News and Insights

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Miranda Preston
Written by: Miranda Preston

In response to COVID-19, the Secretary of the U.S. Department of Health and Human Services (HHS) declared a public health emergency on January 31, 2020 (the “Public Health Emergency”).  On March 28, 2020, Centers for Medicare & Medicaid Services (CMS) announced that it was expanding its Accelerated and Advance Payment Program (the “Program”) to a broader group of Medicare Part A providers and Part B suppliers for the duration of the Public Health Emergency.  CMS’s stated objective for the Program’s expansion is to increase cash flow to service providers and suppliers impacted by COVID-19.

This article provides an overview of the expanded Program and information about how to request advanced Medicare reimbursement.

Eligibility Requirements

To qualify for advance payments, providers must: (1) have billed Medicare for claims within 180 days immediately prior to the request; (2) not be in bankruptcy; (3) not be under active medical review or program integrity investigation; and (4) not have any outstanding delinquent Medicare overpayments.

How to Request Advance Payment

To request advanced payment under the Program, healthcare providers must submit the applicable request form to their applicable Medicare Administrative Contractor (MAC).  Each MAC may have its own, distinct request form. A request form is available on each MAC’s website. The request forms must be signed by an authorized representative of the healthcare provider, and can be submitted to the appropriate MAC via email, fax or mail.  Request forms submitted electronically are likely to be processed faster than their non-electronic counterparts.

In the request form’s “Reason for Request” field, CMS has directed providers to state: (1) the request is due to delay in provider/supplier billing process of an isolated temporary nature beyond the provider’s/supplier’s normal billing cycle and not attributable to other third-party payers or private patients; and (2) the request is for an accelerated/advance payment due to the COVID-19 pandemic.

How Much Advanced Payment Can I Request

Providers can request up to three months of advance Medicare payments. Providers must state their current monthly Medicare billing amount on the request form.  However, some healthcare providers, such as critical access hospitals, inpatient acute care hospitals, children’s hospitals and certain cancer hospitals (collectively, “Other Providers”), may request additional amounts, over longer periods of time.  

When to Expect Payment

According to CMS, MACs are already accepting and processing request forms, and payments will be issued within seven calendar days of receiving the request form.  If the MAC denies the request, there is no appeals process.

Repayment and Recoupment

The recoupment process for advanced payments for most healthcare providers begins 120 days after the date on which the MAC makes the advanced payments (the “Grace Period”).  Providers will continue to receive payment in full during the Grace Period .  Following the Grace Period, the MAC will recoup the advanced payments by offsetting payments otherwise owed to the provider.  

For a small subset of Medicare Part A providers receiving Period Interim Payments, and Other Providers, there are lengthier repayment periods.  For all other healthcare providers, the entire balance of advanced payments must be repaid or recouped within 210 days after the date the MAC makes the advanced payments.  It is likely that interest will accrue (at the rates applicable to Medicare overpayments) for advance payments outstanding after the 210-day repayment period, though CMS has not yet clarified this.

Additional Resources

CMS has published a fact sheet on the advance payment process, which is available here.  Each MAC has established COVID-19 hotlines to assist providers with advance payment requests.  Noridian’s COVID-19 Hotline number is: 866-575-4067.  For additional information about CMS’s Accelerated and Advance Payment Program, please contact Miranda Preston at Miranda@milliganlawless.com, or another health care attorney at Milligan Lawless.

Written By: Kylie E. Mote

The United States Department of Labor’s (DOL) Wage and Hour Division has issued additional guidance on the paid leave provisions of the newly-enacted “Families First Coronavirus Response Act” (FFCRA). The FFCRA, which was signed into law on March 18, 2020, authorizes an emergency relief package intended to support individuals impacted by the COVID-19 (Coronavirus) public health emergency. The support includes temporary paid sick and emergency family leave for eligible employees. The FFCRA takes effect on April 1, 2020.

