United States of America
Welcome to the high-level summary of Covid-19 related actions by the US Federal Government. The details and links below have been split between “Tax Filings Affected”, “Government Employee Wages Benefits Programs” and “Government Loan Programs”; and are extracts from the more detailed information available on the websites of the US Federal Praxity Participant firms’ websites, links to which are available at the bottom of this page. Praxity Participant Firms in USA are Aronson LLC, BKD, LLP, Dixon Hughes Goodman LLP, Kaufman Rossin, MazarsUSA, Moss Adams LLP, and Plante & Moran
Tax Filing Affected
- Since the enactment of the tax reform law in 2017, commonly referred to as the Tax Cuts and Job Act (TCJA), NOLs carried forward are limited to 80% of taxable income for the tax year. The CARES Act suspends this rule until the taxpayer’s first taxable year beginning after 2020 and clarifies that the 80% limitation applies to taxable income computed without regard to deductions for Sections 199A and 250 after taking into account pre-2018 NOL carryovers.
- If deferred, the employer would instead pay 50% of this amount by December 31, 2021, and the remaining 50% by December 31, 2022. The eligible payroll taxes are the employer’s portion of Social Security taxes—6.2% of an employee’s wages. Self-employed taxpayers can also defer the employer’s portion of Social Security taxes in the self-employment tax.
- Eligible employers may claim a credit against Social Security taxes for each qualifying calendar quarter, equal to 50% of qualified wages, and up to $10,000 for all quarters per employee. The maximum credit may be worth up to $5,000 per eligible employee. - Eligible employers operating a business during 2020 must have experienced either:
- A partial or full suspension of the operation of their trade or business during the calendar quarter due to governmental orders that limited commerce, travel, or group meetings due to COVID-19
- A significant decline in gross receipts from 2019 - A significant decline begins with the quarter in which the gross receipts for the quarter were less than 50% of those in the same quarter in the prior calendar year. The decline ends with the quarter in which gross receipts are greater than 80% of the gross receipts for the same quarter in the prior calendar year. - Qualified wages for employers with 100 or fewer employees qualify for the entire credit. For employers with more than 100 employees, the wages eligible for the credit are the wages paid to employees who aren’t providing services due to circumstances described above. - Employers who take advantage of the payroll protection loan—Section 1102 of the act—aren’t eligible. Also, qualified wages don’t include amounts paid for the sick leave credit or The Family and Medical Leave Act (FMLA) credit enacted by HR 6201.
- Section 163(j) interest deduction limitations increased from 30% to 50% of adjusted taxable income for tax years beginning 2019 or 2020. Partnerships, however, remain subject to the 30% limitation for tax years beginning in 2019.
- Federal income tax payments, including payments on self- employment income, have been extended from April 15, 2020 to July 15, 2020. There is no extension request required for the deferral. There is no other extension of payment or deposit for other types of federal tax.
- Recover rebates for qualifying individuals, will receive a tax credit, paid in advance, of up to a $1,200 or $2,400 in the case of married filing-joint taxpayers, plus $500 for each qualifying child, for the 2020 tax year. To receive the full credit, individuals must have an adjusted gross income (AGI) that doesn’t exceed: - $75,000 for single filers - $150,000 for married filing-joint filers - $112,500 for head-of-household filers
- The 10% penalty on early withdrawal of retirement funds won’t apply for any coronavirus-related distributions, up to $100,000, through December 31, 2020, from tax-favored employer-sponsored plans and individual retirement accounts (IRAs)
- Minimum distribution rules are suspended for 2020 for defined contribution plans under Section 403(a) or 403(b), Eligible governmental deferred compensation plans, and IRAS.
- There is an above the line deduction of $300 for charitable contributions in 2020 to qualifying organizations. Also the limit increased from the usual rate of 60% of AGI to 100% of AGI.
- Employers can now make payments toward employee’s qualified educational loans (in addition to the education expenses that were generally allowed), including principal and interest up to $5,250 limit.
Government Employee Wages Benefits Programs
Paycheck Protection Program (PPP)
- Authorizes up to $349 billion designed to help small businesses to fund up to 8 weeks of payroll costs including benefits. Funds are provided in the form of loans that will be fully forgiven when used for payroll costs, interest on mortgages, rent, and utilities (due to likely high subscription, at least 75% of the forgiven amount must have been used for payroll). - headcount decreases forgiveness could be reduced. - Qualified employers have 500 or fewer employees and loans are up to $10 million - Application information can be found on the following site: http://www.sba.gov/
- The U.S. Small Business Administration (SBA) has released a loan forgiveness application that borrowers must complete to have their Paycheck Protection Program (PPP) loan forgiven.
