COVID-19 Tactical Resource Page

On  March 18, 2020, the President signed the Families First Coronavirus Response Act into law. One of the major components of this law seeks to protect employees from the adverse effects of missing work because of the coronavirus. It is critical to note that most of the provisions under this act is applicable only to employers with under 500 employeesWhile a large number of employment related laws have exceptions for small businesses, this legislation is specifically applicable to the small and mid-sized businesses. This Act goes into effect on April 1, 2020.

Emergency Paid Sick Leave.  Under the a Act, employees will be entitled to two weeks paid time off if the employee is: (1) subject to quarantine, (2) has been advised by a healthcare provider to self-quarantine due to coronations concerns, (3) experiencing symptoms of coronavirus, (4) caring for someone for someone who is subject to a quarantine order or advised advised to self-quarantine by a healthcare provide: or (5) caring for children at home whose school or daycare is closed because of coronavirus concerns.

  • For full-time employees, “two weeks” means 80 hours.
  • For employees who are less than full time, “two weeks” means the average number of hours the employees works over a two week period. According to the Department of Labor, the employer should calculate this number by determining the daily average number of hours work over the past six-months.
  • For reasons (1), (2) and (3), the employees “pay” means the employees’ regular pay, up to $511 per day and $5,110 over the benefit period.
  • For reasons (4) and (5), the employees “pay” means 2/3 of the employees’ regular pay, up to $200 per day and $2,000 over the benefit period.
  • The benefit is effective immediately. There are not waiting periods.
  • An employer cannot require that the employee first use any other accrued paid sick time prior to using the Emergency Paid Sick Leave.
  • Employers must post a notice of the requirements of Emergency Paid Sick Leave for all employees.  A copy of the notice can be found here. Notice will likely be revised and updated a number of times before it becomes final, so you may want to check here for the latest version. The notices only needs to be distributed in English.

The Department of Labor is currently working on regulations to further clarify these rules.  Please check back for updates as they happen.  The DOL has thus far put together a FAQ regarding the Emergency Paid Sick Lease and can be found here.

Emergency Family Medical Leave Expansion. The Act also expands the Family Medical Leave Act to include paid time off to care for a child because the school or day care has been closed or the child care provider is unavailable due to a public health emergency. Historically, employees are entitled to 12 weeks unpaid leave, while keeping their job protected. However, for the purposes of taking leave to care for a child under these circumstance, the 12 weeks of leave will be paid leave. The other traditional conditions for leave (childbirth, medical conditions, etc.) remain unpaid leave.

  • The first 10 days of leave may be taken unpaid; however, the employee may used accrued paid sick time during this time, or use the Emergency Paid Sick Leave benefits.
  • “Pay” means 2/3 of the employees’ regular pay, up to $200 per day and $2,000 over the benefit period.
  • To qualify, the employee must have worked for the employer for 30 days.

The general threshold for the applicability of the Family Medical Leave Act is employers with less than 50 employees. However, the Emergency Family Medical Leave Expansion applies to all businesses with less than 500 employees. As a result, employees with less than 50 employees are subject to theses rules. However, the Act provides that small businesses with less that 50 employees may be exempted from these rules, if compliance by the employer would jeopardize the viability of the business as a going concern. Currently, there is NO AUTOMATIC EXEMPTION. As an employer, you will need to document why and how compliance will jeopardize your business as a going concern. The Department of Labor is currently working on regulations to further clarify the process for seeking an exemption.

The Interplay Between the Emergency Paid Sick Leave and Expanded Family Medical Leave. A parent can utilize both the Emergency Paid Sick Leave and the Expanded Family Medical Leave. The employee who is caring for a child at home can take the Emergency Paid Sick Leave for two weeks (10 working days), and forgo any paid leave under the Expanded Medical Leave until after the 10 days of Emergency Paid Sick Leave has been used. For full-time employees, the employee is eligible to receive his/her regular pay (up to $511 per day and $5,110 over the benefit period) during the Emergency Paid Sick Leave, then can qualify for the Expanded Family Medical Leave for the remainder of the 12 weeks.

Tax Alerts

Families First Coronavirus Response Act.  To help employers have the funds to comply with the Emergency Paid Sick Leave and the Emergency Family Medical Leave Expansion, the Act provides some employment tax relief.

