June 29, 2020
June 22, 2020
- PPP Loan Forgiveness Application Forms Updated and Streamlined
- Nevada Division of Insurance to Disallow Policy Exclusions Related to COVID-19
- CDI Announces New Order Regarding Workers’ Compensation Premium Savings for CA Businesses Affected by COVID-19
june 15, 2020
june 10, 2020
- Note to the SBA: Debtors in Bankruptcy Are Eligible for PPP Loans
- California Modifies the Tolling of Statutes of Limitations in Civil Cases
june 8, 2020
- CCPA Enforcement Date Fast Approaching Regardless of COVID-19
- Hotels in California May Be Days Away From Reopening: What Hoteliers Need to Know
June 4, 2020
may 29, 2020
may 28, 2020
- House Introduces Pandemic Risk Insurance Act of 2020 in the Wake of COVID-19 Business Interruption Claims
may 27, 2020
- Hoteliers Beware: a Return to Business Post-Pandemic Brings With It Potential Legal Liability
- House Contemplates Revisions to the Paycheck Protection Program
may 15, 2020
may 14, 2020
- U.S. House Democrats Introduce HEROES Act, a New $3T Stimulus Package
- SAFE Banking Act for Cannabis-Related Businesses Included in the HEROES Act
may 12, 2020
may 8, 2020
- Treasury and the SBA Issue Guidance Regarding the Employee Retention Credit
- Businesses Reopen in Los Angeles County as Stage 2 of California’s Statewide Plan Begins
- Update: Large Employers Required to Pay Coronavirus-Related Sick Leave Under New L.A. County Ordinance
may 6, 2020
- SBA Extends PPP Certification Safe Harbor to May 14
- A 2008 Redux: IRS Provides Temporary Cash/Stock Dividend Relief for Publicly Offered REITs and RICs
- EPLI Insurance and Employee Benefits in the Age of the Coronavirus
may 5, 2020
- Update: PPP Guidance Issued by the SBA and U.S. Treasury at Odds With the CARES Act—Michelman & Robinson Files First-of-Its-Kind Lawsuit Challenging FAQs
- NAIC Issues Business Interruption Data Call in the Wake of COVID-19
may 4, 2020
- PPP Guidance Issued by the SBA and U.S. Treasury at Odds With the CARES Act—Michelman & Robinson Files First-of-Its-Kind Lawsuit Challenging FAQs
may 1, 2020
april 29, 2020
- Planning for Your Employees' Return to the Workplace
- Los Angeles Hospitality Workers Among Those Thrown a Potential Lifeline
april 24, 2020
- Attention Cannabis Businesses: Hope May Be on the Horizon for Federal COVID-19-Related Relief
- California Department of Insurance Issues Notice Granting Tax-Filing Extension in Response to COVID-19
- SEC Approves Amendments to Nasdaq and NYSE Continued Listing Requirements Due to the COVID-19 Pandemic
April 23, 2020
april 21, 2020
- Additional Funding Is on the Way to Resurrect the PPP
- Certifying Your PPP Loan: Proceed With Caution
april 17, 2020
april 16, 2020
- Employment in the Wake of Coronavirus: EEOC and OSHA Guidance Allows Employers to Go Where They Could Not Go Before
- New Yorkers Ordered to Stay at Home Even Longer Amid the COVID-19 Crisis
- Paycheck Protection Program Funds Exhausted
april 15, 2020
- Attention Insurers: the CDI Has Ordered You to Fairly Investigate All Business Interruption Insurance Claims Caused By the COVID-19 Outbreak
April 14, 2020
- Insurance Companies Have Been Ordered to Provide COVID-19-Related Premium Relief to Businesses and Drivers in California
- What to Do If Your New York Business Has Been Deemed Non-Essential
APRIL 13, 2020
- IP Deadlines and Fees Extended Under the CARES Act
- Employment in the Wake of Coronavirus: Reintegrating Your Workforce in the New Normal
APRIL 10, 2020
- You Successfully Applied for and Received a PPP Loan Under the CARES Act: Now What?
