The CARES Act: Relief for Yoga Businesses April 7, 2020 Craig - - PowerPoint PPT Presentation

The CARES Act: Relief for Yoga Businesses

April 7, 2020

Craig Saperstein, Partner Aimee Ghosh, Counsel

Aimee P. Ghosh

Counsel Washington, DC aimee.ghosh@pillsburylaw. com +1.202.663.8091

Craig J. Saperstein

Partner Washington, DC craig.saperstein@pillsburylaw.c

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+1.202.663.9244

Federal Response to COVID-19 Pandemic

March 6, 2020: Emergency appropriations of $8.3 billion, mostly for small business disaster assistance loans and emergency health and medicine efforts. March 18, 2020: Enactment of the Families First Coronavirus Response Act, which established paid leave guarantees for certain workers. March 27, 2020: Enactment of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which includes $2 trillion in federal funding for states, businesses, and individuals. The CARES Act provides for small business loans and tax benefits, among other measures. Next: A fourth relief measure targeting the economic effects of the COVID-19 emergency

The CARES Act: At-a-Glance

CARES Act: Small Business Loan Programs

PURPOSE

• The Paycheck Protection Program is a loan program designed to provide a direct incentive for

small businesses to keep their workers on the payroll. PROGRAM OVERVIEW

• Each eligible small business may receive a loan of up to 2.5x its average monthly payroll for the

year preceding the loan, but not more than $10M.

• The loans are available until June 30, 2020.

ADMINISTRATIO N

• The program is administered by the Small Business Administration (SBA) but loans are provided

by designated lenders.

• Loans are distributed on a “first come, first serve” basis.

HOW TO APPLY

• Applicants apply directly to designated lenders.
• Use the “Find Eligible Lenders” tool on the SBA Website at

www.sba.gov/paycheckprotection/find.

Paycheck Protection Program

ELIGIBILITY

• Any business or nonprofit with up to 500 employees are eligible (including “affiliates”).
• Large companies are eligible to the extent the applicable SBA size standard for their industry

allows for a greater number of employees.

• In determining the number of “employees,” a business employs, an “employee” includes

individuals working on a full-time, part-time, or other basis.

• Individuals operating under a sole proprietorship, with or without employees, or as an

independent contractor, may also apply. USES

• Loans may be used to cover certain costs of payroll, employee benefits, interest payments,

rent, and utilities. LOAN TERMS

• Complete payment deferment (including payment of principal, interest, and fees) for six to

twelve months.

• No personal loan guaranty requirement.

FORGIVENESS

• Loan forgiveness is available for loan proceeds used for permitted costs in the eight weeks

after the loan is issued.

• Only 25% of the amount forgiven may be for non-payroll costs.
• Loan forgiveness is subject to limitations on workforce or employee compensation reductions.

Paycheck Protection Program

PURPOSE

• The long-standing Economic Injury Disaster Loan Program was created to assist businesses,

renters, and homeowners located in regions affected by declared disasters. PROGRAM OVERVIEW

• The CARES Act expands the existing Disaster Loan Program.
• Under the program, eligible businesses may receive a loan up to $2M.
• Loans provided under the expanded Disaster Loan Program are available until Dec. 31, 2020.

ADMINISTRATIO N

• Applicants apply directly to the SBA.
• Borrowers may not apply for a Paycheck Protection Loan and a Disaster Loan for the same

purpose. HOW TO APPLY

• Applicants apply directly to the SBA.
• Apply online at https://covid19relief.sba.gov/#/

Economic Injury Disaster Loans

ELIGIBILITY

• Companies with up to 500 employees are eligible.
• Individuals operating under a sole proprietorship, with or without employees, or as an independent

contractor, may also apply.

• The size threshold applies to the applicant entity as well as its “affiliates” – i.e., firms under

common ownership or control. LOAN AMOUNT

• Up to $2M.
• Exact amount is determined based on the applicant’s need.