  • The Act provides that employer will receive a 100% dollar-for-dollar employment tax credit for all wages paid to any employee taking time off under qualified sick leave or the expanded family leave.
  • The credit will be capped at the wages allowed under the qualified sick leave or the expanded family leave.
  • The will also be an individual tax credit for those self-employed individuals taking leave under these rules.

Employment Tax Credits (Release 2020-57). On March 20, 2020, the Internal Revenue Service provided some initial guidance in Release 2020-57 on how to claim the employment tax credit. To take immediate advantage of the paid leave credits, businesses can retain and access funds that they would otherwise pay to the IRS in payroll taxes. If those amounts are not sufficient to cover the cost of paid leave, employers can seek an expedited advance from the IRS by submitting a streamlined claim form. Requirements subject to 30-day non-enforcement period for good faith compliance efforts.  The streamlined claim form is not yet available. Please check back for updates.

EXAMPLES:

  • If an eligible employer paid $5,000 in sick leave and is otherwise required to deposit $8,000 in payroll taxes, including taxes withheld from all its employees, the employer could use up to $5,000 of the $8,000 of taxes it was going to deposit for making qualified leave payments. The employer would only be required under the law to deposit the remaining $3,000 on its next regular deposit date
  • If an eligible employer paid $10,000 in sick leave and was required to deposit $8,000 in taxes, the employer could use the entire $8,000 of taxes in order to make qualified leave payments and file a request for an accelerated credit for the remaining $2,000.

Tax Filing Deadline Extension (Notice 2020-18). On March 28, 2020, the Department of Treasury issued Notice 2020-18, which extended the income tax filing deadline from April 15, 2020 to July 15, 2020. The extension not only extends the tax payment deadline, but also the time to file the return.

  • The extension only covers income tax returns for individuals (Form 1040), trusts and estates (Form 1041).
  • S- Corporation (Form 1120s) and Partnership (Forms 1065) returns were still due on March 15th.
  • Gift Tax (Form 709) and Estate Tax (Form 706) returns are not included in the extended deadline.
  • The extension also covers the first quarterly estimated tax payments for the 2020 tax year, which was originally due on April 15, 2020.
  • No penalties or interest will accrue between April 15th and July 15th for those income tax returns that are subject to the extended deadline.

Tax Filing Deadlines. The Department of Treasury to extend the income tax deadline from April 15th to July 15th. This extension applies to all income tax returns originally due on April 15th. These include individuals, estates and trusts, and C-corporations. It is important to note that partnerships and S-corporations, whose original tax deadline was March 16th, have not been extended. On March 25, 2020, Governor Pritzker finally agreed to extend the state income tax deadline to July 15th as well, to coordinate with the federal deadline.

The first three federal quarterly estimated tax payments for tax year 2020, which were originally due on April 15th, June 15th, and September 15th, are all extended to October 15th. According to the IRS guidance, no penalties or interest will accrue on these estimated payments if paid by October 15th. However, Governor Pritzker has not extended the deadlines for Illinois quarterly estimated tax payments deadlines. Illinois taxpayer should pay their Illinois estimated taxed by the original deadlines of April 15th, June 15th, September 15th, and January 15th (of the following year).

Estate & Gift Tax Returns. Estate and gift tax returns are not specifically included in Tax Filing Deadline Extension.

  • Illinois estates with return and payment dates due between March 16, 2020 though April 15, 2020 are automatically extended for 30 days. The extension, however, does not extend the statutory interest on all estate tax liabilities.

Illinois Sales Tax. On March 19, 2020, the Illinois Governor issues, and the Illinois Department of Revenue issued and informational bulletin on the short term relief from penalties and late sales tax payments due to the Coronavirus outbreak.

  • Only applies to eating and drinking establishments that incurred less than $75,000 in Illinois sales tax liabilities in 2019.
  • All sales tax liabilities due in February, March and April of 2020, are extended and due in four equal quarterly installments on May 20th, June 22nd, July 20th, and August 2oth.
  • All sales tax liabilities beginning with May of 2020 will be due on the regularly scheduled due dates.

On March 20, 2020, Illinois Governor Pritzker executed COVID-19 Executive Order No. 8, implementing stay-at-home and social distancing requirements for all Illinoisans. In order to reduce the spread of the Coronavirus, all individuals living in Illinois are ordered to stay at home or at their place of residence. Such individuals, however, may leave their home to engage in essential activities. Essential activities include: health and safety activities, to obtain necessary services and supplies, to engage in certain outdoor activities, and to take care of others. All essential activities will require that social distancing practices be observed while engaged in those activities. Social distancing means maintaining a distance of at least 6 feet from any other person and utilizing hand sanitizer.

