The PPP expands eligibility for SBA loans under the Small Business Act. The most significant feature of these PPP loans (“PPP Loans”) is that if the borrower complies with certain requirements , some or all of the PPP Loan will be forgiven. The PPP Loans will be made by participating commercial lenders on or before June 30, 2020. Applications will be accepted commencing on April 3, 2020.

Who is Eligible?

Any business (including any nonprofit, self-employed individual, independent contractor, and sole proprietorship), as well as veterans and tribal organizations, is eligible for a PPP Loan if it was in operation on February 15, 2020 and employs 500 or fewer employees. 

How are Employees Counted? 

A borrower applying for a PPP Loan (“Borrower”), should use the following method to determine its employee count:

A.  The Borrower must count its own employees, including full-time, part-time or other basis; however, independent contractors are excluded.

B.  The Borrower must also count employees of its “Affiliates” (as defined by the SBA rules). This calculation must be made by applying the SBA’s existing rules on affiliation. The SBA affiliation rules are broad and generally apply when one controls or has the power to control the other. For example, if a private equity or other shareholder substantially controls Company A and also controls or substantially controls Company B, then when Company A calculates the number of its employees, it must also count the employees of Company B. This could limit the ability of companies controlled by private equity or venture capital firms to be eligible for a PPP Loan.

C.  The CARES Act specifically waives the affiliation rules for a PPP Loan to the following:

1.  Any business with 500 or fewer employees ;

2.  Any business operating under 500 or fewer employees per physical location;

3.  Any business operated as a franchise for which the SBA has assigned a franchise identifier code; and

4.  Any business that receives financial assistance from a company licensed to operate as a small business investment company under the Small Business Investment Act of 1958.

How Much Can Be Borrowed Under a PPP Loan?

A.  An eligible Borrower may borrow up to the lesser of:

1.  Two and one-half times (2.5x) average monthly “Payroll Costs” (as described below) during the one-year period prior to the origination of the PPP Loan, though the initial draft of the SBA Application* expects that most applicants will use 2019 (new businesses and seasonal businesses have other applicable time periods) [*NOTE: the SBA indicated this morning, April 2, 2020, that it might be modifying its application]; or

B.  Subject to certain exclusions (see below), “Payroll Costs” include:

1.  Salary, wages, commission, or similar compensation;

2.  Payment of cash tips or equivalent;

3.  Payment for vacation, parental, family, medical, or sick leave;

4.  Allowance for dismissal or separation;

5.  Payment for group health care benefits, including insurance premiums;

6.  Payment of any retirement benefit; and

7.  Payment of State or Local tax accessed on the compensation of employees.

C.  The CARES Act excludes the following from “Payroll Costs”:

1.  Compensation to an individual employee in excess of $100,000.00, prorated for the covered period;

2.  Compensation of employees whose principal place of residence is outside the U.S., and qualified sick or family leave for which credits are allowed under the new Families First Coronavirus Response Act (which went into effect April 1, 2020).

What are the Loan Terms?

PPP Loans will have the following terms:

A.  No personal guarantees or collateral required;

B.  No loan fees;

C.  Payments of principal and interest are deferred for at least six months and up to a year; and

D.  Any remaining balance on the loan after forgiveness (see below) will be subject to a maximum interest rate of 4 percent per year and maturity of 10 years.

How and When Must the Loan Proceeds be Used?

A.  PPP Loan proceeds must be used during the Covered Period (as defined below) for the following:

1.  payroll;

2.  healthcare benefits;

3.  mortgage interest;

4.  rent;

5.  utilities; and

6.  interest on any other debt obligations that was incurred before February 

15, 2020.

B.  The CARES Act defines the “Covered Period” as the period from February 15, 2020, to June 30, 2020.

How Much of the PPP Loan May be Forgiven? 

A.  A Borrower may apply to its PPP lender for forgiveness of some or all of the PPP Loan. Subject to certain limitations and reductions, the maximum which may be forgiven will be equal to the amounts the Borrower can document it paid in the eight (8) weeks following the PPP Loan origination for the following:

1.  payroll;

2.  healthcare benefits;

3.  mortgage interest;

4.  rent; and

5.  utilities.

Note that proceeds used to pay interest on any other debt obligations will not be forgiven. Also, any amounts paid outside the Covered Period will not be forgiven. In addition, the U.S. government has indicated that no more than 25 percent of the forgiven amount may be for nonpayroll costs.

B.  The forgiven amount will be reduced by both of the following (subject to item (C) below):

1.  The percentage drop in borrower’s average number of full-time equivalent employees per month during the Covered Period, as compared to the borrower’s average number of full-time equivalent employees per month during either of the following periods (whichever will result in a lower forgiveness reduction):

a.  From February 15, 2019, through June 30, 2019; or

b.  From January 1, 2020, through February 29, 2020.

For example, if Company A had 100 full-time equivalent employees during the period from February 15, 2019, through June 30, 2019, but only has 75 full-time equivalent employees during the Covered Period, then the expected forgiveness amount will be reduced by 25 percent; and

2.  The extent to which the total salary or wages of any employee during the Covered Period was reduced in excess of 25 percent of the salary or wages paid to such employee in the most recent full quarter prior to the Covered Period in which such employee was paid. [This only applies to employees who did not receive compensation in 2019 at an annualized rate greater than $100,000.]

