Search

Updated: Apr 4

March 28, 2020

SBA “PAYCHECK PROTECTION” LOAN FORGIVENESS PROGRAM UNDER THE CARES ACT

To our Clients and Friends:

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law. The CARES Act a $2.2 trillion stimulus package providing aid for individuals, States, small businesses, and businesses impacted by the coronavirus pandemic.

The CARES Act authorizes the Small Business Administration (“SBA”) to provide loan guarantees for up to $349 billion in loan commitments under the SBA’s 7(a) program, through a new “paycheck protection” loan program under which loans may be forgiven. This letter discusses how the SBA provisions in the CARES Act can provide much needed relief for small businesses during the Corona Virus pandemic.

OVERVIEW OF SBA “PAYCHECK PROTECTION” LOAN PROGRAM

The Loans may be used for a variety of purposes, including payroll costs, rents, utilities, mortgage interest (not principal), and interest on debt existing prior to February 15, 2020. A Portion of these loans may be forgiven at the discretion of the local bank implementing these SBA 7a loans under the CARES Act for the covered period of eight (8) weeks from loan origination. That means if the Banks can start originating these loans by mid to late April and distributing funds by May 1, 2020 the 8 week period would commence May 1, 2020 and end June 30, 2020. But remember the implementing rules have not been written yet. The SBA has 15 days to write the rules from the date the act was passed on March 27, 2020.

A very good article on the Paycheck Protection Loan Program in the National Law Review is located at the below link, and I have attempted to summarize the details of the program below

https://www.natlawreview.com/article/paycheck-protection-program-sba-loan-program-expanded-cares-act

ELIGIBILITY

Eligible entities are those small businesses with less than 500 employees, and include the following entities

· Small Businesses (less than 500 employees).

· 501c3 Nonprofit organizations. In general, 501(c)(3) and 501(c)(19) non-profits with 500 employees or fewer as most non-profit SBA size standards are based on revenue, not employee number.

· Veterans Organizations

· Businesses in the Accommodation and Food Service industries with less than 500 employees

per physical location. Below is a list of Accommodation and Food Services industries (NAICS code72) that are covered.

· Hotels and Motels

· Casino Hotels

· Bed-and-Breakfast Inns

· All Other Traveler Accommodation

· RV Parks and Campgrounds

· Recreational and Vacation Camps

· Rooming and Boarding Houses, Dormitories, and Workers’ Camps

· Food Service Contractors

· Caterers

· Mobile Food Services

· Drinking Places (Alcoholic Beverages)

· Full-Service Restaurants

· Limited-Service Restaurants

· Cafeterias, Grill Buffets, and Buffets

· Snack and Non-Alcoholic Beverage Bars

NON-PROFIT ORGANIZATIONS ARE ALSO ELIGIBLE TO RECEIVE FORGIVEABLE LOANS

Along with small business concerns, nonprofit organizations also are eligible to receive a covered loan. In general, 501(c)(3) and 501(c)(19) non-profits with 500 employees or fewer as most non-

profit SBA size standards are based on revenue, not employee number.

UNDERSERVED AND RURAL MARKETS ARE TO BE PRIORITIZED

The CARES Act recommends that the SBA issue guidance to lenders to prioritize small businesses and entities in underserved and rural markets, including veterans and members of the military business concerns owned and controlled by socially and economically disadvantaged individuals, women and businesses in operation for less than 2 years.

SBA DISASTER RELIEF LOANS CAN BE APPLIED FOR IN ADDITION TO PAYCHECK PROTECTION PROGRAM LOANS

A recipient of an SBA economic injury disaster relief loan made between January 31, 2020 and the date covered loans are available under the CARES Act, for a purpose other than paying payroll costs and other covered loan purposes described below, is still eligible for a covered loan.

MAXIMUM LOAN AMOUNT

Loans are available for the lesser of the average monthly payroll costs times 2 1/2 plus any Economic Injury Disaster loans (“EIDL”) received after January 31, 2020 that are refinanced under subsection 36 or $10 million. Average monthly payroll costs are calculated based on the one-year period prior to the loan disbursal date except for seasonal employers and employers not in business between February 15, 2019 and July 30, 2019.

