April 8, 2020
Deferral or Forbearance of Loan Payments
Subsidy for Certain Loan Payments – The CARES Act requires the SBA to pay all principal, interest, and fees on all existing SBA loan products, including 7(a), Community Advantage, 504, and Microloan programs (except for the Paycheck Protection Program), for six months as relief to small businesses negatively affected by the COVID-19 pandemic. Loans that are already on deferment will receive six months of payment by the SBA, beginning with the first payment after the deferral period. Loans made in the first six months after enactment will also receive a full six months of loan payments by the SBA.
Foreclosure Moratorium and Consumer Right to Request Forbearance – The CARES Act prohibits foreclosures on all federally-backed mortgage loans for a 60-day period beginning on March 18, 2020. It provides up to 180 days of forbearance for borrowers of a federally-backed mortgage loan who have experienced a financial hardship related to the COVID-19 emergency. Applicable mortgages include those purchased by Fannie Mae and Freddie Mac, insured by HUD, VA, or USDA, or directly made by USDA.
Forbearance of Residential Mortgage Loan Payments for Multifamily Properties with Federally Backed Loans – The CARES Act provides up to 90 days of forbearance for multifamily borrowers with a federally backed multifamily mortgage loan who have experienced a financial hardship. Borrowers receiving forbearance may not evict or charge late fees to tenants for the duration of the forbearance period. Applicable mortgages include loans to real property designed for five or more families that are purchased, insured, or assisted by Fannie Mae, Freddie Mac, or HUD.
Student Loans - All payments of principal and interest for certain federal student loans are suspended through September 30, 2020. The suspended payments are treated as if made for consumer credit reporting.
Equal Employment Opportunity Commission (EEOC) – The EEOC enforces workplace anti-discrimination laws including the Americans with Disabilities Act (ADA) and the Rehabilitation Act. This includes the requirement for reasonable accommodation and rules about medical examinations and inquiries. The EEOC has offered guidance to employers regarding COVID-19. In its guidance the EEOC stated that during the COVID-19 pandemic employers can do the following without violating the provisions of the Americans with Disabilities Act (ADA) or the Rehabilitation Act:
More information available here.
Occupational Safety and Health Act (OSH Act) – OSH Act assures that employees have safe and healthful working conditions by enforcement of standards required under the act. The Occupational Safety and Health Administration (OSHA) released guidance on preparing workplaces for COVID-19. OSHA has divided workplaces and work operations into four risk zones, according to the likelihood of employees’ occupational exposure during a pandemic. These risk zones are useful in determining appropriate work practices and precautions. The guidance also provides steps all employers should take to reduce workers’ exposure to COVID-19. These steps include:
There are no specific standards covering COVID-19, however OSHA has stated that there are standards that could apply to preventing occupational exposure to COVID-19. Among the most relevant are:
National Labor Relations Act (NLRA) – Employers with unionized employees should review their collective bargaining agreements (CBAs) to determine their rights and obligations. Where the plain language of the CBA broadly grants employers the right to implement new policies or procedures or to revise existing ones, an employer may make unilateral changes to the CBA, provided no other provision of the agreement limits those changes. If the CBA does not give the employer the right to proceed unilaterally, then the employer likely has a duty to bargain over changes to mandatory subjects of bargaining. Mandatory subjects of bargaining include rates of pay, wages, hours of employment, and other conditions of employment. However, the National Labor Relations Board (NLRB) has recognized an exception to the duty to bargain where “economic exigencies” compel “prompt action.” The NLRB has applied this exception in cases involving “extraordinary events” that: have a major economic effect; require the employer to take immediate action; and are caused by external events, are beyond the employer’s control, and/or are not reasonably foreseeable. Circumstances caused by COVID-19 could create economic exigencies that compel prompt action.
