June 05, 2020 | BY admin
On, June 5th, 2020, President Trump signed the Paycheck Protection Program Flexibility Act (PPPFA) into law, which gives small businesses more flexibility in how they spend federal loans provided by the Paycheck Protection Program.
Under the act, the following changes were made:
- The covered period to spend the loan proceeds was extended from 8 weeks to 24 weeks. Note: the loan amount will remain the same, borrowers just have more time to spend it and receive forgiveness. Businesses who received a loan prior to June 5, can still elect to use an 8 week period.
- Only 60% of the loan amount must be allocated to payroll costs, instead of the previous 75%. The current language indicates that the 60% is now ‘all or nothing’. In other words, if 60% of payroll costs is not reached within the allowed 24 weeks, there will be zero forgiveness. There are legislators who have asked the SBA to not include this in the regulation.
- The safe harbor to rehire employees in order to maintain FTE numbers was moved from June 30 to December 31. In addition, the amount of loan forgiveness will not be reduced due to loss of employees if the borrower can document the inability to hire or rehire new employees, due to the business’s inability to return to its pre-February 15 operating levels due to compliance of various regulations.
- Employers who obtain forgiveness of a PPP loan may now defer all Employer Social Security tax deposits that would otherwise be required to be deposited before January 1, 2021.
- The amount which is not forgiven can also be extended from a 2-year loan to up to 5 years.
There are many questions which remain unanswered with the passage of this new law. We are awaiting guidance from the SBA and will continue to keep you updated as information becomes available.
This material has been prepared for informational purposes only, and is not intended to provide, nor should it be relied upon for, legal or tax advice. If you have any specific legal or tax questions regarding this content or related issues, please consult with your professional legal or tax advisor.
June 04, 2020 | BY admin
May 28, 2020 | BY admin
In business, much as in life, there are things outside our control. Sudden social, political or economic change can dramatically alter the landscape. When that happens- and inevitably it does- many leaders are presented with similar difficult circumstances, and where some succeed, others fail. Valuable lessons can be learned by observing those who get stuck as well as those who manage to keep moving forward.
Talk to any transformational leader and they will tell you that failure is something you need to get comfortable with if you want to be great. If it’s true that the greatest leaders once failed, then what exactly does it mean to fail, and, more importantly, how do we measure success?
Sports psychology explains what top athletes all have in common: they are always competing against themselves. They don’t play to beat the other players; they strive to outdo their own performance. If they lose, they respect the competition rather than gripe about unfair conditions. Every match is an opportunity to hone their skills. After every game, win or lose, they evaluate the strengths and weaknesses of their performance and adjust their efforts accordingly.
This model works in business as well. The best business leaders are competing against themselves. They understand that in business there is no absolute winner or loser, because the game is infinite. The infinite‐minded player understands that sometimes you have the better product, and sometimes “they” do. And it’s okay because this game isn’t over until you say so; it keeps going as long as you keep going.
When the going gets tough, the only way business will get better is when you do something better. The markets, the economy and the competition are not in your control. You can hope for one, or all of those things to change, or you can change what is in your control‐ your attitude, your process and your effort.
Jeff Bezos often muses about how customer obsession is key to Amazon’s growth. Basketball superstar Kobe Bryant wrote about being fueled by his obsession to be the best, and Dropbox CEO Drew Houston talks about how critical it is to be obsessed with solving a problem that matters to you. What inspires these kind of “obsessions”?
“The most successful, hardest‐working people I know don’t work hard because they’re disciplined,” says Houston. “They work hard because they’re enjoying solving a problem they really care about…it’s not about pushing yourself — it’s about finding the thing that pulls you.”
If you are going to focus on a problem, find one you are enthusiastic about solving and then get excited about pursuing your goal. To be a success, you don’t have to be the best, you just have to be committed to doing something a little better all the time.