All non-essential businesses and operations must cease under this order, but businesses considered essential may remain open. Essential businesses include:

  • Healthcare & Public Health Operations – but is not limited to: hospitals; clinics; dental offices; pharmacies; public health entities, including those that compile, model, analyze and communicate public health information; pharmaceutical, pharmacy, medical device and equipment, and biotechnology companies (including operations, research and development, manufacture, and supply chain); organizations collecting blood, platelets, plasma, and other necessary materials; licensed medical cannabis dispensaries and licensed cannabis cultivation centers; reproductive health care providers; eye care centers, including those that sell glasses and contact lenses; home healthcare services providers; mental health and substance use providers; other healthcare facilities and suppliers and providers of any related and/or ancillary healthcare services; entities that transport and dispose of medical materials and remains; technicians, logistics, and warehouse operators and distributors of medical equipment, personal protective equipment (PPE), medical gases, pharmaceuticals, blood and blood products, vaccines, testing materials, laboratory supplies, cleaning, sanitizing, disinfecting or sterilization supplies, and tissue and paper towel products; and veterinary care and all healthcare
    services provided to animals. DOES NOT INCLUDE: fitness and exercise gyms, spas, salons, barber shops, tattoo parlors, and similar facilities.
  • Essential Infrastructure. Essential Infrastructure includes, but is not limited to: food production, distribution, and sale; construction (including, but not limited to, construction required in response to this public health emergency, hospital construction, construction of long-term care facilities, public works construction, and housing construction); building management and
    maintenance; airport operations; operation and maintenance of utilities, including water, sewer, and gas; electrical (including power generation, distribution, and production of raw materials); distribution centers; oil and biofuel refining; roads, highways, railroads, and public transportation; ports; cybersecurity operations; flood control; solid waste and recycling collection and removal; and internet, video, and telecommunications systems(including the provision of essential global, national, and local infrastructure for
    computing services, business infrastructure, communications, and web-based services).
  • Stores That Sell Groceries and Medicine. Grocery stores, pharmacies, certified farmers’ markets, farm and produce stands, supermarkets, convenience stores, and other establishments engaged in the retail sale of groceries, canned food, dry goods, frozen foods, fresh fruits and vegetables, pet supplies, fresh meats, fish, and poultry, alcoholic and non-alcoholic beverages, and any other household consumer products (such as cleaning and personal care products). This includes stores that sell groceries, medicine, including medication not requiring a medical prescription, and also that sell other non-grocery products, and products necessary
    to maintaining the safety, sanitation, and essential operation of residences and Essential Businesses and Operations.
  • Food, beverage, and cannabis production and agriculture. Food and beverage manufacturing, production, processing, and cultivation, including farming, livestock, fishing, baking, and other production agriculture, including cultivation, marketing, production, and distribution of animals and goods for consumption; licensed medical and adult use cannabis dispensaries and licensed cannabis cultivation centers; and businesses that provide food, shelter, and other necessities of life for animals, including animal shelters, rescues, shelters, kennels, and adoption facilities.
  • Organizations that provide charitable and social services. Businesses and religious and secular nonprofit organizations, including food banks, when providing food, shelter, and social services, and other necessities of life for economically disadvantaged or otherwise needy individuals, individuals who need assistance as a result of this emergency, and people with disabilities.
  • Media. Newspapers, television, radio, and other media services.
  • Gas stations and businesses needed for transportation. Gas stations and autosupply, auto-repair, and related facilities and bicycle shops and related facilities.
  • Financial Institutions. Banks, currency exchanges, consumer lenders, including but not limited, to payday lenders, pawnbrokers, consumer installment lenders and sales finance lenders, credit unions, appraisers, title companies, financial markets, trading and futures exchanges, affiliates of financial institutions, entities that issue bonds, related financial institutions, and institutions selling financial products.
  • Hardware and Supply Stores. Hardware stores and businesses that sell electrical, plumbing, and heating material.
