Federal Stimulus Package and the New PPP Changes

News of a Federal Stimulus Package and changes to the PPP is now official, offering some new financial relief tools to business, individuals, and specific sectors.

The State of California also offered new information and gateways to financial resources through the State. You can find more details on the state stimulus here.

Here is a breakdown by topic. Please read carefully:

Stimulus Payments to Families

The Federal Stimulus Package includes another round of nontaxable direct payments to qualifying individuals. Amounts of up to $600 for individuals and $1,200 for a married couple filing jointly, plus $600 for each dependent child under the age of 17 will be sent based on 2019 filing information.

Payments begin phasing out once adjusted gross income exceeds $75,000 for a single taxpayer and $150,000 for a married couple. As was the case with the first round of payments, this second payment represents an advance on a tax credit that will be reconciled on the 2020 tax filing.

Unemployment Benefits

The bill provides an additional $300 per week through March 14, 2021. Pandemic Unemployment Assistance (PUA) that expands unemployment benefits to self-employed and others in nontraditional employment was extended as well, with the maximum number of eligible weeks increased to 50 weeks.

An additional $100 of extra benefit may also be available for certain workers who have both wage and self-employment income. Unemployment compensation received is taxable income to the recipient.

PPP Loan Program Highlights

Small businesses have access to a new round of funding for PPP Loans. The Federal Stimulus Package could not be meaningful without improving the PPP Loans program of 2020. Therefore, the PPP Loan Program has been revised and updated. The revised program has the following major changes:

• The original PPP will reopen and become available through March 31, 2021
• Expenses paid for with forgiven PPP funds are now tax-deductible for all borrowers, even those who have already applied for forgiveness.
• Streamlined forgiveness for borrowers with loans under $150,000
• Businesses can now take a second PPP loan. See details below
• For borrowers who have not yet received forgiveness, four new types of expenses are eligible non-payroll uses of PPP funds and eligible for up to 40% of total forgiveness: certain operations costs such as software or cloud computing services or administrative costs, public disturbance related property damage/vandalism/looting costs not covered by insurance, covered supplier costs, and covered worker protection costs.
• Eligibility for the PPP Loan Program has been expanded to make the program accessible to more small businesses.
• Borrowers can choose any covered period beginning on the date a borrower receives the loan and ending on a date selected by the borrower during the 8 to 24 weeks after loan origination.
• The PPP Loan Program is now available to 501(c)(6) non-profit organizations. 
• PPP Loan Funds can be used in conjunction with Employee Retention Tax Credits.
• EIDL Grant funds will no longer reduce the amount of PPP loan eligibility.
• PPP forgiveness amounts will no longer be reduced by any Economic Injury Disaster Loan (EIDL) grant received.

Looking for answers to frequently asked questions regarding the second draw of the PPP? Read here.

Second PPP Loan

Businesses can take a second Paycheck Protection (PPP) Loan (up to $2 million) once a first round of PPP Loan funds have been exhausted. Borrowers must have fewer than 300 employees (down from 500). Additionally, the business must be able to establish a 25% drop in gross receipts during a quarter in 2020 relative to that same quarter in 2019. 

Usage of proceeds will follow the same protocol as round one loans. Consequently, loans will be equal to the lesser of 2.5 multiplied by average monthly payroll costs for the one-year period before the loan is made or calendar year 2019, or $2 million. The hospitality industry, however, will use a multiple of 3.5

For borrowers who have not yet received forgiveness, four new types of expenses are eligible non-payroll uses of PPP funds and eligible for up to 40% of total forgiveness.

1. 1Certain operations costs such as software or cloud computing services or administrative costs
2. 2public disturbance related property damage/vandalism/looting costs not covered by insurance
3. 3Covered supplier costs
4. 4Covered worker protection costs

EIDL Loan & Grant Highlights

The Economic Injury Disaster Loan Program is accepting applications (Apply here). The latest Federal Stimulus Package enables and offers some updates:

• The EIDL advance grant will again be available, allowing businesses who did not receive the full $10,000 advance to reapply for the difference.
• The EIDL advance will not be taxable and expenses paid with the funds will be tax deductible.
• The same is true for borrowers of traditional Section 7 SBA loans who had six months of their principal and interest paid under the CARES Act, with the bill requiring the SBA to pay an additional three to eight months beginning in February 2021.
• A non-taxable grant is now available for eligible shuttered venues, theaters, and museums as well. Such businesses include non-profit organizations

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Employee Retention Tax Credit Highlights

As part of the Federal Stimulus Package, the Employee Retention Credit (ERC) is extended to July 1, 2021. Businesses may now take the ERC and the PPP, but the wages used in computing the ERC are not forgivable costs under the PPP program.

Employee Retention Credit is explained in details in this separate article.  

For periods in 2021, the following changes apply to the ERC:

• A business can now apply for both PPP and the ERC. (ERTC and PPP funds cannot be applied to the same wages. Employers must be careful to itemize and account for where each type of funds is being applied).
• Non-profit organizations are eligible to use this ERTC program if operations have been partially to fully suspended.
• The credit percentage is increased from 50% to 70% of qualified wages.
• Qualified wages are increased from $10,000 in total per employee to $10,000 per quarter per employee.
• Qualified wage restrictions apply at 500 employees instead of 100.
• Drop in gross receipts requirement decreases from 50% to 20% over a prior quarter.