May 26, 2020 | BY admin
Updated May 26th, 2020
On Monday, May 11th, Roth&Co hosted a webinar on the topic of maximizing Paycheck Protection Program loan forgiveness. It was presented by Ahron Golding, our in-house tax controversy attorney, and moderated by Zacharia Waxler, Roth&Co Co-Managing Partner. There were opening remarks by Rabbi Abba Cohen, Vice President for Government Affairs and Washington Director and Counsel of Agudath Israel of America. You can view a full video of the webinar here.
Due to lack of guidance from the SBA, there were some questions left unanswered during the webinar. The SBA has recently released their PPP Forgiveness Application, which includes instructions and clarifies some of these questions. For a copy of the forgiveness application from the SBA, see here. For your convenience, we have recapped the conversation below and responded to frequently asked questions, including the recent clarifications from the SBA. For a copy of the forgiveness application from the SBA, see here.
Please note that we are sharing what we currently know about PPP forgiveness, however we are still waiting on guidance regarding the many unknowns. This material has been prepared for informational purposes only, and is not intended to provide, nor should it be relied upon for legal or tax advice.
Secretary of Treasury Steven Mnuchin has indicated that loans over $2 million will be reviewed or audited for compliance. With this in mind, we recommend keeping detailed documentation as you make use of PPP funds to ensure you adhere to the guidelines and maximize forgiveness.
Determining & Documenting “Necessity”
The purpose of the PPP Program is to assist businesses and nonprofits facing financial difficulty with retaining workers, maintaining payroll or making mortgage interest, lease and utility payments. Each PPP applicant is required to sign a certification that specifies that: “the current economic uncertainty makes this loan request necessary to support the ongoing operations of the applicant.” The SBA guidance further clarifies that this takes into account current business activity and other sources of liquidity to support operations in a way that is not significantly determinantal to the organization. We therefore recommend documenting why the loan is necessary. This could be a memo or board meeting minutes where cashflow and forecasting are reviewed and makes clear that financial assistance to maintain operations is needed. The SBA has recently clarified that any loan under $2 million will be deemed to have been made in good faith.
If, upon further consideration, you determine that the PPP loan you received is not necessary under these guidelines, the funds can be returned under “safe harbor” amnesty until May 18th.
Note: PPP loan amounts may become public information as per the Freedom of Information Act, however this is not the case with tax information.
Maximizing Forgiveness – In General
The following guidelines were issued to ensure full or maximum forgiveness:
- A minimum of 75% of received funds must be utilized for payroll.
- The remaining 25% of the funds can be used to pay mortgage interest, rent, and utilities.
- For full forgiveness, businesses must maintain employee headcount and salary levels.
- Eligible expenses need to be incurred and paid over the eight-week period beginning from the day of the first PPP loan disbursement.
Payroll Costs: The Details
- Payroll includes salary, vacation, leave, health and retirement benefits. There is a $100,000 annual salary maximum per employee (which translates to $15,385 maximum for the 8 weeks) allowed for forgiveness.
- Shuttered businesses may pay employees that are not currently working. They are considered full-time employees (FTE) if you pay full wages.
- Wages paid as parsonage is a payroll cost, and is considered cash compensation which is subject to the $100,000 annual salary cap.
- The $100,000 annual salary cap is only a cap on cash compensation. Therefore employee benefits such as retirement contributions and health insurance are not limited by the $100,000 cap and are allowable as an additional payroll cost.
- Businesses may use PPP funding to pay employees’ sick leave, unless they are already taking a credit for Family Medical Leave or Emergency Paid Sick Leave made available under the Family First Coronavirus Response Act.
- Payments to 1099 contractors are notconsidered payroll costs.
- Sole Proprietors (reported on Schedule C) can take a salary, which is also subject to the $100,000 annual cap (resulting in $15,385 maximum forgiveness for the 8 weeks). Retirement contributions, State and local taxes and health insurance for owners/partners/Sole proprietors are not forgivable payroll costs.
