NAVIGATING THE CORONAVIRUS PANDEMIC RESPONSE: Steven A. - - PowerPoint PPT Presentation

NAVIGATING THE CORONAVIRUS PANDEMIC RESPONSE:

OVERVIEW OF TAX AND OTHER BUSINESS IMPACTS

Steven A. Eichenberger, CPA David A. Richardt, CPA Brent M. Holman, CPA

00/00/0000

Wh Wher ere Ar Are We We To Today?

2 BGBC PARTNERS, LLP

316 MILLION PEOPLE IN 42 STATES ARE UNDER SOME SORT OF STAY AT HOME ORDER WITH ONLY ESSENTIAL BUSINESSES OPERATING ‐ THAT IS 95% OF US POPULATION. UNEMPLOYMENT CLAIMS OF APPROX. 17 MILLION AS OF 9 APRIL 2020. EQUATES TO AN UNEMPLOYMENT RATE OF APPROXIMATELY 15% OVER 460,000 CASES AND MORE THAN 16,000 DEATHS – ABOUT 20% IN NEW YORK

00/00/0000 3 BGBC PARTNERS, LLP

US US Gov Gov’t Appr Approach:

• ach:

Economi

• nomic

Stim Stimulus, ulus, Loan Loan Assis Assistance ance & Ta Tax Re Relief

U.S. objectives are to:

Keep people employed Help small businesses survive Inject capital into the U.S. economic system

Economic impact of COVID‐19 is worldwide

U. U.S. Go Governm rnment Response sponse

00/00/0000

Ag Agenda enda

• High‐level summary of the Acts providing relief
• Overview of new loan facilities available to businesses
• Overview of payroll related relief
• Overview of administrative relief and tax modifications

BGBC PARTNERS, LLP

4

00/00/0000

Fa Families Fir First Cor Corona

• navirus

virus Re Response Act Act (FF (FFCRA)

• Signed into law on 18 March 2020
• Expansion of Family & Medical Leave
• Emergency Paid Sick Leave

5

BGBC PARTNERS, LLP

• Employer tax credits
• Applies to businesses with <500 employees ‐

Affiliation rules based on DOL guidelines

00/00/0000

Cor Corona navirus virus Ai Aid, d, Relie lief, and and Econom

• nomic

Security Security (CA (CARES) Act Act

• Signed into law on 28 March 2020
• Provides $2 trillion of relief funding
• Employer assistance
• Including loan facilities
• Additional payroll tax credits/deferral

6

BGBC PARTNERS, LLP

• Employee Unemployment Benefit expansion
• Tax enhancements
• Affiliation rules based on SBA and IRS guidelines

00/00/0000

Sm Small all Business Business Adm Adminis nistration tion Lo Loan ans

Economic Impact Disaster Loan (EIDL):

• For businesses under 500 employees
• Request an advance (grant), up to $10,000, payable

within 3 days of receipt of the EIDL application

• Advance is not required to be repaid, even if the loan

is subsequently denied

• Low interest rates and no guarantee required (if

under $200,000)

BGBC PARTNERS, LLP

7

00/00/0000

Sm Small all Business Business Adm Adminis nistration tion Lo Loan ans

Payroll Protection Program (PPP) Loan:

• For businesses under 500 employees.
• Provides a loan based on 2.5 x average monthly

payroll costs.

• Loan is forgiven if used to pay payroll, rent, mortgage

interest and utilities.

• Low interest rates and no guarantees required

BGBC PARTNERS, LLP

8

00/00/0000

Im Impacts of

• f Legisla

Legislatio ion: n: Em Emplo ployee ee Pay Pay and and Em Emplo ployer er Assis Assistance ance

BGBC PARTNERS, LLP 9

Families First Coronavirus Response Act (FFCRA)

Employee Focused – Emergency Family and Medical Leave Expansion Act (EFMLEA) Employee Focused – Emergency Paid Sick Leave Act (EPSLA) Employer Focused – Payroll tax credit for required leave under Act

Coronavirus Aid, Relief, and Economic Security (CARES) Act

Employer Focused – PPP Loans Employer Focused – Employee Retention Payroll Tax Credit Employer Focused – Payroll Tax Deferral Employee Focused – Expanded Unemployment Benefits

00/00/0000

Im Impacts of

• f Legisla

Legislatio ion: n: Em Emplo ployee ee Pay Pay and and Em Emplo ployer er Assis Assistance ance

BGBC PARTNERS, LLP 10

Families First Coronavirus Response Act (FFCRA)

