PB&L Webinar presented on March 30, 2020

1. parsonsbehle.com
CORONAVIRUS RELIEF AND ECONOMIC SECURITY
ACT (CARES): WHAT THE ACT MEANS TO YOUR
BUSINESS AND HOW TO RESPOND
March 30, 2020

2. 2
Webinar Format
 All Lines Muted
 Please Use Chat Function to Submit Questions
 Webinar Will Be Recorded
 Slides Will Be Shared With All Participants

3. 3
Mike Bailey
Moderator
Matt Cook
PPP Loans and Loan
Forgiveness
Sean Monson
Strategies if The Best
Financial Decision is to
Lay Off Your Work Force
Ross Keogh
Other Potential Tax
Benefits of the
CARES Act
Panel Presenters
Tom Beckett
Recent Changes to Small Business
Bankruptcy Reorganization

4. 4
Presenter Contact Information
 Matthew D. Cook – mcook@parsonsbehle.com
 Ross P. Keogh – rkeogh@parsonsbehle.com
 Sean A. Monson – smonson@parsonsbehle.com
 J. Thomas Beckett – tbeckett@parsonsbehle.com
 J. Michael Bailey – mbailey@parsonsbehle.com

5. 5
Things are changing rapidly. We are working extremely hard to keep
up with all that is happening. This webinar is based on available
information as of March 30, 2020, but everyone must understand that
this webinar is not a substitute for legal advice. If there are questions
about the information contained in the presentation and how it applies
to your business, then you should contact your legal counsel. This
presentation is not intended and will not serve as a substitute for legal
counsel on these issues. Given the complexity and rapidly changing
landscape, you must consult with your legal counsel on these issues.
Disclaimer

6. Payroll Protection Program Loans and
Loan Forgiveness
Matthew D. Cook

7. 7
Payroll Protection Program Generally
 Provides $349BB in SBA Lending Capacity through the
existing 7(a) framework except as modified in key areas by
the CARES Act (affiliation and eligibility).
 Available to cover 8 Weeks of Payroll Costs, interest, rent
and utilities from February 15, 2020 through June 30, 2020.
 If maintain workforce at not less than 75% of compensation
level loan can be forgiven
 All current SBA 7(a) Lenders can make PPP Loans (they
are making them now)

8. 8
Eligibility Generally
 Broadens Eligible Business types:
o Businesses
o 501(c)(3)s
o Veteran’s Organizations
o Tribal Business Concerns
o Self-Employed Individuals
o Sole Proprietorships
o Sector 72 Business
 No Revenue Limits-Just Employee Base limits

9. 9
Specific Eligibility
 Business with 500 of Fewer Employees (Subject to
Exceptions)
o Employees include full and part time and individuals employed on
an “other basis”
 Have more than 500 Employees BUT NAICS Section Code
72 (Hospitality)
 Affiliation Rules Don’t Apply to For Profit Businesses

10. 10
Affiliation
 SBA Affiliation (affiliates-one controls or has the power to
control or common control) generally continue to apply with
certain exceptions.

11. 11
Exceptions To 500 Employee Limit
 NAICS Sector Code 72 (Accommodation and Food Service)
o See list of Sector 72 Businesses on next slide
 Franchisees where franchisor registered with SBA and has a
Franchise Identifier Code
o available on SBA Website
 Any business receiving financing under the Small Business
Investment Act
 If more than 1 Physical Location
o Not more than 500 employees “per physical location of the business concern.”
• Unclear on whether this is an average or 1 location disqualifies

12. 12
NAICS Sector 72 Businesses
Codes Titles
72 Accommodation and Food Services
7211 Traveler Accommodation
721110 Hotels (except Casino Hotels) and Motels
721120 Casino Hotels
721191 Bed-and-Breakfast Inns
721199 All Other Traveler Accommodation
7212 RV (Recreational Vehicle) Parks and Recreational Camps
721211 RV (Recreational Vehicle) Parks and Campgrounds

13. 13
NAICS Sector 72 Businesses
Codes Titles
721214 Recreational and Vacation Camps (except Campgrounds)
7213 Rooming and Boarding Houses, Dormitories, and Workers' Camps
721310 Rooming and Boarding Houses, Dormitories, and Workers' Camps
7223 Special Food Services
722310 Food Service Contractors
722320 Caterers
722330 Mobile Food Services
721214 Recreational and Vacation Camps (except Campgrounds)

