|Our nation and world have experienced an unprecedented threat in the form of coronavirus (COVID-19) and I know this will have devastating consequences for many businesses throughout Collin County. While the situation is constantly evolving, I want to make sure my constituents have current information on the resources available to you and your business.
Over the past several weeks, I have been in communication with many local small businesses, discussing their ability to operate amidst the devastating effects coronavirus has taken on every facet of commerce. Please know, I remain engaged on this rapidly evolving issue and am working to provide needed resources to our local businesses during this critical time. Congress as well as the different federal agencies have worked to enact policies to help employers and businesses impacted by coronavirus. Below you will find information to assist you at this time.
If you have any questions about the materials below, please do not hesitate to contact my office by calling (202) 225-4201 or sending me a message online. My staff and I are here to assist you in any way possible during these uncertain times.
Financial Assistance for Businesses
Small Business Administration Economic Injury Disaster Loan Program
The Small Business Administration is working to provide targeted, low-interest loans to small businesses and most private non-profits that have been severely impacted by the coronavirus (COVID-19). The program provides small businesses with working capital loans of up to $2 million that can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing.
EIDL interest rates are determined by formulas established in law and are fixed for the life of the loan. EIDL loans can have maturities up to thirty years and interest rates cannot be more than four percent.
The CARES Act made a number of changes to the SBA’s Economic Injury Disaster Loan (EIDL) program to help small businesses further. Eligibility for an EIDL loan was expanded under the bill to include cooperatives, ESOPs with fewer than 500 employees, sole proprietors, and independent contractors.
Small businesses in Texas can apply for relief here.
Additionally, due to the processing time of EIDL applications, Congress created a provision to expedite capital access for distressed businesses. This emergency grant allows small businesses that have applied for an EIDL loan due to the pandemic, to request an advance on the loan, of not more than $10,000, which the SBA must distribute within three days. The advance payment may be used for providing paid sick leave to employees, maintain payroll, making rent or mortgage payments, and repaying obligations that cannot be met due to revenue loss. Applicants will not be required to repay advance payments, even if subsequently denied for an EIDL loan.
Paycheck Protection Program
For small businesses and nonprofits worried about retaining employees and going under due to economic losses, the CARES Act, created the Paycheck Protection Program, a Small Business Administration (SBA) 7(a) loan program. This program provides $350 billion for 100 percent federally-guaranteed loans for eight weeks of cash-flow assistance to small businesses and 501(c)(3) nonprofits. Sole-proprietors, independent contractors, and other self-employed individuals are eligible for these loans as well.
Businesses will be able to apply for loans of up to $10 million at an interest rate of four percent. Additionally, built into the loan program is an automatic defer of principal, interest, and fee payments on Paycheck Protection Program loans for six months.
If an employer maintains payroll continuity from February 15, 2020 through June 30, 2020 as defined by headcount, they are eligible to request loan forgiveness on a Paycheck Protection Loan used to cover payroll costs, interest on mortgage obligations, rent, and utilities over an eight week period.
The amount forgiven will be reduced proportionally by any reduction in employees retained compared to the prior year and reduced by the reduction in pay of any employee beyond 25 percent of their prior year compensation.
This program is designed to encourage small businesses to retain their employees and help recover from the economic crisis quickly. Additionally, this program is retroactive to February 15, 2020, to help bring workers who may have already been laid off back onto payrolls.
Small businesses may apply for both SBA loan programs, the Emergency Injury Disaster Loan (EIDL) as well as the Paycheck Protection Program. However, the loans must be used for two separate purposes.
Other SBA Loans
SBA provides a number of loan resources for small businesses to utilize when operating their business. For more information on loans or how to connect with a lender, visit the SBA website.
For small businesses with existing SBA loans, SBA is required to pay all principal, interest and fees for six months. This includes SBA’s 7(a), Community Advantage, 504, and Microloan programs.
Tax Relief for Businesses
Congress has passed a number of tax provisions to help keep businesses open, including assistance with cashflow and providing tax credits for employers to keep employees on payroll.