- Cash distributions to active partners reported on a K-1 are allowable so long as it is allocated during the eight-week period (subject to same $100,000 annual cap).
- There is a maximum of $15,385 of forgiveness (8 weeks of 100k annualized) per individual. If the same individual is an owner of 3 business, he can only receive forgiveness once
- If a husband and wife are both owners, they are each most likely subject to their own $100,000 annual salary cap.
The Unknowns: What SBA Has Yet to Clarify
The following questions and considerations do not have clear guidance from the SBA.
- Can we give raises or bonuses in order to reach the 75% payroll criteria for forgiveness? Yes
- Is overtime pay allowed for employees? Is there a cap on the number of hours per employee based on other pay periods? Yes
- Is an employer allowed to offer incentives to employees to entice them to return to work? Incentive pay has a good chance of being forgiven so long as it was paid during the eight-week period and documented correctly with concrete reasons as to why it was necessary? Yes, incentive or hazard pay is a forgivable payroll expense, as long as it was paid during the eight-week period
- How is Qualified Tuition Reduction considered? This has not been clarified by the SBA. We have reason to believe that this falls under “other fringe benefits,” and would be included as an eligible payroll expense. QTR is not addressed on the newly released forgiveness form. We await further guidance from the SBA.
Expenses Paid & Incurred in the Covered Period
The statute states that, “costs incurred and payments made during the covered period” are eligible for forgiveness. How do we determine “incurred and paid” for the purpose of forgiveness?
The SBA has now clarified that Payroll expenses do not have to be both “paid and incurred” in the exact eight week period (56 days) that begins on the day that the first loan proceeds are received. The borrower is allowed to select the “Alternative Payroll Covered Period,” to coincide with their payroll schedule. The alternative pay period begins on the first day of the borrower’s first pay period following the date that they receive their first PPP funds and goes for the next 8 weeks.
For example, if you received your PPP funds on May 7, 2020, and the first day of your next pay period is May 15, 2020, you may elect to count the payroll costs for the 8-week period beginning May 15, 2020, rather than from May 1. In other words, you can start your 8 week period for payroll costs on your next regular scheduled payroll date after you receive the funds. This guidance ensures that companies will get 8 full weeks to use their loan for payroll costs, and get forgiveness for it.
This would answer questions like:
If I receive funds on May 15th, can I use those funds to make payroll which covers the preceding 2 weeks?
Yes. According to the forgiveness application, Payroll is considered paid on the day the paychecks are distributed or the employer originates the ACH transaction. Therefore, you could receive PPP money on May 15 and immediately pay – as part of your regular payroll process – wages that had been earned by the employees for the previous two weeks, and include the amounts in the forgiveness calculation because the amounts have been paid within your 8 weeks.
What if my 8 week period ends on June 23, but I don’t usually process payroll for that period until June 30? Should I accelerate my last payroll (which is already incurred) to ensure that it falls in the 8-week period?
You don’t have to accelerate, and it will still be forgiven. This is because payroll costs incurred for your last pay period of the 8-week period are eligible for forgiveness as long as they are paid no later than the next regular payroll date.
Can I pay ahead for benefits (such as medical) in order to maximize the forgiveness?
We await further guidance.
Can I pay the previous month’s rent if I haven’t paid it yet? Yes
Can I pay May’s rent if we received funds on May 7th?
Yes. Since the rent will have been paid during the 8 week period, it will qualify for forgiveness.
Note: The “covered period” for expenses other than payroll remains the 8 week period from when the funds were received by the borrower, regardless of whether they chose the Alternative period for payroll purposes. Therefore, if you elect the Alternative period, you will have two different 8 week periods to keep track of.
Other Expenses (up to 25%)
- The remaining 25% of the funds can be used to pay mortgage interest (not including prepayment), rent, and utilities in force before February 15th, 2020.
- For non-payroll costs such as mortgage interest, rent and utilities, to qualify for forgiveness, these expenses must either be: 1) paid during the 8-week covered period, or 2) incurred during the 8-week period, and paid by its next regular due date, even if that due date is outside the 8-week period.