Additional Federal Stimulus Package Highlights

• Pre-Existing SBA Loan Relief – Businesses with SBA loans taken prior to the covid-19 pandemic will continue to see the federal government cover principal and interest payments for up to 18 months. This is an extension from the original six month of relief.
• Pandemic Unemployment Insurance –Displaced workforce will be eligible for an additional $300 per week in pandemic unemployment insurance, which is down from the original $600 offered in the CARES Act. All persons on unemployment insurance will be automatically enrolled into the the benefit program. The program expires March 14, 2021.
• Grants for Live Venue Operators – A new grant program for live venue operators will be available to live venue operators and promoters, theaters, independent movie theaters, live performing arts organization operators, museum operators and talent agents (with a 25%+ reduction of revenue). Grants will be either $10 million or 45% of gross earned revenue in 2019. Grant funds will be limited for use. Unfortunately, this grant does not apply to applicants who have received PPP Loan Funds. Grant application portal is pending through the SBA. Check the SBA site for updates.

Other Credits and Deductions

1. 1Business meals from a restaurant will be 100% deductible for 2021 and 2022, rather than 50%.
2. 2Above-the-line charitable donations for non-itemizers will be available in 2021 as well and increased to $600 for those married filing jointly in 2021.
3. 3The increased individual AGI threshold from 60% to 100% and increased corporate limitation from 10% to 25% of taxable income for qualifying cash contributions is extended through 2021.
4. 4A special temporary rule allows taxpayers taking the Earned Income Tax Credit or the Child Tax Credit the ability to use income from their 2019 tax year to determine a 2020 credit.
5. 5Favorable depreciation rules for taxpayers electing out of tax code Section 163(j) business interest expense limitation rules.
6. 6Educators’ deductible costs now include personal protective equipment and other coronavirus prevention related supplies.
7. 7Farmers may elect to retain the two-year carryback of a net operating loss (NOL), rather than claim a five-year carryback as provided for in the CARES Act. Farmers may also revoke the election to waive the carryback of an NOL.
8. 8The employee portion of certain payroll taxes deferred under President Trump’s memorandum on wages paid from Sept. 1, 2020 through Dec. 31, 2020 have an extended repayment period now through Dec. 31, 2021, rather than April 30, 2021.
9. 9Taxpayers can roll unused health and dependent care flexible spending amounts from 2020 to 2021, and from 2021 to 2022.

Conclusion

This Federal Stimulus Package bill provides significant relief to businesses and individuals alike. There are many areas of complexity, but overall, is provides real value to those impacted by Covid-19. 

Please reach out if you would like help with any applications. It is important you read and understand these articles and guides before reaching out.

Tax Credit Extension for Paid Sick Leave

In the new $900B COVID Relief Bill, Tax Credits for Emergency Paid Sick Leave and EFMLA will be extended to March 31, 2021. The relief bill just became law. It answers the question of whether federal Emergency Paid Sick Leave (EPSL). It also stipulates that the Emergency Family and Medical Leave (EFMLA) will be extended. 

The answer is yes, but it’s an option, not a requirement. Here’s what employers need to know:

• Offering EPSL and EFMLA after December 31 will become optional for employers.  
• An employee will no longer be entitled by law to take EPSL or EFMLA, even if they have a qualifying reason. 
• Employers who choose to offer these paid leaves can still receive a tax credit if they follow the current EPSL and EFMLA rules, including job protection.
• The extension of the tax credit will be available for leaves taken through March 31, 2021.
• Employees will not get new hours to use—the unused portion of their original allotment that remains on January 1 is how much they will be able to use through March 31, 2021. For instance, if an employee who was entitled to 80 hours of EPSL between April 1 and December 31 used 40 of those hours in 2020, they’d have 40 hours left to use between January 1 and March 31, 2021.
• There is a possible exception when an employee’s EFMLA bank could reset if employers use the calendar year or another fixed FMLA tracking period that starts before March 31 and the DOL fails to readopt the regulations they wrote related to EFMLA. We expect the IRS, DOL, or both, to provide guidance soon that will clear up whether certain employers will need to offer additional hours. 

Extension of several other benefits from previous coronavirus-related legislation

The new law also extends or revives several other benefits from previous coronavirus-related legislation, some of which are listed below. Such legislation includes but not limited to the FFCRA and the PPP. 

These aspects of the law are outside the scope of our services, so we are unable to answer follow-up questions. 

Some of the notable provisions include:

• Individual payments of $600 for people with incomes at or below $75,000 and $600 per dependent child, with payments phased out for higher incomes
• A $300 weekly supplemental unemployment benefit, through March 14, 2021
• Extension of Pandemic Unemployment Assistance (for gig workers and the self-employed) and Pandemic Emergency Unemployment Compensation (for those who run out of state unemployment insurance benefits), through March 14, 2021
• Reopening and refunding of the Paycheck Protection Program (see your financial or tax advisor for additional information) 

We will keep you posted on future developments on the tax credit extension and clarifications as they become available.

