CARES Act Information

April 3, 2020

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law on March 27, 2020 and provides loans and grants for small businesses, tax relief and allows states to expand their unemployment compensation programs. A summary of the legislation is also available here. Please keep in mind the information below may change and is based on our current understanding of the programs. Please do not rely solely on this for your financial decisions. This material is intended for general information purposes only and does not constitute legal or financial advice. We encourage you to consult with your lawyers, CPAs and Financial Advisors.

Loans

How does a business apply for a loan under the Paycheck Protection Program (PPP)?

Businesses will apply through lenders that have been approved by the Small Business Administration (SBA), which include many local banks. You can contact the bank you usually do business with or find SBA-approved lenders in your area here. For SBA resources click here.

Can PPP be used to pay for rent? If so, any idea where to find that info and how tenants can apply?

Yes. The PPP loans can be used to pay for rent, in addition to other expenses. Amounts used for paying for rent, payroll, mortgage interest, and utilities may also be forgiven. Tenants can call their bank or find SBA-approved lenders in your area here. For SBA resources click here.

Do small real estate brokerages or 1099 independent contractors qualify for PPP?

Yes. Sole proprietors, independent contractors, gig economy workers and self-employed individuals are all eligible for the PPP. The SBA is working on official guidance, but the law states that net earnings from self-employment or similar compensation that is not more than $100,000 can be considered “payroll costs.”

What specific programs directly help landlords?

In the CARES Act, landlords – and all businesses with fewer than 500 people – are eligible for the PPP. Landlords may also be able to participate in a second loan program for mid-sized business that is backed by the U.S. Treasury Department and the Federal Reserve when that program has been set up. You should also contact your lender or local bank to see what other state and federal programs might be available.

How are loans made under the PPP different from other existing SBA loans?

The PPP loans can be forgiven if certain conditions are met. Only the portion spent for payroll, interest payments on mortgages, rent payments, leases and utility service agreements are eligible. Loan amounts can be spent on other business-related expenses, but that portion of the loan will not be forgiven.

The forgiveness requires the retention of employees. If you keep all of your employees, the entirety of the loan will be forgiven. If you lay off employees, the forgiveness will be reduced by the percent decrease in the number of employees. If your total payroll expenses on workers making less than $100,000 annually decreases by more than 25 percent, loan forgiveness will be reduced by the same amount. If you have already laid off some employees, you can still be forgiven for the full amount of your payroll cost if you rehire your employees by June 30, 2020.

Is this distributed on a first come, first served basis?

No, but impacted businesses should contact their lending institutions to begin the process, or find SBA-approved lenders in their area here. For SBA resources click here.

Is relief available for businesses with pre-existing SBA loans?

Yes. Businesses with existing SBA disaster assistance loans can still receive funding through PPP as long as the loans are not being used for the same thing.

What other loans/grants are available?

The SBA has a number of additional programs that may be helpful. You can find more information about SBA products here. You can also contact your local lenders to see what other state and federal programs are available.

Does the CARES Act affect any other loans available to small businesses?

No, small businesses can still apply for pre-existing SBA disaster relief programs. You can find more information about SBA products here.

Does the CARES Act include rent loss/business interruption coverage?

It does not. ICSC has proposed that Congress enact the COVID-19 Business and Employee Continuity and Recovery Fund, which we are lobbying to be included in additional relief legislation already being worked on in Congress. The Recovery Fund would provide similar benefits of interruption insurance, including short-term and immediate liquidity for employee retention, business solvency and provide a path for recovery. We believe the Recovery Fund is a necessary tool to allow businesses to retain and rehire employees and quickly reopen to spur economic recovery. You can send a message to Congress in support of this measure by clicking here.

Taxes

What was the depreciation change made in the CARES Act?

The depreciation change was for “Qualified Improvement Property,” which includes common tenant improvements to a building’s interior, not including elevators or escalators. The change fixes a drafting error made in tax reform that required these interior improvements to be depreciated over 39 years instead of the intended life of 15 years. The change is retroactive to the beginning of 2018.

When do I need to file and pay my taxes?

IRS has extended the deadline for filing and paying taxes that would normally be due on April 15 to July 15. Employers and self-employed individuals can also defer payment on the employer’s share of social security taxes (the 6.2 percent tax borne by employers on wages up to the social security wage base) that would otherwise be due from 3/27/2020 through the end of this year. The deferred tax must be paid over the following two years, with half paid by 12/31/21 and the remainder paid by 12/31/2022.

Unemployment Compensation

Do you know how the $600 additional unemployment insurance works? Is it up to the discretion of the state?

The CARES Act allows states to provide additional unemployment benefits. Once the state has implemented the expanded programs, it would be fully reimbursed for the cost of administering the program by the federal government. Additional benefits include:

· An extra $600 per week through July 31, 2020, in addition to regular benefits

· An addition 13 weeks of unemployment

· Benefits for the self-employed, independent contractors, “gig economy” employees, and individuals who were unable to start a new job or contract due to the pandemic.

More information can be found here. Check with your state unemployment agency to see if they have adopted these new benefits.