Below are five points of focus for Maiello Brungo & Maiello this week:
Updated April 13, 2020
Your Bank and the Paychecks Protection Program (“PPP”). Where does your application stand? Lenders are beginning to disburse funds in the Pittsburgh area. A business will not receive PPP funds until it executes a Note and, in some instances, a Loan Agreement. Lender forms are varying. Do not execute your documentation until your legal counsel reviews. The structure of your documents will provide relative guidance as to how your lender views the Forgiveness process.
PPP Loan Forgiveness. The 8-week covered spend period begins on the date a business receives the loan funds. What can reduce your loan forgiveness amount? The key is to understand CARES Section 1106(d) Forgiveness Reduction Factors which may greatly impact your loan forgiveness. Business owners need to properly project and calculate full time equivalent employee (‘FTE”) pre and post COVID 19 comparison benchmarks to understand potential forgiveness reduction. Do not be confused by the June 30, 2020 Rehire Exemption language. It is somewhat unclear and likely will be clarified by future Treasury Department guidance.
Eligible COVID 19 Sick Leave Requests. An employee is only eligible for full paid sick leave under the FFCRA if a health care provider (HCP) directs or advises the employee to stay home or otherwise quarantine because the HCP believes that the employee may have COVID-19 or is particularly vulnerable to COVID-19, and quarantining based upon that advice prevents the employee from working (or teleworking). Employer can ask for reasonable substantiation although it is discouraged by the CDC for fear of overburdening HCPs. In certain circumstances an employee is only entitled to 2/3 of their regular pay.
Landlord – Tenant Relationship. Currently there has not been any legislation passed from a state of federal standpoint modifying a tenant’s contractual obligation to pay rent. Payment of rent is considered a contractual obligation, and a tenant’s obligation under current circumstances will vary based on lease language. For example, most force majeure provisions contain specific language providing rent remains due and payable. Landlords need to know their rights to collect rent if a tenant claims a force majeure event. Tenants need to know how to properly invoke a force majeure clause so as not to impact future rights in the event of litigation or new legislation. Make sure to review applicable lease provisions with legal counsel before taking any action.
PPP $100,000 Exclusion Impact. Does $100,000 compensation limitation require the employer to combine compensation paid and the eligible employee payroll benefits such as healthcare, retirement, and state payroll taxes when calculating forgiveness. No. The exclusion of compensation in excess of $100,000 annually (to be prorated) applies only to cash compensation, not to non-cash benefits, including: • employer contributions to defined-benefit or defined-contribution retirement plans; • payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums; and • payment of state and local taxes assessed on compensation of employees.
Please contact us with any questions or assistance you may need regarding these critical issues.