By: Jason Santarcangelo, Esq.
Today, President Trump signed into law, HR 478 the Coronavirus Aid, Relief and Economic Security Act or the “CARES Act.” We are issuing this focused advisory specifically for our small business clients who could be eligible for a loan under the CARE Acts’ Keeping American Workers Paid and Employed Act.
Below is a review of the statutory language of the Keeping American Workers Paid and Employed Act (§1101-1114) of the CARES Act with a focus on a small business with less than 500 employees, not in the accommodation and food services (North American Industry Classification System Code #72) or seasonal employees that were in business as of February 15, 2020. This is meant as an advisory of the CARES Act Keeping American Workers Paid and Employed Act. If you have specific questions related to your particular situation, please contact the firm.
In the firm’s opinion the Paycheck protection program is designed to cover payroll costs, lease payments and utilities for an eight (8) week period. There is no requirement of a personal guarantee or collateral. There is no application fee for the loan. The maximum interest rate is 4%. Any portion of the loan not forgiven is due within ten (10) years from the date of application of loan forgiveness. The loan will be forgiven if used solely for payroll of employees making under $100,000, lease payments and utilities. It is not clear from the statutory language if you can pay employees up to $100,000 and have it reimbursed or no payment to any employee making over $100,000 is allowed. Guidance will be required from the program administrator which is due by April 26, 2020. Qualified Sick Leave and Qualified Family Leave wages for which a credit is allowed under Sec. 7001 and Sec. 7003 of the Families First Coronavirus Response Act (PL 116-127) are not covered under this Act.
Recipient shall be eligible for forgiveness of indebtedness on a covered loan in an amount equal to the sum of the following costs incurred and payments made during the covered period: (a) payroll costs; (b) payments of interest on mortgage obligation (which shall not include any prepayment of or payment of principal on a covered mortgage obligation); (c) payments on any covered rent obligations; and (d) covered utility payments
A decision on any loan application must be made not later than 60 days after which lender receives application for loan forgiveness, the lender shall issue a decision.
For the purposes of Internal Revenue Code of 1986, any amount which (but for this subsection) would be includable in gross income of the eligible recipient by reason of forgiveness shall be
Not later than April 26, 2020 the Administrator shall issue guidance and regulations implementing this section.