COVID-19
Business Updates
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COVID-19 Business Resources

CARES Act

The CARES Act, which was finalized March 27, implements numerous relief measures for individuals and businesses. We are communicating the details in easy-to-understand sections and will continue to provide our insights as new information emerges.

PPP Updates

May 18: The PPP loan forgiveness application has been released. It outlines the documentation required for forgiveness and clarifies a few items, including: 

  • “Covered Period” consists of the 8-week period (actual 56 days) from the date of first loan disbursement.
  • Borrowers with biweekly (or more frequent) payroll may elect to calculate eligible payroll costs using the 8-week (56-day) period that begins on the first day of their first pay period following disbursement of the loan ("Alternative Payroll Covered Period").
  • Only payroll costs incurred and paid during either the Covered Period or the Alternative Payroll Covered Period are eligible for loan forgiveness.
  • Payroll costs are considered paid on the day that paychecks are distributed or the Borrower originates an ACH credit transaction. Payroll costs are considered incurred on the day that the employee’s pay is earned. Payroll costs incurred but not paid during the Borrower’s last pay period of the Covered Period (or Alternative Payroll Covered Period) are eligible for loan forgiveness if paid on or before the next regular payroll date. Otherwise, payroll costs must be paid during the Covered Period (or Alternative Payroll Covered Period).
  • Compensation of owner-employees or self-employed individuals/general partners is limited to the lesser of the amount paid (limited to $100,000 per year) during the Covered Period or the 8-week equivalent of their compensation for 2019.
  • Non-cash compensation payroll costs are limited to employer contributions for health insurance and retirement plans, and employer state and local taxes assessed on employee compensation.
  • Full time equivalents (“FTEs”) are considered on a 40-hour per week basis.
  • For the salary reduction calculation, borrowers must compare the average annual salary or hourly wage from January 1, 2020 to March 31, 2020 to the average annual salary or hourly wage during the 8-week period, and a specific calculation is provided for hourly workers.
  • For the headcount reduction calculation rehire safe harbor, FTEs are counted as of June 30, 2020.
  • Mortgage obligations include payments of interest on real or personal property during the Covered Period, but the obligation must have been in place prior to February 15, 2020.
  • Lease payments include payments for real or personal property during the Covered Period, pursuant to lease obligations in force before February 15, 2020.

May 13: The SBA released an update to its FAQs indicating that any borrower, together with its affiliates, that received a PPP loan of less than $2 million, is deemed to have made the required certification concerning the necessity of the loan request in good faith.

The information comes one day before the safe harbor deadline to repay a PPP loan. The SBA previously provided guidance stating any borrower that applied for a PPP loan prior to April 24, 2020 and repaid it in full by May 14, 2020 (now May 18) will be considered to have made the borrower’s certification in good faith. The certification states, “current economic uncertainty makes this loan request necessary to support the ongoing operations of the applicant.”

For borrowers with PPP loans greater than $2 million, the SBA advises borrowers to consider their individual circumstances to make the determination of whether there was adequate basis for the required certification concerning the necessity of the loan request.  As previously noted, the SBA has stated that all PPP loans in excess of $2 million will be subject to review by the SBA for compliance with the program requirements. In the course of this review, if the SBA determines the borrower lacked an adequate basis for the required certification concerning the necessity of the loan request, the SBA will require the outstanding PPP loan balance to be repaid and will inform the lender the borrower is not eligible for loan forgiveness. If the borrower repays the loan after receiving this notification from the SBA, the SBA will not pursue administrative enforcement or referrals to other agencies based on its determination with respect to the certification concerning necessity of the loan request.  

Unfortunately, the guidance issued does not provide anything further regarding the loan forgiveness provisions. We are monitoring the guidance and will provide updates when they become available. 

May 6: The IRS issued Notice 2020-32, making it clear anyone that receives PPP loan forgiveness cannot deduct the related expenses. The IRS clarification significantly reduces the benefit of PPP loans.The IRS stated in the notice, “this treatment prevents a double tax benefit.” This has been a controversial topic since the CARES Act was signed into law in late March. The Act stated that the loan forgiveness shall be excluded from gross income. However, the Act was silent regarding the deductibility of the related expenses. 

A bipartisan group of lawmakers have also sent a letter to the Treasury Department stating the position taken in Notice 2020-32 regarding non-deductibility of any expenses used for the PPP loan was inconsistent with the intent of Congress.

Filing & Payment Deadline Updates

Federal: Updated April 10: the July 15, 2020 federal income tax deadline has been expanded to generally all taxpayers with a filing (original or pursuant to a valid extension) or payment deadline falling on or after April 1 and before July 15. This includes (but is not limited to) the filing and payment of 2019 income tax returns and estimated income tax payments originally due between April 1 and July 15.

Missouri: The Missouri Department of Revenue is following suit and has also announced that state income taxes will be due July 15. This applies to balance due and estimates as well.

Kansas: The Kansas tax filing deadline has also moved to July 15 and as of April 2, estimated tax payments made after April 15, but before July 15 will not be charged a penalty or interest.

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