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.
The Consolidated Appropriations Act, 2021 signed into law on December 27, 2020 (the “CAA”) appropriated an additional $20 billion for EIDL funding and provides for a new EIDL grant program targeted to small businesses located in low-income communities that have suffered an economic loss of greater 30%. Eligible entities that did not receive the full $10,000 grant previously may request the remaining amount. Except for the targeted grant program created under the CAA, funding for the grants under the EIDL program has been depleted and such non-repayable grants are generally no longer available. The CAA also made certain changes and clarifications regarding the interaction of the EIDL and PPP program and the tax treatment of EIDL amounts.
- SBA website description of EIDL Loan and Grant and FAQs. At this time, the SBA website has not been updated to reflect changes made under the CAA and details regarding the process for requesting the CAA targeted EIDL grants has not yet been made available.
- EIDL Loan Application for qualified small businesses, non-profits and agricultural businesses.
- This advisory firm’s summary of the EIDL program updates under the CAA provides a useful overview of the new provisions.
Paycheck Protection Program (“PPP” Loans)
The Paycheck Protection Program initially launched under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), and the temporary program has been renewed and expanded under the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (the “Economic Aid Act”) signed into law on December 27, 2020. Under the Economic Aid Act, eligible entities have another opportunity to apply for “first draw” loans, and certain entities that already received PPP loans may apply for a “second draw” PPP loan. In addition to previously receiving and using a first draw PPP loan, the eligibility for a second draw PPP loan also requires the borrower to have no more than 300 employees and be able to demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020.
- SBA website description of the Paycheck Protection Program and top-line overviews of first draw loans and second draw loans.
- Interim Final Rules on first draw loans and second draw loans.
- Application forms for first draw loans and second draw loans.
- FAQs on PPP loan forgiveness (last updated prior to the Economic Aid Act).
- A helpful overview of PPP second draw loans by Forbes.
Grants for Shuttered Venue Operators (SOS/Save Our Stages Grants)
The CAA appropriated $15 billion for SOS Grants to be made by the SBA. Eligible persons/organizations meeting a number of requirements may apply for grants to pay qualifying expenses. Eligible entities and individuals include (i) a live venue operator or promoter, (ii) a theatrical producer, (iii) a live performing arts organization operator, (iv) a “relevant” museum operator, (v) a motion picture theater operator, and (vi) a talent representative. The amount of an SOS Grant is generally determined as a portion of the eligible person’s/entity’s revenue during 2019, capped at $10 million. SOS Grants will be disbursed under priority guidelines with higher priority grants allocated to grantees with the greatest revenue loss.
- This National Law Review article provides a more detailed summary of the SOS Grant Program.
- The SBA Office of Disaster Assistance will coordinate the SOS Grants. At this time, information about the process for applying for SOS Grants has not yet been made available by the SBA.
Other Business Relief Resources
- The Federal Reserve’s Main Street Lending Program terminated on January 8, 2021. The below entries are retained for information purposes:
- 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.
- Effective October 30, 2020, the Federal Reserve Board adjusted the terms of the Main Street Lending Program to better target support to small businesses and non-profits. Among other terms, the minimum loan size has been reduced to $100,000 (formerly $250,000). The Federal Reserve announcement includes links to revised term sheets and FAQs.
- 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 – The application deadline for the program was October 15, 2020. The NC Rapid Recovery Loan Program announced on September 15 that the program has expanded its services to reach more NC businesses in need of loans. Qualifying business criteria have been expanded, the loan cap has been increased to $250,000 (originally $50,000), no payments are required and interest accrues at 0.25% for the first 18 months of the loan, and the repayment period has been extended to 8½ years (from 5 years).
- RETOOLNC Grant Program – The RETOOLNC Grant application portal has been closed but may be reactivated if funds become available after assessment of all submitted applications. As of December 24, 2020, nearly $7 million in grants had been disbursed. On October 1, 2020, Governor Cooper announced a new grant program launched by the NC Department of Administration to provide $12 million in grants to minority and women-owned businesses impacted by COVID-19. Certified HUB (Historically Underutilized Businesses) and DBE (Disadvantaged Business Enterprise) firms with 50 or fewer employees and annual revenue not exceeding $1.5 million (per 2019 tax filings) can apply for a grant online beginning Monday, October 5th. The base grant amount is $10,000 (larger grants may be made depending on operating expenses) and applications will be reviewed in the order received until funds are exhausted.
- 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. The Guilford CARES grant program application period is now closed.
- 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.
- NC Triad Lights-On COVID Recovery Loan Program – This program, sponsored by the Piedmont Triad Regional Development Council, offers interest-free, 5-year non-forgivable loans (from $2,500 to $50,000) to small and mid-sized businesses in the NC Triad area whose revenue has been impacted by the COVID-19 pandemic. Applications can be submitted through a streamlined, online process.
- The North Carolina Department of Administration maintains and updates a Summary of COVID-19 Funding & Resources for Small Business Owners listing various federal, state and local programs.
Certain Tax-Related and Employee Leave Measures
Tax Filing and Payment Extensions, E-Signatures on Certain Forms
- The July 15, 2020 extended filing and payment due date for 2019 returns 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
- The IRS approved the temporary use of e-signatures for certain forms through December 31, 2020. The IRS subsequently added more approved forms and extended the period until June 30, 2021.
Emergency Sick Leave and Family/Medical Leave
- Schell Bray posting on the Families First Coronavirus Response Act (FFCRA)– Emergency Paid Sick Leave, Emergency Family and Medical Leave Expansion and Related Tax Credits.
- The leave requirements of the FFCRA expired on December 31, 2021. However, the CCA extends the refundable payroll tax credits for paid sick and family leave under the FFCRA through the end of March 2021 to employers who voluntarily provide such leave through March 31, 2021.
- Department of Labor News Release on the expiration of required leave and extended credits for voluntarily provided leave.
- 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 and Medical 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.
- The CCA extends the Employee Retention Tax Credit until July 1, 2021and expands the credit. EY has published a Tax News Update summarizing the modifications to the Employee Retention Tax Credit and certain other credits.
- 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 and the Consolidated Appropriations Act, 2021 (CAA)
- Economic Impact Payments
- Round 2 under the CAA. The CAA provided for a second round of nontaxable direct payments to qualifying individuals. Payments of up to $600 for individuals and $1,200 for married couples filing jointly, plus $60 for each dependent child under 17 will be made, subject to phase out once adjusted gross income exceeds $75,000 ($150,000 for a married couple). The IRS provides additional information on its website and notes that in most cases, it will automatically send the payment.
- Round 1 under the CARES Act. 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).
- 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 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 under the CARES Act to non-itemizers in 2020 and the relaxation of the 60% and 10% income limitations on charitable contribution deductions for individuals and corporations, respectively.
- The CCA extends the deduction through 2021, doubles the deduction for married filers to $600 and carries over the relaxation of the 60% and 10% income limitations.
- 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.
- Under the CCA, business meals from a restaurant will be 100% deductible for 2021 and 2022 (rather than 50% deductible as otherwise required).
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).