14. 14
NAICS Sector 72 Businesses
Codes Titles
7224 Drinking Places (Alcoholic Beverages)
722410 Drinking Places (Alcoholic Beverages)
7225 Restaurants and Other Eating Places
722511 Full-Service Restaurants
722513 Limited-Service Restaurants
722514 Cafeterias, Grill Buffets, and Buffets
722515 Snack and Nonalcoholic Beverage Bars
7224 Drinking Places (Alcoholic Beverages)

15. 15
Maximum Loan Amount
 Lesser of $10MM or
o Special rules apply to seasonal businesses or organizations not in
business from February 15, 2019 through June 30, 2019
• Seasonal Employees-use 12 week period beginning on February 15 or
March 1 through June 30, 2019 instead of 12 month average
• Not in Business-Can use
o Average total monthly payroll costs for 12 month period ending on
the loan origination date * 2.5
• Plus outstanding amount of EIDL Loan (will generally be refinanced into PPP
Loan)
– Except in special circumstances

16. 16
Payroll Costs
 Payroll Cost includes:
o Salary, Wages, commissions and similar compensation
o Gratuities
o Employee Benefits (Health Care, Retirement, and Leave)
o Severance Benefits
o State and Local Tax
o Independent contractor costs can also be included

17. 17
Payroll Costs
 Payroll Cost excludes:
o Any employee’s compensation which is in excess of $100,000
annually ($8,333.33/month)
o Compensation to Employees residing outside the U.S.
o Sick Leave Benefits under the Response Act

18. 18
Allowable Uses Of Loan Proceeds
 Payroll Costs (Described Previously)
 Interest
 Rent
 Utilities

19. 19
Loan Terms
 No Personal Guaranties
 Non-Recourse-unless use proceeds for impermissible
purpose
 No Collateral
 No Credit Elsewhere Requirement
 No SBA Fees
 No Prepayment Fee

20. 20
Terms Applicable to Portion of Loan Not Forgiven
 Maximum 10-year term (amortized)
 Maximum of 4% interest
 6 months and up to 1 year of deferred interest and principal
payments
o Deferral guidance to come

21. 21
Loan Application Process
 Loan Applications made through existing SBA 7(a) Lenders
 Applicants must certify:
o Loan is necessary
o Will be used to retain workers and pay eligible expenses
 No other applicable loan for same purpose is pending or
received

22. 22
Lists of Top SBA Lenders
 UTAH- https://www.sbalenders.com/top-sba-lenders-utah/
 IDAHO- https://www.sbalenders.com/top-sba-lenders-idaho/
 NEVADA- https://www.sbalenders.com/top-sba-lenders-nevada/
 MONTANA- https://www.sbalenders.com/top-sba-lenders-montana/

23. 23
Loan Forgiveness
 Can’t exceed principal balance of loan
 Subject to reduction forgiveness amount equal to amount of
principal expended on:
o Payroll Costs for Covered Period
o Interest of Mortgage Obligation (incurred before 2-15, 2020)
o Covered Rent (enforceable before 2-15, 2020)
o Covered Utilities
 Amounts Forgiven not subject to income tax
 Forgiveness is Applied for with Lender

24. 24
Reduction of Loan Forgiveness
 Reduction in Number of Employees (proportional)
 Reduction in Compensation
 De minimis exceptions may be coming in the form of
regulations

25. 25
Reduction in Number of Employees
 Multiplying the reduction percentage by the Loan amount
o Average number of FTEs per month (by pay period) in covered
period divided by either of the following periods at employer’s
elections:
• Average number of FTEs for February 15, 2019 to June 30, 2019; or
• Average number of FTEs for period from January1, 2020 to February 15,
2020.

26. 26
Reduction in Compensation
 Only reductions in excess of 25% of an employee count
 Only reduction in compensation for those with annual
compensation less than $100,000 count
 Reductions in force during period from February 15 through
date April 26, 2020 are excluded if rehired.
o Exempted as long as rehired by June 30, 2020.