While the DOL has not yet issued official regulations to help clarify the FFCRA’s paid leave provisions, it has published a series of “Questions and Answers” designed to provide employers and workers with more information about the law’s requirements. Following below are the highlights of the DOL’s most recently-released guidance. For more information about the FFCRA’s paid leave provisions, please refer to our earlier notices:

“Information for Employers on New Coronavirus Relief Law”

“Update on the Families First Coronavirus Response Act: Paid Sick Leave and Emergency Leave Requirements Begin April 1, 2020”

DOCUMENTATION OF NEED TO USE PAID LEAVE:

In initial guidance, the DOL set forth specific types of documentation required to support an employee’s use of paid sick leave for medical purposes. In its most recent guidance, the DOL eliminated its discussion of specific documentation, directing employers instead to applicable IRS forms and instruction (soon to be published). With that said, the DOL continues to indicate that employers may still request appropriate supporting documentation from employees and need not provide paid sick leave if employees do not provide materials sufficient to support a tax credit.

For employees who take paid leave for purposes of caring for their child due to COVID-19 related school closures or childcare unavailability, the DOL notes that employers can require appropriate documentation in support of such leave, just as they would for conventional leave requests under the Family and Medical Leave Act (FMLA).

If employers intend to claim a tax credit under the FFCRA for payment of paid leave, they should retain any supporting documentation provided by employees in their records.

WHAT IS MEANT BY “UNABLE” TO WORK OR TELEWORK

The DOL specifies that being “unable” to work or telework means that an employer has work available, but the employee is unable to perform the work, either under normal circumstances at the regular worksite or by telework, because of a qualifying reason identified by the FFCRA.

The DOL is not entirely clear on who is responsible for deciding whether an employee is able to telework under these circumstances: the employer or the employee. While the DOL does not answer that question directly, it does indicate that the decision should be made jointly between the employer and employee. Specifically, the DOL’s guidance states the following:

If you and your employer agree that you will work your normal number of hours, but outside of your normally scheduled hours (for instance early in the morning or late at night), then you are able to work and leave is not necessary unless a COVID-19 qualifying reason prevents you from working that schedule.”

PAID LEAVE IF UNABLE TO TELEWORK

Employees are eligible for paid leave in the event that they are unable to perform assigned teleworking tasks, or they are unable to work the required teleworking hours, due to a COVID-19 qualifying reason. The DOL reiterates that paid leave is also available to employees who are unable to telework because they are caring for their children due to COVID-19 related school closures or childcare unavailability. To the extent employees are able to telework while caring for their children, however, paid leave is not available.     

TAKING PAID LEAVE INTERMITTENTLY

Provided that employers agree with the arrangement, employees may take paid leave intermittently while teleworking. For example, employers and employees may agree that the employee will telework a portion of the workday and then utilize paid leave for the remainder of the day. Or employers and employees could agree on a schedule under which an employee teleworks three full workdays during the week and takes paid leave for the other two workdays. The DOL encourages employers and employees to collaborate regarding teleworking schedules and to remain flexible in an effort to meet mutual needs.

Provided that employers agree, employees may also take paid leave on an intermittent basis if they are working at their normal worksite, i.e., they are not teleworking, but require paid leave to care for their children due to COVID-19 related school closures or childcare unavailability. The DOL again emphasizes that employers and employees should attempt to be flexible with respect to alternative work schedules.

If employees are continuing to work at their normal worksite and are not taking paid sick leave to care for a child due to COVID-19 related school closures or childcare unavailability, they must take the paid sick leave in full-day increments. Once the employee begins taking paid sick leave, the employee must continue to take paid sick leave each day until the employee either: 1) uses the full amount of paid sick leave available; or 2) no longer has a qualifying reason for taking leave.