  • Critical Trades. Building and Construction Tradesmen and Tradeswomen, and other trades including but not limited to plumbers, electricians, exterminators, cleaning and janitorial staff for commercial and governmental properties, security staff, operating engineers, HVAC, painting, moving and relocation services, and other service providers who provide services that are necessary to maintaining the safety, sanitation, and essential operation of residences, Essential Activities, and Essential Businesses and Operations.
  • Mail, post, shipping, logistics, delivery, and pick-up services. Post offices and other businesses that provide shipping and delivery services, and businesses that ship or deliver groceries, food, alcoholic and non-alcoholic beverages, goods or services to end users or through commercial channels.
  • Educational institutions. Educational institutions—including public and private pre-K-12 schools, colleges, and universities—for purposes of facilitating distance learning, performing critical research, or performing essential functions, provided that social distancing of six-feet per person is maintained to the greatest extent possible. This Executive Order is consistent with and does not amend or supersede Executive Order 2020-05 (COVID-19 Executive Order No. 3) or Executive Order 2020-06 (COVID-19 Executive Order No. 4) except that affected schools are ordered closed through April 7, 2020.
  • Laundry Services. Laundromats, dry cleaners, industrial laundry services, and laundry service providers.
  • Restaurants for consumption off-premises. Restaurants and other facilities that prepare and serve food, but only for consumption off-premises, through such means as in-house delivery, third-party delivery, drive-through, curbside pick-up, and carry-out.
  • Supplies to Work From Home. Businesses that sell, manufacture, or supply products needed for people to work from home.
  • Supplies for Essential Businesses and Operations. Businesses that sell, manufacture, or supply other Essential Businesses and Operations with the support or materials necessary to operate, including computers, audio and video electronics, household appliances; IT and telecommunication equipment; hardware, paint, flat glass; electrical, plumbing and heating material; sanitary
    equipment; personal hygiene products; food, food additives, ingredients andcomponents; medical and orthopedic equipment; optics and photography equipment; diagnostics, food and beverages, chemicals, soaps and detergent; and firearm and ammunition suppliers and retailers for purposes of safety and security.
  • Transportation. Airlines, taxis, transportation network providers (such as Uber and Lyft), vehicle rental services, paratransit, and other private, public, and commercial transportation and logistics providers necessary for Essential Activities and other purposes expressly authorized in this Executive Order.
  • Home-based care and services. Home-based care for adults, seniors, children, and/or people with developmental disabilities, intellectual disabilities, substance use disorders, and/or mental illness, including caregivers such as nannies who may travel to the child’s home to provide care, and other in-home services including meal delivery;
  • Residential facilities and shelters. Residential facilities and shelters for adults, seniors, children, and/or people with developmental disabilities, intellectual disabilities, substance use disorders, and/or mental illness;
  • Professional services. Professional services, such as legal services, accounting services, insurance services, real estate services (including appraisal and title services).
  • Day care centers for employees exempted by this Executive Order. Day care centers granted an emergency license pursuant to Title 89, Section 407.400 of the Illinois Administrative Code, governing Emergency Day Care Programs for children of employees exempted by this Executive Order to work as permitted.The licensing requirements for day care homes pursuant to Section 4 of the Child Care Act, 225 ILCS 10/4, are hereby suspended for family homes that receive upto 6 children for the duration of the Gubernatorial Disaster Proclamation.
  • Manufacture, distribution, and supply chain for critical products and industries. Manufacturing companies, distributors, and supply chain companies producing and supplying essential products and services in and for industries such as pharmaceutical, technology, biotechnology, healthcare, chemicals and sanitization, waste pickup and disposal, agriculture, food and beverage, transportation, energy, steel and steel products, petroleum and fuel, mining, construction, national defense, communications, as well as products used by other Essential Businesses and Operations.
  • Critical labor union functions. Labor Union essential activities including the administration of health and welfare funds and personnel checking on the wellbeing and safety of members providing services in Essential Businesses and Operations – provided that these checks should be done by telephone or remotely where possible.
  • Hotels and Motels. Hotels and motels, to the extent used for lodging and delivery or carry-out food services.
  • Funeral Services. Funeral, mortuary, cremation, burial, cemetery, and related services.

