Dear ABC Central Ohio Member,
The CARES Act just passed the House this afternoon by voice vote and is expected to be quickly signed into law by President Trump today.
Paycheck Protection Program Overview:
The bill authorizes $2 trillion in federal funding for programs to support our nation’s hospitals and businesses, and the most critical of these programs for ABC and our members (a majority of which are small businesses) is the Paycheck Protection Program that authorizes $349 billion in forgivable loans from the Small Business Administration. PPP loans must be made during the period prior to June 30, 2020.
The bill defines eligibility for these loans as a small business – described in section 31(b)(2)(C) of the Small Business Act – with not more than 500 employees.It includes sole-proprietors, independent contractors, and other self-employed individuals as eligible for loans and allows businesses with more than one physical location that employs no more than 500 employees per physical location in certain industries. The bill requires eligible borrowers to make a good faith certification that the loan is necessary due to the uncertainty of current economic conditions caused by COVID-19, and that they will use the funds to retain workers and maintain payroll, lease, and utility payments; and are not receiving duplicative funds for the same uses from another SBA program.
PPP Loans:
PPP loans can be as large as 250% of a business’s average monthly payroll costs over the last 12 months, however, the maximum loan amount under this program is $10 million through December 31, 2020. It also specifies allowable uses of the loan to include payroll support, such as employee salaries, paid sick or medical leave, insurance premiums, and mortgage, rent, and utility payments. SBA-certified lenders simply need to verify that a small business was in operation on February 15, 2020, and paid employee salaries and payroll taxes or paid independent contractors, as reported on Form 1099- MISC, for eligibility in the PPP.
Loan Forgiveness:
Principal amounts on PPP loans, for the first 8-week period from when the PPP Loan is made, may be forgiven, if loan funds are used to cover payroll costs, interest payments on mortgages (not including prepayments or principal), rent and utilities.
Tax Provisions:
- Retention Tax Credit. Creates a refundable payroll tax credit for 50 percent of wages paid by employers to employees during the COVID-19 crisis.
- Delay of payment of employer payroll taxes. Payment would be due over the course of two years with half due 12/31/2021 and the balance due 12/31/2022.
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- Modification for net operating losses (NOL). This provision would allow five-year carryback for 2018, 2019, and 2020 tax years, respectively.
- Modification of limitation on losses for taxpayers other than corporations. The 80 percent carryback limitation would be lifted for pass-through entities to harmonize with corporate NOL treatment for 2018, 2019, and 2020.
- Modification of credit for prior year minimum tax liability of corporations. This would accelerate the ability of companies to recover AMT credits in the form of refunds.
- Modification of limitation on business interest. This would loosen the limitation on interest deduction to 50 percent of EBITDA for 2019 and 2020.
- Technical amendments regarding qualified improvement property (QIP). This fix to the so-called “retail glitch” would unlock $15 billion in liquidity for QIP expenses incurred by hard-hit sectors like restaurants, hotels, and retail, among others.
ABC Central Ohio will be working with our many affiliate members to identify and provide additional information as it becomes available. We are hoping this will include information that doesn’t just report what resources are available, but also how our members might be able to apply or otherwise take advantage of these resources.
Should you have any comments, questions, or concerns please contact me at bhacker@centralohioabc.org or via telephone at 614-597-3591.
Sincerely,
Barton Hacker
President
ABC Central Ohio