- Mortgage Interest: Amounts paid in interest on a mortgage obligation that the company incurred in the ordinary course of business before February 15th, 2020.
- Rent: Rent paid pursuant to a lease agreement in force prior to February 15th, 2020.
- Utility payments: Payment for services including the distribution of electricity, gas, water, transportation, telephone and internet access for which service began before February 15th, 2020. This also includes payments of a business’s car leases, gas, cellphones, Internet and landline bills.
- Keep away from anything that looks like business expansion.
Forgiveness Reduction Issues
For full forgiveness, businesses must maintain prior employee headcount and 75% of salary levels.
How to calculate your prior headcount:
Step 1: Calculate your average full-time equivalent (FTE) headcount by adding:
- A) Total amount of full-time employees (defined as those working 40+ hours a week), plus
- B) Total amount of hours worked per week by part-time employees, divided by 40 (to add up the part timers)
Step 2: Choose the time period with the lower average FTE headcount:
- A) February 15th – June 30th 2019
- B) January 1st – February 29th 2020
You must have the same level now, from what you had prior (based on the above calculation).
- If an employer rehires previously laid-off or furloughed employees by June 30th, the employer will not be penalized for the reduction. However, employers should keep in mind that they still need to ensure that 75% of their loan be paid towards payroll costs, to maximize forgiveness
- Businesses may “replace” an employee to maintain headcount. The total number of employees needs to remain the same – not the employees themselves
- Employers may not reduce the salaries of those earning less than $100,000 annually by more than 25%. However, they can cure that issue by raising the salaries back up before June 30th.
- The employer will not be penalized for reductions in the following circumstances: (1) any positions for which the Borrower made a good-faith, written offer to rehire an employee during the 8 weeks which was rejected by the employee; and (2) any employees who (a) were fired for cause, (b) voluntarily resigned, or (c) voluntarily requested a reduction of their hours. Employer will, however, still need to meet the 75% payroll cost requirement. They just won’t be penalized for reduction of headcount or salary. In order to prevent being penalized for reduction of headcount or salary in such cases, the SBA is now requiring that the employer inform the applicable state unemployment insurance office of such employee’s rejected offer of reemployment within 30 days of the employee’s rejection of the offer. If the employee voluntarily requested a schedule reduction, the employer should keep documentation of such request.
Adding It All Up: Financial & Tax Considerations
Here are some additional details on what can and cannot be included in your expense totals:
- Employer-side payroll taxes are not forgivable.
- The IRS has currently ruled that payroll and other expenses paid which eventually lead to forgiveness, will not be deductible as business expenses by the employer. Members of Congress are currently attempting to make a rule change to allow the expenses to be deductible. Stay tuned.
- The CARES Act permits employers to defer the payment of the employer’s portion of payroll taxes. The employer will need to deposit half of these deferred payments by the end of 2021 and the other half by the end of 2022. If an employer receives forgiveness on a PPP loan, it is no longer eligible for this deferral. However, the deferral is still allowed until the date of forgiveness. At that point, employers will need to make regular payroll tax deposits.
Loan Forgiveness Timeline
The lender is required to issue the loan forgiveness decision within 60 days from the application of forgiveness.
We will continue to keep you updated as more information becomes available.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any specific legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.
May 12, 2020 | BY admin
With businesses across the country preparing for a reopening, Roth&Co’s HR director Chaya Salamon held a joint webinar session with employment attorneys Joel Greenwald and Jessica Shpall Rosen, of Greenwald Doherty LLP, about recommended practices to keep our employees safe and protect our businesses from liability. You can view a recording of the webinar here.
Below, you will find a recap of our discussion. Please keep in mind that this is informational only and not legal advice. In addition, the laws and guidance both governmental and health authorities are in flux.
