New York Extends Filing and Payment Date for 2019 Tax Returns

Governor Cuomo issued Executive Order No. 202.12 authorizing the Commissioner of the Department of Taxation & Finance to provide relief from tax filing and payment deadlines.  Pursuant to Notice N-20-2 (https://www.tax.ny.gov/pdf/notices/n20-2.pdf), the Commissioner has exercised his discretion and extended the due date for personal income tax and corporation tax returns originally due on April 15, 2020 to July 15, 2020 (consistent with a prior extension granted by the Secretary of the Treasury for federal tax returns).

• The extension applies to individuals, fiduciaries for estates and trusts, and corporations taxable under Articles 9, 9A and 33.  
• The deferral also applies to payment obligations due April 15, 2020, without penalties or interest.
• The extension is an automatic extension and taxpayers do not need to file any additional forms or requests for extension.
• Extensions filed for the July 15, 2020 deadline will still expire on the ordinary October 15, 2020 extension deadline.
• For taxpayer’s failing to pay their tax as of July 15, 2020, interest and penalties will begin to accrue on July 16, 2020 (so it appears that failure to pay will not remove the relief from penalties and interest granted with the extension to July 15^th).

If you are owed a refund, you can file sooner and (hopefully) have your refund processed sooner.  If you already filed and provided a schedule direct debit from your bank account, the Department should wait until July 15, 2020 to debit your account.

CARES Act - Planning COVID-19 Re-Hires and Paycheck Protection Program Loans

Planning Issues for Re-Hiring Employees and Paycheck Protection Program Loans

It is laudable and noteworthy that the Paycheck Protection Program SBA 7(a) loan program accommodates the many businesses that have been crushed by COVID-19 and the mandatory closures in New York and many other states.  The impact on employees has also been severe.  Over 3 million people laid off, a number that is growing.

As mandatory business closures continue for the foreseeable future, each employer who has been unable to maintain their pre-crisis employment levels should look at a Payroll Protection Program loan as a way to help the business survive or thrive at the eventual end of the crisis and to help get their employees back at work, earning wages and receiving group benefits.

The rules for the timing of closing of a Paycheck Protection Program loan, the definition of expenditures that make a borrower eligible for loan forgiveness, and the rules for re-hiring employees that have been laid off because of COVID-19 are complicated.  Great care should be taken in understanding the rules and planning the timing and use of the loan to maximize the benefit to employers and getting people back on the payroll.

Tim Lynn
315-766-2118
tim@ldts-law.com

CARES Act - Paycheck Protection Program

Paycheck Protection Program

As part of the CARES Act, the SBA 7(a) Loan Program would provide significant assistance to small businesses in the form of potentially forgivable loans.  

Eligibility:  

Eligible businesses include:

1. Small business concerns
2. Any for-profit business with fewer than 500 employees that does not receive Medicaid expenditures
3. Any not-for-profit with fewer than 500 employees that does not receive Medicaid expenditures

To be eligible for a Small Business Interruption Loan, the applicant must have been in operation on February 15, 2020 and had employees for whom applicant paid salaries and payroll taxes or independent contractors to whom it issued a Form 1099-MISC.

Loan Terms:

• These loans are nonrecourse loans.  No personal guarantees are required except for "bad actor" liability for misuse of loan proceeds.
• Interest rate cannot exceed 4%.
• Unavailability of credit from other sources does not apply to loans made during the covered period.
• SBA fees are waived.
• No collateral.
• Maximum maturity of 10 years.  The SBA guarantee continues for the whole term.
• Deferment of payment of principal, interest and fees for no less than 6 months and no more than one year.
• No prepayment penalties.

These Small Business Interruption Loans would be available for a covered period of February 15, 2020 to June 30, 2020.  

Loan Forgiveness:

A borrower for a Paycheck Protection Program Loan is eligible for forgiveness in an amount equal to the sum of the following costs incurred during the 8 weeks after the origination of the loan:

1. Payroll costs (definition below);
2. Payment of interest on a covered mortgage obligation (pre-dating February 15, 2020);
3. Payment of covered rent (lease agreement in force before February 15, 2020);
4. Any covered utility payment (service began before February 15, 2020).

