COVID-19 CARES Act Resources

Updated June 8, 2020

Disclaimer

*NALP is providing the following information as general guidance based on information directly promulgated and provided by the Federal Government.  This is not intended to be legal, tax, or human resources advice concerning any specific circumstance or financial program. NALP strongly encourages you to consult with legal counsel or your human resources specialist on these matters. NALP is committed to continuing to be a conduit of information from the Federal Government to the Landscape industry and we will do our best to continuously monitor and update these resources with the most current information.*

CARES Act

On March 27, 2020, the CARES Act was signed into law. The legislation is meant to providing financial relief to businesses and individuals that have been affected by the coronavirus outbreak. Some of the provisions include benefits related to: checks issued to many Americans; enhanced unemployment benefits; payroll tax deferments; relaxed 401k rules; suspensions of required minimum retirement distributions;  cash-flow assistance for companies of 500 employees are less who keep people working; adjustments to net operating losses; loans for large corporations and more. We break down access for companies and employees to many of the benefits of the Act. 

CARES Act Questions and Answers

View NALP's Q&As about the CARES Act financial resources.  Have a questions of your own? Members can email membership@landscapeprofessionals.org and our team of experts will find the answer.

Paycheck Protection Program Flexibility Act

This act was signed into law on June 5th and provides additional flexibility on PPP loan proceeds to maximize forgiveness.  Below is a summary of the changes.

Covered Period Extended

  • Borrowers now have 24 weeks (or until December 31, 2020, whichever is earlier), after the origination of the PPP loan, to spend proceeds on forgivable expenditures (The original bill was 8 weeks).
  • Borrowers that have already received a PPP loan will have the option to use the 24-week covered period or keep the period at the original eight-week period.


Payroll Cost Percentage Lowered

  • Borrowers must use at least 60% of loan proceeds, on payroll costs, to qualify for loan forgiveness.
  • The remaining 40% may qualify for forgiveness if spent on qualifying forgivable expenses (rent, utilities, interest on mortgage obligations).
  • If a borrower does not spend at least 60% of the proceeds on payroll costs, the borrower will not be eligible for any forgiveness.
  • What qualifies as a forgivable expense has not changed.


Repayment Period Lengthened

  • For loans that are not forgiven, the time to repay the loan has been extended from two to five years.  The interest rate, of 1%, remains the same.


Full Time Employee Reduction Safe Harbor Change

  • Any reduction in forgiveness, based on a reduction in FTE will be disregarded if a borrower is able to certify the following:
    • It was unable to rehire workers who were employees on Feb 15, 2020 and are unable to hire similarly qualified employees on or before Dec 31, 2020, or
    • It was unable to return to the same level of business activity it was operating at before Feb 15, 2020, due to compliance with requirements or standards issued by Sec of Health and Human Services, CDC, or OSHA related to the maintenance of standards for sanitation, social distancing, or any other worker or safety requirement related to COVID-19.  The period is for March 1, 2020 and ending Dec 31, 2020.


FTE Safe harbor extended to Dec 31, 2020

  • Borrowers have until Dec 31, 2020 to restore levels of FTE employees (to what it was on Feb 15, 2020).  If they are restored, by Dec 31, 2020, there will be no reduction in loan forgiveness.

Paycheck Protection Program

The Paycheck Protection Program (PPP) are loans, backed 100% by the government, that provide short-term cash flow assistance to small businesses who maintain their employees during the COVID-19 emergency.

Principal amounts on PPP loans may be forgiven, for the first eight-week period after the loan is made, if the funds are used for payroll costs, interest payments on mortgages, rent and utilities.

The paycheck protection program is administered by the Small Business Administration (SBA) and loans will be made through lenders approved by the SBA.

Which businesses are eligible to apply for a PPP loan?

Small businesses (businesses that are independently owned and operated, organized for a profit, and are not dominant in their field), 501(c)(3) nonprofits, 501(c)(19) veteran’s organizations and tribal business concerns with 500 or fewer employees (full and part-time) and not more than the applicable size standard for their industry, and provided by the SBA, if higher.  SBA size standards can be found here: https://www.sba.gov/document/support--table-size-standards    

Eligible small businesses also include sole-proprietors, independent contractors, or other self-employed individuals

The PPP is also available for franchises that are assigned a franchise identifier code by the SBA.  Click here for a chart of these franchises: https://www.sba.gov/document/support--sba-franchise-directory

Affiliation rules are waived for these franchise businesses as well as businesses in the hospitality and restaurant industries. Affiliation rules are not waived for other small business concerns, nonprofits and veteran’s organizations.