In the case of seasonal employers, the employer may choose to calculate the average monthly payroll costs based on the 12-week period starting February 15, 2019 or the period starting March 1, 2019 through June 30, 2019.

In the case of new employers not in business between February 15, 2019 and July 30, 2019, the average monthly payroll costs is calculated based on the period beginning January 1, 2020 through February 29, 2020.

Payroll costs include: employee salary, wages and commissions; payment of cash tips; payment of vacation; parental, family, medical or sick-leave; allowance for dismissal or separation; payment required for group health benefits (including insurance premiums); payment of retirement benefits; or payment of state or local tax assessed on employee compensation; and sole proprietor income or independent contractor compensation not in excess of $100,000.

Payroll costs exclude: compensation of an individual person in excess of $100,000 (as prorated for the period); federal employment taxes imposed or withheld taxes; compensation to an employee whose principal residence is outside of the U.S.; qualified sick leave for which a credit is allowed under Section 7001 of the Families First Coronavirus Response Act; and qualified family leave wages for which a credit is allowed under Section 7001 of the Families First Coronavirus Response Act.

LOAN TERMS

Loans are available for up to 10-year term (amortized) at 4% interest, with six months (and up to one year deferral of principal and interest payments. Notably, certain SBA requirements are waived. Loans are available with

· No personal guaranties of shareholders, members or partners

· No collateral

· No proving recipient cannot obtain funds elsewhere

· No SBA fees (may still have to pay lender processing fee)

· No prepayment fees

NO COLLATERAL OR PERSONAL GUARANTEE IS REQUIRED FOR A COVERED LOAN.

The CARES Act provides that proceeds of covered loans may be used for:

· Payroll costs;

· Continuation of group health care benefits during periods of paid sick, medical, or family leave, or insurance premiums;

· Salaries or commissions or similar compensation;

· Interest on mortgage obligations;

· Rent;

· Utilities; and

· Interest on other outstanding debt.

The maximum loan amount is the lesser of the average total monthly payments by the applicant for payroll costs incurred during the one-year period before the date the loan is made multiplied by 2.5 and $10 million.

FOR NEW BUSINESSES LESS THAN A YEAR OLD

If an applicant was not in business from February 15, 2019 to June 30, 2019, the maximum loan amount is the lesser of the average total monthly payments by the applicant for payroll costs incurred from January 1, 2020 to February 29, 2020 multiplied by 2.5 and $10 million.

LOAN FORGIVENESS – Section 1106

The forgiven amount will be equal to the amount actually paid for payroll costs, salaries, benefits, rent, utilities and mortgage interest during the eight weeks following disbursement of the loan. Additional wages paid to tipped employees under Section 3(m)(2)(A) of the Fair Labor Standard Acts may also be forgiven.

The forgiveness amount is subject to reduction if there is a workforce reduction or a reduction in the salary or wages of an employee.

· The amount attributable to a workforce reduction will be equal to the initial forgiven amount multiplied by the quotient of average FTEs during the eight-week period divided by the average FTEs for the period from February 15, 2019 through June 30, 2019 or January 1, 2020 through February 29, 2020, as determined by the recipient

· The amount attributable to a salary or wage reduction will be the amount of any salary or wage decrease in excess of 25 percent of the total salary or wages during the most recent full quarter such employee was employed before the eight-week period. Only employees who did not receive, during any single pay period during 2019, wages or salary at an annualized rate of pay in excess of $100,000 are included in this calculation.

Reductions in workforce, salaries and wages that occur from February 15, 2020 to April 26, 2020 will be disregarded for purposes of reducing the forgiveness amount so long as the reductions are eliminated by June 30, 2020.

Borrowers must apply for forgiveness with the lender servicing the loan. Lenders have 60 days to review and make a determination. Any portion of the loan that is forgiven will be excluded from gross income.

How do you get forgiveness on your PPP loan under CARES Act?

You must apply through your lender for forgiveness on your loan. In this application, you

must include:

· Documentation verifying the number of employees on payroll and pay rates, including IRS payroll tax filings and State income, payroll and unemployment insurance filings.

· Documentation verifying payments on covered mortgage obligations, lease obligations, and utilities.

· Certification from a representative of your business or organization that is authorized to certify that the documentation provided is true and that the amount that is being forgiven was used in accordance with the program’s guidelines for use.

