WEBINAR SERIES COVID-19 LEGISLATIVE IMPACT AND SBA RESOURCES - - PowerPoint PPT Presentation

NONPROFIT WEBINAR SERIES

COVID-19 LEGISLATIVE IMPACT AND SBA RESOURCES

APRIL 3, 2020

Thank you for attending! All attendees have been muted. The presentation will start at 1:00pm. Direct all your questions to the Q&A box.

|

Debra Seefeld

Non-Profit Leader Audit Partner Who We Are

Kaylee Prescott

Tax Senior Manager

Angie Armstrong

Tax Director

|

• Phase 1 - Tax deadlines originally set for April 15 were pushed

back to July 15

• Phase 2 – The “Families First Coronavirus Response Act”

(FFCRA) was passed on March 18; provides financial relief for business to provide time off for employees

• Phase 3 – The “Coronavirus Aid, Relief, and Economic Security

Act’’ or ‘‘CARES Act’’, signed March 27, provides tax benefits and potentially loans/grants for businesses and nonprofits

• Program 1 – SBA/ Paycheck Protection Program (PPP)
• Program 2 – Emergency Economic Injury Grants &

Economic Injury Disaster Loans (EIDL)

• Program 3 – Small Business Debt Relief Program
• Phase 4 – who can imagine?

Washington’s Response

|

• B&V SBA Task Force – formed March 27 for internal & external

education on Washington’s response.

• Education / Webinars - First two COVID-19 webinars Tuesday

and Wednesday had over 1,000 participants. We know you have questions and we are working to share quickly what we have

• learned. Wednesday we decided to highlight for nonprofits.
• Support – SBA Task Force ready to assist clients with data

recovery and application processes.

• Caution – Information is being released fast and furious. The

CARES act is over 600 pages and it was signed just a week ago. Be careful, some mainstream articles are not accurate in the

• details. New IRS Forms released on Wednesday, Apr 1. The

information is changing and our Task Force is staying up to date. There is not a cookie cutter answer, each business and nonprofits needs are different.

Briggs & Veselka’s Response

|

Paycheck Protection Program (PPP) Small Business Debt Relief Program

Emergency Economic Injury Grants & Economic Injury Disaster Loans (EIDL)

Which Program Is Right for My Business?

Cash flow assistance through 100% federally guaranteed loans to employers who maintain payroll during the emergency; up to 100% of funds borrowed are forgivable, if certain conditions are

• met. NOT ALL NPO’s QUALIFY!

Provides immediate relief to small businesses with non-disaster SBA loans; the SBA will cover all loan payments on new or existing SBA loans, including principal, interest, and fees for up to six months Grants: Emergency grant provides up to $10,000 to businesses harmed by COVID-19 with no repayment required. Loans: EIDLs are low interest, long term loans providing working capital to sustain small businesses; repayment is required

SBA Response to COVID-19: What we know today

|

Paycheck Protection Program (PPP) Economic Injury Disaster Loan (EIDL)

Payroll expenses, employee salaries, mortgage interest, rent and utilities What the proceeds be used for?* Payroll, fix debts, accounts payable and other expenses that cannot be paid due to disaster impact 2.5 times business's average monthly payroll Amount covered? Up to $2 million Annual percentage rate, 1% Interest rate? Annual percentage rate, 2.75% for NONPROFITS (Business 3.75%) Payment deferment for

• 6mo. Repayment 2 years

Loan terms? No payments for 12 mo. Repayment up to 30 years Eligible, up to 100%, with documentation & approval (“shall be” not “will be” ) Amount/Loan forgiveness? 0% eligible for forgiveness Through an SBA-approved bank/lender Where to apply? Through the SBA *Business can apply for both programs; however, there can be no duplication in the use of funds

Quick Comparison Between PPP Loans and Disaster Loans

|

Paycheck Protection Program (PPP) Economic Injury Disaster Loan (EIDL)