C.  If the Company had layoffs of full-time employees or salary reductions during the period from February 15, 2020 through April 26, 2020, and the Company re-hires such full-time employees or undoes such salary reductions prior to June 30, 2020, then such layoffs and reductions will not be recognized as reductions when calculating the forgiveness amount.




The Act provides tax credits equal to fifty (50%) percent of employment taxes for qualified wages (up to $10,000), including health benefits, paid to each employee. The tax credit is effective for wages paid between March 13, 2020 to December 31, 2020.  Eligibility for the credit is predicated on (i) the employer carrying on a trade or business in 2020 and the operation of that business is fully or partially suspended (for specified reasons) by the government (Federal, state or local) due to COVID-19, or (ii) the business has seen a significant decline in gross revenue (50% less than in the calendar quarter of the prior year) and for so long until the business recovers to eighty (80%) of prior year’s revenue. A business may not make this election if the business elects to receive a loan under the Paycheck Protection Program. For businesses with one hundred (100) or fewer employees, all employee wages qualify for the credit, regardless of whether the employer is open for business or subject to a shut-down order. 

The Act postpones payment of employer and self-employed individual’s payroll taxes (6.2% portion of Social Security taxes) until December 31, 2021 for half (1/2) of the amount due, with the other half due on December 31, 2022.




Qualifying individuals (those with a social security number and do not qualify as the dependent of another) will receive a refundable income tax credit in 2020. The credit amount will be calculated based on 2019 tax returns that have been filed (2018 returns in cases where a 2019 return hasn't been filed) and sent to qualifying individuals. The credit amount is $1,200 per individual ($2,400 if married filing a joint return) plus $500 for each qualifying child under age 17. The credit is phased out for those with adjusted gross income (AGI) exceeding $75,000 ($150,000 if married filing a joint return, $112,500 for those filing as head of household). For those with AGI exceeding the threshold amount, the allowable rebate is reduced by $5 for every $100 in income over the threshold and is fully phased out when AGI reaches $99,000 ($198,000 for married filing jointly).



The IRS updated its guidance originally provided in Notice 2020-18, Additional Relief for Taxpayers Affected by Ongoing Coronavirus Disease 2019 Pandemic, to provide extension relief to taxpayers in response to the coronavirus emergency.  In addition to the prior extension of time for the filing and payments with respect to federal income tax returns (Forms 1040, 1120, 1120-S and 1065) and federal gift tax returns (Form 709) until July 15, 2020, the IRS has now also postponed a variety of additional federal tax form filings and payment obligations that were due between April 1, 2020 and July 15, 2020.

In Notice 2020-23, the IRS extended the relief until July 15, 2020 for federal estate tax returns (Form 706), including estate tax returns that are filed in order to make portability elections under Revenue Procedure 2017-34, the information form to report the basis in assets received from a decedent (Form 8971), income tax returns for estates and trusts (Form 1041), and exempt organization business income tax returns and private foundation returns (Forms 990-T and 990-PF).  

In addition, the updated guidance extended the due date until July 15, 2020 for estate tax payments of principal or interest that would have been due between April 1, 2020 and July 15, 2020 as a result of elections made under Sections 6166, 6161 and 6163 of the Internal Revenue Code, and the annual recertification requirements under Section 6166 of the Internal Revenue Code.  Associated interest, additions to tax, and penalties for late filing or late payment will be suspended until July 15, 2020.  First and second quarter estimated federal income tax payments for exempt organizations, individuals, estates and trusts and corporations are both now due on July 15, 2020.




The Act will provide individuals eligible for unemployment insurance benefits through their existing state programs, with an additional $600 per week of "Federal Pandemic Unemployment Compensation" to be paid through July 31, 2020. A state may also agree to waive its "waiting week" and pay unemployment benefits to eligible individuals on the first week of unemployment, with states receiving full reimbursement of those monies from the federal government. Recipients may also receive "Pandemic Emergency Unemployment Compensation" in the form of an additional thirteen (13) weeks of unemployment benefits. These benefits will be paid through the states to individuals who have exhausted all other unemployment benefits and are able to work, available to work, are actively seeking work but unemployed, or unable to work.  




Required Minimum Distributions: The Act removes the requirement for individuals to take a required minimum distributions (RMDs) from a retirement plan or IRA in 2020.  This includes any 2019 RMDs that would otherwise have to be taken in 2020. This applies to: (i) individuals that have been taking annual RMDs; and (ii) those who turned 70½ in 2019. Individuals that have already taken an RMD in 2020 have sixty (60) days to roll it back into the plan or IRA. In addition, if a retirement plan owner dies during this time period, he beneficiaries who inherit the plan can ignore 2020 when satisfying the five (5) year rule for distributions (effectively making it a six (6) year rule).

Loan Limits: Loan limits from employer-sponsored retirement plans are expanded from $50,000 to $100,000 (but not more than the plan balance), with repayment delays up to a year provided.

Required Employer Contributions: The Act allows defined benefit plan sponsors to delay making minimum required contributions to meet funding standards for the 2020 calendar year until January 1, 2021. Employers that take advantage of this relief must pay interest on the delayed contributions for the period from when the contributions were originally due to when the contributions are paid. The interest owed is calculated at the plan’s effective interest rate for the plan year which includes the payment date.




The Act provides a six (6) month automatic payment suspension for any student loan held by the federal government through September 30, 2020. The suspension applies to both principal and interest payments. Employer’s may continue to pay up to $5,250 of an employee’s student loan payments, under an education assistance program, and have it excluded from the employee's taxable income.