AS Of 5/21/20 Steven L. Moyer, CPA CGMA PFS CSEP Brent C. Thompson, CPA CMA CGMA Canon Capital Management Group 484 Harleysville Pike Harleysville, PA 19438 215-723-4881 smoyer@canoncapital.com bthompson@canoncapital.com 1
Steve has been with Canon Capital since 1999 and has been practicing in public accounting for over 30 years. He received his BS in Accounting/Business Management with a minor in Psychology from Eastern Mennonite University. He is a member of the AICPA, the PICPA, the National College Advocacy Group and the AICPA Tax, Personal Financial Planning and the Forensic and Valuation Services sections. Steve specializes in tax, estates and trusts, personal financial and college planning services, and business tax planning. He also has significant experience in church, non-profit, and private foundation tax areas. In addition to being a CPA he also holds the Personal Financial Specialist (PFS) designation, the Chartered Global Management Accountant (CGMA) and the Certified Specialist in Estate Planning (CSEP) designation. Steve and his wife reside in Souderton. Steve has three children and enjoys traveling, playing sports, gardening, and bicycling. 2
Brent joined Canon Capital in 1998 and is responsible for providing management advisory services, tax and general business planning, tax preparation, and financial statement preparation and review services for numerous businesses and their owners. In addition, he assists the firm directors with scheduling, staff development, and business development. He earned his Bachelor of Business Administration degree from Temple University. In addition to holding his CPA designation he also holds the Certified Management Accountant (CMA) designation and a Chartered Global Management Accountant (CGMA) designation. Brent is a member of the AICPA and the Institute of CMA’s, and is a former instructor of business development courses at Montgomery County Community College. He has also served on the Economic Restructuring Committee for the Souderton/Telford downtown revitalization efforts and the Stewardship Committee for Keystone Fellowship. He currently serves as the treasurer of the Indian Valley Chamber of Commerce. Brent resides in Souderton with his wife and three children. He enjoys boating, water-skiing, and working on home improvement projects. 3
� FAQ #31, 46, 47 � Over $2M loans to have additional “scrutiny” � If you made a mistake on the borrowing capacity…….. � IRS Rev Proc issued to state that the expenses paid with PPP funds are non-deductible. Therefore, in essence, forgiveness is taxable (expect to change) � Prepayment greater than 20% of unpaid balance requires written notification with minimal three weeks notice 4
� Partnership clarification on guaranteed payments � Self-employed individual loan amount and forgiveness amounts 5
� Currently in 56 56-day “cover period” for 56 56 proceeds to be used � After 56 days, apply to the lender for forgiveness ◦ Application dated to expire on 10/31/20 ◦ If you don’t apply, there is no forgiveness ◦ Lender will have 60 days to make a decision 6
� There’s A LOT of guidance to come out yet ◦ Goal for today is: � Understanding how your situations/actions affect the forgiveness calculation. � Passing on what is new, or what questions were addressed with the forgiveness application release � Communication � The goal is NOT just forgiveness 7
� Worst case scenario - any remaining amounts will: ◦ Be termed out � 6-month deferral (first payment due month 7) � 1% interest rate � 18-month term � Sole-Proprietors without other qual expenses ◦ Inherently will have partial forgiveness (2.5 vs 2) � NO PREPAY PENALTIES – however, written notification is required to be furnished to the lender if prepaying over 20% of the balance 8
� Options for borrowers to calculate payroll costs using an “alternative payroll covered period” that aligns with borrowers’ regular payroll periods � Addition of a new exemption from the loan forgiveness reduction for borrowers who have made a good-faith, written offer to rehire workers that was declined � An employee who resigns, is terminated for cause, or voluntarily accepts a reduction in hours will not count against your headcount � New safe-harbor tests for companies to be exempt from the reduction of FTEs and salary reductions � A new simplified method for calculating FTEs 9
