Category: Coronavirus

OSHA COVID-19 ETS & New Guidance for Employers Not Covered by the Standard

OSHA recently released an Emergency Temporary Standard (ETS) on COVID-19 covering settings where employees provide healthcare services or healthcare support services. Contractors providing healthcare support services, such as equipment and facility maintenance, may have to comply with several provisions in the ETS, such as establishing a COVID-19 plan, implementing precautions, requiring use of personal protective equipment, practicing physical distancing, using physical barriers, cleaning and disinfecting surfaces, implementing health screening and medical management, supporting COVID-19 vaccinations, and providing appropriate training.

However, the standard does not apply to “well-defined hospital ambulatory care settings” where all employees are fully vaccinated, all non-employees are screened prior to entry, and people with suspected or confirmed COVID-19 are not permitted to enter those settings. Ambulatory care means healthcare services performed on an outpatient basis, such as physician’s offices, hospital outpatient departments, ambulatory surgical centers, and specialty clinics. Affected employers must comply with most provisions of the standard within 14 days, and with the remaining provisions within 30 days. OSHA will use enforcement discretion to avoid citing employers who are making a good faith effort to comply with the ETS.

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Contractors whose employees are not providing healthcare support services are exempt from the ETS. However, OSHA has updated their guidelines for employers based on the most current guidance from the CDC. Employers are urged to comply with the updated guidelines, which direct employers to:

  • Grant paid time off for employees to get vaccinated;
  • Instruct workers who are infected, unvaccinated workers who have had close contact with someone who tested positive, and all workers with COVID-19 symptoms to stay home from work;
  • Implement physical distancing for unvaccinated and otherwise at-risk workers in all communal work areas;
  • Provide unvaccinated and otherwise at-risk workers with face coverings or surgical masks;
  • Educate and train workers on your company’s COVID-19 policies and procedures;
  • Suggest that unvaccinated customers, visitors, or guests wear face coverings;
  • Maintain ventilation systems;
  • Perform routine cleaning and disinfection;
  • Record and report COVID-19 infections and deaths;
  • Implement protections from retaliation;
  • Set up an anonymous process for workers to voice concerns about COVID-19-related hazards; and
  • Follow other applicable mandatory OSHA standards.

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Adverse Reactions to Employer Mandated COVID-19 Vaccines Are OSHA Recordable Cases

If your company is requiring its employees to get vaccinated against COVID-19 it runs the risk of acquiring recordable illness cases. Recent revisions to OSHA’s frequently asked questions (FAQs) and answers related to the coronavirus disease 2019 (COVID-19) pandemic indicates that OSHA considers employees’ negative reactions to the COVID-19 vaccines to be “work-related” and therefore, subject to recordkeeping and reporting mandates when an employer “requires” the vaccination. The question and answer from the updated FAQs follows.

If I require my employees to take the COVID-19 vaccine as a condition of their employment, are adverse reactions to the vaccine recordable? If you require your employees to be vaccinated as a condition of employment (i.e., for work-related reasons), then any adverse reaction to the COVID-19 vaccine is work-related. The adverse reaction is recordable if it is a new case under 29 CFR 1904.6 and meets one or more of the general recording criteria in 29 CFR 1904.7.

Updated FAQs

CDC Alters Guidelines on Facility Cleaning & Disinfection for COVID-19

The CDC has revised its guidelines regarding cleaning and disinfecting surfaces to prevent the spread of COVID-19. The virus that causes COVID-19 can land on surfaces, and it’s possible for people to become infected if they touch those surfaces and then touch their nose, mouth, or eyes. However, it has been determined that the risk of infection from touching a surface is low. The CDC now believes that the most reliable way to prevent infection is to regularly wash hands and use hand sanitizers. When there have been no confirmed or suspected cases of COVID-19 in a given space, cleaning only once a day is usually enough to sufficiently remove the virus from surfaces in the space.

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Alston & Bird Offers April 13 Webinar on the New and Improved Employee Retention Tax Credit and Expanded FFCRA Leave Opportunities

Tuesday, April 13, 2021 | 11:00 a.m. – 12:00 p.m. ET 

Originally enacted in March 2020 as part of the CARES Act, the Employee Retention Tax Credit (ERTC) was modified and extended through 2021. Join experts from Alston & Bird On Tuesday, April 13, 2021, from 11:00 a.m. – 12:00 p.m. ET as they explore the new opportunities for employers to claim ERTCs in 2021 and some of the challenges employers may face in determining eligibility for the credits. They will also discuss recent changes to the paid employee leave provisions of the Families First Coronavirus Response Act (FFCRA) that provide additional opportunities for employer tax credits associated with FFCRA leave. Register now!
 