- Safer at Home Order in L.A. Extended to May 15
- Maintaining Your Trade Secrets During the Coronavirus Crisis
APRIL 9, 2020
april 8, 2020
- Congress Looks to Bolster the PPP With Another $250B in Funding
- U.S. Treasury Provides Further Guidance to PPP Borrowers and Lenders
- L.A. Mayor Amends COVID-19-Related Paid Sick Leave Ordinance
april 7, 2020
- Clarifying the Paycheck Protection Program: Payment of Insurance Premiums and Loan Forgiveness under the CARES Act
April 3, 2020
april 2, 2020
april 1, 2020
March 31, 2020
march 30, 2020
- Large Employers Required to Pay Coronavirus-Related Sick Leave Under New L.A. Ordinance
- Insurance Coverage Potentially Triggered by COVID-19
- Attention Insurers: CDI Orders Mandatory Call for Business Interruption Coverage Information in the Wake of COVID-19
- DOL Is Requiring Employers to Post Families First Employee Rights Notice
March 27, 2020
- A Comprehensive Guide to Understanding Coronavirus-Related State Assistance Programs: Who is Giving What to Whom (Part II)
- IRS Releases “People First Initiative” Temporarily Adjusting and Suspending Key Compliance Actions
- HHS Relaxing Enforcement of HIPAA to Facilitate Sharing of Information During the COVID-19 Crisis
March 26, 2020
march 25, 2020
march 24, 2020
- Navigating the Coronavirus Pandemic: a Critical Business Review Checklist
- SBA Loans for Companies Impacted by Coronavirus
- SEC Relaxes Federal Proxy Rules for Annual Meetings
march 23, 2020
- Federal Reserve Responds Boldly to Coronavirus-Related Economic Downturn
- The Number of Jurisdictions Implementing Stay-at-Home Orders Is Increasing Exponentially
- Michelman & Robinson’s Guide to Coronavirus-Related Paid Sick Leave and Unemployment Insurance Laws in the Tri-State Area
MARCH 21, 2020
- New Jersey Orders Its Residents to Stay Home
- “Essential Businesses”— What if I am Stopped?
- The IRS and States Provide Tax Relief in the Wake of the Coronavirus Pandemic
MARCH 20, 2020
- New York Governor’s PAUSE Order
- Illinois Governor’s Statewide Stay-at-Home Order
- Force Majeure Clauses in Commercial Real Estate Contracts
MARCH 19, 2020
- SEC Provides Regulatory Relief for Public Reporting Companies
- Student Loan Borrowers Can Breathe a Sigh of Relief, At Least Temporarily
- California Governor's Statewide Stay-At-Home Order
MARCH 18, 2020
- "Shelter in Place" Orders
- Telecommuting in the Age of Coronavirus
- Families First Coronavirus Response Act Just Passed by the Senate and Signed Into Law by the President
MARCH 17, 2020
- M&R Coronavirus Risk Mitigation Team: A Multi-Disciplinary Legal Team Ready To Immediately Address A Host Of Coronavirus-Related Issues for Businesses, Quickly And Holistically
MARCH 16, 2020
MARCH 5, 2020
You Successfully Applied for and Received a PPP Loan Under the CARES Act: Now What?
For an SBA loan to be forgiven under the Paycheck Protection Program, which was enacted as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, numerous strings are attached. Given the program’s strict restrictions on the use of loan proceeds, as well as its limitations on ultimate loan forgiveness, borrowers face the very real prospect that some or all of their PPP loans may not be forgiven, or even worse.
It must be understood at the outset that compliance with all PPP restrictions must be certified by an officer of the borrower, and a false or misleading certification could give rise to civil, or potentially criminal, liability of that certifying officer under federal law. There is more. While PPP loans are generally non-recourse to the owners of a borrower, if and to the extent loan proceeds are used for unauthorized purposes, the owners may have personal liability for repayment.
Bottom line: it is critically important that borrowers securing PPP loans establish procedures to comply with relevant CARES Act requirements and keep accurate records of their compliance to ensure maximum loan forgiveness. Michelman & Robinson can help. Indeed, we are seeing an increasing demand from businesses seeking our assistance in managing PPP loan proceeds and maximizing loan forgiveness. If you too would like our guidance, please contact us immediately so that we can get you in the queue for these services.
In the meantime, M&R provides the following overview covering PPP loan use and forgiveness.