Paid Leave - Families First Coronavirus Response Act (FFCRA) responds to the COVID-19 outbreak by providing paid sick leave and free coronavirus testing, expanding food assistance and unemployment benefits, and requiring employers to provide additional protections for health care workers.
|Emergency Paid Sick Leave Act (EPSLA)|
|Amount of Leave||12 weeks of job-protected paid (FMLA) leave – of which the first 10 days may be unpaid.||
|Eligibility||The leave benefit covers all employees (full-time and part-time) who have been working for at least 30 calendar days.||Eligible employees do not have to be employed for a certain length of time in order to be eligible for the paid leave provision.|
|Reasons for Leave||Eligible employees are those unable to work (or telework) due to a need for leave to care for the son or daughter under 18 years of age of such employee if the school or place of care has been closed, or the child care provider of such son or daughter is unavailable, due to a public health emergency.*||
|Amount of Pay||
|Employer Threshold||Only applies to employers with fewer than 500 employees||Only applies to employers with fewer than 500 employees|
|*School or Childcare||Both the FMLEA and EPSLA address benefits for employee parents whose child’s school, place of care or care provider is unavailable due to Covid-19 concerns. While they both address the same issue, they mandate different benefits for eligible employees. According to the U.S. Department of Labor, a full-time employee in this situation could reap the benefits of both the FMLEA and the EPSLA. A full-time employee may be eligible for up to 12 weeks of leave (two weeks, meaning up to 80 hours, of paid sick leave under the EPSLA followed by up to 10 additional weeks of partially paid leave pursuant to the FMLEA at two thirds the employee’s regular rate of pay).|
Paycheck Protection Act – The portion of the CARES Act that provides 100% federally-guaranteed loans to small and medium size businesses to help cover payroll and overhead expenses. Entities suffering due to COVID-19 with less than 500 employees are eligible for these loans. Eligible entities include businesses; 501(c)(3) nonprofit organizations; veterans organizations; certain tribal business concerns; eligible self-employed individuals; independent contractors; sole proprietorships; and businesses in the accommodation and food services industry that have less than 500 employees per physical location.
Loan proceeds may be used for payroll expenses, employee paid sick leave, employee healthcare, rent or mortgage interest (not mortgage principal), utilities, and interest on other debt obligations. Payroll expenses include: employee salary, wages and commissions; payment of cash tips; payment of vacation; parental, family, medical or sick-leave; allowance for dismissal or separation; payment required for group health benefits (including insurance premiums); payment of retirement benefits; or payment of state or local tax assessed on employee compensation; and sole proprietor income or independent contractor compensation not in excess of $100,000.
Loans, to the extent not forgiven, will have a 2-year term at a 1 percent interest rate, with deferral of principal and interest payments for six months. Certain SBA requirements are waived. Loans are available wiht no personal guaranties of shareholders, members or partners; no collateral; no proving recipient cannot obtain funds elsewhere; no SBA fees (may still have to pay lender processing fee); and no prepayment fee. The amount of the loan is equal to 2.5 times an employer's monthly payroll, with the maximum loan being $10 million.
The forgiven amount will be equal to the amount actually paid for payroll costs, salaries, benefits, rent, utilities and mortgage interest during the eight weeks following disbursement of the loan. Additional wages paid to tipped employees under Section 3(m)(2)(A) of the Fair Labor Standard Acts may also be forgiven. Borrowers must apply for forgiveness with the lender servicing the loan. Loans are available through more than 800 existing SBA-certified lenders, including banks, credit unions, and other financial institutions.
Emergency Economic Injury Disaster Loans (“EIDLs”) – The SBA provides low-interest emergency economic injury disaster loans (“EIDLs”) to help small businesses recover from declared disasters. The CARES Act expanded eligibility for EIDLs. For the period between January 31, 2020 and December 31, 2020 (the “covered period”) EIDL eligibility is expanded to individuals operating sole proprietorships, independent contractors, cooperatives, non-profits and ESOPs with not more than 500 employees. EIDLs may be approved solely on the basis of an applicant’s credit score or by use of alternative methods to gauge the applicant’s ability to repay.
The CARES Act also provides for emergency grants. Applicants may request an advance of up to $10,000 within three days after the Administrator receives the application, subject to verification that the entity is eligible under this program. The advance may be used for any allowable purposes under §7(b)(2) of the Small Business Act and is not subject to repayment, even if the loan request is ultimately denied.
Small businesses can apply for EIDLs at https://covid19relief.sba.gov/#/.
SBA Express Bridge Loans – The Express Bridge Loan Pilot Program allows small businesses that currently have a business relationship with an SBA Express Lender to access up to $25,000 with less paperwork. These loans can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing and can be a term loan or used to bridge the gap while applying for a direct SBA Economic Injury Disaster loan. If a small business has an urgent need for cash while waiting for decision and disbursement on Economic Injury Disaster Loan, they may qualify for an SBA Express Disaster Bridge Loan.The loans are available for up to $25,000. The loans promise fast turnaround and will be repaid in full or in part by proceeds from the EIDL loan.