Only 501(c)(3) and some 501(c)(19)’s (veteran’s

• rganizations)

Nonprofits Qualifying? All nonprofits, if fewer than 500 employees NO Nonprofits Qualifying for up to $10,000 Grants? All nonprofits, if fewer than 500 employees

Quick Comparison Between PPP Loans and Disaster Loans

|

The Coronavirus Aid, Relief, and Economic Security (CARES) Act allocated $349 billion to help small businesses keep workers employed amid the pandemic and economic downturn Known as the Paycheck Protection Program (PPP), the initiative provides 100% federally guaranteed loans to small businesses who maintain their payroll during this emergency Importantly, these loans may be forgiven if borrowers maintain their payrolls during the crisis

• r restore their payrolls afterward

Program #1: Paycheck Protection Program (PPP)

|

• Small businesses or nonprofits (only

501(c)(3)’s and some 501(c)(19)’s qualify) with fewer than 500 employees

• Required to be in operation as of February 15,

2020

• An individual who is self-employed (sole

proprietorship or as independent contractor) who regularly carries on any trade or business

• A Tribal business concern that meets the SBA

size standard

• Ineligible: some nonprofits 501(c)(6)’s

(business associations) and 501(c)(7)’s (pleasure/recreation)

PPP: Eligible Applicants

|

To be eligible for loan forgiveness, proceeds must be used to cover only specific costs during 8 weeks beginning on date of loan origination: Payroll must be 75% of loan amount:

• Payroll Costs
• Healthcare benefits

Limited to 25% of loan amount:

• Mortgage interest obligations
• Rent obligations
• Utility payments
• Interest on other debt obligations incurred

previous to February 15, 2020

PPP: Acceptable Uses of Proceeds

|

Maximum: Lesser of $10mil or 2.5 x Payroll Costs Payroll Costs: average MONTHLY payroll during year before loan date x 2.5 Includes: salaries, wages, cash tips, vacation, parental, family medical, sick leave, health care benefits, retirement benefits, state/local tax assessed on compensation (unemployment) Does not include independent contractors Excludes: salary/wage cap $100,000 / person, no federal payroll taxes, only US residence, FFCRA credit wages

PPP: Maximum Loan Amount

|

Cautions:

• Not guaranteed forgiveness
• The loan forgiveness cannot exceed the principal

borrowed, even if actual expenses exceed expectations in loan application.

• Forgivable amount is reduced if number of employees is

reduced.

• Forgivable amount is reduced if greater than 25%

reduction in wages paid to employees. Weigh Cost/Benefit:

• Even with reduced forgiveness, left with 1% operating

loan, payments for two years

• No personal guarantees needed, no collateral
• No prepayment penalty

PPP Loan Forgiveness

|

GRANTS: Applicants can get up to $10,000 in emergency cash grants even if they don’t qualify for additional funds.

• The advance does not need to be repaid under any

circumstance, and may be used to keep employees on payroll, to pay for sick leave, meet increased production costs due to supply chain disruptions, or pay business obligations, including debts, rent and mortgage payments. LOANS: EIDLs are low interest loans of up to $2 million, with principal and interest deferment for 12 months, that are available to pay for expenses that could have been met had the disaster not occurred, including payroll and other operating expenses. Unlike traditional Economic Injury Disaster Loans (EIDL), CARES now waives the requirement that you be unable to obtain credit elsewhere which allow you to apply even if you have access to a credit line.