NPR has a nice coverage of the details of this tax credit extension for your further reading. Check it out.

California Stimulus Package Details

The California stimulus package to help struggling businesses in the state has been launched by Governor Newsom. It includes the California Rebuilding Fund, California Hiring Credit, and California Small Business Grant Fund.

California Rebuilding Fund

California Stimulus Package – Low Interest Loans for Small Business

The California Rebuilding Fund offers up to $100,000 and is separate and different than the Federal EIDL and PPP Loan programs. Loans offer a fixed 4.25% interest rate over 36-60 months. Eligible businesses must employee 50 or fewer employees, had gross revenues less than $2.5 million in 2019, must have suffered economically as a result of COVID-19, and must meet other operating criteria.

Applicants must submit a pre-application online. The CRF will review your application. Once matched with a lender, you will receive an email or call to begin the full loan application process.

California Hiring Tax Credit

California Stimulus Package – Main Street Small Business Tax Credit

The (California) Main Street Small Business Tax Credit was enacted with State Senate Bill 1447. This bill provides financial relief to small businesses who have faced economic disruptions and job losses in 2020. Taxpayers can apply a small business hiring credit against California State Income Taxes – OR – a credit for Sales and Use taxes. However, the tax credits are limited and business employers must apply for a tentative credit reservation. Funds are limited, and therefore, not all businesses will be allowed a tax credit.

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California Small Business Grant Fund

As part of the California Stimulus Package, the government has set aside $500 million for the creation of a small business grant fund. This grant will be available through the California Office of the Small Business Advocate (CalOSBA). The amount of grant funding ranges from $5,000 to $25,000. Businesses are eligible based on their annual revenue as documented in their most recent tax return and Non-profit organizations are also eligible.

Eligibility

A small business or small nonprofit must satisfy the following criteria to be eligible to receive a grant award:

1. 1Must meet the definition of an “eligible small business”. An “eligible small business” means (i) a “small business” (sole proprietor, independent contractor, 1099 work, and or registered “for-profit” business entity (e.g., C-corporation, S-corporation, limited liability company, partnership) that has yearly gross revenue of $2.5 million or less (but at least $1,000 in yearly gross revenue) based on most recently filed tax return) or (ii) a “small nonprofit” (registered 501(c)(3), 501(c)(19), or 501(c)(6) nonprofit entity having yearly gross revenue of $2.5 million or less (but at least $1,000 in yearly gross revenue) based on most recently filed Form 990)
2. 2Active businesses or nonprofits operating since at least June 1, 2019
3. 3Businesses must currently be operating or have a clear plan to re-open once the State of California permits re-opening of the business
4. 4Business must be impacted by COVID-19 and the health and safety restrictions such as business interruptions or business closures incurred as a result of the COVID-19 pandemic
5. 5Business must be able to provide organizing documents including 2018 or 2019 tax returns or Form 990s, copy of official filing with the California Secretary of State, if applicable, or local municipality for the business such as one of the following: Articles of Incorporation, Certificate of Organization, Fictitious Name of Registration or Government-Issued Business License
6. 6Business must be able to provide acceptable form of government-issued photo ID
7. 7Applicants with multiple business entities, franchises, locations, etc. are not eligible for multiple grants and are only allowed to apply once using their eligible small business with the highest revenue

Ineligible Businesses

Businesses that do not qualify for this California Stimulus Package are:

1. 1Businesses without a physical location in California
2. 2Nonprofit businesses not registered as either a 501(c)(3), 501(c)(19), or 501(c)(6)
3. 3Government entities (other than Native American tribes) or elected official offices
4. 4Businesses primarily engaged in political or lobbying activities (regardless of whether such entities qualify as a 501(c)(3), 501(c)(19), or 501(c)(6)) 
5. 5Passive businesses, investment companies and investors who file a Schedule E on their personal tax returns 
6. 6Churches and other religious institutions (regardless of whether such entities qualify as a 501(c)(3), 501(c)(19), or 501(c)(6)) 
7. 7Financial businesses primarily engaged in the business of lending, such as banks, finance companies and factoring companies
8. 8Businesses engaged in any activity that is illegal under federal, state or local law
9. 9Businesses of a prurient sexual nature, including businesses which present live performances of a prurient sexual nature and businesses which derive directly or indirectly more than de minimis gross revenue through the sale of products or services, or the presentation of any depictions or displays, of a prurient sexual nature
10. 10Businesses engaged in any socially undesirable activity or activity that may be considered predatory in nature such as rent-to-own businesses and check cashing businesses
11. 11Businesses that restrict patronage for any reason other than capacity
12. 12Speculative businesses
13. 13Businesses of which any owner of greater than 10% of the equity interest in it (i) has within the prior three-years been convicted of or had a civil judgment rendered against such owner
14. 14“Affiliated” companies (as such term is defined in 13 C.F.R. § 121.103)
15. 15Multiple business entities, franchises, locations, etc. are not eligible for multiple grants and are only allowed to apply once using their eligible small business with the highest revenue

How to apply

PLEASE NOTE: This grant is not awarded by a first come, first served process. All applications have until January 13, 2021 to complete and submit their application.  Click the button below to begin working through the application process.

