Mamone Villalon PLLC prides itself on offering dynamic and efficient solutions for small to medium sized businesses. As business owners and entrepreneurs, we are particularly conscious of the disruption to businesses caused by the COVID-19 pandemic. We are monitoring the government’s response to this situation and would like to take this opportunity to provide you with a summary of relevant points in the proposed economic stimulus package, known formally as the “Coronavirus Aid, Relief and Economic Security Act” but more commonly referred to as the “phase 3 bill” (the “bill”), current being debated in Congress.
Please note, this bill is not final and as such its provisions are subject to change. However, we feel it best to inform our clients of the tenor of the bill so that they can be prepared to act swiftly once final legislation is approved. Additionally, this post will focus on aspects of the bill relevant to businesses. There are extensive provision governing amendments to health care laws which are not discussed here. This summary is very general. If you have specific questions, please consult with an attorney. This is not intended to be construed as legal advice.
Small Business Loans & Forgiveness
Arguably, the most relevant portion of the bill provides for Small Business Administration loans to businesses with less than 500 employees which existed prior to March 1, 2020. The bill proposes $299,400,000,000.00 be set aside for guaranteed loans. Loan amounts will be available to the lesser of (i) the payroll and expenses incurred by a company in the previous year multiplied by four (4) or (ii) $10,000,000.00. These loans are available to cover general business expenses including payroll, salaries, mortgage payments, rent, utilities and any other debt obligations that were incurred before March 1, 2020. All businesses that apply are presumed to be impacted by the COVID-19 pandemic and are eligible for deferment for no more than one year.
The bill provides for loan forgiveness on “amounts equal to the cost of maintaining payroll continuity” from March 1, 2020 to June 30, 2020. Or, stated more simply, any loan amounts used to pay employees will be forgiven. However, there is a caveat. The loan forgiveness amount will be reduced pro rata by a quotient of the employees employed compared to the number of full-time employees from March 1, 2019 to June 30, 2019. This means that an employer that has reduced its workforce in response to the COVID-19 pandemic will be not be eligible for full loan forgiveness on amounts from the loan used to pay salaries.
Tax Credits & Rebates
The bill provides for immediate tax relief for individuals by providing a credit of $1,200 for individuals and $2,400 in the case of a joint return. There is an additional credit of $500 per dependent. This credit is reduced if your adjusted gross income exceeds $75,000.00. This credit is presumed to have been paid and earned from a previous year and the bill instructs the Secretary to expedite advance refunds to eligible taxpayers. In short, this credit is the immediate rebate the President has discussed and is intended to put funds into the hands of taxpayers.
The bill also provides for comprehensive changes to net operating loss carryforward and carryback rules. Please consult with a tax professional.
Distressed Sectors of the Economy
The bill makes accommodation for sectors of the economy particularly devastated by the pandemic. Specifically, $208,000,000,000.00 are being made available for bridge loans. Passenger air carriers are eligible for $50,000,000,000. Cargo air carriers are eligible for $8,000,000,000. The remaining $150,000,000,000 are available for other eligible businesses. For more details on your eligibility for these loans please contact an attorney.
The bill suspends student loan payments for three (3) months. During that time interest will not accrue and payments are presumed to have been made for the purpose of computing loan forgiveness.
Amendments to Emergency FMLA and Paid Sick Leave
The bill amends the recently enacted Emergency FMLA and Paid Sick Leave Acts by reducing daily coverage under the EFMLA to $200 per day and altering the pay required under Paid Sick Leave act depending on the basis for paid sick leave.
We hope you find this information useful. We will continue to provide updates as information becomes available. If you have any questions or want to learn more, please feel free to contact us.