The Senate unanimously passed the Coronavirus Aid, Relief, and Economic Security Act the “CARES Act”), which provides businesses and individuals impacted by the COVID-19 pandemic with extensive financial relief. House passage is expected to follow shortly. The Department of Labor also recently released much-anticipated guidance regarding the Families First Coronavirus Response Act in the form of fact sheets and Q&A’s, as well as notices and posters that employers are required to display in their businesses, all of which can be found here.

Portions of the CARES Act that will benefit small businesses include widespread expansion of SBA loans and many tax-related savings, credits, and deferrals:

Expansion of SBA 7(a) Loans. Businesses that have been affected by the pandemic and have 500 employees or fewer will be able to obtain SBA 7(a) loans equal to 250% of their monthly payroll (up to an annual rate of pay for each employee of $100,000), up to a maximum loan of $10,000,000. These loans may be forgiven to the extent they are used between February 15, 2020 and June 30, 2020 to fund payroll expenses, make interest payments on mortgages, or pay rent and utilities. The loan forgiveness will be reduced by any proportionate reduction in employees compared to the prior year and a 25% or greater reduction in employee compensation. The amount forgiven will be excluded from the business’ gross income. The loans will be non-recourse (no security or personal guarantee required), and bear interest of 4% with a repayment period of 10 years.

Expansion of Other SBA Loan Programs. The CARES Act will also expand existing loan programs offered by the SBA as follows:

• The maximum Express Loan will increase from $350,000 to $1,000,000. These loans provide borrowers with revolving lines of credit for working capital.
• Businesses affected by the pandemic can access Economic Injury Disaster Loans and obtain an advance of up to $10,000 within 3 days of application to maintain payroll, make debt payments, and provide paid sick leave. Businesses that receive a 7(a) loan under the CARES Act will not be eligible to receive an Economic Injury Disaster Loan for the same purpose
• The SBA will be required to pay the principal, interest, and fees owed on pre-existing SBA loans for six months, beginning with the next payment.

Tax Benefits. The CARES Act provides business with multiple forms of tax relief, including but not limited to refundable payroll tax credits, delay of payroll payments, changes to net operating loss carry back and limits, and roll back of net interest deduction limitation. We suggest you contact your tax advisor to determine what tax relief your business may be entitled to under the CARES Act.

If you have any questions about the CARES Act or the Families First Coronavirus Response Act, including how they may affect your business, contact us at (312) 216-2720 or firm@marcusboxerman.com.

The U.S. Department of Labor recently posted answers to commonly asked questions about the Families First Coronavirus Response Act.  The questions and answers can be found here.

On March 18, 2020, President Trump signed the Families First Coronavirus Response Act (“Act”), which becomes effective April 2, 2020. Important provisions employers must be aware of include the following:

Family Medical Leave Act Extension.  Division C of the Act allows employees who have been employed for at least 30 days by an employer with fewer than 500 employees to take up to 12 weeks of leave if they cannot work or telework because they must care for a child whose school or care provider is closed or otherwise not available due to a federal, state, or local restriction precipitated by a public health emergency, including the current COVID-19 pandemic. The Secretary of Labor can exempt employers with fewer than 50 employees if the requirement would jeopardize the viability of the employer’s business, but has not yet issued any guidance on the subject.

Key provisions of Division C include the following:

• The first 10 days off is unpaid, after which, the employer must pay the employee at least two-thirds of their regular pay up to $200 per day or $10,000 total.
• For hourly employees whose schedules vary, the paid leave rate is calculated using the average number of hours the employee was scheduled per day over the six-month period prior to the leave.
• Upon the employee’s return to work, employers with at least 25 employees must generally restore the returned employee to the same or an equivalent position as they had prior to taking leave.
• Employers with fewer than 25 employees need not restore the employee if their prior position doesn’t exist because of changes to employer’s economic or operating condition caused by the pandemic, the employer makes efforts to restore the employee to their prior position, and the employer attempts to contact the employee if a similar position opens up in the next year.

Emergency Paid Sick Leave.  Division E of the Act allows employees (regardless of the length of their employment) to take up to 2 weeks of paid sick leave if they cannot work or telework because they (a) are subject to a quarantine or isolation order because of COVID-19, or they are caring for someone who is (b) were told by a health care provider to self-quarantine because of COVID-19, or they are caring for someone who was, (c) are experiencing symptoms of the novel coronavirus and are seeking a medical diagnosis, (d) are caring for a child whose school or care provider is closed or otherwise not available due to a federal, state, or local restriction due to COVID-19, or (e) are experiencing a similar condition due to COVID-19 as specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor. The Secretary of Labor can exempt employers with fewer than 50 employees if the requirement would jeopardize the viability of the employer’s business, but has not yet issued any guidance on the subject.

Key provisions of Division E include the following:

• Full-time employees are entitled to 80 hours of paid sick leave, while part time employees are entitled to the average number of hours they work over a two-week period.
• For hourly employees whose schedules vary, the paid leave rate is calculated using the average number of hours the employee was scheduled per day over the six-month period prior to the leave.
• Employees entitled to paid sick leave due to quarantine or isolation orders, who have been advised by a health care provider to self-quarantine, or are experiencing coronavirus symptoms and seeking medical diagnosis must be paid at their regular rate of pay not to exceed $511 per day or $5,110 in total.
• Employees entitled to paid sick leave for any other reason must be paid at least two-thirds of their regular pay up to $200 per day or $2,000 total.
• Sick leave is not paid out to employees upon termination and may not be carried over to another year if the Act is extended.
• The Secretary of Labor is required to issue guidelines to help employers calculate paid sick leave within 15 days of enactment, as well as a notice that employers must display to inform employees of the availability of paid sick leave within 7 days.

Tax Credits.  Division G of the Act provides employers tax credits to offset their costs of compliance with the Act, including (a) a refundable tax credit against employer Social Security payroll taxes worth 100% of paid sick leave and emergency leave wages under the Act, (b) a tax credit for paid sick leave and emergency leave wages, and (c) a tax credit for amounts employers pay for the employee’s health plan coverage while they are on leave.

Key provisions of Division G include the following:

• The amount of paid sick leave credit permitted for any calendar quarter cannot exceed the employer’s total payroll tax obligations and, if it does, the excess amount is refundable to the employer.
• Employers receiving a credit for paid family and medical leave under the 2017 Tax Cuts and Jobs Act cannot receive the above tax credits.
• These rules are subject to additional expected requirements and guidelines from the Treasury Department.

What We Don’t Know:  At this point the Department of Labor has not issued any guidance regarding exemptions for employers with fewer than 50 employees or from any government authority regarding whether entities with similar ownership should be aggregated when determining whether the Act applies to them.

If you have any questions about the Families First Coronavirus Response Act, including how it may affect your business, contact us at (312) 216-2720 or firm@marcusboxerman.com.