Simplified PPP Forgiveness Form 3508S

Recipients of PPP loans can now apply for forgiveness using the simplified PPP forgiveness Form 3508S if they borrowed $50,000 or less. This form was just released by the treasury and the SBA on October 8, 2020. It provides new guidance on the forgiveness and loan review processes for all PPP loans of $50,000 or less.

Under the Interim Financial Rule (IFR), PPP borrowers of the said amount or less are exempted from loan reductions in forgiveness based on:

• Reductions in employee salaries or wages
• Reductions in full-time-equivalent employees

The new SBA Form 3508S enables small to midsized businesses to apply for forgiveness for their PPP loans. If such borrowers, plus their affiliates, received the loans amounting to about $2 million or more they are disqualified from using form 3508S. These guidelines are clearly stated on the instructions for the SBA Form 3508S. These guidelines were released with the new directive.

Current stats show that of the 5.2 million loans approved by the SBA, over 3.57 million were in the range of $50,000 or less. In total, these loans amounted to about $62 billion of the total $525 billion in PPP loans. Of this, about 1.71 million PPP loans of $50,000 and below were made out to businesses that have zero or close to no employees.

Certainly, borrowers of PPP loans of $50,000 and below must still make some certifications. They must also provide lenders with some documentation for payroll and non-payroll costs.

Defining the Paycheck Protection Program (PPP)

The Paycheck Protection Program is a loan program that was established to help small to medium businesses stay afloat and keep paying their workers during the pandemic. Also, businesses covered included sole proprietors, self-employed workers, tribal businesses, and certain non-profit organizations. The Paycheck Protection Program allowed businesses to apply for low-interest loans use for their payrolls. Such PPP loans could also be used to cover rent, utilities, and other interests touching on businesses.

Lenders are obliged to partially or fully forgive these loans if borrowers keep their employee counts and maintain their employee wages. The program was established in 2020 and used to help small and midsized businesses stay afloat amidst the Covid-19 crisis.

Requirements to qualify for PPP loan forgiveness form 3508S

To qualify to use the Simplified PPP forgiveness Form 3508S application, you must fill out the following loan details:

• The PPP loan amount
• SBA and lender loan numbers
• PPP loan disbursement date
• Economic Injury Disaster Loan advance amount and application
• Employees at the time of loan application and during the time of forgiveness application
• Forgiveness amount

Borrowers must then certify that they meet all the Simplified PPP loan forgiveness requirements to qualify for loan forgiveness.

Lender responsibilities regarding PPP loan forgiveness

The Interim Final Rule (IFR) set guidance on lender responsibility for PPP loans of all sizes. This was done to review the borrower’s documentation of eligible costs for forgiveness in excess of their PPP loan amount.

When a borrower submits Form 3508S, the lender would be required to:

• Confirm the receipt of the certifications in the form
• Confirm the receipt of the documentation the borrower must submit to aid to verify payroll and non-payroll costs

The borrower would be responsible for providing accurate calculations of the loan forgiveness amounts. She must also attest to the accuracy of the reported calculation and any information on their loan forgiveness application. According to the IFR, lenders are allowed to rely on the borrower’s representations.

The IFR addresses all the lender’s responsibilities should the borrower submit documentation of eligible costs exceeding the borrower’s PPP loan amount. This amount cannot exceed the borrower’s initial amount of the PPP loan.

How to apply for PPP loan forgiveness using the Simplified PPP forgiveness form 3508S

Whether the borrower submits SBA Forms 3508, 3508S, or 3508EZ, or a lender’s equivalent form, it’s the lender’s responsibility to acknowledge receipt of the documentation.

This action by the IFR streamlines the loan forgiveness process of the Simplified Paycheck Protection Program. And this has been made possible on PPP under $50,000 toward the benefit of thousands of PPP lenders who strived to have their loans processed quickly.

Steven Mnuchin, the Treasury Secretary, also expressed his team’s commitment towards making the PPP loan forgiveness process as very simple. He insisted on it being straightforward while protecting against misuse of funds and fraud. According to Steven, the Treasury would continue to favor any additional legislation and directives to simplify the forgiveness process further.

Current PPP Situation in Brief

The SBA only just released another simplified application known as the SBA Form 3508S on October 5th, 2020, along with detailed instructions for its use. As with Form 3508, this form is only applicable if the lender’s PPP loan amount received by the borrower was $50,000 or less.

On the other hand, any borrower who received PPP loan amounts totaling $2 million or more cannot use the Form 3508S. These borrowers must use Form 3508 or Form 3508EZ or the lender’s equivalent form.

Any borrower who qualifies for and uses the 3508S is also exempted from any form of reductions in the borrower’s loan forgiveness amounts. This is based on reductions in FTE employees or employee salaries from the CARES Act.

