The CARES Act: Relief for Yoga Businesses April 7, 2020 Craig Saperstein, Partner Aimee Ghosh, Counsel
Craig J. Saperstein Partner Washington, DC craig.saperstein@pillsburylaw.c om +1.202.663.9244 Aimee P. Ghosh Counsel Washington, DC aimee.ghosh@pillsburylaw. com +1.202.663.8091
Federal Response to COVID-19 Pandemic March 6, 2020: Emergency appropriations of $8.3 billion, mostly for small business disaster assistance loans and emergency health and medicine efforts. March 18, 2020: Enactment of the Families First Coronavirus Response Act, which established paid leave guarantees for certain workers. March 27, 2020: Enactment of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which includes $2 trillion in federal funding for states, businesses, and individuals. The CARES Act provides for small business loans and tax benefits, among other measures. Next: A fourth relief measure targeting the economic effects of the COVID-19 emergency
The CARES Act: At-a-Glance
CARES Act: Small Business Loan Programs
Paycheck Protection Program PURPOSE The Paycheck Protection Program is a loan program designed to provide a direct incentive for • small businesses to keep their workers on the payroll. PROGRAM Each eligible small business may receive a loan of up to 2.5x its average monthly payroll for the • OVERVIEW year preceding the loan, but not more than $10M. The loans are available until June 30, 2020. • ADMINISTRATIO The program is administered by the Small Business Administration (SBA) but loans are provided • N by designated lenders. Loans are distributed on a “first come, first serve” basis. • HOW TO APPLY Applicants apply directly to designated lenders. • Use the “Find Eligible Lenders” tool on the SBA Website at • www.sba.gov/paycheckprotection/find.
Paycheck Protection Program ELIGIBILITY Any business or nonprofit with up to 500 employees are eligible (including “affiliates”). • • Large companies are eligible to the extent the applicable SBA size standard for their industry allows for a greater number of employees. In determining the number of “employees,” a business employs, an “employee” includes • individuals working on a full-time, part-time, or other basis. Individuals operating under a sole proprietorship, with or without employees, or as an • independent contractor, may also apply. USES Loans may be used to cover certain costs of payroll, employee benefits, interest payments, • rent, and utilities. LOAN TERMS Complete payment deferment (including payment of principal, interest, and fees) for six to • twelve months. No personal loan guaranty requirement. • FORGIVENESS Loan forgiveness is available for loan proceeds used for permitted costs in the eight weeks • after the loan is issued. Only 25% of the amount forgiven may be for non-payroll costs. • Loan forgiveness is subject to limitations on workforce or employee compensation reductions. •
Economic Injury Disaster Loans PURPOSE The long-standing Economic Injury Disaster Loan Program was created to assist businesses, • renters, and homeowners located in regions affected by declared disasters. PROGRAM The CARES Act expands the existing Disaster Loan Program. • OVERVIEW Under the program, eligible businesses may receive a loan up to $2M. • Loans provided under the expanded Disaster Loan Program are available until Dec. 31, 2020. • ADMINISTRATIO Applicants apply directly to the SBA. • N Borrowers may not apply for a Paycheck Protection Loan and a Disaster Loan for the same • purpose. HOW TO APPLY Applicants apply directly to the SBA. • Apply online at https://covid19relief.sba.gov/#/ •
Economic Injury Disaster Loans ELIGIBILITY Companies with up to 500 employees are eligible. • Individuals operating under a sole proprietorship, with or without employees, or as an independent • contractor, may also apply. The size threshold applies to the applicant entity as well as its “affiliates” – i.e., firms under • common ownership or control. LOAN Up to $2M. • AMOUNT • Exact amount is determined based on the applicant’s need. USES • Loan proceeds may be used to pay fixed debts, payroll, accounts payable, and other business costs. LOAN TERMS Interest rate is 3.75% for small businesses. • Loan term of up to 30 years. • Personal guaranty is not required on loans up to $200,000. • No collateral required for loans of $25,000 or less; for loans of more than $35,000, general security • interest in business assets will be used. Borrowers do not have to prove that they cannot get credit elsewhere. • Borrowers must allow the SBA to review tax records. •
Economic Injury Disaster Loans: Advance Grants AVAILABILITY $10,000 emergency advance is available while the application is pending. • TERMS • The emergency advance is not required to be repaid. • Applicant may receive this advance while applying for a Paycheck Protection Loan. If received, the advance will be deducted from the loan forgiveness amount.
CARES Act: Tax Benefits
Delay of Employer Payroll Taxes SUMMARY Employers generally are responsible for paying a 6.2% Social Security tax on employee wages. • • The CARES Act allows employers to defer payment of the employer share of the Social Security tax between March 27, 2020 and Jan. 1, 2021. ELIGIBILITY All employers who pay Social Security tax on employee wages. • Exception: Businesses that received a (forgiven) Paycheck Protection Loan are not eligible to delay • employer payroll taxes. DEFERRAL The CARES Act requires that the deferred employment tax be paid over the following two-years, • with half the amount required to be paid by December 31, 2021 and the other half by December 31, 2022.
Employee Retention Tax Credit SUMMARY The CARES Act provides a refundable payroll tax credit for 50 percent of “qualified wages” paid • by employers to employees between March 13, 2020 and December 31, 2020. ELIGIBILITY Any employer may take advantage of the Employee Retention Tax Credit if during a calendar • quarter: (1) business operations are fully or partially suspended during the calendar quarter due to orders from a governmental authority limiting commerce, travel, or group meetings due to COVID-19; or (2) the business experiences a significant decline in gross receipts (50% less than the previous year). Exception: Businesses that received a (forgiven) Paycheck Protection Loan are not eligible. • “QUALIFIED For employers with 100 or fewer full-time employees, all employee wages are eligible, • WAGES” regardless of whether an employee is furloughed. REFUNDABILITY The amount of qualified wages that may be taken into account for any individual employee may • not exceed $10,000. If the amount of allowable credit exceeds this limitation (for any calendar quarter), the excess • shall be refundable to the employer.
Additional Business Tax Benefits PAID LEAVE • The Families First Coronavirus Response Act (FFCRA) provides a tax credit to employers with PAYROLL TAX fewer than 500 employees for amounts paid to employees for paid sick leave and emergency CREDIT leave the law requires • The credits apply against an employer’s quarterly Social Security and Medicare taxes and are equal to the amount paid by the employer, subject to limitations TAX FILING DUE The IRS extended the federal income tax filing due date from April 15, 2020 to July 15, 2020 • DATE EXTENDED Many states have also extended their tax filing due dates, be sure to check the deadline in the • state where you pay taxes
Local Small Business Assistance Programs
CHICAGO Chicago Small Business Resiliency Fund • DENVER Denver Economic Development and Opportunity (DEDO) Small Business Emergency Relief • Program Denver Microloan Program • LOS ANGELES LA Small Business Microloan Program • NEW YORK CITY • NYC Small Business Continuity Loan SACRAMENTO Sacramento Small Business Emergency Economic Relief Loan Program • SAN FRANCISCO • SF COVID-19 Small Business Resiliency Fund SEATTLE Seattle Small Business Stabilization Fund •
Private Support for Small Businesses
AMAZON $5 million relief fund to provide cash grants to local Seattle small businesses • FACEBOOK $100 million grant program for small businesses impacted by COVID-19 • KABBAGE Online program to allow businesses to sell gift cards to use at a later date •
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