Alston & Bird experts will:

  • Provide an overview of the employee retention tax credit as originally enacted in the CARES Act
  • Discuss taxpayer-friendly changes to the ERTC provisions for 2020 and 2021
  • Explore some of the challenges employers are facing when determining eligibility for ERTCs
  • Discuss recent changes to FFCRA employee leave provisions and the additional tax credit opportunities they create

Meet the Panelists

Scott Harty | Partner | Alston & Bird
Companies rely on Scott to guide them through the tax implications of domestic and cross-border commercial transactions. An experienced negotiator and technician, Scott provides clients the counsel they need to navigate complex transactions.

Seth Buchwald | Associate | Alston & Bird
Drawing from his experience as a certified public accountant, Seth guides his clients through complex business transactions and controversy matters. Since enactment of the CARES Act, Seth has worked extensively with the ERTC provisions.

Brett Coburn | Partner | Alston & Bird
Brett regularly counsels employers of all sizes on compliance with federal and state employment laws. During the pandemic, he has worked extensively with employers regarding their compliance with the paid leave provisions of the FFCRA.

Want to Know What to Expect from OSHA in the New Administration? Don’t Miss Our April 7 Webinar with Adele Abrams!

Wednesday, April 7, 2021 | 12:00 p.m. – 1:00 p.m. EDT

Prepare for OSHA’s coming regulatory and enforcement agendas by participating in this 60-minute webinar for mechanical construction and service companies. Our presenter is nationally recognized safety and health expert and attorney Adele Abrams. She is a frequent presenter for MCAA with expertise in legal, occupational safety/health issues, employment law, and mine safety. Adele is also co-author of several books related to occupational safety and health, construction, employment law, and mining. Join us Wednesday, April 7, 2021 from 12:00 p.m. to 1:00 p.m. EDT. Register now!

Withum COVID-19 Bill Update – 3/9/21

National accounting firm Withum shares some recent developments from the IRS with respect to the ERC and one PPP development.

IRS Issues Notice 2021-20:

On the evening of March 1, the IRS released 102 pages worth of guidance surrounding the 2020 ERC program. While much of the notice was regurgitating the FAQs already on its website, they did provide some notable clarifications:

  • Self-employed individuals are not entitled to ERC with respect to their own wages, but can claim the credit for their employees’ wages.
  • Entities subject to aggregation are treated as one employer to determine the following: (i) full or partial shutdown rule, (ii) gross receipts test, (iii) 2019 FTE calculation, and (iv) determining maximum credit per employee.
  • Rules surrounding full or partial suspension of activities were greatly expanded, installing a definition of ‘nominal’ for businesses who have part of their business shut down while others are able to continue to operate. These rules are fairly facts and circumstances based, so we recommend you reach out to your advisor to discuss on a more detailed level. 
  • Interplay of PPP is discussed with 7 examples provided – in general, the notice reaffirms the flexibility of wages to be allocated in advantageous manner between programs. It further clarifies that borrowers who have already submitted their loan forgiveness application can re-allocate wages to the ERC, provided those wages were not needed to obtain forgiveness within the context of the PPP forgiveness application was filed – any excess wages can be re-allocated as necessary.
  • IRS confirmed that when claiming the 2020 credit, separate 941-Xs should be filed for each quarter. 

Taxation of the ERC:

We have received many questions around this, so we thought it appropriate to include a point of emphasis. Unfortunately, the ERC carries with it a disallowance of otherwise deductible costs in the amount of the credit. Because the amount of the credit will reduce otherwise deductible expenses, this means that taxable income for recipients will increase. Generally, this taxable income increase would occur in the year to which the credit relates. This is an important note, as companies applying now for the 2020 credit will have to adjust their 2020 taxable income and 2020 tax returns. This treatment seems particularly inequitable, especially because the actual credit amount for borrowers not receiving the amounts is not likely to be received until well after the tax deadline. We are working on a more detailed discussion of this issue, which will be posted in our resource center in short order. 

