CARES Act

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By Rich Peterson, Wendy Moore, and Minkeun Woo

UPDATES

In response to the ongoing coronavirus (COVID-19) pandemic, U.S. Congress, the executive branch, and the Internal Revenue Service (IRS) have taken several actions intended to provide immediate relief to taxpayers. In prior updates, we summarized some of the actions taken in the last several months, including the tax provisions contained in the Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).…
Continue Reading Summary of Notice 2020-65: Deferral of Employee’s Portion of Social Security Taxes

By Andrew Smetana, Wendy Moore, and Sean Apfelbaum

In its latest interim final rule (IFR #24) providing guidance under the Paycheck Protection Program (PPP), the Small Business Administration (SBA) provided clarification on two topics impacting borrowers that are preparing to apply for loan forgiveness and, in doing so, created new limitations on PPP loan forgiveness. A summary of this latest guidance follows.

Compensation Limits for Owner-Employees

The new guidance will help some small business owner-employees understand when their compensation is subject to special limits with respect to PPP loan forgiveness. As discussed in our prior client alert (see here), the SBA announced through FAQs that special limits apply with respect to loan forgiveness for loan proceeds used to pay compensation to owner-employees. These owner-employee restrictions impose both a lower cash compensation limit on owner-employees of borrowers who use the 24-week “covered period” for PPP loan forgiveness and certain categorical restrictions that differ from the treatment for ordinary employees. However, prior guidance did not specify any ownership threshold for these compensation limits, allowing speculation as to whether these limits would apply to any business owner, only owners of more than 20% of the business, or some other category of business owners. The new guidance provides as follows:…
Continue Reading SBA Provides Additional Guidance on PPP Loan Forgiveness for Owner-Employees and Landlords or Sublandlords

Businesswoman Signing Cheque

By Andrew (Andy) Smetana, Teri A. Lindquist, Joe Bailey, and Wendy L. Moore,

While debates in Congress continue regarding extending or providing additional COVID-19 relief legislation, the Small Business Administration (SBA), U.S. Department of Treasury (Treasury), and lenders under the Paycheck Protection Program (PPP) are preparing for the next wave of activity for PPP loans. Specifically, the deadline to obtain a PPP loan is tomorrow, August 8, 2020. In addition, other key milestones related to PPP loan forgiveness are rapidly approaching. The SBA previously announced that it intends to make an electronic portal available on August 10, 2020 to begin processing PPP loan forgiveness applications, and on August 4, 2020 the SBA and Treasury released new FAQs regarding loan forgiveness. The new FAQs largely reiterate prior guidance but include some clarifications that may impact borrowers’ applications for loan forgiveness. Highlights of these developments and key reminders regarding the loan forgiveness process are provided below.…
Continue Reading New Guidance Issued Regarding PPP Loan Forgiveness in Advance of Opening of the SBA’s Loan Forgiveness Portal

By Thomas Abbott and Kristine Kruger

On March 27, 2020, the president signed into law the Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, in response to the national emergency arising from the COVID-19 pandemic. Four key provisions of the CARES Act are likely to affect mortgage loan servicers: (1) credit protection; (2) a moratorium on foreclosures; (3) forbearance on mortgage payments; and (4) a moratorium on eviction filings. Compliance with the CARES Act may be straightforward for moratoriums but more challenging for credit reporting and regulatory compliance. This post provides an updated summary of salient portions of the CARES Act and identifies potential regulatory compliance pitfalls.

Summary of the CARES Act

  • Amendment to the Fair Credit Reporting Act
    The CARES Act amends the Fair Credit Reporting Act (FCRA) to require furnishers of credit information who make an accommodation that the consumer satisfies to report the credit obligation or account as current unless the account was delinquent before the accommodation. See 15 U.S.C. § 1681s-2(a)(1)(F)(ii)(I)-(II). The amendment is potentially retroactive, defining the covered period from January 31, 2020, to the later of July 25, 2020, or 120 days after the termination of the national emergency. See 15 U.S.C. § 1681s-2(a)(1)(F)(i)(II). Accommodations are defined broadly to include forbearances under the CARES Act in addition to a loan servicer’s deferment of payments, loan modifications, or other assistance or relief granted to a consumer affected by the COVID-19 pandemic during the covered period. See 15 U.S.C. § 1681s-2(a)(1)(F)(i)(I).

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Continue Reading CARES Act Regulatory Considerations for Mortgage Servicers

By Joe Bailey, Teri A. Lindquist, Wendy L. Moore, Andrew (Andy) Smetana and Sean M. Apfelbaum

After putting much emphasis on eligibility requirements for PPP loans, the SBA has now turned its attention to the requirements for loan forgiveness.  On Friday night, the SBA released a PPP loan forgiveness application. The application…

By Joe Bailey, Teri Lindquist and Andy Smetana

On May 5, 2020, the Small Business Administration (SBA) issued a new FAQ[1] announcing that it will be extending the deadline for borrowers under the Paycheck Protection Program (PPP) to repay their loans and be deemed to have made the “necessity” certification in good faith from May 7 to May 14. The extension is to be implemented through a revision to the fourth Interim Final Rule that had previously set a May 7 deadline.…
Continue Reading SBA Announces Plans to Extend Deadline for Borrowers to Return PPP Loans Under “Necessity” Safe Harbor

By Kevin Feldis, Markus Funk and David Fletcher

Companies seeking PPP loans must concurrently navigate the potential minefield of public scrutiny and government enforcement, requiring a heightened level of planning and procedures.

An adequate compliance program is a must to avoid ramped-up enforcement efforts and to minimize legal and reputational risks.

Click here to…

By Joseph Cutler, Will Gillis, Anna Joy, and Michelle Han

Smaller nonprofit organizations may find themselves struggling to maintain their mission under the current coronavirus (COVID-19) crisis, let alone keep abreast of the resources available to them under federal relief programs. While details about eligibility, qualification, and how to proceed may be overwhelming, it is a relief to know there are several programs specifically tailored to assist smaller organizations with their biggest concerns—including payroll, rent, and utilities. This post summarizes the programs offered through the Small Business Administration for which a nonprofit organization may qualify.

We emphasize that funds are limited, and applications are reviewed on a rolling, first-come-first-served basis. Accordingly, nonprofits should act expeditiously to determine eligibility and contact their banks to submit the applications necessary to secure a place for relief funding.

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Continue Reading Nonprofits: COVID-19 Relief Resources for Smaller Organizations

By Alexander Canizares and Richard Oehler

Businesses that receive government funding under the nearly $2 trillion Coronavirus Aid, Relief, and Economic Security Act (CARES Act) should be mindful of the heightened risks of government investigations of fraud, waste, and abuse, for several reasons.

  • With the increased spending comes oversight. The CARES Act creates a new special inspector general for pandemic recovery within the U.S. Department of the Treasury to investigate misconduct, and provides resources towards identifying fraudulent activity related to the CARES Act programs.
  • Businesses are under pressure to apply for funds under the CARES Act, including government-backed loans under the $350 billion Paycheck Protection Program (PPP).
  • Borrowers applying for PPP loans are required to certify their eligibility for loans and make other representations that, if not properly substantiated, can expose them to allegations of fraud and potentially lead to damages and penalties.
  • Some businesses applying for PPP loans may not have previously dealt with the Small Business Administration (SBA) and may be unfamiliar with SBA’s affiliation rules, which are complicated and may make some entities backed by venture capital or private equity funds ineligible.

This update provides an overview of these enforcement risks and discusses the importance of diligence and documentation to mitigate these risks.

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Continue Reading CARES Act Creates New Resources for Fraud Enforcement—and Risks for Businesses