Employee Focused – Emergency Family and Medical Leave Expansion Act (EFMLEA) Employee Focused – Emergency Paid Sick Leave Act (EPSLA) Employer Focused – Payroll tax credit for required leave under Act

00/00/0000 BGBC PARTNERS, LLP 11

FFCRA Notice ‐ FAQs

Required DOL Poster

00/00/0000

Fa Family & Me Medi dical cal Lea Leave

• Effective as of 1 April 2020 and provides 12‐week period of job‐protected

leave

• Requires employers with less than 500 employees to provide paid and

unpaid public health emergency leave to certain employees. (Effective through 12/31/2020)

• Leave available to persons employed at least 30 days who are unable to

work or telework due to a need for leave to care for a son or daughter under age 18 due to school or childcare closures as a result of a public health emergency. (i.e. COVID‐19)

BGBC PARTNERS, LLP

12

00/00/0000

Fa Family & Me Medi dical cal Lea Leave

• First 10 days of leave are unpaid, then paid leave is required.

Note: Employees may choose to use any available paid leave during the first 10 days

• Leave pay is calculated based on not less than two‐thirds employee’s

regular rate of pay and number of hours regularly worked, not to exceed $200/day and $10,000 in the aggregate.

BGBC PARTNERS, LLP

13

00/00/0000

Em Emer ergency ncy Pa Paid Sick Sick Lea Leave

• Effective 1 April 2020
• Requires employers with less than 500 employees to provide 80 hours of

paid sick time to full‐time employees unable to work or telework due to specified virus‐related reasons. (Effective through 12/31/2020)

• Immediately available to employees regardless of length of employment.
• Sick leave for part‐time employees based on average hours worked over a

2‐week period

BGBC PARTNERS, LLP

14

00/00/0000

Em Emer ergency ncy Pa Paid Sick Sick Lea Leave

• Department of Labor authorized to exempt businesses with less than 50

employees under certain circumstances.

• Employer cannot require employee to find substitute worker or use other

sick leave before this sick time.

• Maximum amounts payable vary based on the reason for the absence.

BGBC PARTNERS, LLP

15

00/00/0000 16 BGBC PARTNERS, LLP

Em Emer ergency ncy Pa Paid Sick Sick Lea Leave – P – Pay and and Ta Tax Cr Credits edits (Sum (Summary) ry)

Reason Basic Rate Limitation Max Days Max Credit Category 1 – Quarantine order Regular Pay $511/day 10 $5,110 Category 2 – HC provider advises employee ‐> self‐quarantine Regular Pay $511/day 10 $5,110 Category 3 – COVID‐19 symptoms, seeking diagnosis Regular Pay $511/day 10 $5,110 Category 4 – Caring for category 1 or 2 individual 2/3’s of regular pay $200/day 10 $2,000 Category 5 – Caring for son or daughter – closed school/daycare 2/3’s of regular pay $200/day 60* $12,000

($2,000 sick leave + $10,000 FML)

Category 6 – Substantially similar condition specified by HHS 2/3’s of regular pay $200/day 10 $2,000

* Combines the (1) Paid sick leave, and (2) Family medical leave

00/00/0000 17 BGBC PARTNERS, LLP

Em Emer ergency ncy Pa Paid Sick Sick Lea Leave – P – Pay (D (Details) ails)

• Employees must be compensated at regular rate up to $511/day ($5,110 total) if:
• Employee subject to a quarantine or isolation order;
• Employee advised by health provider to self‐quarantine;
• Employee experiencing symptoms & seeking diagnosis.
• Employees compensated at two‐thirds regular rate up to $200/day ($2,000 total) if:
• Caring for someone subject to a quarantine or isolation order;
• Caring for someone advised by health provider to self‐quarantine;
• Caring for someone experiencing symptoms & seeking diagnosis;
• Caring for a son or daughter whose school or childcare is closed.

00/00/0000 18 BGBC PARTNERS, LLP

Em Emer ergency ncy Pa Paid Lea Leave – T – Tax Cr Credits edits (D (Details) ails)

The credits have 3 components:

• 1. EPSLA credit for each employee is amount of leave pay up to $511/day while employee caring

for him/herself, or $200/day if caring for family member or child whose school/childcare is

• closed. EMFLEA credit for each employee is amount of leave pay up to $200/day with a $10,000

maximum.

• 2. Amount of EMFLEA & EPSLA credits increased by the portion of employer’s “qualified Health

Plan expenses” properly allocable to qualified sick leave and family leave wages, limited to the amount excluded from the employee’s gross income.

