Article Posted on 03/30/2020
As you know, the President signed the CARES Act into law on Friday, March 27, 2020. Kopsa Otte has sent out two previous emails that detail the Individual and Business tax relief provisions in this bill. To be clear, those previous alerts only include the tax relief provisions.
The hottest topic that most of you are waiting for is in regards to the “Paycheck Protection Program.” This looks to be a tremendous opportunity for each and every one of your businesses. This link will take you to a very good summary, developed by the US Chamber, of many of the important facts regarding this program, but we want to highlight a few things:
- Maximum loan amount is 2.5 times your average monthly payroll costs during the 1 year period prior to date loan is made.
- Compensation of an employee over $100,000 is excluded.
- Compensation (not payroll taxes), Group Health insurance, Retirement match and Independent Contractors are included in this calculation.
- Loans may be eligible for forgiveness for qualifying expenses paid in the 8 weeks following the origination date. These qualifying expenses include the sum of payroll costs, interest on mortgages (of the company), rent and utilities during those 8 weeks, subject to potential limitations. You will have to provide certified documentation of this spending.
- Loan forgiveness will be proportionately reduced for employee retention and/or reduction in wages (have to watch this).
- Loan forgiveness will NOT be subject to income tax.
- If you do not spend all proceeds on those items that can be forgiven, the remainder of the loan is a 10 year loan with a max interest rate of 4%.
- Loan fees are waived.
- Personal guarantees are waived.
We believe you will ALL want to consider applying for these loans as they become available to help you maintain your workforce and team. You want to reach out to your banker as soon as feasible regarding this program. The banks are waiting on final guidance on applications, but they are all gearing up and taking names of their customers who are interested in this program. Your banker can provide you additional information as to what you need to gather for them. Kopsa Otte will be here to assist with gathering any of the information that we have.
As you know, this is all very new and there are lots of parts and pieces that we need guidance on, but please feel free to reach out to us with any questions you have. We will do our best to answer those questions or let you know the status of the unknown. It is an absolute pleasure serving you.