PPP Forgiveness Changes Signed into Law June 5, 2020
On Friday the Paycheck Protection Program Flexibility Act (PPPFA) was signed into law. This significantly changes the Paycheck Protection Program forgiveness rules.
Some of the major changes in the law include:
- Borrowers now have 24 weeks to use their PPP funds, extended from the original 8 weeks
- The forgiveness threshold requiring 75% of funds to be spent on payroll was lowered to 60%. Whereas, the prior rule allowed for partial forgiveness if payroll costs fell below 75% of the total, the new lower mark of 60% is a cliff that must be met to receive any forgiveness at all. A number of senators have made it known this was not the intent and hope the SBA will issue guidance to change this
- The deadline for re-hiring workers in order to qualify for safe harbor from the reduction factors was moved from June 30 to December 31
- Employers can exclude from the FTE Reduction Factor calculation any positions that, during the period between February 15 and December 31, they were unable to fill because they either: could not find qualified employees to hire; or, could not restore their business to a comparable level of activity because of social distancing or other federal health guidance
- For new loans issued after this amendment takes effect, the payback period for any unused funds was extended from 2 years to 5, with repayments to begin upon receipt of a final forgiveness determination from the SBA. For existing PPP loans, any request for a term extension requires the lender’s consent, which is not automatic
- Granting of forgiveness will no longer disqualify a business from electing to take Payroll Tax deferrals under the CARES Act
As we have seen all along, expect further changes and clarifications to be issued. Please stay tuned as we will keep you posted.
Here is a link to an informative article from Forbes regarding the new law.
Congress Agrees on Favorable Changes to the PPP Loans: What Does It Mean For The Borrowers?
PPP Forgiveness Update
Most of you are in the process of paying bills in your 8 week forgiveness period. As you know, payroll and covered expenses paid during this period can be applied towards PPP loan forgiveness.
The SBA just came out with their Loan Forgiveness Application. We wanted to reach out and let you know that guidance on forgiveness from SBA is still lacking and lawmakers and administration officials are expected to make more revisions this week. There is talk about extending the 8-week period to allow for more flexibility. For the time being we will continue to plan forgiveness as outlined in the application.
Ultimately, it will be the lenders (with the SBA) who will determine what portion of the loan is forgiven. It would appear the borrower will be submitting the completed application for forgiveness to the lender.
One critical element for most of you is you did not start back to work and pay staff right at the outset of the PPP loan disbursement due to mandatory office closures. Most left their employees on unemployment since the business was not open. A provision in the CARES Act regarding forgiveness requires that to get full forgiveness the employer needs to have the same size staff (FTE-full time equivalent) in place during the 8 weeks as there were prior to COVID-19. In the above scenario, that won't happen. There is a provision in the law that overrides that requirement and allows full forgiveness assuming the same number of FTE employees on payroll pre-COVID-19 are employed again by June 30th. How long after June 30th must those same employees remain? The law does not address that question. This is a simplified description of the issue and we want you to be aware of it as you navigate through this process. Keep in mind, if lawmakers extend the 8-week period the above will change dramatically.
There are a number of significant questions about forgiveness remaining to be clarified. We believe it will be a messy process and it's conceivable (and likely) different lenders will have different interpretations. More guidance and clarification and perhaps new law from SBA, Treasury, and Congress is needed and probably forthcoming.
Know that we are vigilant in staying updated as new information becomes available. We will do our best to keep you apprised through emails and our website.
Tony Nitti writes a great article on the forgiveness application that was just released. I am sharing that with you below because it gives you a good idea how complex this whole process is.
March 28, 2020
What to do as of now:
- If your employees are not on furlough or unemployment, call your payroll service and get instructions on how to submit your payroll with Emergency Paid Sick Leave and Emergency Family and Medical Leave. We are not clear yet how the Emergency Sick Leave and unemployment benefits coordinate.
- Call your regular lender to determine if they will be able to get you the new SBA 7a loan with “loan forgiveness” provisions (if not, can they recommend another lender – call us if you need a referral). Funds from this loan should be available in a few weeks.
- Start gathering the SBA loan documentation your lender will need. These are outlined in the Foley & Lardner LLP and Collier & Associates articles. Some of the documents include payroll reports, paid retirement plan calculations and proof of funding, and paid health insurance premiums.
- If you feel like you will need additional funds, apply for an Economic Disaster loan through the SBA. This is a time consuming and difficult process.
You may want to listen to the ADA Webinar
Here is a recap of the FFCRA Act
Emergency Family and Medical Leave: Employees can now take up to 12 weeks of job protected leave-2 weeks unpaid followed by 10 weeks of paid leave (at up to two-thirds of an employee's regular rate of pay and the number of hours the employee would otherwise normally be scheduled to work, not to exceed $200 per day and $10,000 in the aggregate). This applies if they are unable to work (including by telecommuting) due to a need to care for a child whose school or childcare provider is closed or unavailable due to the Coronavirus outbreak.
