CARES Act Employment Considerations

CARES Act Lending Programs: Small Business Lending

CARES Act Lending Programs: Midsized Business Lending

Other Agricultural Funding Resources Under the CARES Act

CARES Act Tax Considerations

Congress recently passed the economic stimulus package referred to as the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The CARES Act is important to certain agricultural organizations and producers because it offers necessary financial relief during this unprecedented time. Understanding the available loans and grants, tax provisions, and employment considerations available under the CARES Act could have a tremendous impact on agricultural and farm businesses as they make business-critical decisions about their workforces and the continuation of their businesses. As further information becomes available about financial relief offered under the CARES Act, we will update this post.

What are the key provisions in the CARES Act that impact the agricultural sector?‎

The CARES Act establishes a new temporary lending program for small businesses, extends the Economic Injury Disaster Loan (“EIDL”) program and allows for advances, amends the tax code, ‎includes new items relevant to unemployment insurance, and provides support to certain producers and programs through the United States Department of Agriculture (“USDA”) and other governmental entities.‎

What provisions in the CARES Act do not apply to farms?

Agricultural enterprises (e.g., farms), other than aquaculture enterprises, agricultural cooperatives, or nurseries, are not eligible for EIDLs or advances.

CARES Act Employment Considerations

The CARES Act made federal funds available to states that enter into agreements with the federal government to increase their weekly unemployment benefits and added additional funds available if states eased some of their unemployment requirements.

1. Are workers who were not typically eligible for unemployment now able to receive benefits?

Yes. The CARES Act created a Pandemic Unemployment Assistance program that expands coverage to individuals who would otherwise not be qualified for benefits, including self-employed workers, independent contractors, and part-time workers. As with other recipients, these individuals must still establish that they are able and available to work but cannot because of a COVID-19 related reason. The benefits will be administered by the states, which means the states will determine eligibility, but these benefits are federally funded and will be eligible through December 31, 2020.

2. Is there an increase in benefits that workers can receive?

Yes. The federal government will provide an additional $600 per week in Federal Pandemic Unemployment Compensation for those who receive unemployment benefits as of the date the state enters into an agreement with the federal government until July 31, 2020.

3. A worker has exhausted their unemployment benefits that a state provides. May they receive more?

Yes. The CARES Act established Pandemic Emergency Unemployment Compensation to provide an additional 13 weeks of unemployment benefits for workers who have exhausted their state benefits, are able and available to work, but cannot work because of a COVID-19 related reason, including but not limited to quarantine, illness, or a movement restriction order. These additional 13 weeks become available as of the date the state enters into an agreement with the federal government until December 31, 2020.

4. How does the CARES Act interact with the Families First Coronavirus Response Act (“FFCRA”) for my employees?

The FFCRA requires employers with fewer than 500 employees to provide up to 80 hours of emergency paid sick leave (“EPSL”) and up to 10 weeks of emergency paid Family and Medical Leave Act (“EPFMLA”) leave in certain circumstances. The CARES Act clarified the amounts that individuals would be paid under these leaves. For example, an individual who takes 80 hours of EPSL because they are seriously ill with COVID-19 symptoms and cannot perform work would be paid their regular daily rate up to a maximum of $511 per day, or $5,110. If another employee needs to stay home to care for young school-aged children and cannot perform work, that employee would be paid up to two-thirds of their regular daily rate to a maximum of $200 per day, or $12,000 (if you combine their EPSL and EPFMLA leave). The CARES Act also clarified that an individual who was laid off on or after March 1, 2020, worked for an employer at least 30 of the last 60 calendar days before the layoff, and is rehired is eligible for EPFMLA leave.

5. Does seeking tax credits under the FFCRA for emergency sick leave and extended leave make me ineligible for a Paycheck Protection Program (“PPP”) loan?

No, you may seek tax credits under the FFCRA and still apply for a PPP loan. You just cannot apply the payments you make under the FFCRA to employees for emergency sick leave or extended FMLA leave toward PPP loan forgiveness if you are seeking a tax credit for the same funds. That would be “double-dipping.”

6. Is the calculation of the number of employees for the FFCRA and PPP the same?

No. For purposes of FFCRA, companies count all employees as of the time the FFCRA related leave is being requested, including full-time and part-time employees, employees on leave, temporary employees, and those employees who are jointly employed with another employer or considered part of the “single integrated employer.” Please be careful. The calculation analysis differs under the PPP. See Question 9 under the CARES Act Lending Programs Section.

