturity term established by the Administrator and the Secretary would require the borrowers to repay any amount not eligible for forgiveness within the remainder of the initial 2-year term. The Act, however, allowed for a maximum maturity of up to 10 years. SBA’s requirements could result in an unintended burden to the borrowers. For example, PPP borrowers who do not use at least 75 percent of the loan for payroll (therefore use more than 25 percent of their loan proceeds for nonpayroll expenses) may not be able to have all of their loan forgiven. It may be important to consider that many small businesses have more operational expenses than employee expenses. Our review of data from round one found that tens of thousands of borrowers would not meet the 75-percent payroll cost threshold and would therefore have to repay the amount of nonpayroll costs in excess of 25 percent in less than 2 years.”
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Alston & Bird have released their May 11 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.
Faced with a tight working space, Hermanson Company took advantage of Miller Electric’s new XMT® 350 FieldPro System welder along with a custom-built pipe turner so the mechanical contractor could make hundreds of high-quality welds in a fraction of the time that hand-turning would have required. The innovative approach not only increased productivity but also contributed to a safer, healthier work environment.
Visit the Smart Solutions Case Studies area of our website! You’ll see how other mechanical contractors found their win-win with productivity-enhancing and cost-saving applications from members of MCAA’s Manufacturer/Supplier Council.
Plus, you’ll find tips and ideas on other ways you and your company can save money and enhance your productivity.
The coronavirus pandemic is forcing us to reevaluate so much of our lives and what is TRULY important to us. It is imperative that all of us focus on our own personal health and well-being. And contrary to how we might feel – we are NOT powerless. The more proactive we act individually – and collectively – the more empowered we become. SATAURA co-founders, Beverly Holcomb and Sarah Pozdol, provide simple strategies on how to nourish and support, not only your mental and emotional health; but also provide practical tools and guidelines that will help you strike a healthy “work-life-home-health” balance. By providing tools for mental and emotional resilience, work-life strategies, REAL whole foods, restorative sleep, moving our bodies, and staying connected to nature and our loved ones – we can invoke deep reservoirs of balance, health and healing. This wellness webinar is sponsored by Women in the Mechanical Industry.
Additional Resources:
This webinar was recorded Tuesday, May 18, 2020.
Webinar on Forgiveness – On May 21st at 11am Withum will be hosting a webinar on how to calculate forgiveness. Feel free to RSVP if you are interested in joining. Based on recent FAQs Withum “suspects” new guidance will be out by Mid-May and thus we will have time to digest and discuss on the 21st. Given response rates from previous webinars, we recommend RSVPing as soon as you know you will be joining.
Use of EIDL Proceeds – We are starting to hear of some receiving the Economic Injury Disaster Loan (EIDL). The question we are receiving is: Can we have both? How do they interplay? Yes, you can have both the PPP and EIDL loan at the same time. Keep in mind that you cannot use both loans for the same purpose, meaning you cannot use the EIDL for payroll costs, then ask for forgiveness of payroll costs relating to your PPP loan. The EIDL allows for a much more broad set of expenses that are “allowable” than the PPP and has a repayment term that can be as long as 30 years at a competitive, fixed interest rate, it can serve as a nice source of liquidity if you are able to receive it.
Possible changes to the PPP – An article written by the NY Times talks about possible changes to the PPP program. There has been an undercurrent of discussion around the length of the covered period and if it should be extended. Withum has not heard anything that leads them to believe that the notion of extending the covered period is getting serious traction, but the article clearly indicates that certain members of Congress are focusing in on some of the PPPs inherent shortcomings. If this develops, we will certainly let you know.
Inconsistencies on FAQs – As FAQs continue to come out, we are starting to see inconsistencies between old and new FAQs. As an example, FAQ 3 and FAQ 44 address eligibility. Importantly it addresses an interplay between the size standard and affiliation with foreign entities (parents, subs and sibling affiliations). FAQ 44 appears to close the loop on how to deal with a foreign entity when it comes to the size standard (i.e. the 500 employee test), but FAQ 3 appears to open the door to the notion that you only look at US employees when considering the size standard. Issues like this are creating confusion as Borrowers try to understand what the “final” set of rules actually are. A possible place to look for guidance when this comes up is FAQ 17, which appears to indicate that Borrowers and lenders may rely on the laws, rules, and guidance available at the time of their relevant application if it was made prior to April 2nd. If it was made after that period and new guidance has come out that is contrary to a position you took, you should consider discussing with counsel.
FAQ 45 – A new FAQ came out confirming if a Borrower returns their PPP loan, they will be eligible for the Employee Retention Credit. Nothing earth shattering here, but a welcomed clarification. As a reminder you ARE allowed to take advantage of the Payroll Tax Deferral if you received the PPP.
45. Question: Is an employer that repays its PPP loan by the safe harbor deadline (May 14, 2020) eligible for the Employee Retention Credit?
Answer: Yes. An employer that applied for a PPP loan, received payment, and repays the loan by the safe harbor deadline (May 14, 2020) will be treated as though the employer had not received a covered loan under the PPP for purposes of the Employee Retention Credit.
Reminder of where to find updates on forgiveness calculation – On April 13th Withum authored an article which covered a host of questions that we need to have answered when it comes to flaws/ambiguities in the forgiveness calculation. Since that date, there have been over 20 new FAQs, Withum has updated this article to address the FAQs and their impact, it is a single source of information for what remains unknown for those who are struggling with issues.
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Alston & Bird have released their May 8 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.
“Grace period” extended and SBA commits to new guidance on eligibility – FAQ 43 was released May 5th, indicating that the May 7th deadline for companies to return PPP funds without penalty if they have determined they are not eligible has been extended to May 14th. The big news is that the SBA committed to providing “additional guidance” on how it will review the certifications made in the application prior to May 14, 2020. This could mean that the SBA will further clarify (and possibly narrow) the scope of what they meant by the concept of “economic uncertainty.” This is something that borrowers will need to closely consider.
Clarification on Foreign Affiliates – FAQ 44 was released May 5th and clarified that, for the 500 employee limit, the employees of foreign affiliates need to be included. This is important because many companies were under the impression that only US employees were considered when it came to affiliation guidance. Thus, if a company had a foreign subsidiary, those employees will now need to be included for the purpose of the 500 FTE headcount limitation. Keep in mind, the 500 employee limit considers ALL employees as a full employee. So a part time employee is considered 1 person for the purpose of this calculation. This may require some companies to re-evaluate their eligibility.
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