NO PAID LEAVE FOR WORK CLOSURES, FURLOUGHS, AND LAYOFFS

Paid leave is not available to any employee in the event that an employer closes its worksite, either temporarily or permanently, because it does not have work for employees or is forced to close under government order. It does not matter whether 1) the closure occurs before or after the FFCRA’s April 1, 2020 effective date; 2) an employee is already on paid leave when the closure occurs (the employee is only entitled to FFCRA paid leave starting April 1, 2020 through the effective date of the worksite closure); 3) an employer furloughs an employee; or 4) the worksite closure is only temporary.

The DOL is clear that paid leave is not available to any employee on furlough, temporary or permanent layoff, or reduced hours due to a lack of work or business.

Employees who are not eligible to receive paid leave as a result of these circumstances may be eligible for unemployment benefits.  

CONTINUING HEALTH COVERAGE

When an employee takes paid leave under the FFCRA, employers must continue the employee’s group health coverage on the same terms as if the employee had continued to work.

FFCRA PAID LEAVE WITH AN EMPLOYER’S EXISTING PAID TIME OFF ALLOWANCE

If employees are eligible to take paid leave under the FFCRA, as well as paid leave that is already provided by their employer (e.g., vacation), the employees have the sole discretion to use the FFCRA paid leave or the existing paid leave provided by their employer. Employers cannot dictate what type of leave their employees use under these circumstances.

Employees may not, however, choose on their own to supplement the pay received when taking FFCRA paid leave with existing paid leave provided by their employer. For example, employees cannot decide unilaterally to use one-third of available vacation days to “top off” any FFCRA paid leave that is provided at only two-thirds of the employee’s regular pay (so as to receive a full day of pay). Employees who wish to “top off” FFCRA paid leave with existing paid leave must obtain their employer’s consent (note, however, that employers cannot require employees to supplement). 

The DOL makes clear that employers cannot claim or receive tax credit for any supplemented paid leave.  

SMALL BUSINESS EXEMPTION

In its most recently-released guidance, the DOL clarifies that small employers with fewer than 50 employees may be exempted from the FFCRA’s paid leave requirements if their authorized officer determines one of the following applies:

  • Providing paid leave relating to school closures/childcare unavailability would cause the business’s expenses and financial obligations to exceed its revenues and cause the business to cease operating at a minimal capacity; 
  • The employee’s absence for school closure/childcare unavailability reasons would entail a substantial risk to the business’s financial health or operational capabilities because of specialized skills, knowledge of the business, or responsibilities the employee possesses; or 
  • There are insufficient workers who are able, willing, and qualified to perform the labor or services provided by the employee requesting school closure/childcare unavailability leave, and these labor or services are needed for the business to operate at a minimal capacity.

The DOL is clear that the small business exemption is only available with respect to employees requesting FFCRA paid leave for school closure/childcare unavailability. Small employers are not exempt from providing FFCRA paid sick leave to employees for reasons unrelated to school closure/childcare unavailability.

HEALTHCARE PROVIDER AND EMERGENCY RESPONDERS

Employers of healthcare providers and emergency responders are permitted to exclude those employees from FFCRA paid leave benefits. In its most recent guidance, the DOL has broadly defined “healthcare provider” to include “anyone employed at any doctor’s office, hospital, health care center, clinic, post-secondary educational institution offering health care instruction, medical school, local health department or agency, nursing facility, retirement facility, nursing home, home health care provider, any facility that performs laboratory or medical testing, pharmacy, or any similar institution, employer, or entity. This includes any permanent or temporary institution, facility, location, or site where medical services are provided that are similar to such institutions.” 

The definition of “healthcare provider” also includes any individual employed by an entity that contracts with any of the above institutions, employers, or entities to provide services or to maintain the operation of the facility. This also includes anyone employed by any entity that provides medical services, produces medical products, or is otherwise involved in the making of COVID-19 related medical equipment, tests, drugs, vaccines, diagnostic vehicles, or treatments. This further includes any individual that the highest official of a state or territory, including the District of Columbia, determines is a health care provider necessary for that state’s or territory’s or the District of Columbia’s response to COVID-19.