On March 19, 2020, Illinois small businesses qualify for low-interest disaster loans directly from the U.S. Small Business Administration as a result of the Coronavirus outbreak. Small businesses can apply online for loans directly from the SBA here. Note: This procedure is different than applying to typical SBA loans, which require you to go through a bank lender.  The disaster loans come directly from the SBA.

  • SBA’s Economic Injury Disaster Loans offer up to $2 million in assistance and can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing.
  • These loans may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact. The interest rate is 3.75% for small businesses. The interest rate for non-profits is 2.75%.
  • SBA offers loans with long-term repayments in order to keep payments affordable, up to a maximum of 30 years. Terms are determined on a case-by-case basis, based upon each borrower’s ability to repay.

Information come soon. Please check back.

As part of the recently enacted CARES Act, the $2 trillion stimulus package, designed to help bolster workers and small businesses during the COVID-19 crisis, the law provides businesses (including sole proprietorships and self-employed individuals) with financial assistance though direct SBA loans.  The loans will be primarily use to help businesses pay operating expenses, especially helping business maintain their workforce on their payroll.

Coverage Period. The loans will cover eligible costs incurred from February 15, 2020 though June 30, 2020.

Eligibility Requirements. All “small business concerns” are eligible to receive a covered loan during the covered period. The small business must have been:

  • in operation on February 15, 2020
  • had employees for whom the borrower paid salaries and payroll taxes or paid independent contractors, as reported on a Form 1099-MISC.

A business is a “small business concern” if: (1) the size of the concern alone (without affiliates) does not exceed the size standard designated for the industry in which the applicant is primarily engaged, and (2) the size of the concern combined with its affiliates is not greater than the size standard designated for either the primary industry of the concern alone or the primary industry of the concern and its affiliates, whichever is greater.

Credit Eligiblity/Non-Recourse

  • Specifically, during the covered period, the normal requirement that an applicant be unable to obtain credit from nonfederal sources on reasonable terms and conditions does not apply to a covered loan.
  • In addition, SBA has no recourse against any individual shareholder, member or partner of an eligible recipient of a covered loan for nonpayment of any covered loan, except to the extent that the shareholder, member or partner uses the covered loan proceeds for a purpose not authorized.

Allowable Uses. Payroll costs, healthcare benefits, mortgage interest obligations (not principal repayments), rent obligations, utilities, and interest on other debt obligations incurred prior to February 15, 2020.

For purposes of the covered loans, “payroll costs” means:

  • For Businesses with Employees. The sum of payments of any compensation with respect to employees that is a:
    • salary, wage, commission or similar compensation;
    • payment of cash tips or equivalent;
    • payment for vacation, parental, family, medical or sick leave;
    • allowance for dismissal or separation;
    • payment required for the provision of group health care benefits, including insurance premiums;
    • payment of any retirement benefit; or
    • payment of state or local tax assessed on the compensation of employees.
  • For Self-Employed Persons. The sum of payments of any compensation to or income of a sole proprietor or independent contractor that is a wage, commission, income, net earnings from self-employment or similar compensation and that is in an amount not more than $100,000 in one year, as prorated for the covered period.
  • Not Payroll Costs.
    • Compensation of an individual employee in excess of an annual salary of $100,000, as prorated for the covered period.
    • Social Security and Medicare taxes (both employee and employer portion), and income tax withholding obligations from employees
    • Compensation of an employee whose principal place of residence is outside the U.S.
    • Qualified sick leave wages and qualified family leave wages, in each case, for which a credit is allowed under the Families First Coronavirus Response Act.

Maximum AmountThe maximum amount that can be borrowed is 2.5x average monthly payroll costs during the 1-years period before the loan was made (up to a maximum of $10 million).

Repayment/Forgiveness. Loans may be repaid over a maximum of 10 years.  Some amounts can be FORGIVEN (see below).

Loan Forgiveness. Loan recipients will be eligible for loan forgiveness for a period of 8 weeks after the loans origination date in an amount equal to the sum of the following costs incurred during that period:

  • Payroll costs (not to exceed $100,000)
  • Payments of interest on mortgage obligations
  • Rent obligations
  • Utility payments

Amounts forgiven are not included as cancellation of debit income for federal income tax purposes.

Loan Forgiveness Exclusions and Limitations. The amount forgiven is subject to the following limitations:

  • Amount forgiven cannot exceed the total amount borrowed.
  • The amount forgiven will be proportionately reduced if the average number of employees is reduced during the covered period, as compared to the same period in 2019.
  • The amount forgiven will be reduced by the amount of any reduction in the total employee salary or wages during the covered period that exceeds 25% of the total salary or wages.
  • Borrowers that rehire laid-off workers by June 30 will not be penalized for having a smaller workforce at the beginning of the period.