The amount of loan forgiveness will be reduced by multiplying (1) the forgivable costs by (2) the quotient obtained by dividing (a) the average number of full-time equivalent employees per month during the covered period by (b) at the election of the borrower, (i) the average number of full-time equivalent employees per month from February 15, 2019 to June 20, 2019 or (ii) the average number of full-time equivalent employees per month from January 1, 2020 to February 29, 2020.

The amount of loan forgiveness will also be reduced by the amount of any reduction in total salary or wages of any employee during the covered period that is in excess of 25 percent of the total salary or wages during the most recent full quarter during which the employee was employed before the covered period.

There are exceptions for these reductions if, during the period beginning on February 15, 2020 and ending 30 days after enactment of the Act, there is a reduction in the number of full-time equivalent employees or salary and the reduction is eliminated no later than June 30, 2020.

If a covered loan has a remaining balance after the forgiveness described above, it will have a maximum maturity of 10 years and an interest rate not exceeding 4 percent. Lenders must defer payments under the loan for at least six months and up to one year

COVERED PERIOD DEFINED

For purposes of determining the maximum loan amount, “covered period” means and eight-week period from loan origination (estimated at May 1, 2020) through June 30, 2020.


WHAT CAN YOU DO NOW? Apply for an SBA 7a loan under the CARES Act through your SBA approved lender bank. Ask your bank if they are going to participate in this new SBA loan program.

To seek loan forgiveness, an eligible business must submit an application to a lender participating in the SBA 7(a) program that includes:

1. Documentation verifying the number of full-time equivalent employees on payroll and pay rates for the applicable periods, including payroll tax filings; and state income, payroll, and unemployment insurance filings; and

2. Documentation verifying payments on mortgage obligations, lease obligations and utilities, including cancelled checks, payment receipts, transcripts of accounts, or other documents.

We recommend that you start gathering that documentation now, while the banks get ready to make these loans. The banks are waiting for the SBA to issue implementing regulations.

The SBA must issue regulations within 15 days of enactment of the CARES Act without regard to notice and comment requirements. Hence, it is possible that lenders could begin taking loan applications as soon as mid-April.

LOAN APPLICATION PROCESS

Eligible entities may file applications with an SBA-approved lender. Lenders have been delegated authority to make loans without SBA review. Eligible applicants will have been in operation on February 15, 2020 and will have paid employees and payroll taxes or independent contractors.

Applicants will need to certify that the loan is necessary and will be used to retain workers and pay eligible expenses. Applicants will further need to certify that no other application for a loan for the same purpose is pending and that the entity has not received any other loan for the same purposes through December 31, 2020.

SBA ECONOMIC INJURY DISASTER LOANS

In early March of 2020, Congress passed an $8.3 billion appropriations measure to combat the effects of the coronavirus pandemic, the Coronavirus Preparedness and Response Supplemental Appropriations Act of 2020.

The Act allows the SBA to provide up to $1 billion in loan subsidies for economic injury disaster loans. This funding enables the SBA to provide an estimated $7 billion in economic injury disaster loans.

Additionally, the Act provides the SBA $20 million to cover the cost of administering these loans. Small businesses in all U.S. states and territories are currently eligible to apply for an economic injury disaster loan due to COVID-19.

The SBA’s Economic Injury Disaster Loan program provides small businesses with working capital loans of up to $2 million. Affiliation rules have not been waived in connection with determining the eligibility of participants in the Economic Injury Disaster Loan program.

Sarah Smyth McIntosh of Smyth McIntosh PS and Law Manzanita is available to assist with any questions you may have regarding developments related to the COVID-19 outbreak.

Sarah Smyth McIntosh regularly counsel clients on issues raised by this pandemic, and we are working with many of our clients on their response to COVID-19. Please also feel free to contact the her at directly at 360.352.0866 or sarah@smythmcintosh.com

© 2020 Smyth McIntosh PS

Attorney Advertising: The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

  • Sarah Smyth McIntosh

Dear Clients and Friends

Here is our updated Newsletter from Smyth McIntosh  PS/ Law Manzanita and Summary of Various Sources of Stimulus.

There is also a link below to a good video summarizing 8 different sources of economic stimulus for small businesses.  It not just about the paycheck protection program loans (PPP Loans)  or the SBA disaster loans (EIDL Loans).