The SBA Form 3508S doesn’t require borrowers to provide the calculations they used to find their loan forgiveness amounts. Nevertheless, the SBA may request that you provide documentation and other information to review those calculations. The borrower is also expected to retain all documentation that:

• Was submitted with the loan application
• Proves the borrower’s certification of eligibility for the loan and material compliance with PPP’s requirements
• Backs up the loan forgiveness application.

 Such documents are to be retained for six years from the date of repaying or forgiving the loan.

As a borrower, you can submit the application for forgiveness electronically. Be sure to submit it within ten months after the expiry of the loan-covered period to the lender servicing your loan.

EZ Application for Forgiveness to Avoid Data-Intensive Calculations

The latest streamlined loan forgiveness application, Form 3508EZ, and its related instructions are the current most significant simplification forms of the PPP loan.

This new simplified PPP loan forgiveness form 3508S should eliminate the need to collect several counts of FTE employees provided either of these statements are applicable:

• The borrower doesn’t produce the number of employees or average pay hours of employees between January 1st, 2020, and February 15th, 2020, the end of the Covered Period. If the borrower could not hire similarly qualified employees for any unfulfilled positions by December 31st, 2020, and corresponding reductions in each employee’s hours that the borrower offered to restore but was refused.
• The borrower could not operate optimally between February 15th, 2020, and the end of the Covered Period. This may be due to compliance with the Secretary of Health and Human Services’ guidance and requirements between March 1st, 2020, and December 31st, 2020. This also included directives by the Occupational Safety and Health Administration and the Director of the Centers for Disease Control and Prevention. These guidelines were issued to maintain standards of social distancing, sanitation, and any other customer safety requirements related to the Coronavirus.

Borrowers using the SBA Form 3508EZ will still be required to submit the number of their employees up to the time of the loan application and forgiveness application dates. However, this should be a much easier tally compare to undertaking the FTE counts.

About the Small Business Administration

The U.S. Small Business Administration helps make the American dream of business ownership and maintenance a reality again. As the current only go-to resource and voice for small and midsized businesses, the SBA helps empower small entrepreneurs with the support and resources they need to recover, grow, and expand from the current disaster.

The Simplified Paycheck Protection program delivers services through SBA field offices and partnerships using both public and private organizations.

Compliance Requirements for a Remote Workforce

Due to the increased work from home, compliance requirements for a remote workforce is the hottest topic in HR today.

According to Gallup, the number of days employees are working remotely has doubled during the pandemic. Some companies are even considering making a remote work arrangement permanent. While there are no laws that exclusively apply to remote workplaces, remote work does come with additional compliance risks.

While these compliance requirements for a remote workforce can be customized to specific organizations, below is our general guidance for employers. 

Logging Hours and Preparing Paychecks

Make sure that employees are logging all of their time. Keep in mind that when working from home, the boundaries between work and home life are easy to blur. Employees may be racking up “off the clock” work, and even overtime, that they aren’t being paid for. While this may seem harmless enough in the moment, particularly if the employee isn’t complaining, unpaid wages can come back to bite you once the employee is on their way out the door.

Minimum Wage

Employees should be paid at least the minimum wage of the state where they physically work, whether this is a satellite office or their own home. Beyond that, it’s important to be aware that some cities and counties have even higher minimum wages than the state they are located in. In general, with most employment laws, you should follow the law that is most beneficial to the employee.

Breaks

Remote employees must take all required break and rest periods required by law, as if they were in the workplace. Just because your employees are working from home doesn’t mean they are exempt from breaks. You cannot assume that they are always running to the fridge, making breaks one of the major compliance requirements for a remote workforce.

Harassment Prevention Considerations

You may have employees working in a state that has a lower bar for what’s considered harassment or that requires harassment prevention training. You can find this information on the State Law pages on the HR Support Center.Remote work also comes with additional opportunities for harassment (even if it doesn’t rise to the level of illegal harassment) such as employees wearing clothing that crosses the line into inappropriate, roommates in the background unaware that they are on camera, or visible objects that other employees may consider offensive.

You can prevent these sorts of incidents by having clear, documented expectations about remote meetings, communicating those expectations to your employees, and holding everyone accountable to them. It also wouldn’t hurt to occasionally remind everyone to be mindful that they and what’s behind them are visible to coworkers when they’re on video.

That said, going overboard with standards that you’re applying to employees’ private homes can cause anxiety and morale issues, so make sure your restrictions have some logical business-related explanation.

Workplace Posters as one of the compliance requirements for a remote workforce

Many of the laws related to workplace posters were written decades before the internet, and so their requirements don’t always make sense given today’s technology.The safest option to ensure you are complying with all posting requirements in one fell swoop is to mail hard copies of any applicable workplace posters to remote employees and let them do what they like with the posters at their home office. If you have employees in multiple states, you should send each employee the required federal posters, plus any applicable to the state in which they work.Alternatively, more risk-tolerant employers often provide these required notices and posters on a company website or intranet that employees can access. A number of newer posting laws expressly allow for electronic posting, but this option is not necessarily compliant with every posting law out there.