Forgiven amounts are treated as cancelled debt.  SBA covers the full amount forgiven by payment to the lender.  Forgiven amounts are not cancellation of debt income for federal income tax purposes.

The amount forgiven may be reduced if employment levels decrease or salaries and wages decrease.  Exceptions are provided for employers who laid off workers after February 15, 2020 but brings them back to work before June 30, 2020.

Loan Amount:

Maximum loan amount is determined as follows:

• Average total monthly payments for payroll during the 1 year period before the date on which the loan is made
• Multiplied by 2.5
• This is subject to a cap of $10 million.

Special exceptions are made for seasonal employers and employers not yet in business in 2019.

Payroll Costs means the sum of salary, wage, commission or similar compensation, cash tips or equivalent, vacation, parental, family, medical or sick leave, termination benefits, payments for group health benefits (including premiums), payment of retirement benefits, and state and local payroll taxes.  It can also include compensation to or income of a sole proprietor or independent contractor.

Payroll Costs excludes payment in excess of an annual salary of $100,000 (for employees, sole proprietors and independent contractors).

Permitted Uses of Loan Proceeds:

Small Business Interruption Loans may be used for the following purposes:

1. Payroll costs;
2. Costs for continuing group health benefits during periods of paid sick, medial or family leave (including insurance premiums);
3. Employee salaries or similar compensation;
4. Interest on mortgage obligations (no payment of principal);
5. Rent;
6. Utilities;
7. Payment of interest on other debt obligations incurred before the covered period (i.e., incurred before February 15, 2020).

Express Loans: The limits for express loans is increased to $1 million until January 1, 2021 (at which time it returns to $350,000).

Borrower Certifications:

Required borrower certifications:

1. That the uncertainty of current economic conditions makes necessary the loan request to support the ongoing operations of the eligible recipient; 
2. Acknowledging that funds will be used to retain workers and maintain payroll or make mortgage payments, lease payments, and utility payments;
3. That the eligible recipient does not have an application pending for a loan under this subsection for the same purpose and duplicative of amounts applied for or received under a covered loan; and
4. During the period beginning on February 15, 2020 and ending on December 31, 2020, that the eligible recipient has not received amounts under this subsection for the same purpose and duplicative of amounts applied for or received under a covered loan. 

Tim Lynn 

315-766-2118
tim@ldts-law.com

CARES Act - Temporary exception from excise tax for alcohol used to produce hand sanitizer

CARES Act - Temporary Exception From Excise Tax for Alcohol Used to Produce Hand Sanitizer

The CARES Act includes an exception from the excise tax on distilled spirits for distilled spirits removed from bonded premises between January 1, 2020 and December 31, 2021 for use in or contained in hand sanitizer produced and distributed in accordance with FDA guidance relating to COVID-19.

Furthermore, rules for labeling and bulk sales under the Federal Alcohol Administration Act and Alcoholic Beverage Labeling Act of 1988.

CARES Act – Employee Retention Credit for Employers Subject to Closure Due to COVID-19

CARES Act – Employee Retention Credit for Employers Subject to Closure Due to COVID-19

Employers are potentially eligible for an Employee Retention Credit for 50% of payroll taxes on qualifying wages paid to employees.

Employers eligible include for-profit and not-for-profit organizations that conducted a trade or business during calendar year and the operation of the trade or business is fully or partially suspended pursuant to an order from an appropriate governmental authority due to COVID-19.  For-profit employers can also qualify in gross reciepts in a calendar quarter declined more than 50% from the same quarter in 2019.

The credit is for 50% of payroll taxes paid on qualifying wages pursuant to Section 3111(a) and Section 3221(a) of the Internal Revenue Code.  Qualifying wages for any employee is capped at $10,000.  Determination of the amount of qualified wages depends upon how many employees the employer has:

1. For employers with more than 100 employees (certain aggregation rules apply), the credit is only available for wages continued even though the employer was unable to provide services because of an order from an appropriate governmental authority due to COVID-19 or the employer satisfies the reduction in gross receipts test. 
2. For employers with 100 or fewer employees, all employees are eligible and all wages paid to such employees are eligible.

