Hello Vertical Advisors (VA) Clients & Friends:
This morning listening to the news, I heard that the jobs report showed 3MM job added. That is great! In listening to the news but more importantly speaking with our clients, everyone seems ready to open and or get their business back to normal or bigger. President Trump has stated he expects the US economy to bounce back strong. A lot of our clients want to believe President Trumps statements about the economy getting back to normal, but we need to see the results to convince us. The fact that the job report showed 3MM jobs added seems to be the beginning of support for the Presidents statements and supports what I’m hearing from our clients and business owners. Please read this memo in conjunction with our memo dated April 2, 2020 that discusses the CARES Act.
Today, President Trump signed H.R. 7010 which revised the PPP Act. The revisions were small but should be helpful. The revisions are focused on the loan forgiveness section and are as follows:
Section 1106 of the CARES Act discusses PPP Loan Forgiveness:
Change in Covered Period. The covered period is the time one needs to spend the PPP funds:
The original CARES act stated the covered period to use the PPP funds was 8 weeks. H.R. 7010 changes the covered period to the earlier of 24 weeks or December 31, 2020.
Change in the requirements of the PPP funds spent on payroll costs:
The CARES Act didn’t define a specific percentage needed to be spent on payroll and no payroll. The SBA provided regulations which stated at least 75% needed to be spent on payroll costs. H.R. 7010 states that 60% must be spent on qualified payroll and 40% on the non-payroll items.
- Payroll costs include employees’ wages during the covered period which can’t exceed $100k / annual.
- Includes health insurance premiums
- Doesn’t include employer payroll taxes
- Other costs for the 40% (rent, interest on mortgage, utilities)
Updates on rehiring:
There are reductions in the loan forgiveness if head counts is reduce 25% or more. If an employee quit or was fired, then the business had the option to replace that position with a new employee. However, there were discussions regarding the company asking the employee to come back to work and the employee not accepting. The updates allow additional flexibility regarding employee counts and availability. A company head count will not be hurt if the company can show support and documentation that they were unable to rehire an employee AND unable to hire a similar qualified employee for an unfilled position on or before December 31, 2020.
COVID-19 Safety Standards:
Requires the business to follow requirements established or guidance issued by the Secretary of Health and Human Services for the period March 1, 2020 and ending on December 31, 2020 to maintain standards of sanitation, social distancing and other related safety requirements related to COVID-19. Our firm has used the OSHA guidelines at https://www.osha.gov/Publications/OSHA3990.pdf, and we suggest you speak with your HR or labor attorney. Also as stated previously, OSHA may come and check your facility to follow regular requirements and COVID-19 in accordance with the CARES Act. So, make sure you are prepared. Make sure you have your posters up.
Loan Limit Changes:
Any of the PPP that isn’t forgiven is a loan. The interest rate is 1% and the term seems to be changed from two (2) years to five years (5). This area of the law needs to be explained more.
President Trump today again discussed a payroll tax holiday, so stay tuned.
Our firm is back working in the office. Let’s all continue to get back to normal. Please contact us if we can be of any assistance. 949-756-8080.