Program #2: Economic Injury Disaster Loans

|

Key differences from PPP Forgiveness

• EIDLs are non-forgivable: they are low interest, long term

(up to 30 years) loans with scheduled P&I payments

• PPPs may be up to 100% forgivable, if requirements are

documented and approved Grant

• EIDL includes up to $10,000 emergency grant that

never has to be repaid

• No automatic grant with PPP

Application

• EIDLs obtained by applying directly to SBA -

https://covid19relief.sba.gov/#/

• PPPs obtained through SBA lenders

Economic Injury Disaster Loans

|

This program will provide immediate relief to small businesses with non-disaster SBA loans, in particular 7(a), 504, and microloans Under it, SBA will cover all loan payments on these SBA loans, including principal, interest, and fees, for six months This relief will also be available to new borrowers who take out loans within six months of the President signing the bill into law

Program #3: Small Business Debt Relief Program

|

Paycheck Protection Program (PPP) Small Business Debt Relief Program Emergency Economic Injury Grants & Economic Injury Disaster Loans (EIDL) Which Program Is Right for My Nonprofit? Whether an EIDL unrelated to COVID-19 has already been received, or a business receives a COVID-19 related EIDL and/or Emergency Grant between January 31, 2020 and June 30, 2020, businesses may also apply for a PPP loan and Small Business Debt Relief Program If a business ultimately receives a PPP loan or refinances an EIDL into a PPP loan, any advance amount (grant) received under the Emergency Economic Injury Grant Program would be subtracted from the amount forgiven in the PPP . Funds obtained from multiple programs cannot be used to cover the same expenses

Tying it All Together

|

Nonprofit will prepare Good Faith Certification that:

• The loan is needed to continue operations during the

COVID-19 emergency

• Funds will be used to retain workers and maintain

payroll or make mortgage, lease, and utility payments

• The applicant does not have any other application

pending under this program for the same purposes

• From February 15, 2020 until December 31, 2020, the

applicant has not received duplicative amounts under this program or under the SBA Disaster loan for the same purpose

Anticipated Application Information

|

Application came out Friday, April 3rd. Sample application released earlier this week has changed. Payroll and financial information to have available:

• 2019 payroll summary reports with forms W-3 and all

W-2s; request April 2019 – March 2020 also

• Quarterly State Unemployment Insurance (SUTA/TWC)
• Start & termination dates that occurred in 2019 or 2020
• Health insurance expenses (employee and employer)
• Projected payroll costs over 8 week period following the

loan

• Rent expense summary with 3 month forecast
• Utility expense summary with 3 month projection
• Three years historical tax returns
• Most current balance sheet with debt schedule
• Monthly income statements over last 12 months

Anticipated Application Information

|

TAXES

– yes, even for nonprofits!

|

• NONPROFITS: For calendar year entities, Form 990

(990-PF) is still due May 15, 2020. Can be extended until November 15, 2020.

• NONPROFITS: The extension does not apply to

payroll tax reports and tax due. NEW: TWC announced April 1 a one-month extension due to large amount of unemployment claims.

• EMPLOYEES: Income tax returns (Form 1040) and

1st Quarter ES tax payments deferred until July 15,

• 2020. Note 2nd Qtr ES tax payment still due June

15, 2020

• Taxpayers are not required to file anything to qualify

for the extension.

Tax Deferral

|

• Nonprofits are generally tax-exempt, but

lots of changes now relate to payroll taxes

• Bad news? Expanded payroll benefits you

may be required to pay

• Good news? New credits against payroll

taxes

• Don’t forget to file for refund of 2018

“parking tax”(Form 990-T)

TAXES – yes, even for nonprofits!

|

Tax Credits

EFMLEA: Emergency Family

and Medical Leave Expansion Act

EPSLA: Emergency Paid Sick Leave

Required paid and unpaid public health emergency leave What? Required paid sick time unable to work for virus-related reason Employers < 500 employees Who is covered? Employers < 500 employees 10 days unpaid, up to 10 weeks paid How long? 10 days paid 10 days unpaid, then not less than 2/3 regular pay not to exceed $200 / day up to $10,000 How much? Regular rate up to max of $511/day x 10 days ($5,110) Employee leave OR 2/3 regular rate up to $200/day x 10 days ($2,000) Family leave 100% refundable credit Credit? 100% refundable credit Form 7200 (new) month after payroll tax paid or on Form 941, 943, 944 or CT-1 How to apply? Form 7200 (new) month after payroll tax paid or on Form 941, 943, 944 or CT-1

|

• Families First Coronavirus Response Act

(the “Act”). (Passed March 18) This bill provides assistance and relief in multiple areas:

• Family and medical leave
• Sick leave for employees
• Tax credits to employers and self-employed

individuals providing the leave

• Impacts on employer-sponsored health plans.
• Per the DOL, effective date is April 1, 2020.
• More information is available at:

https://www.dol.gov/agencies/whd/pandemic/ffc ra-questions

FFCRA

|

• For purposes of the count of 500 employees, this

includes all employees (full and part time, temporary employees, employees on leave all within US) and excludes independent contractors

• Count employees employed at least 30 days
• When employee cannot work (or telework) due to

(1) a need for leave to care for a son or daughter under age 18 because a school or place of care has been closed, or (2) a childcare provider is unavailable.

• Can also allocate expense for qualified health plan

to qualified sick leave wages or qualified family medical leave wages for purposes of credit.

FAQ: Family medical leave

|

Exception: This means a small business is exempt from mandated paid sick leave or expanded family and medical leave requirements only if the:

• employer employs fewer than 50 employees;
• leave is requested because the child’s school or

place of care is closed, or child care provider is unavailable, due to COVID-19 related reasons; and

• an authorized officer of the business has

determined that would “jeopardize the viability”

• f the small business (DOL defines)

FAQ: Family medical leave

|

Jeopardize the viability of the business as a going concern (per DOL)?

1. The provision of paid sick leave or expanded family and medical leave would result in the small business’s expenses and financial

• bligations exceeding available business revenues and cause the

small business to cease operating at a minimal capacity; 2. The absence of the employee or employees requesting paid sick leave or expanded family and medical leave would entail a substantial risk to the financial health or operational capabilities of the small business because of their specialized skills, knowledge of the business, or responsibilities; or 3. There are not sufficient workers who are able, willing, and qualified, and who will be available at the time and place needed, to perform the labor or services provided by the employee or employees requesting paid sick leave or expanded family and medical leave, and these labor or services are needed for the small business to

• perate at a minimal capacity.

Family and medical leave

|

EMPLOYEE LEAVE The maximum amounts payable vary based on the reason for

• absence. Employees who are:
• subject to a quarantine or isolation order
• advised by a health provider to self-quarantine
• experiencing symptoms and seeking diagnosis

must be compensated at their regular rate, up to a maximum of $511 per day ($5,110 total). FAMILY LEAVE Employees that find themselves:

• caring for an individual described in one of the three categories

above

• caring for a son or daughter whose school is closed, or
• experiencing a "substantially similar condition" (to be

determined) must receive two-thirds of their regular rate, up to a maximum of $200 per day ($2,000 total).

FAQ: Emergency sick time

|

• Individual Rebate
• $1,200 ($2,400 for eligible individuals filing a

joint return), plus

• $500 for each qualifying child of the taxpayer
• Phase out: The amount of the credit is reduced

(but not below zero) by 5% of the taxpayer's adjusted gross income (AGI) in excess of:

• $150,000 for a joint return,
• $112,500 for a head of household, and
• $75,000 for all other taxpayers
• Fully phased out at $198,000 for married filing

joint, $99,000 for single

Rebate Checks

|

• Employers receive a refundable quarterly payroll tax credit equal to

50% of qualified wages paid to an employee. For purposes of the credit, up to $10,000 of qualified wages per employee is taken into account.

• For this credit, “Eligible employers” include employers
• whose trade or business is fully or partially suspended during the

calendar quarter due to orders from governmental authority limiting commerce, travel, or group meetings due to COVID-19,

• r
• who have a 50% decrease in gross receipts for the same

calendar quarter in the prior year.

• Applies to wages paid after March 12, 2020, and before January 1,

2021.

• Not available to employers receiving assistance through PPP
• Wages do not include paid family and/or sick leave under the

Families First Coronavirus Response Act for which a credit is taken.