FMLA Eligibility

Remote employees who otherwise qualify will be eligible for leave under the federal Family and Medical Leave Act (FMLA) if they report to or receive work assignments from a location that has 50 or more employees within a 75-mile radius.According to the FMLA regulations, the worksite for remote employees is “the site to which they are assigned as their home base, from which their work is assigned, or to which they report.” So, for example, if a remote employee working in Frisco, TX, reports to their company’s headquarters in Portland, OR, and that site in Portland has 65 employees working within a 75-mile radius, then the employee in Frisco may be eligible for FMLA.

However, if the site in Portland has only 42 employees, then the remote employee would not be eligible for FMLA. The distance of the remote employee from the company’s headquarters is immaterial.

You may be interested in the recent FFCRA Sick Leave Rules Changes

Verifying I-9s as compliance issue for your remote workforce

In normal circumstances, the physical presence requirement of the Employment Eligibility Verification, Form I-9, requires that employers, or an authorized representative, physically examine, in the employee’s physical presence, the unexpired document(s) the employee presents from the Lists of Acceptable Documents to complete the Documents fields in Form I-9’s Section 2.However, in March, the Department of Homeland Security (DHS) temporarily suspended the physical presence requirement for employers and workplaces that are operating remotely due to COVID-19 related precautions. In other words, employers with employees taking physical proximity precautions due to COVID-19 (and operating remotely) are not required to review the employee’s identity and employment authorization documents in the employee’s physical presence. Inspection should instead be done remotely. As of the date of this blog post, this temporary rule is still in effect.

Equipment

In some states, an employer is required either to provide employees with the tools and items necessary to complete the job or to reimburse employees for these expenses. However, workstation equipment like desks and chairs is usually not included in this category of necessary items.That said, an employee might request a device or some form of furniture as a reasonable accommodation under the Americans with Disabilities Act (ADA) so they can perform the essential functions of their job. In such cases, you would consider it like any other ADA request. Allowing them to take home their ergonomic office chair, for example, would probably not be an undue hardship and therefore something you should do.

Deciding Who Can Work from Home

You may offer different benefits or terms of employment to different groups of employees as long as the distinction is based on non-discriminatory criteria. For instance, a telecommuting option or requirement can be based on the type of work performed, employee classification (exempt v. non-exempt), or location of the office or the employee. In order to be in compliance with requirements for a remote workforce, you should be able to support the business justification for allowing or requiring certain groups to telecommute.

New Back-to-School FFCRA Guidance from the Department of Labor (DOL)

The new back-to-school FFCRA guidance from the department of labor (DOL) is out. Ever since it became clear that not all schools would be fully reopening for the new school year, employers and employees have been unclear on what to do. They have been wondering how the federal Families First Coronavirus Response Act (FFCRA) would apply in the variety of new schooling scenarios. 

A few weeks ago we wrote this blog post detailing the FFCRA sick leave rules changes. If you are not up-to-date. Please read it first.

Last week, the Department of Labor released several new Questions and Answers that address those issues, quoted below:

Question 98: My child’s school is operating on an alternate day (or other hybrid-attendance) basis. The school is open each day, but students alternate between days attending school in person and days participating in remote learning. They are permitted to attend school only on their allotted in-person attendance days. May I take paid leave under the FFCRA in these circumstances?

Yes, you are eligible to take paid leave under the FFCRA on days when your child is not permitted to attend school in person and must instead engage in remote learning, as long as you need the leave to actually care for your child during that time and only if no other suitable person is available to do so.

For purposes of the FFCRA and its implementing regulations, the school is effectively “closed” to your child on days that he or she cannot attend in person. You may take paid leave under the FFCRA on each of your child’s remote-learning days.

Question 99: My child’s school is giving me a choice between having my child attend in person or participate in a remote learning program for the fall. I signed up for the remote learning alternative because, for example, I worry that my child might contract COVID-19 and bring it home to the family. Since my child will be at home, may I take paid leave under the FFCRA in these circumstances?

No, you are not eligible to take paid leave under the FFCRA because your child’s school is not “closed” due to COVID-19 related reasons. It is open for your child to attend. FFCRA leave is not available to take care of a child whose school is open for in-person attendance.

If your child is home not because his or her school is closed, but because you have chosen for the child to remain home, you are not entitled to FFCRA paid leave. However, if, because of COVID-19, your child is under a quarantine order or has been advised by a health care provider to self-isolate or self-quarantine, you may be eligible to take paid leave to care for him or her. See FAQ 63. Also, as explained more fully in FAQ 98 of the new back-to-school FFCRA guidance, if your child’s school is operating on an alternate day (or other hybrid-attendance) basis, you may be eligible to take paid leave under the FFCRA on each of your child’s remote-learning days. This is because the school is effectively “closed” to your child on those days. 

Question 100: My child’s school is beginning the school year under a remote learning program out of concern for COVID-19, but has announced it will continue to evaluate local circumstances and make a decision about reopening for in-person attendance later in the school year. May I take paid leave under the FFCRA in these circumstances?

Yes, you are eligible to take paid leave under the FFCRA while your child’s school remains closed. If your child’s school reopens, the availability of paid leave under the FFCRA will depend on the particulars of the school’s operations.