Managing Use of Loan Proceeds
Q. What can PPP loan proceeds be used for?
A. The CARES Act provides that proceeds of PPP loans may be used to pay for the following expenses incurred during the “covered period” between February 15 and June 30, 2020:
- Payroll costs including wages, salaries, commissions or similar compensation, and healthcare benefits
- Mortgage interest (but not payments of principal)
- Interest incurred during the covered period on obligations incurred before the covered period
Q. Does a borrower have to track the use of PPP loan proceeds?
A. As part of the PPP loan application, the borrower must certify that loan proceeds will be used solely for permitted purposes. Therefore, recipients of PPP loans must keep careful track (and records) of the use of all loan proceeds. At the same time, the borrower must be able to show that all other (non-PPP) payments have independent sources. Toward that end, the borrower needs to establish careful accounting practices and monitor all uses of cash, both those identified as PPP loan proceeds and, to assure compliance, cash from other sources, such as operations and capital contributions.
One approach to simplifying recordkeeping and tracking of PPP loan proceeds would be for borrowers to open and utilize one or more separate bank accounts from which loan proceeds flow in and out. This would limit the amount of accounting effort necessary to (1) track loan use, (2) demonstrate compliance with the program’s use restrictions, and, as discussed in more detail below, (3) make the forgiveness application process smoother and more streamlined.
Q. How much of a borrower’s PPP loan can be forgiven?
A. Up to 100% of PPP loans are forgivable, but only to the extent of certain qualified uses of loan proceeds during the eight weeks following loan origination, which means that careful recordkeeping is essential. A borrower must (1) track use of PPP loan proceeds with precision, (2) provide backup evidence to the SBA, and (3) certify to the SBA such backup materials as true and complete, in order to receive any loan forgiveness. Long story short: a borrower must be in a position to accurately account and retain complete records of these data sets.
Q. How is the amount of loan forgiveness calculated?
A. The percentage of the eligible loan proceeds that may be forgiven is determined by a formula based upon the number of jobs retained by the borrower adjusted by any reductions in compensation in excess of 25% for any employees. The basic formula is relatively straightforward: the average monthly number of full-time equivalent (FTE) employees during the covered period divided by either (at the borrower’s election) the average monthly number of FTE employees between February 15 and June 30, 2019, or the average monthly number of FTE employees in January and February 2020 (this assumes no reductions in compensation of greater than 25% for any employee). A reduction in employee headcount is disregarded if employees are terminated between February 15 and April 26, 2020, but rehired by June 30, 2020. Similarly, reductions in employee salary level greater than 25% between February 15 and April 26, 2020 are disregarded if reversed by June 30, 2020.
Q. What can a borrower use PPP loan proceeds for and still be eligible for loan forgiveness?
A. Expenditures of PPP loan proceeds eligible for forgiveness are almost, but not completely, identical to the restrictions on uses of PPP loan proceeds. For example, the following permitted uses of PPP loan proceeds are not forgivable:
- Interest on obligations incurred before February 15, 2020
- Lease payments under leases entered into after February 15, 2020
- Utility payments contracted for after February 15, 2020 (e.g., if a borrower contracts for Internet service after such date, loan proceeds used to pay such expenses during the covered period are not forgivable, but electric service contracted before such date but incurred during the covered period would be forgivable)
Q. What must a borrower provide to its lender to facilitate PPP loan forgiveness?
A. The CARES Act requires borrowers to submit to its lender an application for forgiveness, which shall include the following documentation:
- Verification of FTE employees on payroll and pay rates during the covered period
- Payroll tax filings to the IRS
- State income, payroll, and unemployment insurance filings
- Cancelled checks, payment receipts, transcripts of account, or other documents verifying mortgage, rent, and utility payments
- Certification from the borrower as to the accuracy and completeness of the submission
Clearly, very precise recordkeeping must be maintained in order to compute the amount of available loan forgiveness. Failure to submit adequate records will result in denial of loan forgiveness, and false certifications can result in significant liability and potential criminal exposure. The takeaway: borrowers must have systems and recordkeeping policies in place designed to track these expenses and employment-related information, and be meticulous in maintaining these systems and policies.
We are working diligently to keep our clients up to date on coronavirus-related developments. Nevertheless, these developments are changing daily and, in some cases even hourly, so it is important that you make sure you are dealing with the most current information. That being said, this alert is not offered, and should not be relied on, as legal advice. You should consult an attorney for guidance and counsel regarding any specific concern or situation.