Withum COVID-19 Bill Update – 5/8/2020

May 8, 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.

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 Sick Pay Bill (passed prior to the CARE Bill).
  • Be in constant communication with your bank (about status of your PPP application).
  • Consider speaking with your bank 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.
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