Providing Non-FFCRA Leave and Flexibility

Although employees aren’t entitled to FFCRA leave if their child’s school is technically open and they choose remote learning, we encourage employers to work with employees who have chosen to keep kids home (as in Question 99), working out a flexible or reduced schedule as needed.

If an employee has chosen to have their children attend school online only, it is likely because they feel the school is not safe or the risk of the child bringing the virus home and infecting a more vulnerable person is too high.

If required to choose between working and keeping their family safe, many parents will choose safety. This, unfortunately, leaves their employer with a position to fill. The cost of replacing an employee is generally from 20 to 200 percent of their annual salary. Therefore, we suggest to employers to work out a flexible or reduced schedule with employees. This is likely the best choice for the company’s bottom line as well as its reputation.

Besides the new back-to-school FFCRA guidance, the full 100-question Department of Labor FAQ is available here. 

The Paycheck Protection Program (PPP)

Also known as the Corona-virus Aid, Relief, and Economic Security Act (CARES Act)

On Friday, March 27, the President signed the Corona-virus Aid, Relief, and Economic Security Act (CARES Act). The new law is a $2 trillion economic stimulus package designed to repair the economic damage caused by COVID-19 and provide additional protection to individuals and businesses who may lose income due to the pandemic. While most of the act pertains to direct payments and loans, there are some sections that affect employers.

Providing Alternatives to Closure and Layoffs

The CARES Act gives employers the following options and benefits, which may allow them stay open and keep more people employed:

The CARES Act has 3 key relief options:

Furthermore:

• Small businesses may be eligible for emergency grants of up to $10,000 to cover immediate operating costs.
• The Small Business Administration (SBA) may provide loans of up to $10 million per business; any portion of that spent to pay employees, keep workers on payroll, or pay for rent, mortgages, or existing debt could be forgiven, provided workers remain employed through the end of June.
• Small businesses with existing SBA loans may have up to six months of payments waived.
• Businesses who have experienced a decline in gross receipts of 50% as compared to the same quarter of 2019 or who have been fully or partially shutdown by order may be eligible to receive a refundable tax credit for 50% of qualified employee wages up to $10,000 per employee. This is unrelated to the dollar-for-dollar payroll tax credit that can be taken for FFCRA leaves.
• Businesses may defer payment of employer payroll taxes imposed between the enactment of this law and December 31, 2020 with half of the deferred taxes due by December 31, 2021 and the rest due by December 31, 2022. This is unrelated to the dollar-for-dollar payroll tax credit that can be taken for FFCRA leaves.

We are unable to advise on these topics as they are outside the scope of our expertise. We encourage you to follow the IRS Coronavirus Tax Relief page and the SBA Coronavirus Loan Resources page, as well as consult with your tax professional or financial adviser. Detailed guidance on how to access these financial resources should be coming soon from those sources.

Impact on Unemployment Insurance

The act expands unemployment benefits by 13 weeks and adds $600 to the weekly amount an individual would usually receive. While these unemployment benefits are generous, employers should still consider their options and incentives under the CARES Act mentioned above before making decisions about reduced hours, furloughs, or layoffs.

Employees who experience reduced hours, furloughs, or layoffs should be encouraged to file for unemployment insurance as soon as possible. We recommend that both employers and employees visit their state’s unemployment insurance department website and track local and state news, as departments across the country are updating their rules to facilitate displaced workers during this time.

Covid-19 Small Business Programs through the SBA

The Small Business Administration (SBA) has the following 4 programs for small businesses to help the financial challenges brought about by the Coronavirus (Covid-19) pandemic:

• Paycheck Protection Program
• Economic Injury Disaster Loans and Loan Advance
• SBA Debt Relief
• SBA Express Bridge Loans

1. Paycheck Protection Program (PPP)

The Paycheck Protection Program prioritizes millions of Americans employed by small businesses by authorizing up to $349 billion toward job retention and certain other expenses.

The Paycheck Protection Program will be available through June 30, 2020. If you maintain your workforce, SBA will forgive the portion of the loan proceeds that are used to cover the first 8 weeks of payroll and certain other expenses following loan origination.

Who is Eligible?

This program is for any small business with less than 500 employees including:

1. Sole proprietorships
2. Independent contractors and self-employed persons
3. Private non-profit organization or 501(c)(19)
4. Veterans organizations
5. Businesses in certain industries may have more than 500 employees if they meet the SBA’s size standards for those industries.
6. Certain hospitality businesses such as restaurants and hotels with more than 500 employees, but not per physical location.

What can the Paycheck Protection Program Loans we used for?

If you are going to apply for load forgiveness, please take a note of what the PPP loans can be used for in order to qualify:

• Payroll costs
• Mortgage interest (but NOT prepayments or the payment of the principal)
• Utilities
• Rent
• Interest on other debt incurred by the borrower before the covered period

What CAN’T Paycheck Protection Program Loans be used for?

• Compensation for employees that is in excess of annualized salary of $100,000.00, and prorated for the covered period
• Compensation to non-US residents
• Sick leave or qualified family leave under the FFCRA program
• Payments to contractors (1099 workers).