� Eligible payroll costs – “Costs Paid AND Costs Incurred” ◦ Payroll – has the “alternative coverage period option” “Payroll costs incurred but not paid during the borrower’s last pay period of the covered period are eligible for forgiveness if paid on or before the next regular payroll date”. ◦ Non-Payroll Costs – “Paid OR Incurred” “an eligible nonpayroll costs must be paid during the Covered Period or incurred during the Covered Period and paid on or before the next regular billing date, even if the billing date is after the Covered Period”. The term “or” seems to indicate that non-payroll expenses in arrears can be counted towards forgiveness 10
� Beginning 56 days from the date of proceeds: � Payroll Costs US Citizens compensation, vacation, tips, commissions, severance, and � similar Employees capped at $100K annual (1,923/week) � Families First PTO and FMLA DO NOT count � ◦ Payments (net) employee health insurance ◦ Employer payments to employee retirement plans ◦ Employer state and local taxes assessed on compensation � Non-Payroll Costs ◦ Rent/Lease on real or personal property ◦ Utilities – electric, gas, water, transportation(?), phone, internet ◦ Interest on business debts ◦ Interest on business mortgages � Note – all cost “structures” had to be in place by 2/15. No “new” loans, utilities, rent, etc. 11
� Logistics of interest accrual � “Paid and/or Incurred” ◦ Retirement account contributions � What is “transportation” utility ◦ Gas for company auto – some guidance ◦ Trash – there’s been no guidance � “Mortgage” interest on personal property ◦ We believe interest on business loans secured by assets qualify � Owners Health Insurance and Retirement Contributions 12
� 1) Determine the dollar amount eligible � 2) Salary Reduction ($ calculation)* � 3) FTE (% calculation)* � 4) Apply the 75/25 ratio limitation to the dollar amount eligible * Individual safe harbors exist 13
� Borrower to calculate the average number of hours paid per week for each employee during the covered period (or alternative). ◦ 40 hours equals 1 FTE ◦ Each employee is capped at 1.0 FTE ◦ Round to the nearest tenth � Compare that count to one of two base periods of borrower’s choice: ◦ February 15, 2019 to June 30, 2019, or ◦ January 1, 2020 to February 29, 2020 � Note-covered period as a whole, not per week reduction of forgiveness � Above ratio will set the forgiveness reduction before the safe harbor 14
� Borrower is exempt from losing loan forgiveness based on reduced FTE levels if both: ◦ the borrower reduced its FTE employee levels in the period beginning 2/15/20 and ending 4/26/2020, AND ◦ The borrower, by no later than 6/30/20 restored it’s FTE employee level to the FTE employee level that existed during the borrower’s pay period that included 2/15/20. 15
� New Simplified Method: ◦ Same calculations ◦ Employees that work 40 or more hours per week are counted as 1 FTE. ◦ All others working less than 40 hours per week are counted as .5 FTE ◦ This may not be beneficial to borrowers who have a number of employees in the 20-40 hour range, but may be very beneficial to borrowers who have a number of employees in the 1-19 hour range 16
� Not Penalized for the following: ◦ Reductions related to any positions for which the borrower made a good-faith, written offer to rehire an employee during the covered period (or alternative) that was rejected by the employee ◦ Reductions related to any employees who during the covered period (or alternative) were: � Fired for cause � Voluntarily resigned, or � Voluntarily requested and received a reduction of their hours 17
� Calculate FTEs for the following: ◦ Period of 2/15/19 to 6/30/19 ◦ Period of 1/1/20 to 2/29/20 ◦ Period of 2/15/20 to 4/26/20 ◦ The pay that includes 2/15/20 ◦ Soon: � Your 56 day payroll covered period � The pay that includes 6/30/20 18
� A reduction in forgiveness amount is required if the reduction in wages over the payroll covered period is in excess of 25% of the total salary or wages of the employee during the period from January 1, 2020 through March 31, 2020 (for employees who did not did not have annualized wages of did not did not over $100K for any single pay in 2019). � Note - the forgiveness application has two different tables for wage reporting. One is for employees over $100K, the other is for employees under. The under table does not have a reduction column. Your free to reduce these employee salaries any amount 19
� The reduction is based on the dollar excess the annualized reduced salary exceeds the allowable 75% � That annualized difference is then de- annualized to 8 weeks. 20
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