Enhanced Unemployment Benefits – The CARES Act expands eligibility for unemployment benefits to include those who are furloughed or out of work as a direct result of COVID-19, self-employed or gig workers, and those who have exhausted existing state and federal unemployment benefit provisions. Individuals who have the ability to telework with pay and those who are receiving paid sick leave or other paid benefits are expressly excluded. Additionally, the Act provides an increase of $600 per week in the amounts customarily available for unemployment under state law. The increase applies for unemployment payments made from the date of the law’s enactment through July 31, 2020.
Employee Retention Credit – The CARES Act provides for an employee retention credit. Eligible employers will receive a credit against applicable employment taxes for each calendar quarter in an amount equal to 50% of the qualified wages with respect to each employee. The amount of qualified wages taken into account for each eligible employer will not exceed $10,000 per calendar quarter and the credit will not exceed the applicable employment taxes owed for such calendar quarter. An eligible employer is defined as any employer: (i) which was carrying on a trade or business during calendar year 2020, and (ii) the operation of their trade or business was fully or partially suspended due to governmental order as a result of COVID-19.
If an eligible employer has 100 or fewer full-time employees, all employee wages are qualified wages. For eligible employers with more than 100 employees, qualified wages are wages paid to an employee unable to provide services due to either (i) the employer’s operations being fully or partially suspended by governmental authority due to COVID-19, or (ii) the employer’s decline in gross receipts.
Extension of Tax Deadlines - The deadlines to file and pay federal income taxes are extended to July 15, 2020. The 2019 income tax filing and payment deadlines for all taxpayers who file and pay their federal income taxes on April 15, 2020, are automatically extended until July 15, 2020. This relief applies to all individual returns, trusts, and corporations. This relief is automatic, taxpayers do not need to file any additional forms or call the IRS to qualify. This relief also includes estimated tax payments for tax year 2020 that are due on April 15, 2020. Penalties and interest will begin to accrue on any remaining unpaid balances as of July 16, 2020.
Individual taxpayers who need additional time to file beyond the July 15 deadline can request a filing extension by filing Form 4868 through their tax professional, tax software or using the Free File link on IRS.gov. Businesses who need additional time must file Form 7004.
Ohio – Ohio has followed the federal government and IRS in extending the deadline to file and pay the state income tax to July 15, 2020. The filing extension, and waiver of penalty and interest, will be available to those filing the Ohio individual income tax, the school district income tax, the pass-through entity tax, and to those taxpayers that have opted in to have the commissioner administer the municipal net profit tax through the state’s centralized filing system. Individuals, estates, trusts and certain businesses making quarterly estimated income tax payments, have also been granted additional time to file and pay without penalty or interest. The first and second quarterly payments, normally scheduled for April 15 and June 15 for most taxpayers, have both been extended to July 15, 2020.
Michigan – Governor Whitmer signed an executive order extending the April 2020 Michigan income tax filing deadlines. State and city income tax returns and payments due on April 15, 2020 are now due before midnight on July 15, 2020. Cities with income taxes due on April 30, 2020 will now be due on July 31, 2020.
Delay of Payment of Employer Payroll Taxes – The CARES Act allows for most employers to defer paying their share of the social security tax from the time the Act was signed into law through December 31, 2020. Half of this deferred amount would be due on December 31, 2021 and the other half by December 31, 2022.
Modifications for Net Operating Losses (“NOL”) - The CARES Act amends section 172(b) to allow for the carryback of losses arising in a taxable year beginning after December 31, 2017, and before January 1, 2021, to each of the five taxable years preceding the taxable year of the loss.
Modification of Limitation on Losses for Taxpayers Other Than Corporations – The CARES Act provides that for any taxpayer other than a corporation:
Regarding treatment of capital gains and losses the Act provides that deductions for losses from sales or exchanges of capital assets will not be taken into account. The amount of gains from sales or exchanges of capital assets taken into account will not exceed the lesser of (1) the capital gain net income determined by taking into account only gains and losses attributable to a trade or business, or (2) the capital gain net income.
The amendments shall apply to taxable years beginning after December 31, 2017.
Modification of Limitation on Business Interest – The Cares Act temporarily increases the amount of interest expense businesses are allowed to deduct on their tax returns, by increasing the 30% limitation to 50% of taxable income (with adjustments) for 2019 and 2020.
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