COVID-19 CARES Act

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Summary of Paycheck Protection Program Flexibility Act of 2020

Enacted June 5, 2020 The legislation is available here.

Borrowers who received loans prior to June 5 have the option to extend the 8-week period to 24 weeks

  • Provides flexibility for borrowers that may make it easier to achieve full or near-full forgiveness if current conditions aren’t conducive to bringing back employees.
  • Election is made on the forgiveness application by indicating the covered period dates.

Borrowers who receive loans June 5 or later have a covered period of 24 weeks after the loan proceeds are received.

  • The covered period cannot extend beyond December 31, 2020.
  • This is based on the Loan Forgiveness Application Instructions for Borrowers

The deadline for PPP loan applications continues to be June 30, 2020.

The 75% payroll expenditure requirement is reduced to 60%

  • Interim Final Rule 1 requires 75% of eligible costs to be used for payroll and if not, there was a reduction in loan forgiveness.
  • This Act provides that borrowers shall use at least 60% of the covered loan amount for payroll costs.
  • Because the loan amount is based on 10 weeks of payroll, borrowers may have a good chance of meeting the 60% requirement with the covered period extended to 24 weeks.

Opportunity to avoid FTE or Salary/Wage reduction penalties if headcount or salary/wages are restored by December 31 instead of June 30

  • Borrowers have a longer period of time to restore workforce or salary/wages

New exceptions for FTE reduction provided if borrower documents an inability to:

  • Rehire individuals who were employees of the eligible recipient on February 15, 2020; and
  • Hire similarly qualified employees for unfilled positions on or before December 31, 2020; or
  • Return to the same level of business activity as before Feb. 15, 2020, due to compliance with requirements established or guidance issued …related to COVID–19. (See language in the Act for full description)

Repayment period extended to five years for loans made on or after June 5

  • Existing PPP loans can have maturity extended if lender and borrower agree
  • Interest rate to remain at 1%

PPP Borrowers can now qualify for the deferral of employer's share of payroll taxes available under the CARES Act

  • Deferral of Social Security payments (6.2%)
  • 50% due in 2021, remainder due in 2022

Loan Payments are deferred until the SBA determines the amount of loan forgiveness and remits to the lender

  • Had been a 6-month deferral
  • However, if borrower doesn’t apply for forgiveness within 10 months after the last day of the covered period, payments will be required at that 10th month.

This legislation does not address tax deductibility of expenses paid with a forgiven PPP loan.

Questions:

  • Can a current borrower apply for forgiveness before December 31, 2020?
    • We expect that borrowers will be able to apply for forgiveness before Dec. 31 based on unofficial statements from Treasury officials. However, additional guidance is needed as to how safe harbors for FTE and Salary/Hourly wage reductions would be applied if applicable.
  • Does the limit on cash compensation change to $100,000 x 24/52 from $100,000 x 8/52?
    • Based on the loan forgiveness application released June 16, 2020, eligible payroll costs per employee are
      • Capped at $46,154 for 24-week covered period borrowers
      • Remains capped at $15,385 for 8-week covered period borrowers
    • For owner-employees, self-employed individuals and general partners, eligible costs are
      • Capped at the lesser of $20,833 or 2.5 months’ worth of 2019 net profit for 24-week covered period borrowers
      • Remains capped at $15,385 for 8-week covered period borrowers


Reviewed June 18, 2020

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Disclaimer: The AICPA anticipates making updates to the contents of this resource to incorporate future changes related to the PPP loan forgiveness process, AICPA Professional Standards, and best practice recommendations, as necessary. These resources do not establish standards and are not a substitute for the original authoritative guidance. This document has not been approved, disapproved or otherwise acted on by an AICPA senior committee. It is provided with the understanding that the staff and publisher are not engaged in rendering legal, accounting or other professional services. All such information is provided without warranty of any kind.




Courtesy of ADP:

The Families First Coronavirus Relief Act (FFCRA) General Questions

Q: Is there any federal legislation addressing COVID-19 that impacts my operations as employer? A: Yes. The Families First Coronavirus Relief Act (FFCRA) was enacted on March 18, 2020.

Q: What does FFCRA cover in general?

A: FFCRA guarantees free coronavirus testing, establishes paid family and medical leave and corresponding tax credits, enhances Unemployment Insurance, expands food security initiatives, and increases federal Medicaid funding. It is divided into the following sections:

A.   Appropriations,

B.   Nutrition Waivers, to allow students who receive free or reduced priced meals through schools to continue to receive them

C.   Emergency Family and Medical Leave Act Expansion

D.    Emergency Unemployment Insurance Stabilization and Access Act of 2020

E.   Emergency Paid Sick Leave Act

F.     Health Provisions, to help expand COVID-19 diagnostic testing and required tests to be performed at no cost to consumers

G.  Tax Credits for Paid Sick and Paid Family and Medical Leave

This FAQ document addresses Sections C, E and G. Q: When does FFCRA take effect?