Any employer taking a Small Business Interruption Loan is not eligible for the Employee Retention Credit.

House Passes CARES Act

Today at 4:45PM, the House of Representatives passed the CARES Act.  Hopefully the President will sign it quickly and get SBA to work.

Tim Lynn
315-766-2118
tim@ldts-law.com

CARES Act - Small Business Interruption Loans

Small Business Interruption Loans


As part of the CARES Act that passed the Senate and is pending in the House, the SBA 7(a) Loan Program would provide significant assistance to small businesses in the form of potentially forgivable loans.  Eligible businesses include:

1. Small business concerns
2. Any for-profit business with fewer than 500 employees that does not receive Medicaid expenditures
3. Any not-for-profit with fewer than 500 employees that does not receive Medicaid expenditures

These Small Business Interruption Loans would be available for a covered period of March 1, 2020 to December 31, 2020.  Maximum loan amount is determined as follows:

• Average total monthly payments for payroll during the 1 year period before the date on which the loan is made
• Multiplied by 2.5
• This is subject to a cap of $10 million.

Special exceptions are made for seasonal employers and employers not yet in business in 2019.

Payroll Costs means the sum of salary, wage, commission or similar compensation, cash tips or equivalent, vacation, parental, family, medical or sick leave, termination benefits, payments for group health benefits (including premiums), payment of retirement benefits, and state and local payroll taxes.  It can also include compensation to or income of a sole proprietor or independent contractor.

Payroll Costs excludes payment in excess of an annual salary of $100,000 (for employees, sole proprietors and independent contractors).

Small Business Interruption Loans may be used for the following purposes:

1. Payroll support, including paid sick, medical or family leave and costs related to the continuation of group health care benefits during those periods of leave;
2. Employee salaries;
3. Mortgage payments;
4. Rent;
5. Utilities;
6. Payment of other debt obligations incurred before the covered period (i.e., incurred before March 1, 2020).

To be eligible for a Small Business Interruption Loan, the applicant must have been in operation on March 1, 2020 and had employees for whom applicant paid salaries and payroll taxes.

The loans potentially include a one year deferral of all payments.

A key aspect of these Small Business Interruption Loans is the potential for loan forgiveness.  The loan forgiveness applies to loans made between March 1, 2020 and June 30, 2020.  Some of the rules are:

• The amount potentially eligible for forgiveness is the cost of maintaining payroll during the period March 1, 2020 to June 30, 2020.  It appears that the cost of maintaining payroll includes payroll expenses and payments on eligible debt obligations.  There is some ambiguity in the Act that needs clarification.
• Forgiveness is reduced if employment levels have dropped compared to the same period in 2019.
• Forgiveness may be reduced if employee compensation has been reduced by more than 25% (with a formula for determination).
• To help the restaurant and hotel industry employees, there are exceptions for tipped workers to allow forgiveness for additional wages paid to tipped workers.

Congress would allocate $299.4 billion to fund these loans.

Tim Lynn

tim@ldts-law.com

315-766-2118

Rep. Katko Announces $130K in Emergency COVID-19 Funding to Support Community Health Centers in Central New York

Link to the announcement:

https://katko.house.gov/media-center/press-releases/rep-katko-announces-130k-emergency-covid-19-funding-support-community

Tim Lynn
tim@ldts-law.com
315-766-2118

CARES Act

The following is a link to a good blog entry from the GOP Ways & Means Committee and follow up entries regarding the CARES Act.

https://gop-waysandmeans.house.gov/the-senate-cares-bill-protecting-americans-livelihoods/

Paycheck Protection Program

[UPDATE: SEE POST REGARDING CARES ACT]

From the Senate Committee on Small Business and Entrepreneurship:

Paycheck Protection Program

The stimulus includes nearly $350 billion in funding for a provision to create a Paycheck Protection Program (PPP) that will provide small businesses and other entities with zero-fee loans of up to $10 million. Up to 8 weeks of average payroll and other costs will be forgiven if the business retains its employees and their salary levels. Principal and interest is deferred for up to a year and all borrower fees are waived. This temporary emergency assistance through the U.S. Small Business Administration (SBA) and the Department of Treasury can be used in coordination with other COVID-financing assistance established in the bill or any other existing SBA loan program.

