Small Business Administration (“SBA”) Loan Programs
The original funding for the EIDL and PPP programs lapsed of April 16 and the SBA stopped accepting applications under either program. On April 24, legislation was enacted to add $310 billion to the programs. Of the $310 billion, $250 billion replenishes 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. $60 billion of the $310 billion is to replenish the EIDL program. After replenishment, the SBA was initially accepting new EIDL applications only for agricultural businesses. As of June 15, the SBA is accepting new EIDL applications for loans and grants to both qualified small businesses and US agricultural businesses. This resource page will be updated for future developments under the SBA programs.
The PPP loan program shut down on June 30, 2020. However, on July 4, President Trump signed legislation unanimously passed by the Senate and the House of Representatives to extend the PPP application deadline until August 8, 2020. The PPP loan program had approximately $130 billion of unallocated funds remaining when it shut down on June 30.
Economic Injury Disaster Loan (“EIDL”) Program
- SBA website description of EIDL Loan and Grant.
- EIDL Loan and Grant Application – The SBA changed the EIDL application on March 30 and now uses a streamlined application that allows an applicant to apply for both an EIDL loan and an EIDL grant in one application. EIDL loans do not have a forgiveness component, but EIDL grants do not require repayment. Applications are submitted online and no third party lender is involved in this process. Applicants that applied before March 30 and have not received a loan number are encouraged to re-apply using the new streamlined application.
- EIDL Loan and Grant Application for qualified small businesses and agricultural businesses.
Paycheck Protection Program (“PPP” Loans)
- 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.
- SBA website information regarding eligibility, loan details and forgiveness.
- 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
- SBA PPP Loan Forgiveness Application – A PPP borrower must apply for forgiveness of its PPP loan by completing this application as directed in the provided instructions, and submitting it to the Lender. Borrowers may also complete this application electronically through their Lender.
- SBA finalized PPP loan forgiveness guidelines issued July 23, 2020.
- 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).
Other Business Relief Resources
- Federal Reserve website information on the Main Street Lending Program – Including 4-year loans ($500,000 minimum) with one-year deferred interest and principal payments for qualifying borrowers. Loans are originated at local banks. Interested applicants should contact and apply through their local lenders.
- The Main Street Lending Program webpage of the Federal Reserve Bank of Boston has more specific information and resources with respect to the loans available under the Main Street Lending Program, including a general program overview, FAQs, and applicable forms and agreements.
- covidcap.com – A searchable website launched by CASE and CASEi3 at Duke University’s Fuqua School of Business to help any entrepreneur in the world, for-profit or nonprofit, struggling due to the economic impacts of COVID19, locate cash relief resources in their community.
- North Carolina COVID-19 Rapid Recovery Loan Program – Loans of up to $50,000 for NC small businesses affected by COVID-19, administered through the Golden Leaf Foundation. On May 4, Governor Cooper signed legislation allocating an additional $125 million in funding for the program.
- The Guilford CARES Small Business Assistance Grant Program is offering one-time grants of up to $10,000 to qualifying small businesses impacted by the COVID-19 pandemic due to Stay At Home Orders.
- IRS FAQs regarding the CARES Act Relief Fund provide that a business receiving a state or local government grant funded from the CARES Act Relief Fund generally cannot exclude the grant from gross income.
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 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 Reformed Broker, the blog of financial advisor and “FinTwit” personality Josh Brown, has an accessible Q&A format post discussing the provisions of the CARES Act permitting affected individuals to withdraw up to $100,000 from a qualified retirement account without incurring the 10% early withdrawal penalty, waiver of RMDs and the higher loan amount ($100,000) from qualified plans. The IRS has published FAQs 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).