Tax Deadline Extension
The Department of Treasury and IRS have moved Tax Day from April 15, 2020 to July 15, 2020 for small and medium size businesses and individuals who need it. While businesses have an additional 90 days to file and make payments without interest or penalties, those who may receive tax refunds should file now to get money. Details can be found on the IRS website.
Employee Retention Credit
Employers that face full or partial closure orders or suffer economic hardship due to COVID-19 may be eligible for a refundable payroll tax credit. Employers that continue to pay employees that are furloughed may qualify for a fifty percent credit on up to $10,000 of wages paid to those employees. This is not only to help businesses stay afloat but also to help workers keep their jobs, stay connected with their employer and ensure that furloughed workers have jobs to return to.
Delay of Payment of Employer Payroll Taxes
To help cash strapped businesses, employers and self-employed individuals will be able to delay the payment of their 2020 payroll taxes over two years, with half of the amount required to be paid in 2021 and the remaining half in 2022. Employers are generally required to pay a 6.2% Social Security tax on employee wages, which is matched by employees. This provision will allow for an additional $300 billion of cash flow for businesses.
Support for Businesses Suffering Losses
As part of the CARES Act, limitations on a company’s use of net operating losses is relaxed. Under this bill, a net operating loss arising in a tax year beginning in 2018, 2019, or 2020 will be permitted to be carried back five years - ostensibly to a prior year in which that company had been profitable. This provides distressed businesses access to immediate tax refunds. Additionally, this provision temporarily removes the taxable income limitation to allow a net operating loss to fully offset income.
Modification on Business Interest
Another provision to help employers maintain operations and payroll is a temporary increase in the amount of interest expense businesses are allowed to deduct on their tax returns. The CARES Act will increase this limitation from thirty percent to fifty percent of taxable income for 2019 and 2020.
Qualified Improvement Property
The CARES Act fixes an error in the tax code related to the depreciation schedule for improvements to business properties. Specifically, the CARES Act allows businesses to immediately write off costs associated with improving facilities instead of having to depreciate those improvements over a 39-year life of the building. This will encourage businesses to continue to invest in property improvements as America recovers from COVID-19, and increase businesses’ access to cash flow.
Relief for Businesses
The CARES Act includes measures to temporarily delay or modify regulations that normally tie up capital. The following provisions are in place to encourage banks and credit unions to work with those businesses and individuals struggling to survive.
Capital Relief for Community Banks
Community banks looking to deploy additional, needed capital to consumers and businesses will be able to take advantage of the temporary reduction in the Community Bank Leverage Ratio (CBLR) from nine percent to eight percent. Federal banking regulators will also be allowed to grant a reasonable grace period if any community bank falls below the eight percent threshold.
Relief from Troubled Debt Restructuring (TDR) Disclosures
Banks and credit unions trying to help mitigate the stress and impact of COVID-19 on borrowers by providing loan modifications, will no longer have to worry about triggering a Troubled Debt Restructuring (TDR) classification or disclosure. The CARES Act temporarily suspended “generally accepted accounting principles” (GAAP) requirements for TDR classifications on loans. This provision further incentivizes and encourages banks and credit unions to exhaust all options to support consumers and businesses during this time.
Relief from Current Expected Credit Losses (CECL) Standard
In 2016, the Financial Accounting Standards Board (FASB) finalized a new accounting standard called the Current Expected Credit Losses (CECL). This new standard forces banks to recognize expected future losses immediately, requiring banks to hold more capital reserves, which therefore ties up capital and reduces the supply of available credit. The CARES Act, however provides banks and credit unions with the option to decide to comply with the new accounting standard. Currently, smaller banks and credit unions are not required to comply with the new standard until 2023. This provision gives larger banks the option to free up trapped capital and will allow banks and credit unions to extend additional loans to consumers and businesses. This temporary waiver from CECL will expire when the pandemic ends, or by December 31, 2020, whichever comes first.
Debt Guarantee Authority
Due to the pandemic, many are worried about their financial security, including their deposits being held by financial institutions. Under the CARES Act, the Federal Deposit Insurance Corporation (FDIC) is authorized to temporarily guarantee noninterest bearing accounts of banks and credit unions without a maximum guarantee limit. Depositors will be reassured that their deposits are safe at any amount.
