Congress Passed The CARES Act

20May

Congress Passed The CARES Act

CARES act

Congress Passed The CARES Act

Congress passed the CARES Act which initiated the Payroll Protection Program in an attempt to keep business paying their employees and to retain them during the nearly 3 month lockdown to this point in the hardest hit areas. An overwhelming amount of those funds under the PPP did not go to actual “small businesses” and caused a more stringent bind on them, but a second round was released and small business were able to take action.

For all of the businesses who were able to acquire the money, there were many restrictions on that money to make the loan completely forgivable, or if they would pay a low interest rate on that loan to be repaid. During the time of the loan, there was not one definitive method of determining if the loan was going to be completely forgivable or not. In fact, there had been nearly 14 different interpretations and “guidance” documents to explain how to apply the loans.

The basics is that, to have the loan forgiven:

  • The money is supposed spent on at least 75% on payroll and up to 25% for non-payroll covered expenses (which includes business leases like office space, car, copier, etc.); and
  • The money must be spent within 8 weeks from your disbursement date; and
  • You must have the same amount of full time employees you had as of February 15, 2020

Last Wednesday the government released the first of the loan forgiveness applications to make the loan a grant, and is not a simple 1 page form, but one that is, at this point, 10 pages in length.  Depending on how you classify yourself for tax purposes is how the government is going to calculate if you spent the money on covered expenses.

Areas that could be trouble spots are a) how to calculate your base full time employees, b) how to calculate if you properly paid at least 75% of on payroll (total and any reduced wages), c) expenses if you are a pass through Limited Liability Corporation and d) if a furloughed worker refuses to come back to work.

If you obtained a loan under the PPP portion of the CARES Act and are ready to show the government it should be forgiven, hiring an attorney to scrutinize and assist in interpreting and filling out the loan forgiveness application would be beneficial. An attorney will guide you through the many paths you can take to obtain the best result possible for you.


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