Federal Reserve Board Extends PPP Facility to June 30, 2021:

We also have one piece of news regarding the PPP to share. The Federal Reserve Board announced yesterday that it will extend the expiration date of the PPP servicing from March 31, 2021 to June 30, 2021. It is unclear whether this will also be followed by Congress and/or the SBA. The deadline of March 31, 2021 was set by the CAA, which would need to be updated in order to allow applications to be approved after March 31, 2021. If extended to June 30, 2021, this would provide businesses, including those with more than 20 employees who have not been able to apply for the PPP over the last two weeks, some comfort that they will not be up against a March 31 deadline to be approved. In theory, an extension also would provide the ability of a borrower who received PPP1 funding during 2021 to use the funds within the rules of the program and then apply for PPP2 funding prior to the cutoff date of June 30, 2021.  

These last two weeks have been busy from the IRS and SBA – with Congress in the final phases of stimulus package negotiations, we are sure to have further updates for you in the coming week. As always, we welcome you to follow along our Stimulus Package Headquarters resource center, where we will continue to publish information as notable guidance becomes available. If you have questions on the above information, please reach out to your Withum advisor.

Withum COVID-19 Bill Update – 02/24/2021

National accounting firm Withum shares some thoughts on recent developments related to the PPP, PPP2, Loan Forgiveness, and Employee Retention Tax Credits.

White House Announces Changes to PPP:

Yesterday afternoon, President Biden announced changes to the PPP geared toward making the program easier to access for smaller businesses. Last night, the SBA released further guidance solidifying these changes: 

  • Starting February 24, 2021 at 9am, the SBA will establish a 14-day exclusive loan application period for businesses/not for profits with fewer than 20 employees. 
  • SBA will also enact the following changes to promote equitable access to SBA relief:
    • Allow sole proprietors, independent contractors and self-employed to receive more financial support by revising the PPP’s funding formulas for these categories
    • Eliminate restrictions for small business owners with non-fraud felony convictions and restrictions for student loan debt delinquency
    • Ensure access for non-citizen small business owners who are lawful US citizens (ITINs will be used for PPP)
  • The adjustments to the funding formula for these groups are not available at this time, neither is any information on whether these borrowers who have previously received PPP2 funding can apply for more with their lender
  • It is not clear if/how this will affect applications that are currently in processing with lenders or the SBA or whether funding will be delayed in these instances

PPP2 Update:

After re-opening for business in mid-January with new appropriations of $284 billion, the PPP has had it’s fair share of bumps along the way. Here are some updates:

  • Through February 21, the program has had 1.9 million loans approved for approximately $140 billion in loan dollars during 2021. Average loan size of approximately $73k is considerably less than the first round, as expected due to the employee count and maximum loan amount standards imposed
  • The SBA installed more than 50 validation checks to prevent fraud and misuse of program funds. An unintentional effect of this was that many otherwise eligible borrowers were being held from receiving funds due to “hold codes” not applicable to their situation. The SBA has indicated that they are working to correct this, and on February 10, 2020, issued guidance to lenders on how to bypass to allow borrowers to receive their funding. 
  • The SBA has installed a loan cap of $35,000 per employee for funding within either a PPP1 or PPP2 loan. This cap is not specified anywhere in the legislation or subsequent guidance, however they have been limiting certain loan amounts of borrowers for this through the SBA E-Tran system. We believe this would be calculated at $20,833 in wages and $14,117 of employer sponsored health insurance, retirement contribution and state and local taxes.  We are not sure how they are determining the $14,117 amount as that information is not supplied on an employee basis.
  • In last night’s release, the SBA announced they are working with their partners to improve the “digital front door” – presumably aimed at correcting some of the hold code issues previously identified. 

For a refresher on the eligibility criteria for receipt of a second draw PPP loan, please visit our article here.

Loan Forgiveness Update: 

The SBA has published the following forgiveness data through February 18, 2021:

Issued:  5.2 million loans$521 billion loan dollars
Forgiven1.7 million loans$152 billion loan dollars
Under review187k loans  $76.9 billion loan dollars 
Not yet received by the SBA3.3 million loans $292 billion loan dollars
Not forgiven:– not provided – $500 million loan dollars

Employee Retention Tax Credits (“ERC”):

Outside the PPP, the revamped ERC program has been the hottest topic of the new year for businesses in need of relief after the downturn has negatively impacted their revenues. The program, which carries a refundable $19,000 credit per employee for businesses who qualify for both 2020 and 2021, should be explored by ALL small businesses who have either had significant reductions in gross receipts or were fully or partially suspended due to government orders during 2020. A brief summary of each program is as follows: 