- The SBA also released a PPP status update as of June 20, 2020. Lenders have issued approximately 4.7 million PPP loans totaling $515 billion. Due to loan repayments, the remaining funding available is $128 billion until the application deadline of June 30.
- On July 4, President Donald Trump signed into law legislation extending the Paycheck Protection Program (PPP) application deadline from June 30, 2020 to August 8, 2020.
- On July 13, 2020, the U.S. Small Business Association (SBA) released a procedural notice that further details the process for reporting fully disbursed Paycheck Protection Program (PPP) loans and collecting the related processing fee.
- On August 4, 2020, the U.S. Small Business Administration (SBA) issued a set of frequently asked questions addressing loan forgiveness on its Paycheck Protection Program (PPP).
- On August 28, 2020, the American Institute of CPAs (AICPA) released a Technical Questions and Answers covering a lender’s accounting for forgiveness or repayments of a U.S. Small Business Administration’s (SBA) Paycheck Protection Program (PPP) loan. The SBA also issued an interim final rule addressing owner-employee compensation, tenants, subtenants, and home-based businesses, as well as related party rent
Paycheck Protection Program Flexibility Act
- Extends loan maturity to five years for any portion of the PPP loan that is not forgiven (up from two years). This change would apply only to PPP loans received after the bill’s enactment date; however, existing PPP loans could be modified to reflect the new maturity terms by agreement with the lender and borrower
- Extends application deadline to December 31, 2020, from June 30, 2020
- Extends covered period to the earlier of 24 weeks after loan issuance or December 31, 2020. Borrowers with existing loans could elect to retain the existing eight weeks
- Extends safe harbor restoration deadline date provisions (full-time equivalent (FTE) and salary/wage reduction) to December 31, 2020, from June 30, 2020
- Reduces the minimum required spend for payroll costs for loan forgiveness purposes to 60 percent from 75 percent
- Creates a new safe harbor provision to remove the FTE reduction in forgiveness. Borrowers must be able to document either of the following: Inability to rehire individuals who were employees on February 15, 2020, and inability to hire similarly qualified employees for unfilled positions on or before December 31, 2020, or Inability to return to the same level of business activity as such business was operating at before February 15, 2020, due to compliance with requirements established or guidance issued by the secretary of the U.S. Department of Health and Human Services, director of the Centers for Disease Control and Prevention or the Occupational Safety and Health Administration during the period beginning March 1, 2020, and ending December 31, 2020, relating to the maintenance of standards for sanitation, social distancing or any other worker or customer safety requirement related to COVID-19
- Defers principal and interest payments until the U.S. Small Business Administration (SBA) remits the loan forgiveness amount to the lender (currently only a six-month deferral period)
- Loan forgiveness must be requested by the borrowers within 10 months of the last day of their covered period or payments would begin at that time
- Removes restriction on a borrower’s access to payroll tax deferment (previously, borrowers could only take advantage of the payroll tax deferral provision until a borrower receives PPP loan forgiveness)
- On June 22, 2020, the U.S. Small Business Administration (SBA) released an interim final rule (IFR) that includes revisions to two previous IFRs by updating loan forgiveness and SBA loan review procedures guidance in light of the amendments under the recently passed Paycheck Protection Program Flexibility Act of 2020. The IFR conforms previous rules to reflect PPPFA provisions, including the covered period (CP) for forgiveness, nonpayroll costs eligible for forgiveness, reductions in the forgiven amount, and the timing of when borrowers must apply for forgiveness to avoid making payments. It confirms that borrowers may submit forgiveness applications any time on or before the loan matures, including before the end of the CP, provided they have used all of the loan funds for which they wish to apply for forgiveness. The rule also incorporates PPPFA exemptions that preserve loan forgiveness for borrowers that made good-faith attempts to rehire employees or fill vacant positions (and retained a previous exemption for borrowers that have reduced employee hours and offered in good faith to restore them) or whose business could not return to previous levels of business activity because of public health directives. The SBA interpreted the latter exemption to include both direct and indirect compliance with state and local directives that are patterned after directives from the Centers for Disease Control and Prevention (CDC), the U.S. Department of Health and Human Services (HHS), or the Occupational Safety and Health Administration (OSHA).
