HHS Stimulus Attestation Reminder and Update on PPP Rules

Update on Stimulus Funds Timelines
to Comply with Regulations

On May 22, 2020, the deadline established by the HHS for healthcare providers to attest to the receipt of payments from the Provider Relief Fund was increased from 45 days to 90 days from the date of payment. The original deadline was previously increased by HHS from 30 days to 45 days.

The announcement states that providers have now been granted 90 days from the date they received a Provider Relief Fund payment to accept HHS Terms and Conditions or return the funds. Attestation must be made for both stimulus payments.

Providers that do not attest and accept the Terms and Conditions after 90 days of receipt will be deemed to have accepted the Terms and Conditions.

For example, a provider receiving an automatic payment of funds on the earliest possible date of April 10, 2020 now has a deadline of July 9, 2020. The deadline for return of a payment from the first tranche, on or after April 10th, or for return of a payment from the second tranche, would be 90 days from receipt.

Please check with your legal counsel or your accounting professional on your specific situation regarding these funds.

​Grant Thornton's COVID-19 Stimulus for

Small and Mid-Sized Businesses At A Glance - UPDATE

(Updated for Treasury Rules "RIN 3245-AH34", "RIN 3245-AH35", "RIN 3245-AH36", "RIN 3245-AH46", "RIN 3245-AH47")

CARES Act – Coronavirus Aid, Relief and Economic Security Act

Payroll Protection Plan

• Businesses with fewer than 500 employees that have been substantially affected by COVID-19 are eligible for a forgivable loan subject to certain conditions. This loan has a maximum maturity of 10 years and is limited to the lesser of $10 million or 2.5 multiplied by the average total monthly payments by the applicant. The loan proceeds should be used to meet payroll (up to $100,000 annual salary), mortgage interest payments, rent on real and personal property, and utilities. The salary limit is a ceiling of $100,000 and does not disqualify employees with salaries in excess. The loan is forgivable to the extent of maintaining payroll continuity and other allowable costs for the 8 weeks from loan origination. This interruption loan is not eligible to be used in conjunction with the Payroll Tax Deferral or the Employee Retention Credit. However, Payroll Tax Deferral is allowed until the borrower receives notification by the lender of forgiveness.
• "Affiliation Rules" are based on the tests described in 13 CFR 121.301(f). Concerns and entities are affiliates of each other when one controls or has the power to control the other, or a third party or parties controls or has the power to control both. It does not matter whether control is exercised, so long as the power to control exists (13 CFR 121.301(f)). Exceptions apply to faith based organizations, Accommodation and Food Services (NAICS sector 72), franchises that are assigned a franchise identifier code by the SBA, and those businesses who receive financial assistance from small business investment companies (section 301 of the Small Business Investment Act of 1958 (15 U.S.C. 681).
• Employers with W-2 wages, must exclude Independent Contractors from both the loan and forgiveness calculations in the updated rules.
• The RIN 3245-AH36 specifically instructs partnerships to include partners within the PPP loan application. There should only be one loan for a partnership and its partners. This self-employment income of the partner is reported as part of the payroll cost subject to the $100,000 annualized limit.
• The CARES Act and Interim Rule indicate the average monthly payroll costs should be determined over the 12 months preceding the loan application. This is in contrast with some loan applications which asks for the average monthly payroll for the 2019 calendar year. This may lead to differences in the approved loan amount and the current monthly payroll costs, i.e., payroll adjustments in 2020 would not be reflected in the 2019 average monthly payroll costs.
• Each application is based on employer status. For example, Independent Contractors and self-employed individuals will need to file separately. The application process opened on April 3, 2020 for companies and opened to Independent Contractors and self-employed individuals on April 10, 2020. The application process for all closes on June 30, 2020. Applications are awarded on a first-come, first-serve basis. To expedite processing, businesses should work with a bank that can verify qualifications to support and meet requirements set by the SBA. For purposes of this provision, it will include a bank that already has your financial information including financial statements, current lending agreements, etc.
• Please see the following link to sample application provided by the SBA: Paycheck Protection Program Borrower Application Form (confirm with lender).

