Summary of New Laws Impacting Businesses
Below is a brief summary of the some of the provisions of the new laws passed recently that affect small to medium size businesses (i.e., those under 500 employees). I realize there is a lot of information being disseminated in regard to the various new state and federal laws, programs and orders, so I apologize for any redundancy in the below information.
Families First Coronavirus Response Act – Employee Paid Leave Rights (“FFCRA”)
The following information comes from the U.S. Department of Labor. The FFCRA applies to all employers with less than 500 employees, now including those employers with less than 50 employees. The FFCRA requires certain employers to provide employees with paid sick leave or expanded family and medical leave for specified reasons related to COVID-19 and is effective from April 1, 2020 through December 31, 2020. The highlights are as follows:
· An employee is entitled to two weeks (up to 80 hours) of paid sick leave at the employee’s regular rate of pay where the employee is unable to work because the employee is quarantined (pursuant to federal, state or local government order or advice of a health care provider), and/or experiencing COVID-19 symptoms and seeking a medical diagnosis, or
Two weeks (up to 80 hours) of paid sick leave at two-thirds the employee’s regular rate of pay because the employee is unable to work because of a bond fide need to care for an individual subject to quarantine, or to a care for a child (under 18 years of age) whose school or child provider is closed or unavailable for reasons related to COVID-19, and/or the employee is experiencing a substantially similar condition as specified by the Secretary of Health and Human Services; and
· An employee is entitled to up to an additional 10 weeks of paid expanded family and medical leave at two-thirds the employee’s regular rate of pay where the employee, who has been employed for at least 30 calendar days, is unable to work due to a bona fide need to leave to care for a child whose school or child care provider is closed or unavailable for reasons related to COVID-19.
· Small businesses with fewer than 50 employees may qualify for an exemption from the requirement to provide leave due to school closings or childcare unavailability if the leave requirements would jeopardize the viability of the business as a going concern.
See the following link for questions and answers pertaining to this law from the Department of Labor: https://www.dol.gov/agencies/whd/pandemic/ffcra-questions
Key Provisions for Businesses of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”)
· Eight-week cash flow assistance: Employers who maintain their payroll can receive up to 8 weeks of cash-flow assistance through the Paycheck Protection Program (i.e., an SBA loan that may be forgivable if certain criteria are met). Applications can start being made on April 3, 2020.
· Expanded unemployment benefits: The CARES Act extended the unemployment insurance program and expands eligibility and offers workers an additional $600 per week for four months, on top of what state programs pay (e.g., in Michigan, the new maximum amount would be approximately $962 per week). It also extends the unemployment benefits by 13 weeks for eligible workers through December 31, 2020.
· Payroll taxes: The CARES Act allows employers to delay payment of the employer portion of 2020 payroll taxes (i.e., paid between 3/27/2020 – 12/31/2020) until 12/31/2021 (50%) and 12/31/2022 (remaining 50%).
· Employee retention tax credit: The CARES Act provides a refundable Social Security tax credit equal to 50% of qualified employee wages up to $10,000 for each employee. Employers may be entitled to this credit if they paid required leave pay under the FFCRA (see first section above). An employer is not entitled to both the Payroll Protection Loan and the employee retention credit.
· Retirement funds. The CARES Act waives the 10% early withdrawal penalty for distributions of up to $100,000 for Coronavirus-related purposes, retroactive to January 1, 2020. Withdrawals are still subject to income tax, but the taxes are spread over three years, or the taxpayer has the option to roll the distribution back over within the three-year period.
· Loans from 401(k)’s: The CARES Act increases the loan limit on 401(k) accounts from $50,000 to $100,000.
· Net Operating Losses: The CARES Act allows for use of 100% of net operating losses (“NOLs”) to offset income versus just 80%, and the net operating loss rules are modified by the CARES Act so the losses can now be carried back five years.
· Excess Loss Limitation: The excess loss limitation rules for pass-through entities and sole proprietorships are temporarily suspended.
· Interest Expense Limitation: The CARES Act increases the interest expense limitation to 50% from 30% for tax years beginning in 2019 or 2020. Additionally, taxpayers can also elect to calculate the interest limitation for 2020 using their 2019 adjustable taxable income as the relevant base.