What must PPP loan funds be used for?

  • Payroll costs (i.e., salaries, wages, vacation, severance, retirement benefits, and state or local taxes assessed on compensations)
  • Costs related to group health care benefits (i.e., insurance premiums)
  • Employee commission
  • Interest on mortgage obligations
  • Rent, including rent under a lease
  • Utilities
  • Interest on other debt incurred prior to obtaining the loan
  • PPP loan funds cannot be used to pay salaries over $100,000

What is payment forgiveness on a PPP loan?

Principal amounts on PPP loans may be forgiven, for the first 24 week period after the loan is made, if the funds are used for payroll costs, interest payments on mortgages, rent and utilities.

The amount of a PPP loan that can be forgiven can’t exceed the principal amount of the loan. 
To get the full benefit of loan forgiveness, businesses must keep their employees and pay them at least 75% of their prior-year compensation.

Borrowers can use the 24-week period to restore their workforce levels and wages to the pre-pandemic levels required for full forgiveness. This must be done by Dec. 31, a change from the previous deadline of June 30.

To apply for forgiveness, businesses must submit documentation regarding the use of funds (payroll, mortgage, utilities, etc.), a certification that the document is true and correct, as well as the amount to be forgiven, and any other SBA required documentation.  

Can payments above forgiveness be deferred on PPP loans?

Payments on remaining principal, interest, and fee balance amounts, that exist after loan forgiveness, may be deferred for at least six months and not more than a year. Businesses can get a substantial portion of their loan forgiven in the first 24 weeks, after loan issue, and not have to make payments for up to a year.

What are the terms of a PPP Loan?

Loan amounts are determined by 8 weeks of prior average payroll plus an additional 25% of that amount, not to exceed $10 million (salaries over $100,000 are not counted as payroll costs).  Any amount that is not used for forgiveness purposes will have a maturity of not more than 10 years. The maximum interest rate is 4%-PPP loans only start to mature following the date a business applies for loan forgiveness and can have a maximum maturity of ten years from that date.

The following are waived for PPP loans: borrower and lender fees; credit elsewhere test for funds; collateral and personal guarantee requirements.

How to Apply

Starting April 3, 2020, small businesses and sole proprietorships can apply for and receive loans to cover their payroll and other certain expenses through existing SBA lenders. View and download loan application form. 

Starting April 10, 2020, independent contractors and self-employed individuals can apply for and receive loans to cover their payroll and other certain expenses through existing SBA lenders.

Other regulated lenders will be available to make these loans as soon as they are approved and enrolled in the program. You should consult with your local lender as to whether it is participating. Visit www.sba.gov for a list of SBA lenders.
 

Loans will be available in all 50 states These lenders will only need to verify that the business was in operation on February 15, 2020, and the business paid salaries and payroll taxes or paid independent contractors. If you currently have a loan with the SBA you can apply to refinance it, to a PPP, if you qualify.

Visit the SBA Coronavirus web page for complete information and updates https://www.sba.gov/funding-programs/loans/paycheck-protection-program.

Not Applying for a PPP Loan?  You May Be Eligible for Tax Credits or Deferments.

Payroll Tax Credit for Retaining Employees

Under the CARES Act, employers may be eligible for a refundable tax credit for the employer’s share of the 6.2% Social Security Tax based on qualified wages paid to employees from March 13 to December 31, 2020.  The tax credit is for 50% of the first $10,000 in qualified wages paid per employee for 2020 across the four quarters of 2020. 

The refundable amount of this credit is reduced by up to four other credits against the employer portion of social security tax :

  • FFCRA credit for providing paid sick leave related to COVID-19
  • FFCRA credit for providing paid health emergency leave
  • Credit for employing qualified veterans
  • Credit for research expenditures of qualified small businesses

Eligibility is met when an employer meets one of the following conditions:

  1. Business suspension - The employer must have had operations fully or partially suspended because of a shut-down order from a governmental authority related to COVID -19, or
  2. Gross Receipts Condition - Had gross receipts decline by more than 50% in a calendar quarter when compared to the same quarter in 2019 and will remain eligible until the earlier of a) gross receipts exceeding 80% relative to the same quarter in the prior year, or b) December 31, 2020.