The bill requires the SBA Administrator to set a cap on how much a bank can earn to process loan applications and prioritize underserved borrowers, including those in rural communities, minorities, women and veterans.

More to follow.

Tim Lynn
tim@ldts-law.com
315-766-2118

Facebook Rolling out Small Business Grants Program in Response to COVID-19

Facebook indicates that they will provide up to 30,000 small businesses in 30 countries a total of $100 million in grants and ad credits.  The awards are intended to help with maintaining workforce, rent costs, customer connection and operational costs.

The program has not been rolled out yet, but interested businesses can sign up for updates at https://www.facebook.com/business/boost/grants?ref=eml

Tim Lynn
tim@ldts-law.com
(315) 766-2118

SBA Disaster Assistance in Response to COVID-19

Designated states, parts of states and territories -- including New York State -- are being offered low-interest federal disaster loans for businesses.  The program is coordinated with the respective state.

These SBA administered loans are for up to $2 million, interest rate is 3.75%, and long-term (up to 30 years) repayment terms are available.  The exact terms are determined on a case-by-case basis by SBA.

The application is available at SBA Disaster Loan Assistance.

For more information, contact Tim Lynn at tim@ldts-law.com or (315) 766-2118.

Coronavirus Bill Introduced in Albany Affecting Employers

In New York, Senate Bill S8090 was introduced at the request of the Governor.  It is expected to be adopted an signed by Governor Cuomo this week.  The law would create sick leave relating to the Coronavirus pandemic and would implement permanent sick leave provisions affecting all employers.

Coronavirus (COVID-19) Provisions:

Employers are split into four categories:

• Employers with 10 or fewer employees and less than $1 million in net income would be required to provide unpaid sick leave during the entire duration of a government ordered quarantine or isolation for an employee.  
• Employers with 10 or fewer employees but with $1 million or more in net income (in the prior tax year) must provide 5 days of paid sick leave and unpaid leave until the quarantine or isolation is lifted.
• Employers with between 11 and 99 employees must provide at least 5 days of paid sick leave and unpaid sick leave until the quarantine or isolation is lifted.
• Employers with 100 or more employees must provide 14 days of paid sick leave and unpaid sick leave until the quarantine or isolation is lifted.

The paid sick leave is in addition to any other sick leave created by the law and the sick leave does not count against an employee's fringe benefit sick time off.  

Upon completion of the sick leave, the employee must be reinstated to the same position, pay and other terms and conditions of employment.

For more information on this section of the law, contact Tim Lynn at tim@ldts-law.com or (315) 766-2118.

Permanent Sick Leave Provisions:

Every employer will be required to provide sick leave.  Employers are divided into four categories:

• Employers with less than five employees must provide every employee with up to 40 hours of unpaid sick leave in each calendar year.
• Employers with less than five employees but net income of more than $1 million in the prior tax year must provide up to 40 hours of paid sick leave.
• Employers with between five and 99 employees must provide up to 40 hours of paid sick leave.
• Employers with 100 or more employees must provide up to 56 hours of paid sick leave.

The sick leave accrues at a rate of not less than one hour for every 30 hours worked.  There is an option to accrue all of it at the beginning of the year, but once done it cannot be undone based upon the number of hours worked through the course of the year.

The law provides definitions of what constitutes a basis for sick leave and limitations on employers' ability to gather information confirming the underlying qualification for sick leave.

The law provides that unused sick leave carries over to the following calendar year, but an employer with fewer than 100 employees cannot be required to pay for more than 40 hours in a calendar year not can employers with more than 100 employees be required to pay for more than 56 hours in any calendar year.  Upon termination of employment, the law does not require payment to an employee for any unused sick leave under the law.

For more information on this section of the law, contact Tim Lynn at tim@ldts-law.com or (315) 766-2118.