Small Business Administration (“SBA”) Loan Programs

Economic Injury Disaster Loan (“EIDL”) Program

Funding for EIDL loans is still available and the SBA continues to accept loan applications from qualified small businesses, agricultural businesses and non-profit organizations. However, funding for the grants under the EIDL program has been depleted and such non-repayable grants are no longer available.

• SBA website description of EIDL Loan and Grant and FAQs.
• EIDL Loan Application for qualified small businesses, non-profits and agricultural businesses.

Paycheck Protection Program (“PPP” Loans)

The Paycheck Protection Program closed on August 8, 2020, and as such, the SBA is no longer accepting PPP applications from participating lenders. The links below to general information about PPP loans and the PPP loan forgiveness process may be helpful to PPP borrowers. The remaining entries are for informational and background purposes.

• SBA website information regarding eligibility, loan details and forgiveness
• U.S. Treasury Department website information regarding PPP loans, including links to all Treasury Department and SBA Interim Final Rules relating to PPP
• SBA FAQs about PPP Loan Forgiveness
• SBA finalized PPP loan forgiveness guidelines issued July 23, 2020
• PPP Loan Forgiveness Application and Instructions
• PPP EZ Loan Forgiveness Application and Instructions
• The original funding for PPP lapsed of April 16 and the SBA stopped accepting PPP loan applications. On April 24, legislation was enacted to add $250 billion to the PPP program with $60 billion of this amount slated for community banks and Community Development Financial Institutions. The SBA resumed accepting PPP applications on April 27. The PPP loan program initially shut down on June 30, 2020 when it had approximately $130 billion of unallocated funds remaining. On July 4, the president signed legislation unanimously passed by the Senate and the House of Representatives to extend the PPP application deadline until August 8, 2020.
• On June 5, the Paycheck Protection Program Flexibility Act of 2020 (the “Flexibility Act”) was signed into law. The Flexibility Act relaxes certain requirements relating to the use of forgivable PPP funds including (i) an extension of the period during which PPP loan proceeds may be used to pay eligible expenses from 8 weeks to 24 weeks (or until December 31, 2020, if earlier), and (ii) a reduction in the percentage of the borrowed funds that must be used for payroll expenses from 75% to 60%. The Flexibility Act also relaxed the requirements with respect to restoring full time equivalent employees, permits PPP loans that are not forgiven to be repaid over 5 years rather than 2 years, and allows PPP borrowers to continue to take advantage of payroll tax deferrals even after the PPP loan is forgiven. This ADP posting summarizes key aspects of the Flexibility Act. Only certain of the SBA resources listed below have been updated to reflect changes made by the Flexibility Act.
• PPP Borrower Application Form– Paycheck Protection Program loans are available only through third party lenders. Applicants cannot submit these applications directly to the SBA. The application form should be submitted to the applicant’s primary bank for approval and submission to the SBA. The Borrower Application Form has been updated to reflect the Flexibility Act. As originally enacted, the last day on which a lender could obtain an SBA loan number for a PPP loan was June 30, 2020. This deadline will be extended to August 8, 2020 once the legislation passed by Congress extending the date is signed into law by the president.
• SBA FAQs for Lenders and Borrowers under the PPP– Link to downloadable .pdf of FAQs to be updated on a regular basis by the SBA and Department of the Treasury
• Certification safe harbor for loans under $2 million – PPP borrowers were required to certify that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” In the above FAQs (#31), the SBA reminded borrowers to consider whether the certification had been made in good faith and provided that any borrower who repaid the PPP loan by May 7, 2020 (extended to May 14 by FAQ 43, and then to May 18 by FAQ 47) would be considered to have made the certification in good faith. On May 13, the SBA issued FAQ 46 stating that any borrower that received a PPP loan with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith. All PPP loans in excess of $2 million will be reviewed, and if the SBA determines that there was not adequate basis for the certification, no enforcement action will be taken against the borrower if the loan is repaid after receiving notification from the SBA.
• SBA Guidance on How to Calculate PPP Loan Amount by Business Type
• SBA Interim Final Rule giving lenders and applicants additional guidance regarding the PPP program. Revisions to first interim final rule to conform key provisions to the Flexibility Act.
• Schell Bray PPP Informational Zoom Conference with Erica Parker, Senior Vice President at Pinnacle Financial Partners.
• Schell Bray PPP Follow-up Informational Zoom Conference with Erica Parker, Senior Vice President at Pinnacle Financial Partners.
• U.S. Chamber of Commerce Small Business Guide and Checklist offering a concise explanation of the PPP loan program for small businesses.
• The CARES Act provides that borrowers do not have taxable income with respect to the portion of the PPP loan that is forgiven. However the IRS has clarified that the borrower cannot take an income tax deduction for qualified expenses paid with forgiven loan proceeds (e.g., wages, rent, utilities and mortgage interest).