  • 2020 Opportunity: The CAA removed the requirement that businesses cannot obtain a PPP loan and claim the ERC. This means that any business that previously obtained a PPP loan can now retroactively claim the ERC for 2020 if they qualify. The test for the 2020 ERC is that the business must have suffered either (i) a full or partial suspension of its business operations due to COVID-19, or (ii) it experienced a decline in gross receipts for any quarter in 2020 by more than 50% compared to the same quarter in 2019.
  • 2021 Opportunity:  Under the CAA, businesses can now claim an ERC for the first two quarters of 2021, and the rules are less restrictive than they were in 2020. Two key changes include: (i) the maximum credit per employee is $14,000 in 2021, compared to $5,000 in 2020, and (ii) the decline in gross receipts test has been relaxed to include a decline of 20% instead of 50%. Businesses can also utilize the prior quarter to establish eligibility for the 2021 program.  This means for Q1 2021, the Q4 2020 can be used to determine the 20% decline in revenues. There are other expansions of the ERC that are favorable for businesses with employee counts between 100 and 500.
  • Note that businesses can only claim the ERC for eligible wages that were not used to support PPP loan forgiveness, and this prohibition against double dipping applies in 2020 and in 2021. 

Our team has put together some resources for small businesses to start evaluating whether they might benefit from this program. Please visit our ERC flowcharts here, or our article on the overall program here. We also invite you to view our on-demand webinar from last week here.

Need the Bottom Line on OSHA’s Recent COVID-19 Guidance? MCAA’s Summary Has It

OSHA recently released guidance to help employers protect their workers and prevent the spread of the COVID-19 virus in the workplace. MCAA’s new summary highlights the bottom line items in the areas of COVID-19 Prevention Programs, Return to Work Criteria, Social Distancing Measures, Engineering Controls, Face Coverings and PPE, and Sanitization, Cleaning, and Disinfecting Practices.

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H.R. 133 Offers Relief, Opportunities and Challenges Going into 2021

The $2.3 trillion Consolidated Appropriations Act, 2021 (H.R. 133) provides badly needed COVID economic relief, construction market stimulus and a forward-looking prospect for market recovery in public sector infrastructure investments as the pandemic recedes. In a memo to the MCAA Government Affairs Committee, Chair Jim Gaffney provided a summary digest of the items most likely to impact MCAA members and the MCAA policy agenda. The President is seeking greater individual stimulus checks, so there may be an amendment or veto, but this summary will stand for most of what will be the final result. Correction: The latest COVID relief measure signed into law Sunday does not extend the requirement that employers offer paid sick and family leave as required under the Families First Coronavirus Relief Act passed last March as erroneously reported in the MCAA summary published in the Weekly Update on December 28, 2020. The latest COVID bill extends only the availability of the refundable tax credit as under the FFCRA until the end of March 2021 for those employers voluntarily providing such paid leave after December 31, 2020. MCAA regrets the error.

Congress Expected to Pass Stimulus Package. Watch Withum’s December 23rd Webinar Covering Package Details On-Demand.

Experts from Withum’s SBA Financial Services and Tax Services teams navigate through the myriad of provisions included in the more than 5,000 page legislative package finalized mid-December. Withum’s team covers in detail the provisions of the legislation which cover the following topics:

  • PPP Loans: Another Round of Funding
  • PPP Loan Forgiveness Process (Round 1 and Round 2)
  • PPP Loan Forgiveness Deductibility

Withum also covers the basics of the following provisions, but expect to have more detailed communications on these as guidance becomes more clear:

  • Unemployment Provisions
  • Stimulus Checks
  • Employer Focused Tax Credits

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CDC Issues New Guidance on Quarantine of Individuals Exposed to Persons with COVID-19

December 4, 2020|by Kathleen M. Connelly

Until now, the CDC recommended a 14-day quarantine for individuals who might have had “close contact” with a person who has or is suspected of having COVID-19.[1]  This quarantine was longer than the 10-day recommendation for those who test positive, as the longer quarantine period is based on estimates of the upper boundaries of the viral incubation period. However, in its new guidance issued December 2, 2020, the CDC acknowledged three adverse consequences of the 14-day quarantine:

  • It can impose personal burdens that may affect physical and mental health as well as economic hardship that may reduce compliance.
  • It may pose additional burdens on public health systems and communities, especially when cases are rising and the need to impose quarantines are rapidly rising.
  • It may dissuade recently diagnosed persons from naming contacts and dissuade contacts from responding to contact tracer outreach if they perceive the duration of the quarantine is too onerous.