• 3. Amount of EMFLEA & EPSLA credits increased by 1.45% Medicare tax to which employee’s leave

wages are subject.

00/00/0000 19 BGBC PARTNERS, LLP

Em Emer ergency ncy Pa Paid Lea Leave – T – Tax Cr Credits edits (D (Details) ails)

• Tax credits are refundable to the extent they exceed employer’s payroll tax liability.
• Employers don’t receive credit if employee is already receiving paid family & medical leave under

IRC §45S.

• Credits also available to self‐employed individuals.
• Rules in effect for payroll periods 4/1/2020 through 12/31/2020.
• Wages paid under EFMLEA & EPSLA not considered wages for Social Security Tax purposes.

00/00/0000

Im Impacts of

• f Legisla

Legislatio ion: n: Em Emplo ployee ee Pay Pay and and Em Emplo ployer er Assis Assistance ance

BGBC PARTNERS, LLP 20

Coronavirus Aid, Relief, and Economic Security (CARES) Act

Employer Focused – PPP Loans Employer Focused – Employee Retention Payroll Tax Credit Employer Focused – Payroll Tax Deferral Employee Focused – Expanded Unemployment Benefits

00/00/0000

Em Emplo ployee ee Re Retention Cr Credit edit fo for Em Emplo ployer ers

Provides a refundable payroll tax credit for 50% of wages paid by eligible employers to certain employees during the COVID‐19 crisis.

• Employer Eligibility

Employers & non‐profits whose operations have been fully or partially suspended due to government order limiting commerce, travel, or group meetings.

• r

Employers who have experienced a greater than 50% reduction in quarterly receipts measured on a year‐over‐year basis.

• Not available to employers receiving Small Business Interruption Loans under
• Sec. 1102 of the Act. (Paycheck Protection Plan Loan)
• Not available with respect to an employee for any period for which the employer

is allowed a Work Opportunity Credit for the employee.

BGBC PARTNERS, LLP

21

00/00/0000

Em Emplo ployee ee Re Retention Cr Credit edit fo for Em Emplo ployer ers

• Eligible Wages

Employers with average number of 2019 full‐time employees of 100 or fewer: all employee wages are eligible, regardless of whether the employee is furloughed. Employers with average number of 2019 full‐time employees greater than 100: only the wages of furloughed employees or those who face reduced hours due to their employers' closure (or reduced gross receipts) eligible for the credit.

• The term "wages" includes health benefits and is capped at the first

$10,000 in wages paid by the employer to an eligible employee.

BGBC PARTNERS, LLP

22

00/00/0000

Em Emplo ployee ee Re Retention Cr Credit edit fo for Em Emplo ployer ers

• Wages do not include:
• Amounts considered for purposes of the payroll credits, for required

paid sick leave (EPSLA) or required paid family leave (EFMLEA).

• Amounts considered for the Code Sec. 45S employer credit for paid

family and medical leave.

BGBC PARTNERS, LLP

23

00/00/0000

Em Emplo ployee ee Re Retention Cr Credit edit fo for Em Emplo ployer ers

• IRS is granted authority to advance payments to eligible employers and

to waive applicable penalties for employers who do not deposit applicable payroll taxes in anticipation of receiving the credit. (Form 7200)

• Reconciliation of credit and any applicable advances taken will be done
• n payroll form, Form 941
• Effective date ‐ credit applies to wages paid after 3/12/2020 and before

1/1/2021.

BGBC PARTNERS, LLP

24

00/00/0000

Pay Payment De Deferr rral al of

• f Em

Emplo ployer er Pay Payroll Ta Taxes

• Allows taxpayers to defer paying the employer portion of certain payroll

taxes imposed from 3/27/2020 through 12/31/2020.

• Half of deferred employer portion now due 12/31/2021, with the

remaining half due 12/31/2022.

• Applies to both employers and self‐employed persons.
• Above rules won't apply to any taxpayer who had debt forgiven under

Act §1106 for loan under Small Business Act § 7(a)(36), as added by Act §1102, or debt forgiven under Act §1109.

BGBC PARTNERS, LLP

25

00/00/0000 26

Enhanced Enhanced Unem Unemploym ployment Bene Benefits fits

• Additional $600/week over normal unemployment compensation through 31 December 2020
• These beefed‐up benefits will be paid out weekly if you are unable to work due to the coronavirus but are currently

capped at 39 weeks.

