Update on Passage of CARES Act, Key Provisions
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 constantly 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 economic stimulus package, known formally as the “Coronavirus Aid, Relief and Economic Security Act” but more commonly referred to as “phase 3” (the “law”), which was signed into law on March 27, 2020. News outlets are reporting on a second, “phase 4” stimulus bill that is likely to go through congress in April. We will continue to provide updates as information becomes available. Please note, this law is expansive, and this is a very general overview. If you have specific questions, please consult with an attorney. This is not intended to be construed as legal advice. Payroll Protection Program (SBA Loans) & Forgiveness Arguably, the most relevant portion of the law provides for Small Business Administration loans to businesses with less than 500 employees. The law provides $349,000,000,000.00 be set aside for these guaranteed loans. Loan amounts will be available to the lesser of (i) the average monthly payroll multiplied by two point five (2.5) or (ii) $10,000,000.00. Loan terms are, generally, a ten-year maturity at four percent interest per annum. There are no collateral requirements and the loans will be non-recourse. The law also waives the traditional SBA “credit elsewhere” requirement, which means that business with access to alternative avenues of credit can still apply for these loans. These loans are available to cover general business expenses including payroll, salaries, mortgage payments, rent, utilities and any other debt obligations. All business that apply are presumed to be impacted by the COVID-19 pandemic. Payments, including principal, interest, and fees, may be deferred for six months and up to one year. Independent contractors are eligible to apply for a loan under this Payroll Protection Program. The bill provides for loan forgiveness for amounts used to cover payroll, interest on a covered mortgage, rent, and utilities from February 15, 2020 to June 30, 2020. The loan forgiveness amount will be reduced by a quotient of the employees employed from February 15, 2020 to June 30, 2020 as compared to the number of full-time employees between either February 15, 2019 to June 30, 2019 or January 1, 2020, to February 29, 2020 The law provides a forgiveness safe harbor for employers that have already reduced their workforces. If by June 30, 2020, an employer restores their number of full-time equivalent employees to the number they maintained in between (i) February 15, 2019 to June 30, 2019 or (ii) January 1, 2020, to February 29, 2020, they will still be eligible for full loan forgiveness. Critically, any amounts forgiven will not be counted as income for tax purposes. Individual Credits & Rebates The law 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. Unemployment Benefits The law provides that in addition to state unemployment benefits, the federal government will contribute an additional $600 per week to eligible individuals. The law also expands unemployment benefits for individuals that may have exhausted their unemployment benefits prior to the COVID-19 pandemic. Business Provisions For businesses that elect not to apply for a Payroll Protection Program loan, the law provides for a tax credit equal to fifty percent (50%) of the qualified wages. Please consult with a tax professional. The law also provides for a delay in the payment of payroll taxes until December 31, 2021, and December 31, 2022. Distressed Sectors of the Economy The bill allocated $500,000,000,000.00 for direct loans from the Department of the Treasury. Procedures for applying for these loans will be published within 10 days. These loans are available for business that employee between 500 and 10,000 employees. Interest rates are no higher than two percent per annum. These loans are subject to numerous conditions, like limitations on highly compensated individuals, stock buybacks, and guarantees regarding the restoration or preservation of a workforce. Moratorium on Residential Evictions The law places a 120-day moratorium on evictions, which includes properties backed by a federal guaranteed mortgage loan and prohibits the charging of late fees or penalties for the nonpayment of rent. Student Loans The law suspends payments on student loans through September 30, 2020. We hope you find this information useful. We will continue to provide updates as information becomes available. If you have any questions please feel free to contact Mamone Villalon or review our updates.
Coronavirus Update – Proposed CARES Act
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. Student Loans 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.