7. For purposes of counting employees under the FFCRA, are all employees counted or only those employees whose principal place of residence is in the United States?

The FFCRA does not require the employee’s permanent residence to be in the United States for purposes of counting.

CARES Act Lending Programs

Small Business Lending

1. What programs are available?

The Paycheck Protection Program (“PPP”) was established and the Economic Injury ‎Disaster Loan (“EIDL”) program was extended to certain businesses, and advances were allowed. The PPP is run through lenders and the Small Business ‎Administration, and it is designed to provide a direct incentive for small businesses to keep their workers on the payroll. Please note: Most agriculture businesses cannot apply for an EIDL. For the PPP, ‎apply at a Small Business Administration (“SBA”) lender, and for the EIDL program, apply on the SBA site. ‎

2. When does the PPP application process begin?

The PPP loans are first come, first served. For PPP, some lenders began taking applications on ‎Friday, April 3, 2020, for small businesses and sole proprietorships. April 10 was the target date for independent contractors ‎and self-employed persons to apply. Some banks are limiting applications to customers only. Reach ‎out to your bank as soon as possible to find out about any limitations. PPP loans will be available under the program through June 30, 2020.‎ EIDLs are available online.‎

3. How long will PPP funds be available?

The program has $349 billion available. The American Bankers Association reported on April 12, 2020, that $205 billion of the $349 billion had been claimed (presumably represented by applications banks have processed and that have been approved through the SBA). As of April 13, 2020, while leaders in Congress and the White House have stated that they will provide additional funding for PPP loans, there is no guarantee that additional funds will be provided or whether there will be any new restrictions on those funds.

4. Are agricultural producers eligible for the Paycheck Protection Program?

‎First, agricultural producers may be eligible under any of the following situations (see Question 8 for ineligible businesses):

• If they meet the SBA size standards. A business can qualify if it meets the SBA employee-based or revenue-based size standard corresponding to its primary industry. Most agriculture organizations fall within SBA revenue-based size standards, which is average annual receipts of $1 million. See NAICS Codes – 13 CFR 121.201.
• If they meet both tests in the SBA’s “alternative size standard” as of March 27, 2020: (1) the maximum tangible net worth of the business is not more than $15 million; and (2) the average net income after federal income taxes (excluding any carry-over losses) of the business for the two full fiscal years before the date of the application is not more than $5 million.
• If they have 500 or fewer employees whose principal place of residence is in the United States.
• If they are sole ‎proprietorships, independent contractors, and self-employed individuals.

The affiliation rules apply for most businesses. See Questions 6 and 7.

Second, the eligible business must:

• Have had operations on February 15, 2020; and
• Either had employees for whom the business paid salaries and payroll taxes or paid independent contractors.

As part of the application, the business will need to supply documentation and certifications relating to these items. See Questions 15 and 16. ‎

5. Are agricultural and other forms of cooperatives eligible for the PPP?

As long as the other eligibility requirements are met, small agricultural cooperatives may receive PPP loans. Other forms of cooperatives may be eligible provided they comply with the other Loan Program Requirements (as defined in 13 CFR 120.10).

6. Who determines eligibility and applies the affiliation rules?

The borrower is responsible for this analysis and must certify that it is eligible to receive a PPP loan, including that it has applied the applicable affiliation rules. Lenders are not required to make an independent determination and may rely on the borrower certification. Knowing misrepresentations or false statements, in the borrower certification or otherwise, can result in civil and criminal penalties.

7. What are the affiliation rules?

In most cases, a borrower will be considered together with its affiliates for purposes of determining eligibility for the PPP. Under SBA rules, entities may be considered affiliates based on factors including stock ownership, overlapping management, and identity of interest. The Borrower Application Form, SBA Form 2483, released on April 2, 2020, requires applicants to list other businesses with which they have common management. Applicants should use the information supplied as they assess whether they have affiliates that should be included in their number of employees reported on SBA Form 2483.

