Carlsbad, CA (March 26, 2020)—A webinar, COVID-19 Small Business Relief Resources, hosted by NAMM on March 24 provided details of the current federal and state relief for businesses affected by the coronavirus pandemic, including Small Business Administration (SBA) emergency business loans and newly expanded emergency sick leave and family leave legislation.
“It’s complex, but we need to make sure that our members have access to some of these business-saving resources that will be coming online,” said NAMM president and CEO Joe Lamond in his brief introduction. Mary Luehrsen, director of public affairs and government relations for NAMM, hosted the webinar, which was presented by representatives of South Carolina-based law firm and lobby group Nelson Mullins Riley & Scarborough.
Indeed, the new legislation is complicated and could be affected by subsequent bills passed by lawmakers as they continue to respond to the current crisis. For that reason, anyone planning to take advantage of these new programs is advised to check with the relevant federal and state agencies, local Chambers of Commerce or their tax advisors for the very latest information.
The SBA Economic Injury Disaster Loan Program, passed into law March 17, 2020, offers low-interest loans for working capital of up to $2M to help small businesses overcome their temporary loss of revenue due to the virus. Full details are available at sba.gov. Lawmakers are currently negotiating over an additional stimulus package that may include further relief for small businesses.
The loans may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid due to the impact of the coronavirus. The interest rate is 3.75% for small businesses or 2.75% for non-profits, repayable over 30 years.
There is a three-stage loan application process beginning with a 30-minute online form, followed by verification, documentation and a credit review, a process that reportedly could take three or four weeks. Terms are determined on a case-by-case basis.
[UPDATE: Phase III of the congressional response to the coronavirus crisis, Coronavirus Aid, Recovery, and Economic Security (CARES) Act or H.R. 748, has passed the Senate and is expected to pass the House on Friday, March 26. According to the Wall Street Journal, small businesses and non-profits with fewer than 500 employees in a single location can apply for loans backed by the SBA via qualifying banks: “The loans would convert into grants that don’t have to be repaid for amounts spent on items such as payroll, rent or utilities, with the grants reduced when workers are laid off. The loans would be capped at $10 million and cover wages up to $100,000 a year,” reports the WSJ.]
New legislation providing expanded emergency sick leave and family leave is temporary and fully reimbursed through payroll tax credits. It applies to businesses with less than 500 employees and is in effect from Apr. 2 through Dec. 31, 2020. It also applies to independent contractors and gig workers. The package is designed to keep workers on payrolls while ensuring that employees aren’t forced to choose between work and the health of themselves and their families, or the public health.
Full-time employees are eligible for up to 80 hours of sick leave, while part-time workers’ compensation will be based on work history and a formula in the legislation. Employees will be compensated at their regular rate of pay, federal minimum wage or the local minimum wage, whichever is higher. Employees unable to work (including telework) are to be paid 100% of wages if they are subject to quarantine or self-isolation or are experiencing symptoms and seeking a medical diagnosis. Compensation is capped at $511 per day or $5100 per employee in aggregate.
A second rate applies if the employee is caring for someone with coronavirus, or for a child because the child’s school or childcare facility is closed, or if the childcare provider is unavailable due to the coronavirus. Eligible employers may claim a credit for two-thirds of the employee’s regular rate of pay, which is capped at $200 per day or $2000 in aggregate, for up to 10 days’ leave.
An emergency paid family leave provision provides up to 12 weeks of protected leave, of which 10 are paid. Eligibility is very narrow, specifically, if the employee is unable to work in order to care of a son or daughter, if the school or place of care is closed, or if a childcare provider is unavailable due to the public emergency. The employee must have been employed for at least 30 days before the law was enacted.
The first 10 days may be unpaid and during that time the employee may elect to use other paid leave such as vacation or sick leave. The employer cannot require them to use that leave. Compensation is at two-thirds the rate of regular pay and is capped at $200 per day or $10,000 in the aggregate, per employee. Again, compensation for part-time workers is calculated using a formula.
Every dollar of sick leave or paid leave that employers are required to pay under the act is to be offset by a refundable tax credit. The tax credit can also be advanceable. In practice, employers will take the payroll taxes withheld in an escrow account and use those funds to pay for the leave. They may also be reimbursed if their cost for the leave exceeds the taxes they would owe. For those businesses with cashflow issues, there will be a procedure for employers to request an advance from the IRS.
Cost offsets for independent contractors and gig workers will come from self-employment tax and payroll taxes. The IRS and Department of Labor are reportedly working on compliance details.
The Dept. of Labor is reportedly also working on rules detailing the circumstances under which a small business of 50 or fewer employees would be eligible for a hardship exemption from the leave provisions. Legislation currently passing through Congress may further impact or clarify this provision.
Under the new legislation, federal requirements such as the one-week waiting period, looking for work and the requirement to quit for good cause are temporarily waived with regard to unemployment insurance benefits. The bill before Congress may further expand these benefits.
Finally, the deadline for filing federal taxes has been moved from Apr. 15 to July 15. Anyone owing taxes of up to $10M on Apr. 15 will pay on July 15 with no penalty for those additional 90 days. There is no guidance available yet regarding the estimated Q1 2020 tax payments due Apr. 15 for some individuals.
Most states have harmonized their tax filing deadlines to July 15 with the revised federal filing date, except for—currently—nine states: Maine, Massachusetts, Michigan, Mississippi, New Jersey, Ohio, Oregon and West Virginia. Check with taxadmin.org for the latest information.
Additional resources and information, constantly updated, are available from NAMM.
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