Emergency Paid Sick Leave: If employees are subject to a federal, state, or local quarantine or isolation order ("isolation order") related to COVID-19 (or have COVID-19 or are caring for a family member with COVID-19). Employers must offer employees 80 hours of paid sick leave (up to a maximum of $511 per day ($5,110 total). Part-time employees are eligible for the number of hours equal to the average hours worked over a two-week period.
Paid Leave Tax Credits: To help bear the cost of the new paid-leave requirements, employers can offset the amounts paid above from employment taxes and otherwise seek refunds additional payments. Credits are increased by the portion of the employer's "qualified health plan expenses" that are properly allowable to qualified sick leave wages or qualified family and medical leave wages.
House Passes $2 Trillion Coronavirus Stimulus Package
Now we wait for all the details to come out.
The State of California's COVID-19 Response web page has a lot of helpful information. Here is some information on how to Get Financial Help-in California in addition to information on 90-day relief on mortgage payments, emergency sick leave, paid family leave and Unemployment Insurance.
March 26, 2020
It looks like there are going to be several options regarding Small Business Loans. We have left several messages with our local bankers to get more information. As details emerge we will keep this site updated.
Here is an article from the Wall Street Journal regarding applying for loans.
March 25, 2020
Gavin Newsom announced a 90-day California mortgage grace period. Wells Fargo, Citibank, JPMorgan and US Bank have agreed to this grace period. This is still developing. Ask you lender about their policy.
Proposed Coronavirus Aid Relief and Economic Security Act. A $2 trillion stimulus package that provides financial assistance and relief to workers and businesses impacted by the coronavirus pandemic has passed. Specific terms are not yet available. Some key elements of the bill are:
$300 Billion of guaranteed loans distributed thru the SBA
Some loans or portions of the loans will have provisions to be forgiven. Here is an article from the Wall Street Journal that explains some of these provisions.
To apply online please visit this link:
Americans making up to $75,000/year would receive checks for $1,200. Couples making up to $150,000/year would receive $2,400, with an additional $500 per child. The payments would decrease for those making more than $75,000/year, with an income cap of $99,000/year per individual or $198,000/year for couples.
Expanded Unemployment Benefits
The legislation would significantly boost unemployment insurance benefits, expanding eligibility and offering workers an additional $600 a week for four months, on top of what state unemployment programs pay. Benefits would also be extended to workers who typically do not qualify, such as furloughed employees and freelancers.
March 24, 2020
We have been receiving a lot of questions regarding available financial assistance and the Family First Coronavirus Response Act. The details of these are still developing and we are trying to stay up to date on all clarifications as they are published. Below we have tried to answer some of your questions and provide you with useful links. Keep checking this site as we update it regularly in hope to keep you informed.
Some Questions & Answers
Extensions for IRAs and HSA Contributions as well as Pensions Plans
You now have until July 15th to fund your HSAs, IRAs and business pension plans for tax year 2019. See the link below for a Q & A from the IRS for more details.
Is there any Federal financing available?
The U.S. Small Business Administration (SBA) Economic Injury Disaster Loans are available to provide working capital to small businesses. We are expecting new legislation to provide additional small business loans.
To apply online please visit this link:: SBA Disaster loan Webpage
Here is a fact sheet from the SBA regarding this financing
How does the Family First COVID-19 Response Act Work?
The US Treasury Department, the IRS and the Labor Department have announced that small and midsize businesses can get payroll tax credits to provide for Coronavirus related leave. The credits will be immediate through reductions in payroll tax deposits and are designed to reimburse employers for 100% of paid sick and family leave subject to limitations.
Here is the News Release from the IRS which explains the preliminary details to these tax credits. More clarification is expected by April 1st.
This article explains the sick leave and family leave well. Things are getting clarified daily and we will keep you posted.
We are getting a lot of questions about the above. Please know that you will have to submit to your payroll provider information that complies with the Act. You should contact your payroll provider and see their website for instructions.
Here is a link to ADP’s COVID-19 Small Business Resource Center
What are Health Insurance Companies doing about insurance premium payments that are due?
Insurance companies are addressing this now and the solution is developing. We will update this site as we get more information.
Can I get a 90-day forbearance on my mortgage or business loans?
Many lenders are working with their clients to facilitate this. Call or email your lender and make arrangements. There is talk that new legislation will include an automatic 90-day forbearance on mortgages. Again, this is still developing, and we will keep you posted.
Are my Real Estate Taxes still due April 10th?
We have heard from Sonoma County regarding this. They have informed us that it is up to the State to extend the deadline. The counties do however have the ability to waive penalties and interest if the payment is late due to “reasonable cause and circumstances beyond the taxpayer’s control”. You would have to contact your county Tax Collector to get further information.
You can reach us via email through the “About Us” page on this site or you can leave a message using the telephone tree. We will be checking our emails and messages regularly.
Please keep in mind that there may be delays, especially as we make adjustments to our processes and procedures to allow our staff to work remotely. We apologize for any inconvenience this may cause you.
We appreciate your understanding as we work through this global pandemic and appreciate your continued partnership!
Thank you and stay safe!
Haas & Reaney, LLP
3835 Cypress Drive
Petaluma, CA 94954
You can also send us a message directly through the About Us page of this website.