A: The bill will take effect within 15 days of enactment, i.e., by April 2, 2020.

Q: Which employers are impacted by FFCRA?

A: The paid sick and paid family leave components impact employers with fewer than 500 employees. The bill authorizes the Secretary of the Department of Labor to issue regulations to (1) exclude certain healthcare providers and emergency responders from the definition of eligible employee and (2) exempt small businesses with fewer than 50 employees when it would jeopardize the viability of the business as a going concern.

Q: How will FFCRA impact my workforce?

A: Most, but not all, of the provisions of the FFCRA will impact employers with fewer than 500 employees. These employers will be required to provide a certain amount of paid sick and paid family leave to employees affected by COVID-19, and will receive corresponding employment tax credits. In addition, the FFRCA temporarily expands the reasons for which employees working for enterprises with fewer than 500 employees may take leave under the Family and Medical Leave Act (FMLA).

Emergency Family and Medical Leave Expansion Act (Emergency FMLA Act)

Q: Which employers are covered by the FFCRA Emergency FMLA Act?

A: Employers with 500 or fewer employees, except that businesses with under 50 employees may claim exemption from leave requirements if it would jeopardize the business. It is unclear at this time how employers would demonstrate an exemption should apply and we anticipate any future regulations would address this issue.

Q: Which employees are eligible to take leave under the FFCRA Emergency FMLA Act?

A: Employees who have been employed for at least 30 calendar days are eligible, except the Secretary of Labor may exclude health care providers and emergency responders from being considered eligible employees. We anticipate that future regulation may further define which employers are considered healthcare providers and emergency responders.

Q: How much leave are eligible employees entitled to take?

A: Eligible employees are entitled to take up to 12 weeks of job protected leave.

Q: Are employees entitled to an additional 12 weeks of leave under the FFCRA Emergency FMLA Act, or is the total leave for all FMLA reasons limited to 12 weeks?

A: Total leave under the FMLA, including leave under the FFRCA and for previously existing FMLA-qualifying situations, is limited to 12 weeks.

Q: Are there any exceptions to the requirement that the leave be job-protected?

A: Employers with fewer than 25 employees are not required to provide job-protected leave for an employee taking leave if the employee’s position no longer exists following leave due to operational changes occasioned by a public health emergency provided that: (1) the employer makes reasonable efforts to restore the employee to an equivalent position; and (2) the employer makes reasonable attempts to contact the employee for a period of one- year following a certain period if an equivalent position becomes available.

Q: What are the reasons an employee can take leave?

A: Eligible employees can take leave for “a qualifying need related to a public health emergency.” A qualifying need related to a public health emergency for purposes of FFCRA Emergency FMLA Act is limited to when an employee is unable to work (or telework) due to a need to care for a son or daughter under the age of 18 if the child’s school or place of care has closed OR the child care provider of such child is unavailable due to the public health emergency.

Q: Must leave under this provision be paid?

A: The first 10 days of the leave can be unpaid. An employee may elect – but cannot be required – to use accrued

vacation, personal or medical or sick leave for those days. The remainder of the leave must be paid at two-thirds the employee’s regular rate of pay, for the number of hours the employee would otherwise be scheduled to work. For employees who have weekly working hours that fluctuate, the employer is allowed to take an average over a six- month period. If the employee did not work over such period, the reasonable expectation of the employee at the time of hiring of the average number of hours per day that the employee would normally be scheduled to work controls.  Paid leave is subject to a limit of $200 per day, and up to a total amount of $10,000.

Q: Can I take a credit for the amount I pay my employees in paid leave?

A: Yes. See Section Tax Credits for Paid Sick and Paid Family and Medical Leave below.

Q: For how long is the FFCRA Emergency FMLA Act in effect?

A: The FFCRA Emergency FMLA Act will sunset effective December 31, 2020.

Emergency Paid Sick Leave Act

Q: Which employers are covered by the FFCRA Emergency Paid Sick Leave Act?

A: Employers with 500 or fewer employees, except that businesses with under 50 employees may claim exemption from leave requirements if it would jeopardize the business. It is unclear at this time how employers would demonstrate an exemption should apply and we anticipate any future regulations would address this issue.

Q: Which employees are eligible to take leave under the FFCRA Emergency Paid Sick Leave Act?