New Shorter Quarantine Options. In an effort to reduce these burdens and increase community compliance, the CDC has announced the following shorter quarantine alternatives to the 14-day quarantine.

  1. 10-Day Quarantine Option. Under this option, quarantine can end after day 10 without testing and if no symptoms have been reported during this period.
  2. 7-Day Quarantine Option. If diagnostic testing resources are available, quarantine can end after day 7 if i) the test results are negative and ii) no symptoms are reported during this period.  The testing specimen may be collected and tested within 48 hours of the expiration of the 7-day period (or before the planned end of quarantine in the event of testing delays).

Quarantine may only be discontinued under either option if these additional criteria are met:

  • no clinical evidence of COVID-19 was elicited via daily symptom monitoring during the entirety of the quarantine;
  • daily symptom monitoring continues through day 14; and
  • persons are counseled regarding the need to strictly adhere through day 14 to all recommended non-pharmaceutical mitigation strategies, and advised to immediately contact local health officials or their healthcare provider and self-isolate should symptoms develop.

Of course, individuals can continue to quarantine for the longer 14-day period without testing in accordance with the preexisting recommendations, which maximally reduces the risk of post-quarantine transmission.

Persons Who Must Quarantine Together, Such as Households. The CDC further recommends that when housing is shared (e.g., families, incarcerated persons, students), every effort should be made to physically separate the quarantined individual from others through such measures as having the quarantined individual residing alone in a separate closed room with exclusive use of their own bathroom and implementation of other mitigating strategies.  If any co-housed person is diagnosed with COVID-19, all co-housed persons will require evaluation as contacts.

[1] The CDC defines “close contact” as being within 6 feet of an infected person for a cumulative total of 15 minutes or more over a 24-hour period starting from 2 days before illness onset (or, for asymptomatic patients, 2 days prior to test specimen collection) until the time the patient is isolated.

As always Lindabury’s Labor & Employment team is vigilantly monitoring the legislative and regulatory developments in response to the coronavirus outbreak. Stay up to date with the latest information by visiting the Lindabury COVID-19 (Coronavirus) Resource Center. If you have any questions, please contact Lindabury.

CDC Updates COVID-19 Guidelines on When to Quarantine

The CDC recently updated its guidelines on when to quarantine following exposure to a person who has tested positive for COVID-19. The new guidelines indicate that people who have been in close contact with someone who has COVID-19, excluding people who have had COVID-19 within the past 3 months, should quarantine immediately. It is considered close contact when:

  • You were within 6 feet of someone who has COVID-19 for a total of 15 minutes or more;
  • You provided care at home to someone who is sick with COVID-19;
  • You had direct physical contact with the person (hugged or kissed them);
  • You shared eating or drinking utensils; and/or
  • The person sneezed, coughed, or somehow got respiratory droplets on you.

People who have tested positive for COVID-19 do not need to quarantine or get tested again for up to 3 months as long as they do not develop symptoms again. People who develop symptoms again within 3 months of their first bout of COVID-19 may need to be tested again if there is no other cause identified for their symptoms.

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Withum COVID-19 Bill Update – 10/12/2020

As the very public debate in Congress regarding another stimulus bill rolls on, Withum wanted to share an update issued late last week by the SBA, in conjunction with the Department of Treasury. With lobbying groups, lenders, and borrowers long-since advocating for a more simple forgiveness process, specifically for smaller loans, the SBA took this into their own hands late last week, as they released a new interim final rule (“IFR”). Because they are required to work within the confines of the current statutes, the consequences of this interim final rule are not as far reaching as proponents for a simpler forgiveness process would like, but it’s certainly a movement in the right direction. Here are the highlights:

