Paycheck Protection Program

Aug. 5, 2020The Small Business Administration has released updated FAQs on the Paycheck Protection Program (PPP). These are particularly useful if you have questions about loan forgiveness or the 24-week benefit period.

June 16, 2020Small Business Administration re-opens applications for Economic Injury Disaster Loans. If you have already replied and have NOT received funding, you do NOT need to re-apply — you’re in the pipeline. Read more at forbes.com.

June 4, 2020U.S. Senate passes Paycheck Protection program changes; awaiting president’s signature.

Key provisions

  • Lower to 60% from 75% the minimum portion of the PPP loan that must be spent on payroll. The rest must be spent on rent, utilities and other business-related expenses.
  • Extend from eight to 24 weeks the amount of time the loan can cover.
  • Extend from two to five years the time new PPP loans must be paid back if the amount provided doesn’t convert into a grant.

Read more at usatoday.com.

May 22, 2020The Small Business Administration issued further details on loan forgiveness. Read more aboout it at grassicpas.com.

SBA releases Paycheck Protection Program (PPP) loan forgiveness application. Read more about it at forbes.com.

PPP loans under $2 million “assumed” to be in good faith; all larger loans will get further scrutiny. Documentation will still be required for loan forgiveness.

April 23, 2020House approves additional $310 billion in funding for the Paycheck Protection Program. Headed to White House for signature. Read more at cnn.com.

April 22, 2020Washington Post (no subscription required for this story) has an excellent primer today on where PPP and other SBA programs stand with a new influx of funding imminent. Read it at washintonpost.com

Revised Paycheck Protection Program FAQs from the SBA. Details here.

Updated list of Washington state lenders participating in the Paycheck Protection Program here.

The SBA’s existing 7(a) Loan Program will be expanded to Support “Paycheck Protection Program” Loans.

  • Increase in maximum loan amount to $10 million.
  • Allowable uses expanded to include:
    • Payroll support (including paid sick or medical leave)
    • Employee salaries
    • Mortgage, rent and utility payments
    • Insurance premiums
    • Other debt obligations
    • Loan Forgiveness: Certain borrowers would be eligible for loan forgiveness equal to the amount spent during an eight-week period after the origination date of the loan on
      • Payroll costs
      • Interest payment on any mortgage incurred before Feb. 15, 2020
      • Rent on any lease in force before Feb. 15, 2020
      • Utilities for which service began before Feb. 15, 2020

The amount forgiven would be reduced in proportion to any reduction in employees retained compared to the prior year and to the reduction in pay of any employee beyond 25% of prior year compensation.

  • Subsidies for Certain Existing SBA 7(a) Loans
  • Special Terms for SBA Loans
    • No personal or collateral guarantee will be required.
    • The eligible recipient does not have to certify that it is unable to obtain credit elsewhere.
    • Eligible borrowers must make a good faith certification that the loan is necessary due to the uncertainty of current economic conditions caused by COVID-19; that funds will be used for a permitted purpose; and that they are not receiving fund from another SBA program for the same uses.
    • Maximum term of loan is 10 years.
    • Interest rate cannot exceed 4% but interest payments are completely deferred for 1 year.
    • No prepayment penalty.

The CARES Act program covers business with 500 or fewer employees

SBA Grants & Loans

April 23, 2020Additional funding announced for state Small Business Emergency Grant program. No new applications are being accepted, will serve requests already in the pipeline. Details here.

Loans will be made by lenders who are participants in the SBA’s Section 7(a) program and those lenders will also decide whether to accept a borrower’s application for forgiveness. Such a decision must be made within 60 days of receipt of the application for forgiveness. Not later than 90 days after the loan forgiveness amount has been agreed by the lender, the SBA is authorized to reimburse the lender directly for the principal amount of any forgiven debt, plus interest accrued through the date of repayment.

The amount of any loan forgiveness will be reduced by any meaningful reductions in employee wages (in excess of 25% for any employee) or layoffs of employees during the covered period in accordance with the terms of the program. Borrowers that rehire workers previously laid off will not be penalized for having reduced payroll at the beginning of the period. There will not be a cancellation of indebtedness income recognized upon forgiveness for tax purposes.

Any loan amount not forgiven at the end of one year is carried forward as an ongoing loan with a maximum term of 10 years and a maximum interest rate of 4%.

It is expected that new lenders will be recruited to deal with an expected crush of applications. Check with your lender for guidance.

Subsidy and Deferment for Existing SBA Loans

The SBA will pay the principal, interest and any associated fees that are owed on certain existing 7(a) loans for a six-month period starting on the next payment due date. Loans already currently in deferment would include an additional six months of payment by the SBA beginning with the next payment. Loans made during this period until six months after the enactment of the legislation would also qualify for six months of deferral payment by the SBA. This does not apply for new “Paycheck Protection Program” loans made under the CARES Act.

Existing SBA Disaster Loan Program

Under the Coronavirus Preparedness and Response Supplemental Appropriations Act signed into law on March 6, 2020,  the SBA expanded the ways in which businesses could apply for an Economic Injury Disaster Loan (EIDL).

Importantly, under the CARES Act, a borrower that receives a 7(a) loan for employee salaries, payroll support, mortgage payments and/or other debt obligations would not be able to receive an EIDL for the same purpose, or co-mingle funds from another loan for the same purpose.

The EIDL program does have the benefit of establishing an emergency grant to allow an eligible entity to request an advance on the EIDL of up to $10,000. An applicant would not be required to repay such an advance payment, even if it is subsequently denied an EIDL.