Don't hesitate to call me directly at 360.352.0866 or 503.368.4225 with any questions.

Stay home and stay safe and healthy!  

Sarah

SUMMARY OF VARIOUS SOURCES OF STIMULUS

According to Mark J. Kohler

https://www.youtube.com/watch?v=NLUb-pwmLU8&t=512s

1.  Stimulus Checks 

     Please note: This is an advance on next years refund checks

2.  Unemployment Benefits - New federal federal and state benefits are available

3.  SBA Loan Forbearance – if you currently have an SBA loan you can ask

 for  forbearance of your loan payments for 3 months

4.  Retirement Accounts - There are many ways to borrow against your retirement account now without penalties

5.  Economic Injury Disaster Loan (EIDL) (sba.gov)

    $10,000 Advance on SBA  Loan will be forgiven

    - apply online atsba.gov

6.  Paycheck Protection Program Loans (through banks only. If you don't currently have a banking relationship ie a business loan, and only ahve a depository relationship, the bank will not help you obtain a PPP loan. Beware: You will get different interpretations of how to calculate from different banks)

        a.) SOLE PROPRIETORS , INDEPENDENT CONTRACTORS AND LLC OWNERS.  If you are an owner of an LLC and you take draws rather than a salary the banks may tell you that you cannot apply for a PPP loan for your draws.

However, an LLC owner may request an SBA PPP Loan for net income plus health insurance paid and retirement contribution divided by 12 times 2.5 according to Mark J. Kohler (see YouTube Video link above)

Also, if you are an LLC but elected to be taxed like an s-corporation and have been drawing a salary you can declare your salary along with all your workers salary based on average monthly payroll in 2019 times 2.5 plus any EIDL net of advances you may have already received from your EIDL loan.  

If you haven’t received your $10,000 advance under the EIDL, don't add it into the PPP Loan.

DOCUMENTATION NEEDED: 2019 personal Tax return (Schedule C) Take your 2019 net income from your business plus any health insurance premiums paid in 2019 plus any retirement contributions made in 2019 and divide by 12 then multiple by 2.5 to submit your loan request

      b.) S-CORPS/ C-CORPS -  based on 2019 Payroll reports (941s payroll reports for 2019). Average monthly payroll for 2019 times 2.5 equals your loan request.

Also see:  https://www.uschamber.com/co/start/strategy/cares-act-small-business-guide

7.    Emergency Paid Sick Leave (EPSL)

8.    Family Medical Leave Act

HELPFUL LINKS:

WASHINGTON STATE

Governor Jay Inslee's office

Q&A re covid symptoms

OREGON

Senator Merkley’s Office

Governor Kate Brown's office

Unemployment

To file for the Small Business Relief Loan, visit The Small Business Association Website

https://disasterloan.sba.gov/ela/Information/Index

If you would like help filing the application for the Small Business Relief Loan contact

Sarah Smyth McIntosh at

Sarah@smythmcintosh.com

360.352.0866 or 503.368.4225

Updated: Mar 31



HOLISTIC ESTATE PLANNING PRESENTATION - given to the Art of Aging and Art of Dying Lecture Series at the Hoffman Center for the Arts in Manzanita, Oregon

Good afternoon, my name is Sarah Smyth McIntosh. I am your local estate planning attorney in Manzanita. I have been practicing for over 30 years in Washington state and when we purchased a second home here in Manzanita was prompted by many in the business community to obtain my Oregon license to practice and open a branch office here in Manzanita. My office is located in a lovely art Gallery at 144 Laneda Ave across from the Sand Dune Pub. I live and work in the same building and it’s a lovely space to meet with my clients. I have exclusive use of the office during the week, and then on the weekends everything is locked up, confidential information is secured and the gallery is opened to the public. It’s been a wonderful experience reconnecting with my original purpose of becoming a lawyer, that is, solving problems for people, and it is especially gratifying to do this work here in this small village with so many wonderful people.

So, what is Holistic Estate Planning, and how am I going to spend the next 2 hours with you discussing this topic? Well, Holistic estate planning, is not just a topic about whether to have a will or a trust, or about getting your financial life in order and passing on your assets to your loved ones.

It’s about YOU, it’s about your life, your legacy and yes, your death!