The DOL also takes a broad stance on which employees constitute emergency responders under the FFCRA. An “emergency responder” is defined as an employee who is “necessary for the provision of transport, care, health care, comfort, and nutrition of such patients, or whose services are otherwise needed to limit the spread of COVID-19.” The DOL guidance extends the exemption to, among others, law enforcement officers, correctional institution personnel, fire fighters, EMS personnel, physicians, nurses, public health personnel, paramedics, EMT, 911 operators, and public works personnel.

PAID LEAVE ABSENCES COUNT TOWARD WAITING PERIOD FOR HEALTH COVERAGE

The DOL states that eligibility requirements for employer-provided health coverage, including a waiting period, apply in the same way as if the employee continued to work, including days spent on paid leave.

TOTAL FMLA LEAVE AVAILABLE

The DOL clarifies that the FFCRA’s emergency family leave provisions do not change the overall amount of FMLA leave available to employees during an applicable FMLA 12-month period.

For example, if an employee takes some, but not all, of the 12 weeks of emergency family leave provided by the FFCRA, he or she is still eligible to take the remaining portion of conventional FMLA leave (for a qualifying reason, e.g., a serious health condition) so long as the total time taken does not exceed 12 workweeks in the 12-month period. On the other hand, if an employee uses all 12 weeks of emergency family leave provided by the FFCRA, he or she will not be eligible to take any additional conventional FMLA leave during the same 12-month period.

30 DAYS TO COMPLY IN GOOD FAITH

The DOL will observe a temporary period of non-enforcement for the first 30 days after the FFCRA’s April 1, 2020 effective date, so long as the employer has acted reasonably and in good faith to comply with the FFCRA.  For purposes of this non-enforcement position, “good faith” exists when violations are remedied and the employee is made whole as soon as practicable by the employer, the violations were not willful, and the DOL receives a written commitment from the employer to comply with the FFCRA in the future.

The attorneys at Milligan Lawless will continue to update employers on various workplace issues arising from the rapidly-developing COVID-19 public health emergency.

If you have any questions regarding how the FFCRA’s paid sick leave or emergency leave requirements affect your workplace, please contact John Conley at (602) 792-3535 or Kylie Mote at (602) 792-3523.

Written by: John A. Conley

In response to the COVID-19 pandemic, the Arizona Department of Economic Security (“AZDES”) has implemented the AZDES Unemployment Insurance Shared Work Program.  Employers experiencing a business slowdown, as a result of the economic impact of COVID-19, may apply for the program.  This program provides employers an alternative to layoffs and allows the retention of trained employees by reducing their hours and wages which may be partially offset with unemployment insurance benefits.  Below are frequently asked questions and answers regarding the program. 

What is the Shared Work Program?

The Shared Work Unemployment Compensation Program is an alternative for employers faced with a reduction in force.  It allows an employer to divide the available work or hours of work among a specified group of affected employees in lieu of a layoff, and it allows the employees to receive a portion of their Unemployment Insurance (UI) benefits while working reduced hours.  The Shared Work Program is not available to an employee unless the employer for whom the individual is currently working reduced hours completes an application which then must be approved by AZDES.

An approved Shared Work Plan is valid for one year and an employee may be eligible for up to 26 weeks of Shared Work benefits.

What are the eligibility requirements?

The employee is eligible for Shared Work benefits for each week in which:

His or her normal weekly hours are reduced by at least 10% but no more than 40%,

The employee files a claim and meets the eligibility requirements for regular Arizona benefits,

The employee has not exceeded the maximum benefit amount that is payable within the benefit year of his/her UI claim.

How does the Shared Work Program differ from regular Unemployment Insurance?

Under the Shared Work Program, employees:

  • May refuse work offers from other employers
  • May work for other employers without affecting their Shared Work benefits
  • Whose normal weekly hours are not reduced by at least 10%, for more than two weeks, will be required to submit a work search for each week

An employee who participates in a Shared Work plan may not receive benefits for any week in which he or she receives regular UI benefits, nor may an employee participate concurrently in two or more Shared Work plans.