8. Are there other limitations on eligibility?‎

Some industries, one of which is cannabis, are prohibited. Some activities (like financial businesses, household employers, private clubs, loan packagers, etc.) and some owners (like passive businesses owned by developers and landlords, and a 20% owner that is incarcerated, on probation, on parole, etc.) are prohibited. For a list of ineligible businesses, see 13 CFR 120.110 (“What businesses are ineligible for SBA business loans?”) ‎and the SBA’s Standard Operating Procedure (SOP) 50 10 5, Subpart B, Chapter 2, except for nonprofit organizations authorized under the CARES Act.

9. What time period should borrowers use to determine their number of employees and payroll costs?

In general, borrowers can calculate their aggregate payroll costs for their employees who reside in the United States using data either from the previous 12 months or from calendar year 2019. For seasonal businesses, the applicant may use average monthly payroll for the period between February 15, 2019, or March 1, 2019, and June 30, 2019. An applicant that was not in business from February 15, 2019, to June 30, 2019, may use the average monthly payroll costs for the period January 1, 2020, through February 29, 2020.

Borrowers may use their average employment over the same time periods to determine their number of employees, for the purposes of applying an employee-based size standard. Alternatively, borrowers may elect to use the SBA’s usual calculation: the average number of employees per pay period in the 12 completed calendar months prior to the date of the loan application (or the average number of employees for each of the pay periods that the business has been operational, if it has not been operational for 12 months). Importantly, only employees whose principal place of residence is in the United States are counted.

10. May all employees be included in the PPP calculation? Is there any limitation based on immigration status (such as H-2A and H-2B) or U.S. citizenship?

Only employees whose “principal place of residence” is in the United States count toward eligibility and calculation of the payroll costs. Also, only employees who are work authorized may be counted. The regulations do not explicitly restrict PPP loans based on citizenship or immigration status. However, the Oregon Department of Agriculture has interpreted the PPP’s requirement that employees’ “principal place of residence” be in the United States to mean that nonimmigrant guest workers such as those employed in H-2A or H-2B status are excluded (which thus likely reduces the loan amount available to some agricultural producers). Also, some banks have reportedly restricted loans to cover only employees who are either U.S. citizens or lawful permanent residents. Further guidance is expected in this area.

11. What is the loan amount and other terms?

The maximum loan amount is two and a half times the “average monthly ‎payroll cost” (with some adjustment for seasonal employers) or $10 million. No collateral or personal guarantees are required. There is a six month deferment on payment. The interest rate is 1%, and there is a two year maturity. Only ‎one loan per business is permitted—this means that a business should consider applying for the ‎maximum amount. E-signature and e-consent can be used. ‎

12. For what purposes may the agricultural producer use its loan?

The loans are primarily intended to be used to pay employee compensation and benefits ‎during the COVID-19 crisis, including salaries, health care costs, paid leave, and state and ‎local taxes. Businesses can only include payroll costs for employees whose principal place of residence is inside the United States. The ‎loans can also be used for rent payments, utility bills, mortgage interest payments, interest ‎on other debt, and to refinance an SBA EIDL, if applicable. The lender is to make the first disbursement no later than 10 calendar days from the date of loan approval. The amount of forgiveness of a PPP loan depends on the borrower’s payroll costs over an eight-week period, and the eight-week period begins on the date the lender makes ‎the first disbursement of the loan. There is also a limitation on forgiveness, in that only 25% of forgiveness can be for non-payroll items.

13. What are “payroll costs”?

“Payroll costs” consist of compensation to employees (whose principal place of residence is in the United States) in the form of salary, wages, commission, or similar compensation; payment for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payment 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, wage, commission, income, or net earnings from self-employment or similar compensation. Independent contractors are not employees for purposes of PPP loan calculations, and they have the ability to apply for a PPP loan on their own.

Payroll costs do not include the following:

• $100,000 cap on an ‎annualized basis of cash compensation for each employee (does not apply to non-cash benefits, including employer contributions to defined-benefit or defined-contribution retirement plans, payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums; and payment of state and local taxes assessed on compensation of employees).
• Compensation of an employee whose principal place of residence is outside of the United States.
• Federal employment taxes imposed or withheld between February 15 and June 30, 2020, including the employee’s and employer’s shares of FICA (Federal Insurance Contributions Act) and Railroad Retirement Act taxes, and income taxes required to be withheld from employees.
• Qualified sick and family leave wages for which a credit is allowed under sections 7001 and 7003 of the Families First Coronavirus Response Act (“FFCRA”).

Please note that limited liability company distributions are not wages.