What are the terms for the Paycheck Protection Program loans?

• Borrowers can request up to $10 Million
• Based on average monthly payroll costs during the year (calendar year per the SBA) prior to the loan origination date times 2.5.
• Applicants can refinance Economic Injury Disaster Loans (EIDL) obtained after 1/31/2020 and roll into the PPP loan. This can increase the $10million limit
• The loan maturity is 2 years from the date of origination
• Interest rate is 1.00 %.
• Principal and interest payments are deferred for 6 months. Interest accrues during the deferral period. 

What portion of the Paycheck Protection Program Loans can be forgiven?

The loan will be fully forgiven if the funds are used for:

1. Payroll costs incurred and paid by the borrower during the covered period
2. The following non-payroll costs which may NOT exceed 25% of the forgiven amount:
   • Payment of interest on mortgages on real or personal property purchased before 2/15/2020.
   • Payment of rent under a leasing agreement in force before 2/15/2020
   • Payment for utilities (electricity, gas, water, transportation, telephone or Internet) for which service begun before 2/15/2020.

Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.

Are there any limitations on the Paycheck Protection Program Loan forgiveness?

Yes. There are 3 factors that will reduce the amount forgiveness. They are:

• The average number of full-time equivalent (FTE) employees during the covered period is less than it was during the comparable period. There are several options of comparable periods: 2/15/2019 to 6/30/2019, 01/01/2020 to 2/29/2020 and seasonal.
• Employer reduces salaries and wages by 25% or more during the covered period for employees who make less than annualized wages of $100,000 per year compared to the most recent quarter.

If salaries and FTE employees are reinstated by 6/30/2020, you can credit in your calculation for forgivable amount.

The amount of loan forgiven is NOT taxable income to the borrower.

How to Apply

You can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. You should consult with your local lender as to whether it is participating in the program.

Lenders may begin processing loan applications as soon as April 3, 2020.

List of Important Items for Paycheck Protection Program Loan Applications

Your lender may not request all of these documents. Required documents will be based on each lender’s own requirements. Contact your banker for their specific requirements.

However, given the high demand for these loans, it will help to be ready for anything your lender may request.

1. 2019 IRS Quarterly 940, 941 or 944 payroll tax reports
2. Monthly payroll reports for 2019 (Must show the following:)
   • Gross wages for each employee (including the officer(s) if paid W-2 wages)
   • Paid time off for each employee
   • Vacation pay for each employee
   • Family medical leave pay for each employee
   • State and local taxes assessed on the employee’s compensation for each employee
3. 1099s for 2019 for independent contractors that would otherwise be employees of your business. (Do NOT include 1099s for services)
4. Documentation showing total health insurance premiums paid by the company owner under a group health plan. (Include all employees and the company owners.)
5. Document the sum of all retirement plan funding that was paid by the company owner. (Do not include funding that came from the employees out of their paycheck deferrals.) Include all employees, including company owners, 401K plans, Simple IRA, SEP IRAs.
6. Business entity documentation (e.g. operating agreement, certificate of organization, bylaws, articles of incorporation)
7. 2017, 2018 and 2019 business tax returns, if applicable, and 2019 internal financial statements if 2019 tax return is not filed
8. 2020 interim financial statements (balance sheet, income statement, accounts receivable aging and accounts payable aging)
9. Debt schedule for operating business
10. List of owners of the business if not included in tax return
11. Copy of driver’s license for signers of business. (This is likely for 20%+ owners)

How will taking a Paycheck Protection Program loan affect other CARES Act Benefits?

2. Economic Injury Disaster Loans and Loan Advance

• In response to the Coronavirus (COVID-19) pandemic, small business owners in all U.S. states, Washington D.C., and territories are eligible to apply for an Economic Injury Disaster Loan advance of up to $10,000.
• The SBA’s Economic Injury Disaster Loan program provides small businesses with working capital loans of up to $2 million that can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing. The loan advance will provide economic relief to businesses that are currently experiencing a temporary loss of revenue. Funds will be made available within three days of a successful application, and this loan advance will not have to be repaid.
• To apply for a COVID-19 Economic Injury Disaster Loan, click here.

3. SBA Debt Relief

The SBA Debt Relief program will provide a reprieve to small businesses as they overcome the challenges created by this health crisis.

Under this program:

• The SBA will also pay the principal and interest of new 7(a) loans issued prior to September 27, 2020.
• The SBA will pay the principal and interest of current 7(a) loans for a period of six months.

4. SBA Express Bridge Loans

Express Bridge Loan Pilot Program allows small businesses who currently have a business relationship with an SBA Express Lender to access up to $25,000 with less paperwork. These loans can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing and can be a term loans or used to bridge the gap while applying for a direct SBA Economic Injury Disaster loan (#2 above). If a small business has an urgent need for cash while waiting for decision and disbursement on Economic Injury Disaster Loan, they may qualify for an SBA Express Disaster Bridge Loan.

Terms

• Up to $25,000
• Fast turnaround
• Will be repaid in full or in part by proceeds from the EIDL loan

Find an Express Bridge Loan Lender by connecting with your local SBA District Office.