New Application Form and Simplification for Loans under $50,000: In the release of the IFR, the SBA granted a de minimus exemption that all borrowers who have loans under $50,000 (provided that they do not, with affiliates, exceed $2M) would be exempt from any reductions in the loan forgiveness amount based on reductions in full-time equivalents or reductions in salaries/wages. This is welcomed news to these borrowers. The SBA also released the Form 3508S, a much more simple version of the Form EZ previously issued, which just asks the borrower for the bare minimum of requirements – loan information, forgiveness amount, and for the borrower to sign the certifications. While this is welcomed news to borrowers, the statutes of the CARES Act still require that forgiveness is not to be issued unless supporting documentation supporting the expenditures is provided, and there was no change to this rule offered by the SBA. Borrowers who utilize this form are still required to submit the supporting documentation for their expenditures, ultimately supporting the amount claimed for forgiveness. Further, the IFR clarifies that lenders are required to complete the following when in receipt of such application: 1) confirm receipt of the certifications, 2) confirm receipt of the documentation required to be submitted. It clearly indicates that the borrower is responsible to provide an accurate calculation of the loan forgiveness amount. 

With 3.57 million outstanding PPP loans totaling $62 billion in funds, this is set to simplify the process for about 12% of the PPP funds distributed. Withum expects that lending institutions will need some time to update their systems to allow for these applications, so borrowers who fit this mold will likely need to wait a couple more weeks to apply for forgiveness if they desire to use the new form.

Changes to the Lender Review Process for All Loans: In addition to the above, the IFR also amended lender responsibility with respect to reviewing documentation from submitted borrowers. In response to what appears to be an overwhelming number of borrowers submitting applications with documentation of eligible payroll and non-payroll costs in excess of the loan amount, lenders responsibilities are now adjusted such that they are only required to confirm the borrower’s calculation and review the required documentation up to the amount of the request forgiveness amount. Although we cannot be sure how each lender will approach/implement this guidance, it stands to increase the speed with which loans are being processed if utilized. 

What Else is Going on in Congress? Since the IRS published Notice 2020-32, disallowing deductions for expenses that were forgiven under the PPP, Congress members have spoken publicly about how this notice was not in line with the intentions of the CARES Act. On October 1, the House passed an updated Heroes Act which contained language allowing such deductions, marking the first time we have seen any legislation overturning the IRS notice make any headway. Based on what has transpired since that date, we know that the Heroes Act, in it’s current form, is very unlikely to be signed into law, however inclusion of language in this regard is encouraging nonetheless. 

Also at the forefront of these discussions are additional appropriations for the PPP funds. At the very least, the White House has signaled that they would be amenable to redeploying the nearly $130B of unused appropriations for the PPP, and Congress members on both sides of the aisle have indicated they are favor of a PPP v2. The most solid proposal we have seen to date is within the updated Heroes Act, which includes a second round of loans, utilizing the same formula as the first round, to eligible ‘smaller businesses’ of 200 employees or less who can also demonstrate a 25% reduction in revenues in either Q1, Q2 or Q3 as compared to last year. The maximum size loan under this proposal would be $2M. Eligibility under alternative size standards and how the affiliation rules would be applied are not clear at this time.

Withum COVID-19 Bill Update – 9/17/2020

PPP Loans – Disallowance of Expense Deductions: Withum is getting a lot of questions regarding the denial of tax deductions relating to PPP loan forgiveness. As you may recall, cancellation of debt relating to the PPP loan is not taxable income. While that is the case for the loan itself, the amount forgiven actually ends up being fully taxable because the IRS issued Notice 2020-32 to disallow the tax deductions (expenses) that gave rise to the loan forgiveness. Here is a link to a Withum article on the Taxation of PPP Loans and Loan Forgiveness. Thus, taxpayers should expect more taxable income as they will have less deductible expenses in 2020 than are reflected on their internal books and records.

This also has caused some fiscal year-end borrowers to consider whether they can choose which deductions to disallow so they can defer the taxation of the loan forgiveness amount until a later tax year. 

Consider this example: a borrower obtained a PPP loan 8 weeks before the end of its 2020 FYE. If it obtains loan forgiveness based on the first 8 weeks of covered expenses, then those expenses would be disallowed and the loan forgiveness amount would be taxable in 2020. If, however, the borrower can disregard the first 8 weeks of expenses and rely only on the last 16 weeks of covered expenses paid or incurred during the covered period, then it could defer the expense disallowance, and therefore the taxation of the loan forgiveness amount until 2021. There is no guidance on this issue from the IRS or from the SBA, and while there are reasonable arguments to be made both ways, we cannot recommend borrowers take this position because eligibility for loan forgiveness is based on “the sum of” the covered expenses paid and incurred during the covered period, according to section 1106(b) of the CARES Act.