Employee Retention Credit

|

• Employers with fewer than 100 employees: If the

employer had 100 or fewer employees on average in 2019, the

credit is based on wages paid to all employees, regardless of whether they worked or not. If the employees worked full time and were paid for full-time work, the employer still receives the credit.

• Employers with more than 100 employees: If the

employer had more than 100 employees on average in 2019, then the credit is allowed only for wages paid to employees who did not work during the calendar quarter.

• Employers can be immediately reimbursed for the credit by

reducing their required deposits of payroll taxes that have been withheld from employees’ wages by the amount of the credit.

FAQ: Employee Retention Credit

|

• Employers can defer payment of the employer portion of

the Social Security tax (6.2%) paid over the following two years, with half of the amount required to be paid by Dec. 31, 2021 and the other half by Dec. 31, 2022; employers would still be responsible for FICA tax on employee wages

• Deferral is not provided to employers receiving

assistance through the Paycheck Protection Program.

• NEW: Tuesday, Mar 31 IRS announced waiving

penalties for failure to deposit payroll taxes if delayed due to implementation of new payroll tax credits

Defer Payment of Employer Payroll Taxes

|

• Typically, distributions from a qualified retirement plan are

subject to a 10% additional tax (penalty) for withdrawals before age 59 ½ (with handful of exceptions)

• The CARES Act provides that the 10% additional tax does not

apply to any coronavirus-related distribution, up to $100,000.

• A coronavirus-related distribution is any distribution

(subject to certain dollar limits), made on or after January 1, 2020, and before December 31, 2020, from an eligible retirement made to a “qualified individual”

• Any individual who receives a distribution may, at any time

during a 3-year period, may repay the amount back to the plan

• Standard 20 percent federal tax withholding is not required

Retirement Account Benefits

|

• “Qualified Individual” is someone who is :
• diagnosed with the virus SARS-CoV-2 or COVID-19
• whose spouse or dependent is diagnosed with such

virus or disease

• who experiences adverse financial consequences as a

result of being quarantined, being furloughed or laid

• ff or having work hours reduced due to such virus or

disease, being unable to work due to lack of child care due to such virus or disease, closing or reducing hours

• f a business owned or operated by the individual due

to such virus or disease, or other factors as determined by the Secretary of the Treasury.

Retirement Account Benefits

|

• The CARES Act provides that the RMD requirements do not

apply for calendar year 2020 to:

• a defined contribution plan
• a defined contribution plan which is an eligible deferred

compensation plan described in Code Sec. 457(b) but

• nly if such plan is maintained by an employer

described in Code

• an individual retirement plan
• The RMD requirements also do not apply to any

distribution which is required to be made in calendar year 2020 by reason of: (I) a required beginning date occurring in calendar year 2020, and (II) such distribution not having been made before January 1, 2020.

Required Minimum Distributions from Retirement Accounts

|

WAIT FOR IT……

Charitable Contribution Changes

|

• The CARES Act adds a deduction to the calculation of

gross income, in the case of tax years beginning in 2020, for the amount (not to exceed $300) of qualified charitable contributions made by an “eligible individual” (not itemizing) during the tax year.

• The traditional AGI limitation of 50% is increased to 100%

for calendar year 2020 Does NOT apply to donor advised funds

• The CARES Act also increases the limitation on the

corporate charitable contribution deduction from 10% of taxable income to 25% of taxable income.

• In addition, the limitation on contributions of food

inventory is increased from 15% to 25%.

Charitable Contribution Changes

|

Quick Planning Steps:

• 1. Contact your BANK, will they be able to file SBA loan requests

for you?

• 2. Assess whether or not filing for EIDL Emergency Grant

$10,000. Act quickly. File on-line YOURSELF.

• 3. Watch for scams, you do not need to pay anyone to do this.

SBA & IRS will not contact you by phone, email, etc. Be careful

• 4. Work with your BOARD. Resources for assistance in

application process, banking relationships, planning/budgeting adjustments.