Coronavirus Relief Fund The Coronavirus Relief Fund Guidance for State, Territorial, Local, and Tribal Governments was updated on September 2, 2020, to provide additional guidance related to “substantially dedicated” payroll. The update states that public health and public safety employees meet the substantially dedicated test, unless the chief executive (or equivalent) of the relevant government determines that specific circumstances indicate otherwise. This clarification allows that all costs of such employees may be covered using payments from the fund for services provided during the period from March 1, 2020, to December 30, 2020. Payroll Tax Deferral President Donald J. Trump signed an executive memorandum directing the U.S. Department of the Treasury (Treasury) to defer certain payroll tax obligations amid the ongoing COVID-19 pandemic. The Treasury and IRS has also issued Notice 2020-65 with further guidance to employers on how to implement this payroll tax deferral. Any employer required to withhold and pay the employee share of Social Security tax (or railroad retirement tax equivalent) is deemed to be affected by the COVID-19 pandemic and may take advantage of this payroll tax deferral executive order. While it doesn’t specifically state the deferral is optional, the notice’s wording that the due date for withholding and payment of tax is postponed indicates employers have flexibility. The applicable wages are taxable wages to an employee that are less than $4,000 during a biweekly pay period, with each pay period considered separately. No deferral is available to an employee with taxable wages of $4,000 or more for a biweekly pay period. Note: this means it’s possible employees could be above the $4,000 threshold for one pay period and, therefore, not eligible for this payroll tax deferral while remaining eligible in other pay periods when their taxable wages are less than $4,000. Employers will need to carefully monitor the applicable wages each pay period for participating employees.
Government Loan and Support Programs
Economic Injury Disaster Loan Program (EIDL)
- Once a declaration is made for designated areas within a state, the information on the application process for Economic Injury Disaster Loan assistance will be made available to all affected communities as well as updated on our website: SBA.gov/disaster.
- SBA’s Economic Injury Disaster Loans offer up to $2 million in assistance and can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing.
- These loans may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact. The interest rate is 3.75% for small businesses. The interest rate for non-profits is 2.75%.
- SBA offers loans with long-term repayments in order to keep payments affordable, up to a maximum of 30 years. Terms are determined on a case-by-case basis, based upon each borrower’s ability to repay.
- The SEC has given public companies that were to file between March 1, 2020 and July 1, 2020 an additional 45 days to file.
Families First Coronavirus Response Act
- Requires employers with fewer than 500 employees to provide paid sick leave to employees that are forced to stay home due to quarantining or to care for family members or to care for a child if the school or place of care is closed. The employer can claim a tax credit equal to 100% of the sick leave wages paid limited to $200 per day with a total limit of $10 thousand.
- If the individual is subject to government Covid-19 quarantine orders, has been advised to self- quarantine by a healthcare provider, or is experiencing symptoms of Covid-19 and is seeking diagnosis, the individual employer is qualified to receive a credit of $511 per day.
Main Street Lending Program Businesses with up to 15,000 employees or up to $5 billion in 2019 annual revenues may participate. The Fed released FAQ clarified that affiliation rules under the PPP apply to the MSLP size requirements. Eligible businesses need to have been created and organized under U.S. law before March 13, 2020 and must:
- Be domiciled in the United States, with significant U.S. operations.
- Have a majority of their employees based in the United States.
- Be eligible businesses as modified and clarified by the SBA for purposes of the PPP.
- Participate in only one of the Main Street facilities and not the Primary Market Corporate Credit Facility (PMCCF).
- Have been in sound financial condition prior to the onset of the COVID-19 pandemic.
Businesses that receive loans under the PPP are eligible for the Main Street Lending Program. While nonprofit organizations aren’t eligible for this program, the Federal Reserve and Treasury Department will be evaluating the feasibility of adjusting the borrow eligibility criteria for such organizations. Through the Main Street New Loan Facility (MSNLF), the Main Street Primary Loan Facility (MSPLF), and the Main Street Expanded Loan Facility (MSELF), the Main Street SPV will purchase between an 85% and 95% participation in either new, unsecured term loans from $500,000 up to $25 million through the MSNLF or MSPLF and allow lenders to upsize existing facilities through the MSELF in tranches from $10 to $200 million.