Could Deductibility of PPP Expenses Change?  Many have speculated that denying tax deductions for PPP loan recipients was not the intent of the program.  Several members of Congress have indicated that they intend to pursue legislation that would allow for all PPP related expenses to be deductible in order to avoid having small businesses deal with an unexpected tax bill after such a difficult year.  Even though at least one bill to restore the deductions has been proposed, at this point no agreement has been reached, so taxpayers need to proceed assuming that no change is coming.  That said, it is possible that we could see this addressed in an upcoming stimulus bill ….stay tuned.

Reminder Section:  (what should I be doing):

  • Talk to your lender to find out when its PPP loan forgiveness application portal will be ready.
  • 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).

Treasury Department Issues Guidance on Payroll Tax Deferral

By: Jim Paretti, Michael J. Lotito, and William Hays Weissman
August 31, 2020

On August 28, 2020, the U.S. Department of the Treasury issued guidance for employers with respect to the deferral of the employee portion of certain payroll taxes.  This guidance stems from a presidential memorandum issued earlier in the month authorizing employers to defer payment of these taxes.  That memorandum allowed for the deferral of the employee portion of federal payroll taxes (6.2% for Social Security and 1.45% for Medicare) from September 1, 2020 until December 31, 2020.  The memorandum allows employers to defer payment of the employee portion of these payroll taxes for workers earning less than $4,000 on a biweekly basis (roughly $104,000 annually). 

Treasury’s guidance makes clear that an employer may elect to defer the payment of the employee portion of these taxes on “applicable wages” until next year, when they would be owed in installments between January 1, 2021 and April 30, 2021.  “Applicable wages” are defined as those wages paid to an employee on pay dates between September 1, 2020 and December 31, 2020, “but only if the amount of such wages or compensation paid for a bi-weekly pay period is less than the threshold amount of $4,000 or the equivalent threshold amount with respect to other pay periods.”  The guidance specifies that applicable wages are determined on a pay period by pay period basis.  Finally, the guidance makes clear that employers are required to pay these taxes to the federal government, but goes on to state that employers “may make arrangements to otherwise collect the [due taxes] from the employee.”

The guidance leaves several clear takeaways.  First, it is clear that an employer is permitted to defer payment of these taxes, but is not required to.  Second, it is likewise clear that unless further action is taken (likely by Congress), these taxes are merely deferred, not forgiven, and will be due by the end of April 2021.  Finally, it is not clear what, if any, role an individual employee plays with respect to determining whether they want their share of these taxes deferred, or paid in the normal course.  Employers will want to keep each of these points in mind as they evaluate whether or not to participate in this elective deferral.

It is unclear whether Treasury will issue additional guidance regarding this program.  Littler WPI will keep you apprised of relevant developments.

8/17 Alston & Bird Coronavirus Flash Update

Alston & Bird have released their August 17 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.

Withum COVID-19 Bill Update – 8/13/2020

Final PPP Statistics:  As many of you know the PPP loan program is officially closed, it is certainly possible that it can be extended via the next stimulus bill, however that has been delayed and it is unclear what changes to the PPP (if any) will come as a result of the bill and when. The SBA has been consistently publishing PPP loan statistics, and this link provides what is effectively the “final” results as we know them. Some general observations:

  • $133 billion of funds allocated to the program went unused.
  • NY, CA and TX were the largest recipients of loans.
  • Over 87% of the total loans issued were below $150k.
  • Chase, BOA and PNC were the top three lenders (by dollars).
  • Healthcare, professional services and tech were the top three beneficiaries (by dollars).

New Clarifications/FAQs on How to Calculate Forgiveness: The SBA released new FAQs recently, Withum has written an in-depth analysis on each one within this article. The FAQs do not present major shifts in how we view the mechanics of forgiveness but do help provide further detail and clarity on topics such as how to calculate the maximum forgivable salary for owner/employees based on entity type (LLC, S-Corp, C-Corp and how to account for benefits paid within and outside of the covered period among other topics. As borrowers begin working on their applications, understanding these nuances is important. 

PPP and M&A: Withum often gets questions regarding how the sale or a business or the acquisition of another entity may impact a borrowers PPP loan and ability to obtain forgiveness. Withum has put together an article addressing some of the complexity that may arise from these transactions, as well as how they impact the employee retention tax credit.

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.