Reforms to Employee Benefits
Paid Sick Leave Program Reforms
If an employee's ability to work has been impacted by COVID-19, the employer may be required to temporarily provide for fully paid sick leave. Public and Private employers with less than 500 employees will now be required to provide full-time employees with two weeks (80 hours) paid sick leave as well as part-time employees on a pro-rated basis.
This leave would apply to full-time employees who are home sick from coronavirus, complying with a quarantine, or taking care of an individual who has been infected. This leave also applies to working families who may be forced home due to school closures. The Department of Labor provided general guidance here as well as a common questions and answers page.
However, as a result of Congressional action, the federal government will provide employers with a refundable payroll tax credit of 100% of the required wages. The IRS has posted initial general guidance on how to receive your refundable payroll tax credit here.
Employers are required to cover employees not working for the following reasons:
- the employee is subject to a Federal, State, or local quarantine or isolation order related to coronavirus;
- the employee has been advised by health care provider to self-quarantine due to coronavirus;
- the employee is experiencing symptoms of coronavirus;
- the employee is caring for an individual who is subject to an order described in (1) or has been advised as described in (2);
- the employee is caring for their child because the school is closed or childcare provider is unavailable due to coronavirus; or
- the employee is experiencing a similar condition specified by the Secretary of Health and Human Services
It's important to note, the Secretary of Labor has authority to issue regulations to exempt small businesses with fewer than 50 employees if the above requirements would jeopardize the going concern of the business.
- Employers would be required to pay employees their full wages, not to exceed $511 per day and $5,110 in the aggregate, for a use described in (1), (2), or (3) above
- Employers would be required to pay employees two-thirds of their wages, not to exceed $200 per day and $2,000 in the aggregate, for a use described in (4), (5), or (6) above
- Employers would receive a 100% refundable payroll tax credit on the wages required to be paid
- The requirement to provide the paid leave would apply to all public sector employers and those private sector employers with less than 500 employees
- Tax credit eligibility only applies to those private sector employers with less than 500 employees
Furthermore, the United States Department of Treasury will provide advance funds to businesses so they can meet paid sick-leave requirements. Learn more here.
Paid Family Medical and Leave Program Changes
Due to COVID-19, some employers may be required to temporarily extend Family and Medical Leave Act (FMLA) benefits to employees who must stay home to care for a minor child whose school or care provider is unavailable due to COVID-19. If this situation applies to an employee, employers are required to provide said employee with ten weeks paid leave at two-thirds of their wages. However, payments are not to exceed $200 per day and $10,000 total for the 10 weeks.
Again, the federal government will provide employers with a refundable payroll tax credit of 100% of the required wages. More details can be found here.
- This leave would cover employees who are not working because the employee is caring for their child because the school is closed or childcare provider is unavailable due to a public health emergency
- The requirement to provide the paid leave applies to all employers with less than 500 employees
- Federal, state, and local governments are not eligible for the Credit
As with Paid Sick Leave mandates, the Secretary of Labor has authority to issue regulations to: (1) exclude certain health care providers and emergency responders from the definition of eligible employee; and (2) exempt small businesses with fewer than 50 employees if the above requirements would jeopardize the going concern of the business.
Advance Funds from Treasury Department
The United States Department of Treasury will provide advance funds to businesses so they can meet paid sick-leave requirements. Employers will be able to use cash deposited with the Internal Revenue Service to pay sick-leave wages. Learn more here.
Complying with Federal Regulations
The Occupational Safety and Health Administration (OSHA) recently launched a General COVID-19 Information webpage that provides infection prevention information specifically for workers and employers, and is actively reviewing and responding to any complaints regarding workplace protection from novel coronavirus, as well as conducting outreach activities.
Keeping Your Workplace and Employees Healthy
Below are helpful documents from the Centers for Disease Control and Prevention (CDC) you can distribute to your employees to help provide them accurate information. I have included links to these resources below:
Additionally, recommended strategies for employers from the CDC can found at this link.
- What You Need to Know Document [DOWNLOAD]
- What To Do If You Are Sick Document [DOWNLOAD]
- Stop the Spread of Germs Poster [DOWNLOAD]