Business provisions in recent Covid-19 legislation packages

SBA Economic Injury Disaster Loans (EIDL) and Paycheck Protection Program loans

Small businesses are eligible to apply for an Economic Injury Disaster Loan advance of up to $10,000 that does not have to be repaid.Working capital loans up to $2 million are available on a fast turnaround.

Paycheck Protection Program loans are available to employers with fewer than 500 employees, including self-employed, sole proprietors and freelance and gig economy workers.Loans can be up to $10 million with interest no higher than 4%.Payments are deferred for at least six months.

Visit the SBA Covid-19 resource center for more information: Coronavirus (COVID-19): Small Busienss Guidance & Loan Resources.Applications can be made at SBA - Disaster Assistance.Call your banker.The CARE act expanded the lenders participating in the SBA loan program.

Forgiveness for certain SBA-guaranteed loans

An eligible recipient is eligible for forgiveness of indebtedness on a covered loan in an amount equal to the costs paid during the covered period including: (1) payroll costs; (2) any interest payments on any covered mortgage obligation; (3) any payment for any covered rent obligation; (4) covered utility payments.The amount forgiven under this program is not counted as taxable income.

An eligible recipient seeking forgiveness of indebtedness on a covered loan must verify that the amount for which forgiveness is requested was used to retain employees, make interest payments on a covered mortgage obligation, make payments on a covered lease obligation or to make covered utility payments.The covered period is the 8-week period beginning on the origination date of a covered loan.A covered rent obligation is rent paid under a lease agreement in force before Feb. 15, 2020.A covered mortgage obligation is any indebtedness or debt instrument incurred in the ordinary course of business that (A) is the liability of the borrower; (B) is a mortgage on real or personal property; and (C) was incurred before Feb. 15, 2020.Covered utility payments are payments for a service for the distribution of electricity, gas, water, transportation, telephone, or internet access for which service began before Feb. 15, 2020. Businesses that lay off works can be penalized by reducing the amount that can be forgiven.

Expanded paid sick leave and family leave

Employees who have a Covid-19 diagnosis or have symptoms and are seeking a medical diagnosis are entitled to paid sick leave up to a maximum of $511 per day for up to 10 days.Employees who are on leave to care for an individual subject to quarantine or caring for their children because of a school/daycare closure or other conditions to be announced by the Secretary of Health, are entitled to paid sick leave up to a maximum of $200 per day for up to 10 days.

Employees unable to work because they need to care for a child under 18 whose school or daycare is closed due to Covid-19 are entitled to up to 12 weeks of paid family leave at two thirds of the employee’s regular pay up to $200 per day, with a limit of $10,000 total per employee.The employer must notify the employee of this benefit and preserve the employee’s job for their return.

Employers are entitled to tax credits up to $511/day or $200/day as applicable.These rules apply to all employers with 500 or fewer employees and cover leaves taken during the period April 2, 2020 through December 31, 2020.Employers with 50 or fewer employees may be exempted if compliance would jeopardize the business.

Employer tax credits for expanded sick and family leave

The CARES Act provides for advance refunding of the credits for up to 100% of qualified sick leave wages paid by the employer each calendar quarter, subject to limits.IRS will waive any penalty for failure to make a deposit of the payroll taxes if the IRS determines that the failure was due to the anticipation of the credit allowed.

Delay of payment of employer payroll taxes

The CARES Act allows taxpayers including self-employed individuals to defer paying the employer portion of certain payroll taxes through the end of 2020. 50% of the deferred payroll tax is payable by December 31, 2021 and the remaining 50% is payable by December 31, 2022.The above rules won't apply to any taxpayer which has had indebtedness forgiven with respect to a loan under Small Business Act Sec. 7(a)(36), as added by Act Sec. 1102, or indebtedness forgiven under Act Sec. 1109.

Employee retention credit for employers

Provides a refundable payroll tax credit for 50% of wages paid by eligible employers to certain employees during the COVID-19 crisis.

Eligible employers. The credit is available to employers, including non-profits, whose operations have been fully or partially suspended as a result of a government order limiting commerce, travel, or group meetings. The credit is also provided to employers who have experienced a greater than 50% reduction in quarterly receipts, measured on a year-over-year basis.The credit is not available to employers receiving Small Business Interruption Loans.

Wages paid to which employees?

For employers who had an average number of full-time employees in 2019 of 100 or fewer, all employee wages are eligible, regardless of whether the employee is furloughed. For employers who had a larger average number of full-time employees in 2019, only the wages of employees who are furloughed or face reduced hours as a result of their employers' closure or reduced gross receipts are eligible for the credit.

Wages. The term "wages" includes health benefits and is capped at the first $10,000 in wages paid by the employer to an eligible employee.Wages do not include amounts taken into account for purposes of the payroll credits, for required paid sick leave or required paid family leave in the Families First Coronavirus Act, nor for wages taken into account for the employer credit for paid family and medical leave.

The credit applies to wages paid after March 12, 2020 and before Jan. 1, 2021.

Changes to net operating loss rules

The CARES Act temporarily removes the taxable income limitation to allow an NOL to fully offset income. The CARES Act provides that NOLs arising in a tax year beginning after Dec. 31, 2018 and before Jan. 1, 2021 can be carried back to each of the five tax years preceding the tax year of such loss.

Modification of limitation on losses for noncorporate taxpayers

Old law disallows a deduction of excess business losses by noncorporate taxpayers for tax years beginning after Dec. 31, 2017 and ending before Jan. 1, 2026.The CARES Act temporarily modifies the loss limitation for noncorporate taxpayers so they can deduct excess business losses arising in 2018, 2019, and 2020.

Bonus depreciation technical correction for qualified improvement property

The CARES Act provides a technical correction to previous law and specifically designates QI Property as 15-year property for depreciation purposes. This makes QI Property a category eligible for 100% Bonus Depreciation.