324MSLP has been expanded some of the changes are as follows:
- Maximum term: 5 years (previously, 4 years; there’s no penalty for early payment)
- Minimum loan size: MSNLF and SMPLF reduced to $250,000 (previously, $500,000); MSELF remains at $10 million
- Maximum loan size: The calculation is now the lesser amount of leverage calculations (which remained the same) and now, these new maximums for the MSNLF $35 million (vs. $25 million); MSPLF $50 million (vs. $25 million); and MSELF $300 million (vs. $200 million)
- Principal deferral: 2 years for all facilities (previously 1 year)
- Interest deferral: 1 year for all facilities (no change)
- Principal payment schedule: MSNLF 15%, 15%, 70% in Years 3 through 5, vs. previously equal 33% payments each year; MSELF and MSPLF 15%, 15%, 70% in Years 3 through 5, vs. previously 15%, 15%, and 70% in Years 2 through 4
- Interest rate: LIBOR +3%, no change
- Risk retention by the lender: MSPLF reduced to 5% from 15%; the other two facilities remain at 5%
Main Street Non-for-Profit The Federal Reserve (Fed) finalized details for two new programs specifically designed for not-for-profit (NFP) organizations: Nonprofit Organization New Loan Facility and Nonprofit Organization Expanded Loan Facility. Based on feedback received on the June proposal, the Fed has made several key changes to the programs:
- Employee threshold reduced from 50 to 10
- A limit on donation-based funding was erased
- Adjustments were made to financial eligibility criteria to accommodate a wider range of NFP models On August 6, 2020, the Federal Reserve Bank of Boston (BOS) released an updated Frequently Asked Questions
Municipal Liquidity Facility The MLF special purpose vehicle (SPV) will provide up to $500 billion in lending to state and local governments through the direct purchase of short-term notes. Eligible notes include tax anticipation notes (TAN), tax and revenue anticipation notes (TRAN), bond anticipation notes (BAN) and other short-term notes that mature no later than 36 months from issuance date. Proceeds can be used to help manage delayed cash flows from tax deadline extensions, revenue and tax reductions, COVID-19-related expenses or required principal and interest payments on government obligations.
Coronavirus Food Assistance Program (CFAP) The program will provide up to $16 billion in direct payments to help deliver relief to America’s farmers and ranchers affected by the SARS-CoV-2 virus and incidence of COVID-19. Applications will be accepted beginning on Tuesday, May 26, 2020, through local Farm Service Agency (FSA) offices.
The CFAP will provide vital financial assistance to producers of agricultural commodities who have suffered 5 percent or greater price decline due to COVID-19 and face additional significant marketing costs as a result of lower demand, surplus production, disrupted shipping and transportation patterns and the orderly marketing of their commodities. Farmers and ranchers will have the opportunity to receive direct support from two funding sources. The first source is $9.5 billion in appropriated funding provided by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) to compensate farmers for losses due to price declines that occurred between mid-January and mid-April 2020 and provides support for specialty crops for products that had been shipped from the farm in the same time frame but subsequently spoiled due to the loss of marketing channels. The second funding source uses the Commodity Credit Corporation (CCC) Charter Act to compensate producers for $6.5 billion in losses due to ongoing market disruptions. There is a payment limitation of $250,000 per person or entity for all commodities combined. Applicants that are corporations, limited liability companies or limited partnerships may qualify for increased payment limits where members actively provide personal labor or personal management of 400 hours annually for farming operations up to $250,000 per shareholder or partner (not to exceed three) for a maximum benefit of $750,000. Producers will have to certify they meet the adjusted gross income (AGI) limitation of $900,000 for tax years 2016 through 2018 unless at least 75 percent or more of their income is derived from farming, ranching or forestry-related activities. Producers also must be in compliance with the Highly Erodible Land Conservation and Wetland Conservation provisions. Participation in the U.S. Small Business Administration’s Paycheck Protection Program (PPP) or Economic Injury Disaster Loan program does not affect producer eligibility for the CFAP or any USDA farm program. The PPP duplicate benefit provision does not have an effect on FSA farm programs or farm loan programs. New Loan Guidance On August 3, 2020, the Federal Financial Institutions Examination Council issued guidance on the continuing need for loan accommodations and insights on the related accounting and internal control issues. While some borrowers may be able to resume contractual payments at the end of the initial accommodation period, other borrowers may face continued financial challenges. This new guidance clarifies how earlier relief from troubled debt restructuring (TDR) accounting in Coronavirus Aid, Relief, and Economic Security Act (CARES Act) Section 4013 might be extended to additional accommodations as follows:
- If a financial institution elects to account for a loan modification under §4013, an additional loan modification also could be eligible under §4013 if the subsequent loan modification meets the following criteria: COVID related, Executed on a loan that was not more than 30 days past due as of December 31, 2019, Executed between March 1, 2020, and the earlier of 60 days after the date of termination of the national emergency or December 31, 2020
- If a financial institution does not elect to account for a loan modification under §4013 or a loan modification is not eligible under §4013, additional modifications should be viewed cumulatively in determining whether the additional modification is a TDR
- For all other subsequent loan modifications, a financial institution can appropriately evaluate the subsequent modifications by referring to applicable regulatory reporting instructions and internal accounting policies to determine whether such modifications are accounted for as TDRs
Links to Our Member Firms
Further Covid-19 advice
The information contained herein on Covid-19 government measures within the G8, consists solely of information that can be found on the websites of one or more Praxity Participant firms, and has not been written, modified or verified by Praxity, it’s staff, officers or directors.