As we age, we need to think about what our end of life may look like, and this includes how you want to plan for your end of life, who you want to surround you and how you can provide the most peaceful and serene circumstances to leave this earth. It’s about everything that leads up to your death, and yes, your death as well.

This is not just about how you live life now, and how you will live in retirement. It’s not just about good financial planning, it’s also about good elder care planning. What happens when you do get older and do need assistance at home, or have to find another place to live where you can receive 24-hour care.

Where will you live, who will be around you to help you as you age, do you have a plan for in-home care? Who can help you when you are older and need caregiver services, maybe even 24- hour caregiver services, as well as some in-home skilled nursing visits, when needed. Who will help you with your financial affairs (paying bills, organizing your estate plan). Who are the professionals, such as your attorney, your CPA/ and or bookkeeper who can help you with these matters?

HOLISTIC ESTATE PLANNING is taking charge of your life in all areas of your life and death- Frankly, it just being a responsible human being to yourself, and to those around you upon your death, your friends and family and neighbors and fellow villagers. Many don’t want to plan for or think about death, they say “I’ll be dead, what do I care”. Well, that is both selfish and unkind for those loved ones you leave behind, and it’s also irresponsible.

SO WHAT IS HOLISTIC ESTATE PLANNING – IT ABOUT PLANNING FOR YOUR WHOLE SELF – your mind, your body, your spirit, your life and death. These aspects of Holistic estate planning include the following elements.

HEALTH – mind and body – How are you caring for yourself now, how are you preparing both your mind and body for the later years of your life? How are you taking care of your whole self? Your spiritual, mental and physical self?

SPIRITUAL – What are your spiritual beliefs, and how do you want your life lessons, and life’s purpose represented upon your death. What are your life’s conclusions about the ethic and integrity with which you have lived your life and what life lessons you would like to pass down to the next generation? How do you want these spiritual beliefs represented in your own memorial? It is very important to write down how you feel about your own memorial for the benefit of those loved ones you are leaving behind to plan a memorial to honor your life.

FINANCIAL – Your Financial Plan during your life and your Estate Plan for disposition of your estate at your death. Whether it’s a Will or Trust or other probate avoidance mechanisms such as Transfer on Death agreements for stock brokerage accounts, beneficiary designations for retirement accounts, Payable on Death designations for bank accounts or Revocable Living Trusts or Transfer on Death Deeds for your Real Property interests assets. Consider also your elder care planning for in-home caregiver services, medical assistance (in-home skilled nursing), physical therapy, home maintenance, personal assistance for grocery shopping, meal preparation, housekeeping, pet care, etc.

EMOTIONAL – How are you feeling emotionally, now, and what are you concerned about for your future, what is still unresolved in your past, and what can you do to bring peace into your life and sustain that sense of well-being into the future as you age.

SOCIAL – How do you interact with your village, your family, your friends? Do you have a good balance of friends and family that you interact with on a daily weekly and monthly basis?

INTELLECTUAL – What are your passions in life, and how do you engage your mind in pursuing those passions?

ENVIRONMENTAL – Where do you live, what kind of environment surrounds you? Do you have a scared space where you can regroup, de-stress, and connect with your spiritual and emotional needs?

OCCUPATIONAL – Are you still working? Do you need to still work, or do you want to still work? how does this plan for your occupational life help other facets of your Holistic estate plan?

HOLISTIC ESTATE PLANNING is a is a Checklist of Your Life and your Death – In the next two hours I’m going to talk a little bit about the basics of Holistic estate planning, and give you a number of checklists to take home with you to engage in the exercise of Holistic estate planning. Then we are going to open this up for further discussion and break out into groups based on specific subjects to help further facilitate this matter.

ELDER CARE PLANNING - I’ve asked Carolyn Walters to join us today. She is a retired surgical nurse who has moved to Rockaway recently with her daughter and granddaughter, and opened a new in-home caregiver business called Coastal Care. I had the pleasure of meeting Carolyn when I had the need for caregiver services for my 93 -year old Father, when my 92- year old mother had a stroke on New Year’s Day. Carolyn was just starting her business and I was one of her first clients. She was loving, kind and compassionate with my father, who suffers from dementia, but is physically quite capable. He was sad and missing my mother while she rehabilitated from her stroke and while we regrouped with what to do next and how to get the necessary in-home care in place for both of them back in Olympia, we needed 24- hour care due to the fact that my mother had had a stroke and she had also the primary caregiver for my father.