14. Can the loans be forgiven?

Loans under the program are eligible for forgiveness to the extent the funds are used to ‎cover payroll costs, rent payments, utility bills, or mortgage interest payments in the eight ‎weeks following origination of the loan. No more than 25% of the forgiven amount may ‎be for non-payroll cost. Lenders are monitoring this—they want the loans to be fully ‎forgiven.

Loan forgiveness will be reduced to the extent that businesses reduce their full-time employee ‎head count or employee salaries and wages by more than 25%. To encourage employers to ‎rehire any employees who have already been laid off due to the COVID-19 crisis, ‎borrowers that rehire workers previously laid off will be given credit for forgiveness ‎purposes. The forgiveness calculation takes the number of employees and reduced ‎compensation into consideration.

15. What does the application look like?

The Treasury Department has posted a form of application as of April 2, 2020. ‎Please review the application carefully. There is more information in response to Question 16.

16. What documents and certifications are required?

Documents: Per the SBA, the following documents are required:

• Payroll processor records, payroll tax filings, or Form 1099-MISC, or income and expenses for a sole proprietorship.
• For borrowers that do not have any such documentation, the borrower must provide other supporting documentation, such as bank records, sufficient to demonstrate the qualifying payroll amount.

Banks are also requiring other documents, like organizational and authorization documents. Please contact the lender for required documents.

Certifications: As of April 8, 2020, the certifications stated by the SBA are:

• Applicant has read the statements included in this [application], including the Statements Required by Law and Executive Orders, and understands them.
• Applicant is eligible to receive a loan under the rules in effect at the time this application is submitted that have been issued by the Small Business Administration (SBA) implementing the Paycheck Protection Program under Division A, Title I of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) (the Paycheck Protection Program Rule).
• Applicant (1) is an independent contractor, eligible self-employed individual, or sole proprietor or (2) employs no more than the greater of 500 employees or, if applicable, meets the size standard in number of employees established by the SBA in 13 C.F.R. 121.201 for the Applicant’s industry.
• Applicant will comply, whenever applicable, with the civil rights and other limitations in this form.
• All SBA loan proceeds will be used only for business-related purposes as specified in the loan application and consistent with the Paycheck Protection Program Rule.
• To the extent feasible, Applicant will purchase only American-made equipment and products.
• Applicant is not engaged in any activity that is illegal under federal, state or local law.
• Any loan received by the Applicant under Section 7(b)(2) of the Small Business Act between January 31, 2020 and April 3, 2020 was for a purpose other than paying payroll costs and other allowable uses loans under the Paycheck Protection Program Rule.
• The authorized representative of the Applicant must certify in good faith to all of the following:
  • Applicant was in operation on February 15, 2020 and had employees for whom it paid salaries and payroll taxes or paid independent contractors, as reported on Form(s) 1099-MISC.
  • Current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.
  • The funds will be used to retain workers and maintain payroll or make mortgage interest payments, lease payments, and utility payments, as specified under the Paycheck Protection Program Rule; I understand that if the funds are knowingly used for unauthorized purposes, the federal government may hold me legally liable, such as for charges of fraud.
  • Applicant will provide to the Lender documentation verifying the number of full-time equivalent employees on the Applicant’s payroll as well as the dollar amounts of payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities for the eight-week period following this loan.
  • I understand that loan forgiveness will be provided for the sum of documented payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities, and not more than 25% of the forgiven amount may be for non-payroll costs.
  • During the period beginning on February 15, 2020 and ending on December 31, 2020, the Applicant has not and will not receive another loan under the Paycheck Protection Program.
  • I further certify that the information provided in this application and the information provided in all supporting documents and forms is true and accurate in all material respects. I understand that knowingly making a false statement to obtain a guaranteed loan from SBA is punishable under the law, including under 18 USC 1001 and 3571 by imprisonment of not more than five years and/or a fine of up to $250,000; under 15 USC 645 by imprisonment of not more than two years and/or a fine of not more than $5,000; and, if submitted to a federally insured institution, under 18 USC 1014 by imprisonment of not more than thirty years and/or a fine of not more than $1,000,000.
  • I acknowledge that the Lender will confirm the eligible loan amount using required documents submitted. I understand, acknowledge and agree that the Lender can share any tax information that I have provided with SBA’s authorized representatives, including authorized representatives of the SBA Office of Inspector General, for the purpose of compliance with SBA Loan Program Requirements and all SBA reviews.