Help and Programs for Florida Businesses Affected by Coronavirus (COVID-19)
We are closely monitoring legal developments affecting the business community. Below you will find some information pertaining to recent legislation designed to support small businesses affected by Coronavirus (COVID-19). If you have specific questions, please consult with an attorney. This is not intended to be construed as legal advice. Small Business Administration (SBA) Economic Injury Disaster Loan Program In a much-anticipated press release, the SBA has announced that it will be providing access to working capital loans of up to $2 million to qualifying small businesses. Funds are available to small businesses and nonprofits and can be used to pay debt, payroll, accounts payable and other bills. The interest rate is 3.75% for small businesses and 2.75% for nonprofits. Businesses with credit available elsewhere are not eligible. While some repayment terms will vary by borrower, the maximum term of the loan is 30 years. These loans may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact. The Process for Accessing Coronavirus (COVID-19) Disaster Relief Lending, According to the SBA Once a declaration is made for designated areas within a state, the information on the application process for Economic Injury Disaster Loan assistance will be made available to all affected communities. NOTE – this declaration has already been made for Florida. – Complete the registration, at https://disasterloan.sba.gov/ela/Account/Register1. – Complete the application. Per the present version of SBA Form 5, the applicant must submit: – Copies of the applicant’s 3 most recent Federal Income Tax Returns, including all schedules. If this is a new business that has not filed 3 Federal Tax Returns, submit the ones you have filed. – Tax Information Authorization (IRS Form 8821). Note – sole proprietors need only submit the IRS Form 8821. The SBA will contact you if it needs any additional information. – A current (dated within 90 days of application) business balance sheet (SBA attaches a form Personal Financial Statement (SBA Form 413)) if you are a sole proprietorship), a current profit and loss statement, and a current schedule of liabilities. – For each owner having a 20% or more interest and each general partner, a current (dated within 90 days of application) personal financial statement (you may use SBA Form 413 for this purpose), a complete copy, including all schedules, of the most recent Federal Income Tax Return and a complete and signed IRS Form 8821. – Individuals with an ownership interest need only supply an IRS Form 8821 and a personal financial statement. – A complete copy, including all schedules, of the latest Federal Income Tax Return for each affiliate. Affiliates include, but are not limited to, business parents, subsidiaries or other businesses with common ownership or management. An authorized individual must complete and sign IRS Form 8821 for each affiliate. – If applying for physical damage, a Verification of Business Property (SBA Form 739A). – If insurance covers all or a part of this loss (regardless of the current status of your claim), the name and telephone number of your agent and/or claims adjuster, the policy number and the name of the insurance company. – If applying for economic injury, SBA Form 1368, Additional Filing Requirements – Economic Injury Disaster Loan (EIDL). Note: The SBA states that “the typical timeline for approval is 2-3 weeks and disbursement can take up to 5 days.” Florida Small Business Emergency Bridge Loan Program On March 16, 2020, Florida Governor Ron DeSantis activated the Florida Small Business Emergency Bridge Loan Program. The bridge loan program is managed by the Department of Economic Opportunity and will provide short-term, interest-free loans to small businesses that experienced economic injury from Coronavirus COVID-19. PLEASE NOTE – as of today’s date, the application period ends May 8, 2020. According to the program information, businesses must meet the following criteria to eligible: – Be a for-profit, privately held small business that maintains a place of business in the state of Florida. – Be located in a designated disaster area (however Eligible Florida counties per Executive Order 20-52 are: All counties statewide). – Be established prior to March 9, 2020, the date of the designated disaster. – Be able to demonstrate economic injury as a result of the designated disaster. The need for the loan and use of proceeds must be directly related to the economic injury caused by the designated disaster. Note, according to the Florida Small Business Emergency Loan Program, loans will be made to individuals who, individually or collectively, own at least 51% of the equity of the business. Further, a borrower will be required to sign an agreement that the proceeds of the loan will be used only for purposes of maintaining or restarting the business in the designated area, and use of proceeds to pay off debts already incurred for qualifying business maintenance or restart purposes may be authorized on a case-by-case basis. A borrower will be required to certify that the proceeds of insurance claims, other loans applied for or to be applied for, or other financial assistance will be used to repay the loan. The process for Applying to the Florida Small Business Emergency Bridge Loan Program, according to the Florida Department of Economic Opportunity: – The State of Florida designates the activation of the Florida Small Business Emergency Bridge Loan program and makes the application available. NOTE – this now available, at: https://floridadisasterloan.org/a/w/wp-content/uploads/2020/03/20200323-COVID-19-Florida-Emergency-Bridge-Loan-Application.pdf. – Complete and sign the application form and gathers required support documents. – Submit the completed application and support documentation to the Florida Small Business Development Center (SBDC). Note: Applicant may be requested to complete the SBDC Request for Services form. – A Florida SBDC Representative verifies the applicant’s eligibility, identification, completeness of application and support documentation. If the applicant is deemed to be eligible, and the application and support documentation are complete, the Florida SBDC Representative will request a personal credit report for each applicant from Florida First Capital Finance Corporation (state appointed fiscal administrator of the program)