U.S. Government Provides Relief to Individuals, Businesses in Midst of COVID-19 Crisis
On March 27, President Donald Trump signed into law a historic $2 trillion stimulus package designed to provide economic relief to individuals and businesses affected by the coronavirus pandemic.
Our aim in this alert is to give a brief overview of both the tax and non-tax provisions of the government’s new stimulus legislation, including what type of assistance is available for individuals and businesses, how to apply for it, and what to do if you become unemployed. This summary is of the Paycheck Protection Program.
The Paycheck Protection Program provides small businesses with zero-fee loans of up to $10 million to cover payroll and other operating expenses. Up to 8 weeks of payroll, mortgage interest, rent, and utility costs can be forgiven. Payments on principal and interest are deferred for six months and up to one year. Small businesses will be able to apply if they were harmed by COVID-19 between February 15, 2020, and June 30, 2020. This program is retroactive to February 15, 2020, in order to help bring workers who may have already been laid off back onto payrolls. Loans are available through June 30, 2020.
Paycheck Protection Program: Amounts and Eligibility
Your business or entity was in operation on February 15, 2020;
You are a small business, a 501(c)(3) nonprofit organization, a 501(c)(19) veterans organization, or tribal business concern that has fewer than 500 employees, or the applicable size standard in number of employees for the North American Industry Classification System (NAICS) industry as provided by SBA, if higher.
You are a sole proprietorship, an independent contractor, or self-employed.
You are a franchise business that employs not more than 500 employees per physical location and your business has an NAICS code beginning with 72, for which the affiliation rules are waived. Affiliation rules are also waived for any business operating as a franchise that is assigned a franchise identifier code by the SBA, and any company that receives funding through a Small Business Investment Company.
Your maximum loan size is 250% of average monthly payroll costs from the prior 12 months. If you are a seasonal employer, you can opt to choose March 1, 2019, as the time period start date.
If you were not in business this time last year, your maximum loan is equal to 250% of your average monthly payroll costs between January 1, 2020, and February 29, 2020.
The loan maximum in all cases is $10 million.
Payroll costs for the purposes of determining your loan size include:
Compensation (salary, wage, commission, or similar compensation, payment of cash tip)
Payment for vacation, parental, family, medical, or sick leave
Allowance for dismissal or separation
Payment required for group health care benefits, including insurance premiums
Payment of any retirement benefit
Payment of State or local tax assessed on the compensation of employees
The following costs do not count towards your loan size: compensation over $100,000, certain withheld taxes, compensation for employees outside of the United States, and required leave under the Families First Coronavirus Response Act, for which a credit is allowed.
Use of Loan Funds:
You may use the funds for:
Payroll costs (all costs included above)
Costs related to group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums
Employee salaries, commissions, or similar compensations (except as excluded above)
Payments of interest on any mortgage (but not payment or prepayment of principal)
Interest on any other debt obligations that were incurred before the February 15, 2020.
For any amounts not forgiven, the maximum term is 10 years, the maximum interest rate is 4 percent, zero loan fees, zero prepayment fee (SBA will establish application fees caps for lenders that charge).
You can apply to your lender to forgive your loan for the amount of payroll costs plus payments of mortgage interest, rent, and utilities incurred during the 8-week period after the loan is disbursed. The amount that can be forgiven is proportionate to maintaining employees and wages. You must apply through your lender for forgiveness and provide:
This information is still fluid and may change.
These articles are intended to provide general resources for the tax and accounting needs of small businesses and individuals. For specifics on how this may apply to you or your business, please book a meeting with us.