A: All employees are eligible to take paid sick leave under the FFCRA regardless of how long they have been employed by the employer.

Q: How much leave are eligible employees entitled to take?

A: Full-time employees are entitled to take up to 80 hours paid sick leave. Part-time employees are eligible for a number of hours equal to the average hours worked over a two-week period.

Q: For what reasons are employees entitled to take paid sick leave?

A: Employees who are unable to work or telework due to any one or more of the following conditions:

1.   They are subject to a Federal, State, or local quarantine or isolation order (“isolation order”) related to

COVID-19;

2.   They have been advised by a health care provider to self-quarantine due to concerns related to COVID-19

(“quarantined employee”);

3.   They are experiencing symptoms of COVID-19 and seeking a medical diagnosis;

4.   They are caring for an individual who is subject to an isolation order or is a quarantined employee;

5.   They are caring for a son or daughter if the school or place of care of the son or daughter has been closed, or the child care provider of such son or daughter is unavailable, due to COVID-19 precautions; or

6.   They are experiencing any other substantially similar condition as specified by the Secretary of Health and

Human Services.

Q: How much are eligible employees entitled to be paid?

to $511 per day (and a total of $5,110) for employees in categories 1-3 above, and two-thirds of wages up to $200 per day (and a total of $2,000) for employees in categories 4-6 above.

Q. What impact does this have on my existing sick leave policy?

A: This paid sick leave is in addition to any existing sick leave provided by the employer (including subject to state or local requirements). An employer may not require an employee to use other paid leave provided by the employer to the employee before the employee uses the paid sick time under the Act.  Nothing expressly prohibits employers from changing their leave programs after the law is enacted, however the employee relations impact of doing so should be carefully considered.

Q: Is there a required poster or notice to employees?

A. Employers will be required to post an approved notice once the DOL makes it available.

Tax Credits for Paid Sick and Paid Family and Medical Leave

Paid Sick Leave Tax Credits

Q: Will I be entitled to take a credit for the amounts that I pay in paid sick leave under FFCRA?

A: Yes. All employers, except for government employers, required to pay paid sick leave under the FFCRA will be entitled to take a tax credit for the amount paid. These non-government employers will be entitled to a refundable federal employment tax credit for the entire amount that they pay in paid sick leave.

Q: Are government employers eligible for a tax credit for paid sick leave?

A: No. The credit does not apply to the government of the United States, the government of any State or political subdivision or any agency or instrumentality of such government.

Q: Are there limits to the tax credit I can receive for paid sick leave?

A: Yes. Credits may not exceed amounts paid for emergency paid sick leave up to the amounts described above. Because the credit is fully refundable, employers will receive reimbursement of the amount paid, subject to the caps, even if their tax liability is less than the amount paid out in emergency paid sick leave.

Q: Am I entitled to a credit if I keep paying for my employees to have health insurance while they are out on leave? A: If you continue an employee’s health plan coverage while the employee is on paid emergency sick leave under FFCRA, the credit is increased up to an amount which includes the employer’s expense for the health plan coverage.

Q: Do I still need to pay federal employment taxes on amounts paid to employees as emergency paid sick leave under FFCRA?

A: No. Emergency paid sick leave mandated by FFRCA is exempt from Social Security taxes otherwise imposed on the employer.

Paid Family Leave Tax Credits

Q: Will I be entitled to take a credit for the amounts that I pay in paid family leave under FFCRA?

for the entire amount that they pay to eligible employees. Because the credit is fully refundable, employers will

receive full reimbursement of the amount paid regardless of their actual tax liability.

Q: Are government employers eligible for a tax credit for paid family leave?

A: No. The credit does not apply to the government of the United States, the government of any State or political subdivision or any agency or instrumentality of such government.

Q: Are there limits to the tax credit I can receive for paid family leave?

A: Yes. Credits may not exceed amounts paid for an individual with respect to family medical leave, i.e., $200 per day, and an aggregate of $10,000 with respect to all calendar quarters.

Q: Am I entitled to a credit if I keep paying for my employees to have health plan coverage while they are out on family leave?

A: If you continue an employee’s health plan coverage while the employee is on paid family leave, the credit is increased by an amount equal to your expense for providing such coverage.

Q: Do I still need to pay federal employment taxes on amounts paid to employees as family leave under FFCRA? A: Paid family leave mandated by FFRCA for paid family leave are exempt from Social Security taxes otherwise imposed on the employer.

Q: For how long will the credits under FFCRA be in place?

A: Like the paid sick and paid family leave provisions, the tax credits created by FFCRA will sunset effective December 31, 2020.