As an employer, how will the Shared Work Program affect my UI Tax Account?

Shared Work benefits are charged against reimbursement and experience-rated employer accounts in the same manner as regular benefits are charged.  Prior to January 2017, any experience-rated employer with a negative reserve in his/her tax account and having employees paid Shared Work benefits during the fiscal year July 1 through June 30 may have had a surtax added.  The surtax was added to the computed rate of negative reserve accounts.  Due to the repeal of A.R.S. 23-765 through the passing of HB 2222, effective January 1, 2017, no surtax will be added to computed rates of any employer accounts for participating in the Shared Work Program.

What other criteria must the employer meet?

The employer must certify that, for the duration of the Shared Work plan, the reduction in hours replaces a layoff which would have resulted in a reduction of at least the same number of hours of work.

For example:

A business facing a 20% reduction in production usually lays off one-fifth of its workforce.  Under an approved Shared Work plan, a company could employ its total workforce by reducing the workweek to four days.  This allows the employer to carry out the 20% reduction without initiating layoffs.  Each employee participating in the reduction would receive a partial payment equal to 20% of his or her individual weekly UI benefit amount in addition to income for the four days of work.

What are the advantages (and disadvantages) of participating in the Shared Work Program?

Advantages to the Shared Work Program

Production and quality levels are maintained and rapid recovery to full capacity is possible through retention of an experienced workforce.

When the economy recovers, administrative and training costs of hiring new employees are eliminated.

Affirmative action gains are protected.

Employee morale remains high.

The impact of a recession is more equitably distributed because most recently hired workers who would have been most susceptible to layoff are retained.

Employees retain their skills and advancement opportunities.

Consumer spending patterns remain more stable, which could result in a milder recession.

Public Assistance expenditures are lessened.

Disadvantages to the Shared Work Program

Valuable employees who are able to locate full-time employment elsewhere may be lost.

Overhead costs are not reduced proportionately to the reduction in hours.

Work scheduling may be more difficult.

Senior employees suffer a reduction in hours and income.

How can an employer apply for a Shared Work Plan?

A Shared Work Plan Application is available online (https://des.az.gov/file/7204/download).  Your completed application and list of participants should be submitted at least 10 days prior to the date you wish your plan to begin.  You will be notified by mail of the approval or disapproval of your plan.

An employer may have two or more plans in effect at the same time (to cover separate groups of employees).  Each plan must include at least two employees, and all must be identified by name and Social Security Number.  Each plan must specify the beginning date for the plan.

On the application, the employer must certify that:

Each employee listed on the plan has been paid at least $1,500 in wages from the business during the six months prior to the effective date of the plan.

For the duration of the Shared Work plan, the reduction in hours replaces a layoff, which would have resulted in a reduction of at least the same number of hours of work.

He or she has read and understands the Shared Work information and application instructions and is aware of the potential effects on his or her UI account if benefits are paid to his or her employees.

In addition:

The plan application must specify any changes the affected employees will experience in fringe benefits.

Written approval of the plan must be obtained from any collective bargaining representative representing any employee listed on the plan.

For More Information

Information regarding the Shared Work Program can be found at: Unemployment Insurance Benefits – Arizona Shared Work Program | Arizona Department of Economic Security.

For additional information about adapting your employment policies and practices to meet the challenges of the COVID-19 pandemic, please contact John Conley at john@milliganlawless.com. 


Written By: James R. Taylor

The recently enacted CARES Act includes forgivable Paycheck Protection Program loans for small businesses (PPP Loan).  While the CARES Act includes parameters for loan forgiveness, we expect more details when the Small Business Administration (SBA) issues regulations implementing the program. 