17. What records should I keep?

We expect that those that receive PPP loans that are forgiven will be subject to audit by the SBA at some point. Keep all materials to apply for the loan, as well as documents relating to the forgiveness amounts. It is likely the focus of the audit will be on substantiating the forgiveness amounts.

18. What other guidance is available?

The SBA is required to issue rules within 15 days of ‎the CARES Act’s passage to implement the program. The Treasury Department and SBA have issued ‎interim final rules, an interim final rule on affiliation, the application, frequently asked questions, and other information.

19. Can agricultural producers apply for EIDLs and advances?

Generally no. Agricultural enterprises (e.g., farms), other than aquaculture enterprises, agricultural cooperatives, or nurseries, are not eligible for EIDLs or advances.

20. What happened with the EIDLs and the advances?‎

The changes include:

• Extended to small businesses, nonprofits (including faith based), sole proprietors, ‎and independent contractors
• Up to $2 million working capital loan
• Payments deferred for a year ‎
• Loans based on credit scores; no tax returns required; up to $200,000 without a ‎personal guarantee
• No collateral for $25,000 or less; general security interest instead of real estate for ‎larger loans
• Up to $10,000 emergency grant within 3 days that does not have to be repaid
• Apply through gov
• Intersects with the PPP, in that ‎an outstanding EIDL used for payroll costs made between January 31, 2020, and April 3, 2020, less the amount of an advance is added to a PPP loan calculation. If the EIDL loan was not used for payroll costs, it does not affect eligibility for a PPP loan.

Midsized Business Lending

21. What loans would be made available to midsized businesses ‎under the CARES Act?

There is no process as of April 8, 2020, to apply for either a Midsize Business Loan or a Main Street Loan. However, on April 8, 2020, the Federal Reserve took additional actions to provide for the Main Street Lending Program. Regulations are in process, but the CARES Act does not include a specific timeline for the launch of these programs.

• The Department of Treasury is required to endeavor to seek the implementation of a ‎Federal Reserve lending program that targets United States-eligible businesses (and, to the ‎extent practicable, nonprofit organizations) with between 500 and 10,000 ‎employees, subject to additional terms and conditions.‎
• The CARES Act also suggests that the Federal Reserve may establish a Main Street ‎Business Lending Program or facility that supports lending to small and midsized ‎businesses on such terms and conditions that are consistent with its authority under ‎the Federal Reserve Act.‎ See Question 23.
• For both programs, the CARES Act contains restrictions on certain stock buybacks, paying dividends, and executive ‎compensation.
• Midsize loans are not eligible for loan forgiveness and are also subject to specified conflicts of interest rules.

22. What restrictions will be placed on borrowers that receive loans under the ‎midsized businesses program, if it is implemented?‎

• The funds received must be used to retain at least 90% of the borrower’s workforce, ‎with full compensation and benefits, through September 30, 2020. ‎
• The borrower must intend to restore not less than 90% of the workforce that existed as ‎of February 1, 2020, and to restore all compensation and benefits to the workers no later ‎than 4 months after the termination date of the public health emergency. ‎
• The borrower must be domiciled in the United States with significant operations and ‎employees located in the United States. ‎
• The borrower will not pay dividends while the loan is outstanding.‎
• The borrower would be prohibited from engaging in stock buybacks if they are listed on ‎an exchange.‎
• The borrower must agree to caps on employee compensation for a period ending one year after the loan is repaid (for officers receiving over $425,000 in 2019 there is one cap; and for officers that made over $3 million in 2019, there is another cap).
• The borrower is not a debtor in a bankruptcy proceeding.
• Borrowers would be prohibited from outsourcing or offshoring jobs for the term of ‎the loan plus an additional two years.‎
• The borrower would be prohibited from abrogating existing collective bargaining ‎agreements for the term of the loan plus an additional two years.‎
• The borrower would be required to remain neutral in any union organizing effort for ‎the term of the loan.‎
• The borrower needs to certify that the uncertainty of economic conditions as of the date of the application makes the loan request necessary to support its ongoing operations.