BGBC PARTNERS, LLP

00/00/0000

Im Impacts of

• f Legisla

Legislatio ion: n: Adm Adminis nistrativ tive Relie lief and and Ta Tax Modific Modifications tions

BGBC PARTNERS, LLP 27

3-Pronged Approach

Payroll Tax Relief Delayed Due Dates Other Tax Relief

00/00/0000

Del Delayed Due Due Da Dates: tes: Filing Filing Re Returns & Ta Tax Pay Payments

• 3/15/2020 and 4/15/2020 tax return due dates for 2019 and

requirement to pay tax delayed until 7/15/2020.

• 2020 1st and 2nd quarter estimated tax payment also not due until

7/15/2020.

• Provides opportunities and need for cash flow planning.
• Period from 4/15/2020 through 7/15/2020 is disregarded for purpose of

calculating interest, penalty, or any other additions to tax for failure to file a tax return or failure to pay a tax originally due 4/15/2020.

• Extension does not apply to payments of any other type of federal tax.
• An additional 3‐month extension can be filed, but only extends filing due

date not payment due date

BGBC PARTNERS, LLP

28

00/00/0000

Te Temporary Re Repeal & Rule Rule Modific Modification: tion: NOLs NOLs

• Under prior law, NOLs arising in years 2018 and after could only be

carried forward and could only offset 80% of taxable income.

• Now NOLs arising in tax years 2019 & 2020 can be carried back to each
• f the five tax years preceding the tax year of such loss.
• Also, NOLs arising in tax years 2018, 2019, and 2020 can offset 100% of

taxable income in any of the years to which it is carried.

• Effective retroactively so amended return opportunity exists.

BGBC PARTNERS, LLP

29

00/00/0000

Corpor Corporate Mi Mini nimum mum Ta Tax Cr Credit edit is is Acceler Accelerated

• Under prior law, MTC is refundable for any tax year beginning in 2018,

2019, 2020, or 2021, in an amount equal to 50% (100% for tax years beginning in 2021) of the excess MTC for the tax year, over the amount

• f the credit allowable for the year against regular tax liability.
• CARES Act allows corporations to claim 100% of AMT credits in 2019.
• CARES Act also provides for an election to take the entire refundable

credit amount in 2018.

BGBC PARTNERS, LLP

30

00/00/0000

Deductibility Deductibility of

• f In

Interest Expense Expense Te Temporarily Inc Increased

• Tax Cuts and Jobs Act of 2017 generally limited the amount of business

interest allowed as a deduction to 30% of adjusted taxable income (ATI) for entities with over 25M and 26M in average gross receipts in years 2018 and 2019.

• CARES Act temporarily and retroactively increases the limitation on the

deductibility of interest expense under Code Sec. 163(j)(1) from 30% to 50% for tax years beginning in 2019 and 2020.

• Taxpayers may elect to use 2019 ATI when computing the limitation for

the 2020 returns.

• Any amount of disallowed business interest is carried forward

indefinitely and will never expire.

BGBC PARTNERS, LLP

31

00/00/0000

Bonus Bonus Depr Deprecia eciation tion Technic chnical Corr Correction ection fo for QI QIP

Tax Cuts and Jobs Act of 2017 allowed 100% additional first‐year depreciation deductions ("100% Bonus Depreciation") for certain qualified property. The TCJA eliminated pre‐existing definitions for (1) qualified leasehold improvement property, (2) qualified restaurant property, and (3) qualified retail improvement property. It replaced those definitions with one category called qualified improvement property ("QI Property"). A general 15‐year recovery period was intended to have been provided for QI Property. However, that specific recovery period failed to be reflected in the statutory text of the TCJA. Thus, under the TCJA, QI Property falls into the 39‐year recovery period for nonresidential rental property. That made the QI Property category ineligible for 100% Bonus Depreciation.

BGBC PARTNERS, LLP

32

00/00/0000

Bonus Bonus Depr Deprecia eciation tion Technic chnical Corr Correction ection fo for QI QIP

• CARES Act provides a technical correction to the TCJA, and specifically

designates QI Property as 15‐year property for depreciation purposes.

• This makes QI Property a category eligible for 100% Bonus Depreciation.
• Effective for tax years 2018 and after.
• Amended return opportunity exists.

BGBC PARTNERS, LLP

33

00/00/0000

Con Contacts acts fo for Additional Additional In Inform rmatio ion:

• Steven A. Eichenberger, CPA
• stevee@bgbc.com
• David A. Richardt, CPA
• drichardt@bgbc.com
• Brent M. Holman, CPA
• bholman@bgbc.com

BGBC PARTNERS, LLP