As we all come to understand the impact of the FFCRA, effective April 1, 2020, the most common question I am asked is, “how are businesses supposed to pay for this?” The question comes even more frequently as our nation faces a wave of mandatory business closures and shelter-at-home orders. As noted in my earlier alert, the FFCRA provides certain payroll tax credits to help offset the cost of expanded paid sick leave and paid FMLA leave under the Act, and more help is on the way.

Last night, the U.S. Senate passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act which is expected to be passed by the House and signed by the President tomorrow. The CARES Act provides $2 trillion in relief to businesses, including: New Paycheck Protection Loans from the Small Business Administration (SBA) to cover payroll costs:

• New Paycheck Protection Loans from the Small Business Administration (SBA) to cover payroll costs
  • Covered period is February 15, 2020 – June 30, 2020
  • Loan amounts are equal to the LESSER of $10 million, or 2.5 times average monthly payroll costs, plus any refinanced SBA Disaster Loan (below)
  • Loans are fully guaranteed through December 31, 2020
  • The Act provides loan payment forgiveness on a tax-free basis for the first eight weeks
    • Employers requesting loan forgiveness must verify the number of employees, pay rates, and payment of mortgage, rent, and utilities
    • Loan forgiveness amounts are reduced by any layoffs or salary reductions of more than 25% during first eight weeks
• Expanded access to SBA Economic Injury Disaster Loans (already underway) to cover costs other than payroll
  • No personal guarantee required for loans under $200,000
  • Loan amounts of up to $2 million for small business owners who cannot meet ongoing financial obligations
    • Apply online, receive disaster assistance information, and download applications at https://disasterloan.sba.gov/ela, or call 800-659-2955, or email emaildisastercustomerservice@sba.gov. (Note that the website was down yesterday, likely due to high volume.)
  • Applicants will receive an Emergency Grant in the form of an immediate advance of $10,000, and may use the funds to maintain payroll as well as other expenses
  • Emergency Grants do not need to be repaid, even if loan application is denied
  • The Act provides certain subsidies for loan repayment for the first six months
• Additional tax provisions for businesses
  • Employee Retention Credit toward social security payroll taxes for employers forced to close or suspend operations but continue to pay employees
  • Delayed payment of employer payroll tax
  • Changes to tax treatment of charitable contributions to encourage giving
• Help for individuals
  • 2020 Recovery Rebate for individuals, of $1,200 per person, $500 per child, for individuals earning less than $100,000 per year, as an advance payment of a credit on 2020 tax return
  • Exclusion from income of employer payment of employee student loan debt
  • Eliminates 10% penalty on withdrawal of retirement funds for coronavirus-related need
  • Delayed tax filing deadline of July 15, 2020

While I am not a tax attorney and cannot provide tax advice, I offer this summary to alert businesses to key provisions about which each should obtain detailed advice tailored to its unique situation. Please consult your accountant or a tax attorney for details on the tax provisions of the CARES Act and how they impact your business.

We at WSHB remain available to help employers large and small navigate this challenging time.