Brown Brothers Harriman (BBH) continues to monitor changes to legislation and program rules as they come out. The details discussed in this article are accurate as of April 5, 2020.
Business owners are anxiously awaiting the final details of the $2 trillion stimulus package. Though the stimulus is expected to offer several benefits to small businesses, there are a number of opportunities available to business owners right now:
- Disaster Assistance Loans for Businesses: Between January 1, 2020, and December 31, 2020, the U.S. Small Business Administration (SBA) is offering Economic Injury Disaster Loans (EIDL) of up to $2 million to businesses suffering economic injury as a result of COVID-19. Loans carry interest rates of 3.75% and a term as long as 30 years. These loans are made directly by the SBA.
- Families First Coronavirus Response Act (FFCRA): Private employers with fewer than 500 employees (including part-time employees, but not independent contractors) are required to provide their employees with paid sick leave or expanded family and medical leave for reasons related to COVID-19.1 These companies are eligible for dollar-for-dollar reimbursement of wages paid to employees for paid sick leave, as well as family and medical leave (including caring for a child) in the form of payroll tax credits.
- Deferred Federal Income Tax: Corporate taxpayers who file and pay 2019 federal income taxes on April 15 or who pay estimated taxes on April 15, regardless of the amount owed, will have their deadlines automatically extended until July 15, 2020. We recommend contacting your tax advisor to discuss further.2
- State-Level Tax Deferrals and Loan Assistance Funds: Many states have provided tax relief, including extensions on filing as well as extensions on paying taxes, and history suggests more states will follow suit. Similarly, several states have established supplementary funds to support their local economy. We recommend consulting your state’s website for further information and discussing state-specific options with your tax advisor.
Many clients have asked for additional information on the SBA’s disaster assistance loans and the FFCRA to understand if and how these might apply to them. As follows is additional background on these opportunities.
Families First Coronavirus Response Act: Tax Credits for Paid Sick and Paid Family and Medical Leave5
The FFCRA requires businesses with fewer than 500 employees (including part-time employees, but not independent contractors) to provide emergency paid leave to employees who are unable to work or perform telework due to COVID-19.6 Under the act, covered employers are eligible to receive payroll tax credits to reimburse all qualifying wages paid to employees for paid sick leave, as well as family and medical leave, dollar-for-dollar (and amounts paid or incurred to maintain health insurance coverage allocable to sick required leave wages).
Employers who provide paid leave under the FFCRA will be able to retain an amount of payroll taxes equal to the amount of qualifying paid leave provided between the effective date (April 1, 2020) and December 31, 2020. If eligible payroll taxes do not cover the total paid leave employers provided, employers can file a request for an accelerated payment from the IRS.
An employee’s qualified paid leave is based on the following:
Please reach out to your BBH relationship team for further information or assistance in taking advantage of these opportunities. We will continue to provide details as the specific provisions of the stimulus bill are released.
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1 Additionally, two or more entities are separate employers unless they meet the integrated employer test under the Family and Medical Leave Act of 1993 (FMLA).
2 Source: Internal Revenue Service.
3 Source: Internal Revenue Service and Department of Labor.
4 See https://www.sba.gov/size-standards/. To confirm your NAICS code, visit: https://www.naics.com/naics-identification-help/.
5 Source: Internal Revenue Service and Department of Labor.
6 Additionally, two or more entities are separate employers unless they meet the integrated employer test under the Family and Medical Leave Act of 1993 (FMLA). Businesses with fewer than 50 employees may qualify for exemption from the requirement to provide leave due to school closings or childcare unavailability if the leave requirements would jeopardize the viability of the business as a going concern.
7 Part-time employees who are unable to work for reasons 1-5 are eligible to receive paid leave for the number of hours that the employee would be normally scheduled to be working over a two-week period.
8 Employees who have been employed for more than 30 days are eligible to receive up to 10 additional weeks of paid expanded family and medical leave on top of the two weeks of paid sick leave.