Courtesy of Paychex:

HR 6201: FAMILIES FIRST CORONAVIRUS RESPONSE ACT

BASICS

  • The tax credit can be calculated under either of the two acts, detailed below, EFMLA & EPSLA.
  • Employers receive 100% reimbursement of payroll tax for paid leave pursuant to HR 6201.
  • The tax credit is REFUNDABLE.
  • Can also qualify health plan expenses paid or incurred by the employer to provide and maintain a group health plan, but only to the extent that such amounts are excluded from gross wages.
  • The credit only applies to wages paid with respect to the period beginning on a date selected by the Secretary of the Treasury (he has a 15-day window from the enactment of this act on March 18, 2020) and ending on December 31, 2020.
  • Do you need to enroll in a program before taking the credit?
    • No. There is nothing in HR 6201 that indicates this.
  • Equivalent childcare leave and sick leave credit amounts are available to self-employed individuals under similar circumstances

Emergency Family and Medical Leave Expansion Act (EFMLA)

  • Who Qualifies?
    • This act provides employees of employers with fewer than 500 employees, who have been on the job for at least 30 days, with the right to take up to 12 weeks of job-protected leave under the Family and Medical Leave Act.
  • How do you Qualify the Credit?
    • The EFMLA only allows for wages under the act when an employee is unable to work (or telework) due to a need to care for a minor child if the child’s school or place of childcare has been closed or is unavailable due to a public health emergency, Covid-19.
  • What is the Credit Amount?
    • The tax credit equals that amount of compensation the employer is required to pay under the EFMLA.
    • The first 10 days (2 weeks) under the EFMLA can be unpaid and won’t go toward calculating the credit. The remaining 10 weeks of FMLA leave is required to be paid, generally at two-thirds of the employee’s regular rate, for the number of hours the employee would otherwise be scheduled to work.
    • The tax credit shall NOT exceed $200 per day and $10,000 in the aggregate per employee.

Emergency Paid Sick Leave Act (EPSLA)

  • Who Qualifies? And How do you Qualify?
    • Employers with fewer than 500 employees shall provide to each employee paid sick time to the extent that the employee is unable to work (or telework) due to:
      • (1) the employee is subject to a federal, state, or local quarantine or isolation order related to COVID-19;
      • (2) the employee has been advised by a health care provider to self-quarantine because of COVID-19;
      • (3) the employee is experiencing symptoms of COVID-19 and is seeking a medical diagnosis;
      • (4) the employee is caring for an individual subject or advised to quarantine or self-isolate;
      • (5) the employee is caring for a son or daughter whose school or place of care is closed, or childcare provider is unavailable, due to COVID-19 precautions; or
      •  (6) the employee is experiencing substantially similar conditions as specified by the Secretary of Health and Human Services, in consultation with the Secretaries of Labor and Treasury
  • What is the Credit Amount?
    • The tax credit equals that amount of compensation the employer is required to pay under the EPSLA.
    • The employers owe compensation for up to 80 hours for full time employees in the aggregate. If part-time employee, it is the number of hours that such employee works, on average, over a 2-week period.
      • For reasons (1), (2), and (3) è Employee is getting paid the lesser of their regular rate or $511 per day.
      • For reasons (4), (5), and (6) è Employee is getting paid the lesser of two-thirds their regular pay or $200 per day.

Examples

  • (From IRS) If an eligible employer paid $5,000 in sick leave and is otherwise required to deposit $8,000 in payroll taxes, including taxes withheld from all its employees, the employer could use up to $5,000 of the $8,000 of taxes it was going to deposit for making qualified leave payments. The employer would only be required under the law to deposit the remaining $3,000 on its next regular deposit date.
  • (From IRS) If an eligible employer paid $10,000 in sick leave and was required to deposit $8,000 in taxes, the employer could use the entire $8,000 of taxes in order to make qualified leave payments and file a request for an accelerated credit for the remaining $2,000.
  • If you get the full $2,000 under EPSLA and the full $10,000 under EFMLA for an employee in the same quarter, your total credit would be $12,000 available for use against the payroll taxes.

Things That are Still Uncertain

  • When can we start taking the credit?
    • We are assuming that this credit will be available immediately, as early as the second quarter payroll for 2020, because it appears the intent of this Act is to compensate the employers for paying their employees as soon as possible. IRS plans to release a guidance within a week
  • What form is this credit on?
    • Since this is for payroll, it is assumed that it will be on the Form 941.

Plan

  • Once the date is selected by the Secretary of the Treasury, HIREtech should e-mail all clients this summary or something similar.

For more information, please click on the following link:

https://cdn-email.exchangeright.com/industry/documents/USChamber_Small_Business_ELA_Loan_Guide_2020.pdf