Carolyn was marvelous. She came in to care for my father while he was staying with us in Manzanita, and I was working during the day. She could do everything from taking his vitals, review his medications, to taking him to the doctor, taking care of his personal care, as well as taking him out for walks to the beach, drives to the jetty to get a crab, or just go out for lunch. She would spend time with him, talk with him about his life, watch his favorite western with him and she also did some light housekeeping and helped me with preparation of the meals. She was kind and considerate to all the family and supportive of the family members as well as my father.

We couldn’t be luckier to have such a well-educated and accomplished young lady starting and in-home care service here in Manzanita, because there are not many other alternatives besides friends and family for in-home care and or hospice in this community. The Adventist hospital has an in-home caregiver services, with limited ability to provide in-home care, and the hospital also has hospice services, but as I understand it, 24- hour in-home care must be in place first before, the skilled nurses with hospice will be set up for visits.

So, first, make plans for your own in-home care or visit assisted living facilities or adult homes that might be an alternative for you, if you need 24-hour care in the future. We should all plan for this possible eventuality and not leave this important part of holistic estate planning unplanned!

So, what about the actual nuts and bolts of estate planning? How does one prepare the information needed to prepare a will? Can you do it yourself? Should you do it yourself without the assistance of an attorney or an online legal service such as Legal Zoom.com? What alternatives to having to have a will are there? Do you own real property?

So let’s discuss the options and alternatives for estate planning.

First, let’s discuss the difference between having a will and having a trust, what called a revocable living trust

Do you own real property with a gross fair market value of worth more than $200,000? If the answer is yes, how do you want that property managed during your life and after your death who do you want the property to go to and how do you want it cared for and by whom? The answer to all these questions will often dictate the outlines of your estate plan.

What if you don’t own real property anymore, and you rent your home now, and have a small estate (everyone thinks they have a small estate until they fill out my simple estate planning questionnaire), do you need a will or a trust then?

Well, if you have personal property worth more than $75,000, then you need a method to distribute this property after your death.

Small Estate Affidavit. If you have real property worth less than, $200,000 and personal property worth less than $75,000, then there is an alternative probate procedure for small estates. It’s called a small estate affidavit, and a relative and or heir of the estate may use this mechanism to probate the estate and transfer title to both the real and personal property.

Transfer on Death Deed. Use of a Transfer on Death deed is another great alternative to probate, and it allows you to designate who you want your real property to go to upon your death. There is an 18- month creditor waiting period to make sure that the creditors of your state are paid first then your real property can be transferred to your desired heirs upon your death.

Will versus Revocable Living Trust - this choice for your estate plan is really dependent upon the nature of your assets and the desire for the disposition of your assets upon your death. If you own real property in one state or in multiple states, both for your personal use and maybe also for investments, then a revocable living trust is advisable, especially if you would like to transfer management of these assets during your life to your successor trustee while you still enjoy living in your home. I have prepared a short handout on the pros and cons of having a will versus a trust and the alternatives to both as well as a handout on how to title your other assets such as Retirement accounts and Bank accounts and life insurance and stock brokerage accounts so that you can also avoid a probate and plan for the disposition of these assets consistent with your desired estate plan.

Estate Taxes – I will also touch on briefly issues related to proper estate tax planning and provide you with a simple estate tax planning checklist, but an extensive discussion of estate tax planning is outside the scope of this presentation.

#estateplanning #wills #trusts

  • Grey Facebook Icon
  • Grey Twitter Icon
  • Grey LinkedIn Icon

MAIN OFFICE OLYMPIA, WA

  1801 West Bay Drive NW, Suite 202A

  Olympia, Washington 98502

  (360)352-0866 (office) 

  (360)352-3375 (facsimile)

  www.smythmcintosh.com

 

BRANCH OFFICE MANZANITA, OR

   LAW MANZANITA

   144 Laneda Avenue, Suite 3

   P.O. Box 417

   Manzanita, Oregon  97130

   (503) 368-4225 (office)

   Email us:  CLICK HERE

​​​​© 2016 Smyth McIntosh PS.