The CARES Act – Paycheck Protection Program Loan article outlined the method for determining the amount available for businesses to borrow, this article clarifies the parameters for determining forgiveness.  The forgivable amount:

  • Corresponds to the payroll costs, rent and utilities paid over the 8-week period following loan origination
  • Encourages retention of employees by taking into account the number of full-time equivalent employees employed prior to the impact of COVID-19
  • Encourages re-hiring employees laid off due to COVID-19

Maximum Available Forgiveness

The amount borrowed to the extent spent during the 8-week period following loan origination on the following:

  • Payroll costs, excluding the portion of any employee’s compensation above $100,000 per year;
  • Rent or, if the business owns its building, mortgage interest;
  • Utilities.

Adjustment For Workforce Reduction

The amount available for forgiveness will be reduced, but not increased, by multiplying the amount by the percentage obtained by:

Dividing:  
The average number of full-time equivalent employees per month employed by the business during the 8-week period following the loan origination

By:           
The average number of full-time equivalent employees per month employed by the business during either of the following periods (as selected by the business):

  • February 15, 2019 – June 30, 2019; or
  • January 1, 2020 – February 29, 2020.

Example:   A business’s amount available for forgiveness is $1,000,000.  For the first two months of 2020, the business employed, on average, 20 full time equivalent employees per month.  During the 8-week period following loan origination, the business employed, on average, 18 full time equivalent employees per month.  Because of the reduction in work force, 90% (18 ÷ 20 = 90%) of the $1,000,000 (i.e., $900,000) can be forgiven. 

Adjustment For Wage Reduction

The amount available for forgiveness will be reduced by an amount equal to any reduction in an employee’s compensation during the 8-week period following the loan origination that exceeds 25% of the employee’s compensation during the most recent full quarter.  However, this reduction only applies to employees earning less than a rate of $100,000 per year at any time in 2019.

Example:   During the fourth quarter of 2019, Employee’s average compensation was $2,400 (plus benefits) per two-week pay period.  During the 8-week period following loan origination, Employee’s compensation was reduced to $1,200 per pay period (plus benefits).  Because the reduction in compensation exceeds 25% during the 8-week period following the loan origination, the amount available for loan forgiveness will be reduced by the amount of the reduction that exceeds a 25% reduction.  The amount that exceeds 25% is $600 per pay period, which, over four pay periods (8 weeks) totals $2,400.  

We will publish additional updates following the SBA’s release of the implementing regulations.

Written By: Bryan S. Bailey

On Friday, March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) in response to the COVID-19 pandemic.  The CARES Act includes a forgivable small business loan program: the Paycheck Protection Program (PPP).  Under the PPP loan program, forgivable loans of up to $10 million will be available to qualifying small businesses.  Secretary Mnuchin has repeatedly stated that he wants PPP loans to being funding next week.  However, we will know more details when the Small Business Administration (SBA) issues regulations implementing the program, which the CARES Act requires within the next 15 days.

The following summarizes key provisions of the PPP loan program.  We will publish an update after the SBA publishes the implementing regulations.

WHO IS ELIGIBLE FOR A PPP LOAN?

The following businesses which were in operation February 15, 2020 are eligible for a PPP loan:

  • Businesses with 500 or less full-time and part-time employees;
  • Businesses in the hotel and restaurant/food service industries (i.e., with a NAIC system code that begins with 72) may have more than 500 employees, as long as each physical location of the business does not have more than 500 employees;
  • Non-Profit Organizations; and
  • Certain individuals who operate under a sole proprietorship, as an independent contractor or are self-employed.

WHAT AMOUNT IS AVAILABLE UNDER A PPP LOAN?

A qualifying business can receive a PPP loan up to the lesser of (a) $10 million or (b) 2.5 times the business’s total average monthly “payroll costs” during the one-year prior to the date of the loan – practically speaking, the regulations may interpret this as the one-year period before the date the business submits its loan application, excluding any employee’s annual compensation exceeding $100,000.  

“Payroll costs” include employees’ compensation (including tips), vacation, parental, family, medical, and sick leave (but excluding paid leave for which the business receives a tax credit under the Families First Coronavirus Response Act (FFCRA)), allowances for dismissal or separation, payments for group health care benefits, including insurance premiums, and retirement benefits.  