With conditions changing every day, it is important to take the time to make considered decisions and consult your advisors, employment attorneys and accountants as necessary. This is a prime environment for plaintiffs’ attorneys on the lookout for potential lawsuits ‐ the last thing an employer needs at this time. Here are some considerations that our panelists discussed:
Track Time Carefully
Tracking time accurately may be difficult at this time, especially with non‐exempt employees working remotely without access to their usual timecards and oversight. However, it is essential to make sure they keep precise time records to ensure they are being paid for all time worked. In addition, there may be employees who are no longer exempt from overtime due to a decrease in wages below the minimum salary threshold, which means they will have to adjust to tracking their time.
Rehiring Furloughed & Laid‐Off Employees
While bringing back furloughed employees a relatively easy process, recalling laid‐off employees is, essentially, rehiring them. When rehiring employees, keep in mind:
- New employee documentation should be completed and signed once again (for example, arbitration agreements, restrictive covenant agreements, immigration forms, and legal notices).
- Depending on their policy and applicable law, employers may need (or want) to restore paid time off balances upon For example, some jurisdictions that require paid sick leave ‐ like New York City – have specific requirements when an employee is rehired.
- Try to be as objective as possible in deciding who to bring back, to avoid an appearance of For example, base your choices on objective factors like length of service, high billings and sales numbers, and run these by counsel.
Health & Safety Recommendations
Employers should ensure the work environment is as safe as possible. This can be accomplished through measures such as:
Organizational Changes, for example:
- Appointing a Chief Safety Officer or This could include the CEO, HR and other stakeholders who will take responsibility for health and safety.
- Stay up to date on CDC, OSHA (Occupational Safety & Health Administration), EEOC (Equal Employment Opportunity Commission) and local and state guidance and standards of
- Implement strong, clear, safety standards and policies (not just guidelines).
Personal Preventive Measures, for example:
- Make sure that masks, gloves and hand sanitizer are available for your
- Implement screening measures and return‐to‐work measures that are appropriate for your workforce (such as taking temperatures and testing), with guidance from counsel, as the laws and regulations in this particular area are changing
- Monitor symptoms and send home employees exhibiting symptoms of COVID‐19.
- Keep individual records tracking testing, symptoms or
Employment Infrastructure, for example:
- Ensure social and physical
- Stagger shifts so fewer employees are on site at one
- Suspend large, in‐person meetings or extracurricular activities such as birthday
- Allow employees to work remotely whenever feasible, particularly those who are high‐risk.
- Establish common area
Physical Changes to the Workspace, for example:
- Create more space around workstations to maintain social distancing
- Erect walls and barriers among employees and clients
- Update cleaning procedures to ensure regular disinfecting
- Hang signage informing employees and visitors of new practices
- Make stairways/hallways one‐way
- Install hands‐free door‐opening
Responding to Illness, for example:
- Report to health agency
- Enact contact tracing
- Disinfect office spaces
Business Changes, for example:
- Establish rules regarding visitors, vendors and delivery
- Cancel all non‐essential travel.
Requesting or requiring employees to disclose personal health information leaves you open to claims of privacy and HIPPA violations. On the other hand, if you don’t collect this information or take proper safety measures, you are at risk of an employee contracting COVID‐19, and potentially, facing a wrongful death suit. It is also unclear whether workers’ compensation insurance would cover employees who get sick with COVID‐19. Employers will need to weigh all these risks in consultation with counsel.
Be careful not to assume that employees are too feeble to work because of age, disability or illness. Doing so can leave you open to discrimination claims. Allow employees to approach you with their concerns, at which time you should engage in an interactive process to determine whether and how to reasonably accommodate their needs.
The foregoing is a summary of the laws discussed above for the purpose of providing a general overview of these laws. These materials are not meant, nor should they be construed, to provide information that
is specific to any law(s). You should be aware that these laws are changing rapidly. The above is not legal advice and you should consult with counsel concerning the applicability of any law to your particular situation.