USES

• Loan proceeds may be used to pay fixed debts, payroll, accounts payable, and other business costs.

LOAN TERMS

• Interest rate is 3.75% for small businesses.
• Loan term of up to 30 years.
• Personal guaranty is not required on loans up to $200,000.
• No collateral required for loans of $25,000 or less; for loans of more than $35,000, general security

interest in business assets will be used.

• Borrowers do not have to prove that they cannot get credit elsewhere.
• Borrowers must allow the SBA to review tax records.

Economic Injury Disaster Loans

AVAILABILITY

• $10,000 emergency advance is available while the application is pending.

TERMS

• The emergency advance is not required to be repaid.
• Applicant may receive this advance while applying for a Paycheck Protection Loan. If received,

the advance will be deducted from the loan forgiveness amount.

Economic Injury Disaster Loans: Advance Grants

CARES Act: Tax Benefits

SUMMARY

• Employers generally are responsible for paying a 6.2% Social Security tax on employee wages.
• The CARES Act allows employers to defer payment of the employer share of the Social Security

tax between March 27, 2020 and Jan. 1, 2021. ELIGIBILITY

• All employers who pay Social Security tax on employee wages.
• Exception: Businesses that received a (forgiven) Paycheck Protection Loan are not eligible to delay

employer payroll taxes. DEFERRAL

• The CARES Act requires that the deferred employment tax be paid over the following two-years,

with half the amount required to be paid by December 31, 2021 and the other half by December 31, 2022.

Delay of Employer Payroll Taxes

SUMMARY

• The CARES Act provides a refundable payroll tax credit for 50 percent of “qualified wages” paid

by employers to employees between March 13, 2020 and December 31, 2020. ELIGIBILITY

• Any employer may take advantage of the Employee Retention Tax Credit if during a calendar

quarter: (1) business operations are fully or partially suspended during the calendar quarter due to orders from a governmental authority limiting commerce, travel, or group meetings due to COVID-19; or (2) the business experiences a significant decline in gross receipts (50% less than the previous year).

• Exception: Businesses that received a (forgiven) Paycheck Protection Loan are not eligible.

“QUALIFIED WAGES”

• For employers with 100 or fewer full-time employees, all employee wages are eligible,

regardless of whether an employee is furloughed. REFUNDABILITY

• The amount of qualified wages that may be taken into account for any individual employee may

not exceed $10,000.

• If the amount of allowable credit exceeds this limitation (for any calendar quarter), the excess

shall be refundable to the employer.

Employee Retention Tax Credit

Additional Business Tax Benefits

PAID LEAVE PAYROLL TAX CREDIT

• The Families First Coronavirus Response Act (FFCRA) provides a tax credit to employers with

fewer than 500 employees for amounts paid to employees for paid sick leave and emergency leave the law requires

• The credits apply against an employer’s quarterly Social Security and Medicare taxes and are

equal to the amount paid by the employer, subject to limitations TAX FILING DUE DATE EXTENDED

• The IRS extended the federal income tax filing due date from April 15, 2020 to July 15, 2020
• Many states have also extended their tax filing due dates, be sure to check the deadline in the

state where you pay taxes

Local Small Business Assistance Programs

CHICAGO

• Chicago Small Business Resiliency Fund

DENVER

• Denver Economic Development and Opportunity (DEDO) Small Business Emergency Relief

Program

• Denver Microloan Program

LOS ANGELES

• LA Small Business Microloan Program

NEW YORK CITY

• NYC Small Business Continuity Loan

SACRAMENTO

• Sacramento Small Business Emergency Economic Relief Loan Program

SAN FRANCISCO

• SF COVID-19 Small Business Resiliency Fund

SEATTLE

• Seattle Small Business Stabilization Fund

Private Support for Small Businesses

AMAZON

• $5 million relief fund to provide cash grants to local Seattle small businesses

FACEBOOK

• $100 million grant program for small businesses impacted by COVID-19

KABBAGE

• Online program to allow businesses to sell gift cards to use at a later date