*Payroll cost calculations vary for seasonal businesses and businesses that were not in operation between February 15 and June 30, 2019.

HOW CAN PPP LOAN PROCEEDS BE USED?

PPP loan proceeds can be used for:

  • Payroll costs, excluding the prorated portion of any employee’s compensation above $100,000 per year;
  • Costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums;
  • Rent or, if the business owns its building, mortgage interest (but not prepayments or principal payments);
  • Utilities – electricity, gas, water, transportation, telephone, and internet access for which service began before February 15, 2020; and
  • Interest on debt that existed as of February 15, 2020.

WHAT ARE THE PPP LOAN TERMS?

Businesses applying for PPP loans are not required to show that they cannot obtain credit elsewhere, but they must certify that:

  • The loan is necessary due to the uncertainty of current economic conditions;
  • They will use the loan proceeds to retain workers, maintain payroll, or make lease, mortgage, lease and utility payments; and
  • They are not receiving duplicative funds for the same uses.

The interest rate has not been published, but it will not exceed 4%.  PPP loans will be amortized over not more than 10 years after determination of the amount, if any, to be forgiven (see below).  PPP loan payments will be deferred for 6–12 months – the SBA will issue guidance on the terms of this deferral.  There are no SBA fees or prepayment penalties.

There are no collateral or personal-guaranty requirements.  Except to the extent PPP loan proceeds are used for an unauthorized purpose (i.e., for a reason other than payroll costs, rent, utilities, etc.), the owners of businesses receiving PPP loans will not be liable for non-payment.

WILL PPP LOANS BE FORGIVEN?

PPP loans can be forgiven if (or to the extent) the loan proceeds are used to pay the following costs incurred during the eight-week period after the loan is made:

  • Payroll costs, excluding the prorated portion of any employee’s compensation above $100,000 per year;
  • Costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums;
  • Rent or, if the business owns its building, mortgage interest (but not prepayments or principal payments); and
  • Utilities – electricity, gas, water, transportation, telephone, and internet access for which service began before February 15, 2020.

However, the amount forgiven will be reduced proportionately to the extent:

  1. The average number of full-time equivalent (FTE) employees per month employed by the business during the “covered period” is less than the average number of FTEs per month employed by the business during either (a) 2/15/19 – 6/30/19 or (b) 1/1/20 – 2/29/20, as selected by the business.
  2. The compensation paid to an employee making less than $100,000 per year is reduced by more than 25% measured against the most recent full quarter.

The “covered period” is the 8-week period after the loan is made.

Reductions in the number of employees or compensation occurring between February 15, 2020 and 30 days after the CARES Act’s enactment generally will be ignored to the extent the reductions are reversed by June 30, 2020.  

Amounts forgiven will not constitute cancellation of indebtedness income for federal tax purposes.

Businesses must apply for loan forgiveness by submitting required documentation to their lenders.  Loan forgiveness decisions must be made within 60 days.

HOW DO I APPLY FOR A PPP LOAN?

We are waiting for the regulations regarding approved PPP loan lenders.  However, it is generally expected that FDIC insured banks will qualify.

PPP lenders will be delegated authority to make and approve PPP loans, with no additional SBA approval required.  Lenders are only required to consider whether an applicant was in operation on February 15, 2020, and either had employees for whom it paid salaries and payroll taxes or paid independent contractors.  Businesses are not required to show that credit is unavailable elsewhere or demonstrate repayment ability.

CAN I GET A PPP LOAN IF I RECEIVE AN SBA ECONOMIC INJURY DISASTER LOAN?

Yes, but only to the extent the disaster loan is used for a purpose other than those permitted for PPP Loans.  Disaster loans may be refinanced with proceeds of PPP loans, in which case the maximum available PPP loan amount is increased by the amount of disaster loans being refinanced.

WHO SHOULD I CONTACT ABOUT OBTAINING A PPP LOAN?

We recommend that you contact the bank with which you have an existing banking relationship.

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