Payroll Protection Plan – Loan Forgiveness

• PPP loans are eligible to be forgiven up to the sum of specific costs incurred and payments made during the covered period. Borrowers may choose an alternative covered period which would begin the first day of the pay period after the funds are received.
• Costs and payments include the following four categories. Non-payroll costs cannot exceed 25% of loan forgiveness amount. Further, non-payroll costs that are incurred during the covered period and paid on or before the next regular billing date (even if the billing date is after the covered period) are eligible for forgiveness.
• Payroll costs:
  • Payroll costs consist of compensation to employees. This includes salaries, wages, commissions, or similar compensation; cash tips or the equivalent; payment for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payments for the provision of employee benefits consisting of group health care coverage, including insurance premiums and retirement; payment of state and local taxes assessed on compensation of employees; and for an independent contractor or sole proprietor, wages, commissions, income or net earnings from self-employment, or similar compensation. Payments to furloughed employees as well as bonuses and hazard pay are also eligible for loan forgiveness to the extent that these payments do not exceed an annual salary of $100,000 prorated for the covered period.
  • The amount of loan forgiveness requested for owner-employees and self-employed individuals' payroll compensation are capped at about 15.38% of 2019 compensation or $15,385 per individual in total across all businesses. No additional forgiveness is allowed for retirement or health insurance contributions for self-employed individuals, including Schedule C filers and general partners.
  • Interest payments on mortgage obligations incurred before February 15, 2020
  • Payments on business rent obligations on real and personal property under a lease before February 15, 2020
  • Business utility payments for service which began before February 15, 2020
• The average number of Full Time Equivalent (FTE) employees during the covered period must be the same as the FTE during a reference period. A reduction in FTE employees during the covered period will reduce the percentage of loan forgiveness by the same percentage of FTE employee reduction. However, employers can exclude any employees who decline a good faith, written offer to rehire for the same pay and hours as earned prior to separation or reduction in hours.
• Further the loan forgiveness amount is reduced for the reductions in employee salary and wages.
• However, employers who rehire (FTE reduction), or restore salary and wage (wage reduction levels by June 30, 2020) will not need to reduce the loan forgiveness amount. Additionally, the loan forgiveness amount will not be reduced for an employee that is fired for cause, voluntarily resigns, or voluntarily request a reduced schedule.
• To receive loan forgiveness, borrower must complete and submit the Loan Forgiveness Application (SBA Form 3508 or lender equivalent) to the lender who will review and decide on loan forgiveness within 60 days of receipt.
• Any portion of loan not forgiven must be repaid by borrower on or before the two-year maturity of the loan
• NOTE: Although the Paycheck Protection Program Flexibility Act (H.R. 7010) has bipartisan support, the Act needs to pass the U.S. Senate and be signed by the president prior to enactment. This Act was passed by the U.S. House of Representatives on May 28th, 2020 and projected to have the U.S. Senate vote this week. Notable changes include:
  • Extension of time period for using funds from 8 weeks to 24 weeks or December 31, 2020 (whichever is earlier).
  • Reduces the payroll cost requirement for loan forgiveness from 75% to 60%;
  • Increases the minimum loan maturity rate from two years to five years; and
  • Allows deferment of principal and interest on the loan until the amount of forgiveness is determined.

Economic Injury Disaster Loans– Issued by SBA

• The SBA is issuing low-interest loans to small businesses, who have been impacted by COVID-19. These loans are to be used to pay fixed debts, payroll, accounts payable, and other expenses that could have been met if not for the COVID-19 impact. The loans are eligible for repayment terms up to 30 years. These costs cannot be duplicated under different relief programs. Disaster relief can be accessed at the following SBA link: https://covid19relief.sba.gov/#/

Main Street Lending Program
(Term Sheets released April 30, 2020)

• The Federal Reserve has established the Main Street Lending Program which includes the Main Street New Loan Facility (MSNLF), Main Street Priority Loan Facility (MSPLF), and Main Street Expanded Loan Facility (MSELF).
• Program designed for employers with up to 15,000 employees or with 2019 revenues up to $5 billion.
• The loans will have 4 year maturity dates and need to be a minimum of $500,000 for the MSNLF and MSPLF programs. The MSELF has a 4 year maturity and a minimum loan size of $10 million. Principal and interest payments will be deferred 1 year under all three programs.

Oversight Message to Banks

• The federal government including the Federal Reserve, FDIC, et al. issued the "Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus" on March 22, 2020. These federal organizations are encouraging financial institutions to work with borrowers affected by COVID-19. Loan modification programs can help to mitigate the COVID-19 effects to borrowers. Consideration should be given on the effect of existing lines before entering into these programs.

Business Tax Relief

Payroll Tax Deferral

• Employer portion of payroll taxes due to the IRS through the end of 2020 can be deferred for up to 2 years. 50% are due by December 31, 2021 and the remainder is due December 31, 2022. Taxpayers that receive the SBA interruption loans are not eligible for this deferral after notification from the lender that part or all of the PPP loan has been forgiven.

Employee Retention Credit

• Employers may receive a payroll tax credit for 50% of eligible wages (up to $10,000 per employee) paid to employees during COVID-19. This credit is for businesses that are subject to COVID-19 shut-down orders or whose gross receipts declined by more than 50% when compared to same quarter in prior year. Employers that receive the SBA interruption loans are not eligible for the retention credit.

Net Operating Loss (NOL) Carryback

• NOLs for tax years 2018 to 2020 are eligible to be carried back for five years. These NOLs can be used to offset income that was taxed at higher tax rates in place prior to the Tax Cuts and Jobs Act (TCJA).

AMT Credits

• Previously unused AMT credits are eligible to be fully claimed during tax years 2018 and 2019.

Interest Limitation

• The 163(j) interest limitation is increased to 50% from the previous 30% limitation. This is in effect for the 2019 and 2020 tax years. Partnerships must continue using the 30% limitation for the 2019 year, and are eligible for the 50% limitation for the 2020 tax year.

We hope the information contained in this news release has been helpful. We at ABC stand with you and will continue to update you as events warrant. As always, should you have any questions for us, please email us at cares@anesthesiallc.com.