23. What is the Main Street Lending Program?

On April 9, 2020, the Federal Reserve announced that it had taken actions to ensure credit flows to small and midsized businesses with the purchase of up to $600 billion in loans through the Main Street Lending Program. The Main Street Lending Program is to enhance support for small and midsized businesses that were in good financial standing before the crisis by offering 4-year loans to companies employing up to 10,000 workers or with revenues of less than $2.5 billion. Principal and interest payments will be deferred for one year. Eligible banks may originate new Main Street loans or use Main Street loans to increase the size of existing loans to businesses. Banks will retain a 5% share, selling the remaining 95% to the Main Street facility, which will purchase up to $600 billion of loans. Firms seeking Main Street loans must commit to making reasonable efforts to maintain payroll and retain workers. Borrowers must also follow compensation, stock repurchase, and dividend restrictions that apply to direct loan programs under the CARES Act. Firms that have taken advantage of the PPP may also take out Main Street loans.

The Federal Reserve and the Treasury recognized that businesses vary widely in their financing needs, particularly at this time, and, as the program is being finalized, will continue to seek input from lenders, borrowers, and other stakeholders to make sure the program supports the economy as effectively and efficiently as possible while also safeguarding taxpayer funds. See the press release and term sheets.

Other Agricultural Funding Resources Under the CARES Act

1. What funding was allocated to governmental entities supporting agricultural businesses under the CARES Act?

The CARES Act directed $49 billion toward food and agriculture-related programs, with roughly half or $24.6 billion of that amount being allotted to domestic food programs. The Office of the Secretary of the Department of Agriculture received $9.5 billion in funding specifically to support those producers supplying local food systems such as farmers markets, grocery stores, restaurants, and schools, and to support specialty crop growers, livestock producers, and dairy farmers. In addition, the Commodity Credit Corporation was replenished with $14 billion. This program is the funding mechanism for commodity and income support programs, including the Dairy Margin Coverage, natural resource conservation programs, disaster assistance programs, and the Market Facilitation Program, among others. Other funding is directed to enhance staffing and services in critical areas, including inspections and grading programs, and loan programs like the Farm Service Agency. Information relating to how these funds can be accessed are farm and agribusiness specific, and producers should reach out to their local USDA and FSA offices to obtain more information.

CARES Act Tax Considerations

1. What are three “big” tax provisions for agricultural producers in the CARES Act?

• Net operating loss (“NOL”) carrybacks.
• Increase in allowable interest deduction.
• Deferral of payroll tax/employee retention tax credits.

2. How does the NOL carryback provision work?

Under the CARES Act, companies with losses from 2018, 2019, and 2020 may be able to carry those losses back five years and offset up to 100% of taxable income. That could generate tax refunds that businesses could put to use upon receipt.

3. Why should agricultural businesses care about the increase in the interest deduction?

Under the CARES Act, the maximum amount of business interest deductions is increased from 30% of earnings before interest, taxes, depreciation, and amortization (“EBITDA”) to 50% of EBITDA. This means businesses can reduce their taxable income for 2020 and 2021 by deducting more interest expense. Although this takes longer for businesses to realize the savings, it is a net win. Businesses should note, however, that this provision sunsets starting in 2022.

4. Payroll tax deferral and employee retention credits are lumped together. Looking at them one at a time, what more do we need to understand about deferral of payroll taxes?

Under the CARES Act, businesses are permitted to defer payment of the employer’s share of Social Security taxes through the end of 2020. Businesses deferring payroll taxes under this provision are permitted to pay half of the deferred amount by the end of 2021 and the remaining half by the end of 2022. All the while, no penalties or interest will accrue. So in some ways, you can view this as a short-term interest-free loan from the government. Businesses should note, however, that if they seek to cancel any PPP loan amounts, although they will be able to defer any unpaid payroll taxes as of the date of PPP loan forgiveness, those businesses will no longer be permitted to defer additional amounts of payroll taxes.

5. What can you tell me about the employee retention tax credit?

The CARES Act creates a new, temporarily refundable payroll tax credit for “eligible employers” affected by COVID-19. An eligible employer is an entity (1) whose operation is fully or partially suspended in response to governmental orders limiting commerce, travel, or group meetings or (2) that has experienced a significant decline in gross receipts, defined as a decline of 50% or more in quarterly receipts when compared to the prior year quarter. If an employer meets that definition, the credit is 50% on the first $10,000 of certain wages incurred or paid from March 13, 2020, through December 31, 2020. The credit is not available to those employers getting PPP loans.