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Business Stimulus

Small Business Stimulus

The CARES Act has many small business provisions which cover a number of areas. Each provision has its own set of objectives, guidance and rules. We list them below, and attempt to provide you with an appropriate outline of each. As noted above, not all guidance has been issued and we do not expect to see all of it for several days or weeks.

Once these programs do begin, expect another several weeks for the requests to be processed. Of note, not all programs are available at the same time to businesses. In other words, many programs do not allow you to “double dip.”

Paycheck Protection Loan and Forgiveness Program

This program is now open for applications. If you would like us to complete the application for you or need help in filling it out yourself, please give us a call.  Click here to download the SBA's application form as a fillable PDF. 

This program is designed to provide employers with the funds needed to maintain their work force over a period of 10 weeks.  It is based on the employer’s average monthly payroll costs in 2019, which include wages (up to $100,000 per year per employee, including officers and owners), paid sick leave, healthcare, retirement and other related benefits, multiplied by 2.5 (10 weeks = 2.5 months).  Interest rates can be up to 4%, can be repaid over a term up to 10 years, and will be considered NON-RECOURSE. 

Businesses may be able to borrow up to $10 million, depending on their own payroll size and other factors. All loans will have the following terms:

  • 0.5% interest
  • 2 year maturity
  • First payment deferred for 6 months
  • 100% guaranteed by SBA
  • No collateral
  • No personal guarantees
  • No borrower or lender fees payable to SBA

If your company meets certain criteria, you are eligible for loan forgiveness.  The amount of loan forgiveness is subject to reduction based on a business’s decline in headcount or wages. Declines in headcount or wages between February 15, 2020 and April 26, 2020 will not trigger a reduction in loan forgiveness if the business reverses the decline and returns to pre-decline levels by June 30, 2020. Loan forgiveness will not be included in a business’s taxable income.

For each employee who is laid off, not rehired, and earns less than $100,000 per year, that employee’s portion of payroll used to calculate the loan, will not be forgiven. However, companies can reduce employee wages by up to 25% before the loan forgiveness begins to reduce.

Employee Retention Tax Credit

This provision allows for a 50% refundable tax credit, applicable for 1 year, against the employer’s portion of the Social Security tax (6.2%). In order to be eligible for the credit, one of the following tests must be met:

(1) The employee remains employed by the employer;
(2) Business operations were fully or partially suspended by order of the government; or
(3) The business continued operations but saw a decline in gross receipts by more than 50% compared to the same quarter in the prior year.

Employer Payroll Tax and Self-Employed Tax Deferral

Employers are able to defer payment until December 31, 2020, of 50% of the employer share of the Social Security tax (6.2%) incurred from the date of enactment to December 31, 2020. Payment of the remaining 50% incurred during that period, can be deferred until December 31, 2022. The employee portion of the tax is required to be paid as normal.

The same guidelines apply to self-employed individuals, utilizing the same deferral timeline.

Net Operating Losses

Companies that incurred net operating losses or NOL’s dating back to 2017, will now be able to amend the 2 previous year’s tax returns (back to 2015) and apply the losses against those profits that may have been realized. Losses realized in years 2018 -2020 will be able to carry back 5 years. There will be no carry back allowed for losses incurred in 2021; they would be carried forward and limited to 80%.

Qualified Improvement Property

This provision allows business taxpayers to claim bonus deprecation for the costs associated with improving facilities, instead of having to depreciate those improvements over the 39-year life of the building. Further, this provision states that taxpayers may treat the change in law as if it was always in the law. This means that the change also applies to 2018 and 2019. Accordingly, you should analyze your depreciation schedules to determine whether you should file amended returns to claim additional deductions under the bonus depreciation rules for improvements made to their facilities in these prior years.

Other Programs

Other provisions of the CARES Act are available and can be discussed at your request. These include Modification of Limitation on Losses for Non-Corporate Taxpayers; Acceleration of Refundable Alternative Minimum Tax Credit; Relaxation of Limitations on Business Interest Expense Deduction; Air Travel Excise Tax Relief; Employer Student Loan Payments.

If you have any questions about the CARES Act, or need any further assistance, please give us a call.

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