Limitations Based on Reduction in Workforce. The amount of loan forgiveness is reduced by multiplying the forgivable amount by the quotient (expressed as a percentage) obtained by dividing the average number of full-time equivalent employees per month employed by the borrower during the eight-week period after the covered loan is originated by:

  • in the case of nonseasonal employers — either of the following (as elected by the borrower):
    • the average number of full-time equivalent employees per month employed by the borrower during the period beginning on February 15, 2019 and ending on June 30, 2019; or
    • the average number of full-time equivalent employees per month employed by the borrower during the period beginning on January 1, 2020 and ending on February 29, 2020.
  • in the case of seasonal employers — the average number of full-time equivalent employees per month employed by the borrower during the period beginning on February 15, 2019 and ending on June 30, 2019.

The average number of full-time equivalent employees is determined by calculating the average number of full-time equivalent employees for each pay period falling within a month.

In addition, the amount of loan forgiveness is reduced by the amount of any reduction during the eight-week period after the origination of the covered loan in the total salary or wages of any employee who did not receive, during any single pay period during 2019, wages or salary at an annualized rate of pay in an amount more than $100,000 by more than 25 percent of the total salary or wages of the employee during the most recent full quarter during which the employee was employed before the beginning of that eight-week period.

However, the amount of loan forgiveness will be determined without regard to a reduction in the number of full-time equivalent employees or a reduction in the salary or wages of one or more employees that occurred during the period beginning on February 15, 2020 and ending on the date that is 30 days after the date of enactment of the CARES Act if, as applicable:

  • in the case of any such reduction of employment — not later than June 30, 2020, the borrower has eliminated the reduction in the number of full-time equivalent employees, as compared to the number of full-time equivalent employees as of February 15, 2020; or
  • in the case of any such reduction in salary or wages — not later than June 30, 2020, the eligible employer has eliminated the reduction in the salary or wages of such employees, as compared to the salary and wages of such employees as of February 15, 2020.

Maximum Interest Rate (for portions not forgiven). The interest rate for a covered loan is not to exceed 4 percent. There is no prepayment penalty for any payment made on a covered loan.

Is There a Forgiveness Feature of Covered Loans?

A borrower is eligible to have its covered loan forgiven. The amount eligible to be forgiven is the sum of the following costs incurred and payments made during the eight-week period after the covered loan is originated (forgivable amount):

  • payroll costs (as previously described)
  • payments of interest on any liability of the borrower that is a mortgage on real or personal property and that was incurred before February 15, 2020 (covered mortgage obligation)
  • payments on any rent obligated under a leasing agreement in force before February 15, 2020 (covered rent obligations)
  • payments for a service for the distribution of electricity, gas, water, transportation, telephone or internet access for which service began before February 15, 2020 (covered utility payments).

A borrower with tipped employees, as described in the Fair Labor Standards Act of 1938, may receive forgiveness for additional wages paid to those employees.

Applying for Loan Forgiveness. A borrower seeking loan forgiveness is required to submit to the lender that is servicing the loan an application that provides certain documents and makes certain certifications. A borrower is not permitted to receive forgiveness without submitting to the lender the documentation required. These required documents and certifications include:

  • documentation verifying the number of full-time equivalent employees on payroll and pay rates for the relevant pay periods, including:
    • payroll tax filings reported to the Internal Revenue Service
    • state income, payroll and unemployment insurance filings.
  • documentation verifying payments on covered mortgage obligations, payments on covered lease obligations, and covered utility payments, including cancelled checks, payment receipts, transcripts of accounts, or other documents
  • a certification from a representative of the borrower authorized to make such certifications that:
    • the documentation presented is true and correct; and
    • the amount for which forgiveness is requested was used to retain employees, make interest payments on a covered mortgage obligation, make payments on a covered rent obligation, or make covered utility payments.
  • any other documentation SBA determines necessary.

The lender is required to issue a decision on the forgiveness application no later than 60 days after the date on which it receives the application.

  • Increase in SBA Express loans from $350,000 to $1 million through December 31, 2020.
  • 10 year repayment.
  • Maximum interest 4%
  • The federal government will guarantee 100% of these loan balances.
  • Allows for loan deferment for at least 6 months and no later than 1 year.

The 10% early withdrawal penalty on distributions from qualified retirement accounts for individuals under 59½ is eliminated on up to $100,000 for coronavirus-related distributions. A “coronavirus-related distribution” is any distribution made between March 27, 2020 and December 31, 2020 to an individual who is diagnosed with COVID-19, or who is experiences adverse financial consequences of being quarantined, being furloughed or laid off or having work hours reduced due to the virus, or being unable to work due to the lack of child care due to the virus.