• 5. Make decisions with your FINANCE COMMITTEE on applying

for loans. Are you qualified? Do you need more than payroll, mortgage interest, rent & utilities (PPP)? Do you need EIDL to cover more than PPP loan will?

All in this Together

|

6. Work closely with HUMAN RESOURCES , evaluate application of FFCRA, are you paying family and medical leave and sick leave appropriately? Document and track for payroll tax credits. 7. Contact your PAYROLL SERVICE PROVIDER for annual payroll reports needed for loan applications. 8. Make appointments with BANK for loan application review process. 9. Remember if you take advantage of the PPP loan program, you are not qualified for employee retention credit (wouldn’t be qualified anyway if not a 50% decrease in gross receipts prior year same quarter or you didn’t cease operations), or payroll tax delayed payments.

• 10. Start planning on accounting changes to track loan expenditures. You

will need to substantiate the use of funds. Coordinate with BRIGGS & VESELKA for assistance.

All in this Together

|

Resources

Small Business Administration EIDL Loan and Grant Application

www.sba.gov/disaster

Lender Matching Tool

https://www.sba.gov/funding- programs/loans

SBA Houston District Office List of Houston area SBA lenders

https://www.sba.gov/offices/dis trict/tx/houston

US Department of Labor Q&A: Families First Coronavirus Response Act

https://www.dol.gov/agencies/ whd/pandemic/ffcra-questions

US Department of Treasury Links for borrowers & lenders

https://home.treasury.gov/polic y-issues/top-priorities/cares- act/assistance-for-small- businesses

Paycheck Protection Program application

https://home.treasury.gov/syst em/files/136/Paycheck- Protection-Program-Application- 3-30-2020-v3.pdf

SBA Interim Final Rule

https://home.treasury.gov/syst em/files/136/PPP-- IFRN%20FINAL.pdf

|

Resources

Internal Revenue Service FAQs: COVID-19-Related Tax Credits for Required Paid Leave

https://www.irs.gov/newsro

• m/covid-19-related-tax-

credits-for-required-paid- leave-provided-by-small- and-midsize-businesses-faqs

FAQs: Employee Retention Credit under the CARES Act

https://www.irs.gov/newsro

• m/faqs-employee-

retention-credit-under-the- cares-act

Form 7200 Advance Payment of Employer Credits Due to COVID- 19

https://www.irs.gov/pub/irs- pdf/f7200.pdf

Other general COVID-19 announcements

https://www.irs.gov/coronav irus

|

Resources

National Council of Nonprofits NPO-specific COVID-19 articles

https://www.councilofnonprofits.

• rg/nonprofits-and-coronavirus-

covid-19

Community Foundation Public Awareness Initiative COVID-19 Response by State

https://www.commfoundations.c

• m/blog/2020/3/11/community-

foundations-nationwide-launch- efforts-to-help-communities- affected-by-the-coronavirus

Greater Houston Community Foundation and the United Way

• f Greater Houston launched the Greater Houston COVID-19

Recovery Fund

https://www.greaterhoustonrec

• very.org/

Truist Financial (formerly BB&T) Email updates-opt in

https://www.truist.com/coronavi rus-response/banking- solutions/business

Forbes NPOs: How to Apply

https://www.forbes.com/sites/st aceychildress/2020/03/30/349- billion-in-forgivable-paycheck- protection-loans-for-nonprofits- heres-how-to- apply/#5c6048ccab67

|

For Clients Contact your respective B&V team – all of us are standing by ready to help For Everyone Briggs & Veselka SBA Assistance Team SBAassistance@bvccpa.com Briggs & Veselka SBA Home Page https://www.bvccpa.com/services/advisory- services/sba-loans/ Non-Profit specific questions Debra Seefeld, CPA, CFE, debra.seefeld@bvccpa.com

Resources

|

Thank you for all you do for the Community Connected, we are stronger.