Stimulus Program – SBA Paycheck Protection Program

Keeping Workers Paid
Paycheck Protection Program
April 2, 2020

By Matthew E. Miller, CPA, MBA

On Friday, March 27, 2020, Congress passed and the president signed a $2T multi-purpose stimulus package (CARES Act).  Over the next several days, we will send out brief one topic newsletters to inform you of important changes to filing and payment dates, as well as, tax law changes effecting the 2019 and 2020 tax years.

The IRS has set up a special Coronavirus page on its website with up to date information.

To read all of our articles on the stimulus package, please visit this page on our website.

Today’s articles will discuss stimulus incentives for business taxpayers.

KEEPING AMERICAN WORKERS PAID AND EMPLOYED ACT

One of the major goals of the CARES Act is to help families by keeping individuals employed. The CARES Act has a number of provisions designed to keep businesses open or to help shuttered businesses reopen.
While there are many provisions we can write about, today we will cover the most important provisions of the Act in two articles:

• Paycheck Protection Program, and
• Delayed Payment of Employer Payroll Taxes.

Here’s a brief summary of the first –

Paycheck Protection Program

The CARES Act provides for small business lending to ensure businesses have access to cash for payroll, rent or interest on mortgage payments, and utilities. The program is available to businesses with less than 500 employees. The lending program will be administered through your bank and the SBA. The program sets a fixed interest rate of 4%.

Borrowings

The maximum loan amount for an eligible business under the Act will equal the lesser of the following sums:

1. The average total monthly payments for payroll costs incurred by the applicant during the one-year period before the date on which the loan is made, multiplied by 2.5; or
2. $10,000,000.00.

Payroll costs include salary¹, commission payment for vacation, parental, family, medical, or sick leave, allowance for dismissal or separation; payment required for the provisions of group health care benefits, including insurance premiums; payment of any retirement benefit; or payment of any State or local tax assessed on the compensation of employees.

¹Limited to an annual salary of $100,000.

Repayment

Borrowers are eligible for forgiveness of any portion of the loan amount that is used during the eight-week period beginning on the date of the origination for

1. Payroll costs, limited to an annualized salary not to exceed $100,000 per employee.
2. Rent or interest on mortgage payments, and
3. Utility payments.

All loan amounts forgiven under the Act are treated as nontaxable cancellation of indebtedness. The amount of eligible loan forgiveness will be reduced if the borrower reduces its employees or reduces employee wages.

For more details on the program please visit the Treasury Department website.

Comments

Employers participating in the Paycheck Protection Program are not eligible to participate in the Employee Retention Credit for Employers program under section 2301 of the Act, or the Delay of Payment of the Employer Payroll Tax program under section 2302 of the Act.

Our Plans

We expect significate guidance will be available in the coming days on this lending program. We will republish this article as updated information becomes available.

Our wishes to you and your family for your health and safety.