Additionally, all coronavirus-related distribution may be put back into the qualified retirement account within three years from the date the distribution was made. Any repayment of the distribution within this timeframe will be considered an eligible rollover distribution (similar to a trustee-to-trustee transfer within 60 days of the distribution). As a result, the distribution will not trigger income if the distribution is put back in the account in three years.

Further, taxable income related to the coronavirus-related distribution (to the extent not repaid within 3 years), will be included in the beneficiaries taxable income ratably over a 3-year period, starting with the year the distribution becomes taxable. The taxpayer may elect out of the ratable inclusion of income, and may elect to include 100% of the income during the year the distribution becomes taxable.

Combining the 3-year repayment and the 3-year ratable income inclusion provisions gives the beneficiary three years to put the coronavirus-related distribution back with zero income tax consequences, and to the extent the distribution is not paid back within that time, an additional three years to ratably include that distribution in income. It does not appear the beneficiary has the ability to include such distribution in income in any manner other than equally over three years. For example, the beneficiary cannot report 10% as income in the first year, 80% as income in the second year, and 10% as income in the third year.

Increased Borrowing from Qualified Accounts. The law also increased the amount a beneficiary can borrow from a qualified retirement account from the lesser of $50,000 or 50% of the vested account balance, to the lesser of $100,000 or 100% of the vested account balance.

Suspension of the Required Minimum Distribution for 2020.  In order to prevent retirees from having to withdraw funds during a bear market, the law also suspends Required Minimum Distributions for the 2020 tax year.

Charitable Contributions. The law provides a special $300 above-the-line deduction for cash contributions to charity. This deduction can be taken regardless of whether the taxpayer takes the standard deduction or itemizes deductions. If the taxpayer elects to itemized their deductions, this $300 contribution will not affect any adjusted gross income (AGI) threshold for itemized charitable contributions.

For charitable contributions of cash made in 2020 that qualify as an itemized deduction, the law eliminates the 60% of AGI threshold for those contributions. Therefore, in 2020 it is possible for a taxpayer to deduct up to 100% of AGI in 2020. To the extent there are contribution amounts in excess of the taxpayer’s AGI, or that exist because the taxpayer has made other non-cash or capital gain property contributions in the same year, such excess contributions can be carried over for 5 years.

Cash contributions to donor advised funds and private foundations do not qualify for the increased threshold, but presumably, contributions can still be deducted up to the original 50% AGI for  donor advised funds, and 30% for private foundations.

The volatile market, combined with depressed asset values and low business valuations opens up some unique planning opportunities for our high-net-worth and ultra-high-net-worth clients. Some options include:

  • Sale to a Grantor Trusts. Selling assets to a Grantor Trust can help move more assets out of your taxable estate at the current depressed values. The sale will, in part, be paid for by a promissory note for a term of years, based on those depressed values. The current interest rate the IRS requires for these types of transactions is at an all-time low (the mid-term rate for April is 99%). At these advantageous rates, more assets will be allowed to appreciate estate tax free in the trust, while also providing some asset protection.
  • Gift to a Grantor Retained Annuity Trust (GRAT). The Gift to a Grantor Retained Annuity Trust is variation of the Sale to a Grantor Trust. Given the depressed asset values and the low interest rate environment, more assets are allowed to remain in the trust and appreciate estate tax free, while also providing some asset protection.
  • Charitable Lead Annuity Trust (CLAT). Under a Charitable Lead Annuity Trust, you commit to donate a certain amount of money from the trust to charity for a number of years. After the donation term ends, all of the appreciated assets will pass to your beneficiaries estate tax free. Not only are you allowed to avoid estate taxes on the appreciation of the assets transferred to the trust, but you also receive a charitable deduction on your income tax return for each gift you make to charity under the trust.
  • Spousal Lifetime Access Trusts (SLAT). The Spousal Lifetime Annuity Trust still remains the workhorse of the high-net-worth community. Under a SLAT, depressed assets can be transferred to the trust and allowed to appreciate estate tax free, while also allowing your spouse access to such funds.

NOTE: The information provided on this website does not, and is not intended to, constitute legal advice. Instead, all information, content, and materials available on this site are for general informational purposes only. Additionally, nothing creates an attorney-client relationship unless and until we agree to represent you in writing. If you have any questions, please call us at (847) 367-4460.