Here’s a link to the Small Business Administration’s Small Business Guidance & Loan Resources web portal.

Investment Tax Credit Safe Harbor

May 28, 2020Investment Tax Credit Safe Harbor extension: Treasury Department says “construction completion” goes to five years from four; components purchased in late 2019 to get full 30 percent now have delivery deadline extended to Oct. 15, 2020. Read more at pv-tech.org.

“Safe harbor” to return loans extended to May 18, read more at cnbc.com.

Phase 1 Construction Restart

Gov. Jay Inslee has officially announced the Phase 1 Construction Restart

Official job site requirements are here.  Official governor’s proclamation is here.

CARES Act

Payroll Tax Provisions in the CARES Act

Employer Payroll Tax Delay (CARES Act Section 2302):

  • Employers can defer the 6.2 percent payroll tax due for rest of year until end of 2021, 2022.

Employers ordinarily have to pay certain employment taxes—known as Federal Insurance Contributions Act (FICA) taxes—with respect to their employees. The employer is responsible for paying its share (6.2 percent) of social security taxes and its share (1.45 percent) of Medicare taxes for each employee’s covered wages (separate from withheld amounts covering the employee’s portion of each and separate from ordinary income tax withholding), generally depositing such amounts to the U.S. Treasury electronically either semi-weekly or monthly.

The CARES Act will allow employers (and self-employed individuals) to defer paying their portion of the social security payroll tax (6.2 percent) otherwise due. As soon as the CARES Act is signed into law, the deferral period will start. It goes through December 31, 2020. The amounts will ultimately have to be paid over to Treasury in two installments. Half of the deferred amount of payroll taxes from 2020 will be due December 31, 2021, with the remaining half due December 31, 2022. The Social Security Trust Fund will be held harmless by way of transfers from the general fund, as if the payroll tax payments were never deferred.

However, employers who received Small Business Act loans that were forgiven under the CARES Act (so that the Federal government effectively gave them cash—that they did not have to pay back—to fund as much as eight weeks of their payroll costs) are not eligible for this payroll tax deferral.

Employee Retention Payroll Tax Credit (CARES Act Section 2301)

  • Certain employers may receive a payroll tax credit of as much as $5,000 per employee for wages (and health benefits) paid after March 12, 2020, and before January 1, 2021.
  • If the credit amount exceeds the employer’s liability, the excess shall be refundable.

Any employer whose business was fully or partially suspended in 2020 due to government orders associated with COVID-19 or that experienced a significant decline in gross receipts (or that is a tax-exempt organization) may be eligible to receive this refundable employment tax credit. A significant decline in gross receipts is generally established when a business’s gross receipts in a calendar quarter in 2020 are less than 50 percent of the gross receipts of the same calendar quarter in 2019.

For purposes of the credit, qualified wages vary depending on whether the employer has more than 100 full-time employees or not. For those with more than 100 full-time employees, qualified wages are those paid to employees when they are not providing services due to the COVID-19 outbreak. For those with 100 or fewer full-time employees, essentially all wages qualify for the credit. The credit amount is equal to 50 percent of the qualified wages of an employee, but such wages cannot be more than $10,000 per employee. Employers who have taken SBA loans are NOT eligible.

A March 31 press release from the U.S. Department of the Treasury on the employee retention credit can be found at treasury.gov.

Additional CARES Act Resources

Fill out SBA’s streamlined disaster loan application atcovid19relief.sba.gov.

Small Business Guide & Checklist from the U.S. Chambers of Commerce can be found at uschamber.com.

Read the CARES Act Small Business Owner’s Guide from U.S. Senator Richard Durbin at durbin.senate.gov.

Watch a Paycheck Protection Program overview from the American Institute of CPAs on YouTube.

Read about interplay between Washington’s Sick Leave Laws and the New Federal Sick Leave Laws, by Spokane attorney Bill Hughbankshere.

Washington State Response and Financial Relief Resources

The federal CARES Act also gives massive aid grants to state-supported unemployment insurance programs, including the UI program of the Washington Department of Employment Security. Gov. Inslee has waived requirements that furloughed workers wait one week before applying for benefits as well as the rule that requires idled workers to continue to seek other work in order to claim benefits.

Workers are encouraged to apply for benefits immediately. Employment Security has an excellent web portal.

Washington Department of Commerce has Small Business Emergency Grants.

Some highlights:  Businesses with less than 10 FTEs eligible. Administered by local/regional economic development authorities. Initial funding pool is tiny $5 million.

Businesses that file monthly with the Washington Department of Revenue may request a delay by contacting DOR. The deadline for Q1 2020 quarterly filings has been pushed to June 30 and the deadline for annual filers has been extended to June 15, 2020. Read more at dor.wa.gov.

Washington Department of Labor & Industries offers penalty-free delay in filing quarterly industry insurance reports and paying premiums. Read more here.

Washington Department of Labor & Industries latest guidelines on availability of electrical inspections during the duration of the “Stay Home, Stay Healthy” order. Read more here.

Protecting Your Employees and Customers

If you have workers in the field, it’s crucially important they follow social distancing guidelines and CDC exposure control protocols and have Personal Protective Equipment. The Washington Department of Health and the state Joint Information Center has recommendations at coronavirus.wa.gov.

Download n excellent workplace safety guide from Northwest Associated General Contractors here.

The Board of Directors of Solar Installers of Washington released and advisory statement to all members on March 26 is available here.

Download an excellent roundup of best practices for workplaces and job sites from the Building Industry Association of Washington here.