What are Qualified Wages ( based on 2019 average)

Employers with more than 100 employees – are wages paid to an employee for a quarter even though the employee is NOT providing services because the employer has met the business suspension or gross receipts condition, and these wages cannot exceed the amount the employee would have been paid for working during an equivalent duration in the 30 days immediately before that period.

Employers with up to 100 employees – are wages paid to an employee, regardless of whether the employee ceased providing services, while the employer met the business suspension or gross receipts condition.

Qualified wages include qualified health-plan expenses of the employer that are paid to maintain a group health plan and that are excluded from employee’s gross income under IRC Section 106(a).

An employer is not eligible for this credit if it acquires a loan through the Paycheck Protection Program.

Delayed Payment of Employer Portion of Social Security Tax

Under the CARES Act, payments of the employer portion of Social Security tax for the period from March 27 to December 31, 2020 can be delayed. If an employer chooses to delay payment, 50% would be due by December 31, 2021 and the remaining 50% by December 31, 2022.

An employer is not eligible for delayed payment if it acquires a loan through the Paycheck Protection Programand for which all or part of the loan was forgiven.If an employer uses any third party service for tax payments, the employer is ultimately responsible for ensuring the amount of delayed taxes are paid by the due date.

Individual Assistance

Paycheck Recovery Rebate

Who qualifies for the recovery rebate?

  • All U.S. residents with adjusted gross income up to $75,000 ($112,500-head of household/$150,000 married) will qualify for the full rebate and it will completely phase-out for single filers (AGI exceeding $99,000), head of household filers (AGI exceeding $146,500 with one child), joint filers ($198,000 with no children)
  • Those individuals who have no income
  • Those individuals whose income comes entirely from non-taxable means-tested benefit programs, such as SSI benefits
  • Individual must have a work eligible social security number

Who does not qualify for a recovery rebate?

  • Individuals who are a dependent of another taxpayer
  • Individuals above the adjusted gross income threshold set by the act

    How much is the recovery rebate?

  • $1,200 for single filers whose adjusted gross income does not exceed $75,000 plus $500 per child
  • $2,400 for married filers whose adjusted gross income does not exceed $150,000 plus $500 per child
  • The rebate amount is reduced by $5 for each $100 that a taxpayer’s income exceeds the phase-out threshold
  • The amount is completely phased-out for single filers with income exceeding $99,000, $146,500 for head of household filers with one child, and $198,000 for joint filers with no children

When do I get my check?

The IRS will start issuing electronic payments through direct deposit on April 9, 2020 and taxpayers should see the money in their accounts by April 14.

How does the IRS get my direct deposit information?

If you signed up for direct deposit of a refund on your 2018 or 2019 tax return, then the IRS has all the information it needs to pay you electronically. If you haven’t filed your 2019 return yet, you still have time if you want your money as soon as possible.

What if I don’t file a tax return?

The IRS plans to create an online portal in the next few weeks where you can file a “simple return” to provide your bank account information.

What if none of the above apply to me?

You will receive a paper check in late April at best. The higher your income, the longer it will take to get your money. The IRS timetable starts on April 24 and runs through September 11, 2020. 

Retirement Provisions

Under the CARES Act, taxpayers can take up to a $100,000 in coronavirus distributions from retirement plans without being subject to the 10% additional tax for early withdrawal.

When can I take this distribution?

Eligible distributions can be taken throughout the year up until December 31, 2020

What type of retirement accounts are covered?

Eligible accounts include individual retirement accounts and annuities (IRAs), qualified pension, profit-sharing, or stock bonus plans including 401K plans, qualified 403(a) annuity plans, 403(b) annuity contracts and governmental section 457 deferred compensation plans.

Do I have to pay tax on these distributions?

Yes. But taxes can be paid ratably over three years ,beginning with taxable year 2020.

Can I  repay or recontribute the withdrawn funds?

Yes, generally distributions can be repaid in one or more payments within three years.