Certain Tax-Related and Employee Leave Measures

Tax Filing and Payment Extensions-The July 15 extended filing and payment due date has passed

• Schell Bray posting on Tax Filing and Payment Extensions including links to IRS and NCDOR notices.
• IRS FAQs on Filing and Payment Deadlines

Emergency Sick Leave and Family/Medical Leave

• Schell Bray posting on the Families First Coronavirus Response Act – Emergency Paid Sick Leave, Emergency Family and Medical Leave Expansion and Related Tax Credits.
• IRS FAQs on the Paid Sick Leave and Family and Medical Leave provisions of the Families First and Coronavirus Response Act, including both basic FAQs and detailed information for employers.
• Department of Labor FAQs on the Paid Sick Leave and Family/Medial Leave provisions of the Families First and Coronavirus Response Act.

Employee Retention Tax Credit and Deferral of Employment Tax Payments

• IRS Explanation of the Employee Retention Tax Credit – A refundable tax credit of up to $5,000 per employee with respect to wages paid after March 12, 2020 and before January 1, 2021 by an eligible employer whose business has been financially impacted by COVID-19. This credit is not available to borrowers under the Paycheck Protection Program.
• IRS FAQs on the Employee Retention Tax Credit including procedures for an employer to receive an advance of the credits.
• IRS FAQs on Employer Deferral of Certain Employment Tax Deposits – Employers may defer the deposit and payment of the employer’s share of social security tax otherwise required for the period March 27, 2020 – December 31, 2020. Half of the deferred amount must be paid by December 31, 2021, and the other half by December 31, 2022.

Other Tax Provisions of the Coronavirus Aid, Relief and Economic Security (CARES) Act

• Economic Impact Payments – The IRS’s Economic Impact Payment Information Center provides details about eligibility and the payment process for payments of refundable tax credits of up to $1,200 for individual filers and $2,400 for married couples filing jointly, and the additional $500 for each qualifying child. These credits are phased out for taxpayers with adjusted gross income over $75,000/$150,000 and eliminated for taxpayers who made more than $99,000 (individuals) and $198,000 (married filing jointly). Forbes has created a calculator to help individuals estimate the amount of their payments.
• Waiver of 10% Early Withdrawal Penalty and Required Minimum Distributions and Increase of Loan Amounts from Retirement Accounts and Plans – The CARES Act permits affected individuals to withdraw up to $100,000 from a qualified retirement account without incurring the 10% early withdrawal penalty, waives Required Minimum Distributions and permits a higher loan amount ($100,000) from qualified plans. The IRS has published FAQs and Tax Tip 2020-85 on coronavirus-related relief for retirement plans and IRAs implemented under the CARES Act.
• Temporary $300 Above the Line Charitable Contribution Deduction and Relaxation of Limitations – A posting on the North Carolina Center for Nonprofits website includes a brief description of the $300 charitable deduction allowable to non-itemizers in 2020 and the relaxation of the 60% and 10% income limitations on charitable contribution deductions for individuals and corporations, respectively.
• Changes to the Net Operating Loss and Business Interest Expense Deduction Limitations Enacted by the TCJA – PWC has published a detailed advisory about the CARES Act provisions permitting businesses to carryback certain NOLs for 5 years, eliminating the 80% taxable income limit on NOLs, and temporarily increasing the Section 163(j) limitation on business interest expense deduction from 30% to 50%. The IRS has published guidance on claiming the NOL relief offered under the CARES Act and a “do-over” of prior elections out of the Section 163(j) limitation.

Other COVID-19 Related Tax Relief

• In response to the COVID-19 pandemic, Notice 2020-39 provides relief to Qualified Opportunity Funds and their investors with respect to certain requirements, including a 2 year extension of the period during which businesses financed by a Qualified Opportunity Fund may expend cash and an extension of the 180-day period during which certain investors may invest qualified capital gains.
• IRS FAQs for nonresident individuals and certain non-US businesses with employees impacted by COVID-19 emergency travel disruptions. Tax relief under which 60 consecutive calendar days (beginning between February 1 and April 1) of presence and/or activities in the US will be disregarded for purposes of determining certain US income tax consequences. Additional details relating to certain individual taxpayers set forth in Revenue Procedure 2020-20 (individuals and the substantial presence test for residency) and Revenue Procedure 2020-27 (waiver of certain requirements for the foreign earned income exclusion).

Helping Employees and Workers

• Schell Bray posting on Employer Sponsored Philanthropy
• Schell Bray posting on COVID-19 Response
• Arts North Carolina listing of COVID-19 relief funds for artists and the arts
• NC Restaurant Workers Relief Fund website