27. Thank you
Matthew D. Cook
801.536.6819
mcook@parsonsbehle.com

28. Other Potential Tax Benefits
of the CARES Act
Ross P. Keogh

29. 29
Other Subsidies and Programs
 SBA will pay principal and interest on your existing 504 or
7(a) loan (except a PPP Loan)
 Required Minimum Distribution Relief
 Employee Benefits Opportunity- Employer Student Loan
Payments
 Disaster Relief Payments
 Payroll Tax Refundable Tax Credit
 6.2% Social Security Tax Loan
 Modification of NOLs Rules

30. 30
SBA Payment of Your 504 or 7(A) Loan
 The SBA will make 6 months of Payments on your behalf
o Excludes EIDL and PPP Loans
o Starts with next payment due date for 6 months
• If loan is already deferred starts at end of deferment
 Also applies to loans made within 6 months of enactment of
CARES Act
 Available to all 7(a) and 504 Borrowers as impact is
presumed.

31. 31
Required Minimum Distribution Relief (Age 70.5)
 Allows taxpayers to not take RMDs prior to January 1, 2021.
 Avoids retirees locking in losses
 Boosts economy by leaving money in markets

32. 32
Tax Free Payments on Student Loans
 Allows employers to make payments on an employee’s
student loan or to make payment to an employee that the
employee uses to make a payment on the student loan.
 Tax Free to Employee
 Could reduce salary (so long as not more than 25%- PPP
loan issues) and still pay the employee the same after tax
amount.

33. 33
Disaster Relief Payments
 The March 13, 2020 national emergency declaration triggered 26
USC s. 139
 Qualified disaster payments to individuals are now exempt from
gross income
 The provision is extremely broad, allowing employers to
reimburse employees for “reasonable” expenses associated with
the pandemic.
 Example include: costs to set up and maintain a home office,
medical expenses, housing, increased childcare expenses,
expenses to maintain social distancing, alternative commuting,
expenses associated with working from home.

34. 34
Social Security Tax Loan (6.2%)
 May make social security tax payment 50% on December
31, 2021 and 50% on December 31, 2022.
 Precludes PPP forgiveness.

35. 35
Bonus Depreciation
 Improvement Property generally depreciated over 39 year
useful life (straight line)
 Allows amendment of tax returns to claim refund back to
2018 and use 15 year depreciation for Improvement
Property.

36. 36
Modified NOL Rules
 Allows 5-year carryback beginning after December 31,
2017.
 Fix from 2017 TCJA
 Deferral of 80% income limitation from 2017 through 2021
 Section 965 (generally foreign income) income not eligible

37. 37
Payroll Tax Credit
 Credit is not available if you have a PPP loan
 Available in two circumstances:
o Organizations suffering a partial or full shutdown (by Shutdown Order).
o Organizations whose gross receipts decline more than 50% as compared to
same quarter last year. Tax Credit Ends in quarter gross receipts exceed 80%
 Credit Amount
o Fewer than 100 employees: all wages paid in quarter subject to gross receipts
decline, or all wages paid during shutdown order.
o 100 or more employees: wages paid not employees that were not providing
service

38. 38
Payroll Tax Credit
 Credit is immediately refundable as an overpayment of Employment
Taxes.
 Limited to $5,000 credit per employee ($10,000 in wages).
 Healthcare expenses are qualified wages.
 Nonprofits may also utilize.

39. Thank you
Ross P. Keogh
406.206.9710
rkeogh@parsonsbehle.com

40. Strategies if The Best Financial
Decision is to Lay Off Your Work Force
Sean A. Monson

41. 41
Reminders Regarding Reductions in Workforce:
RIF plan should be in writing and:
 State the financial distress faced by the company
 State that the financial situation will be resolved, in part,
through layoffs
 Clearly identify objective criteria forming the basis for the
layoff decision
o Last hired, first fired
o Skill set of employees
o Departments that are not vital

42. 42
Reminders Regarding Reductions in Workforce:
 Ensure that the process is not discriminatory and does not have a discriminatory
impact, if avoidable
 Minimize the risk of a claim of discrimination from one of the terminated employees
 Form a diverse committee to choose who is selected for layoff and ensure that the
workers selected are selected based on objective criteria and not for discriminatory
reasons—DOCUMENT THE PROCESS
 Once the employees are selected, you need to analyze the group for discriminatory
impact
 Work with your outside or in-house legal counsel to analyze these issues

43. 43
Reminders Regarding Reductions in Workforce:
 Determine if any of the affected employees have engaged in
any activities protected under state or federal law,
o Harassment or discrimination complaints
o Notifying OSHA of a perceived health or safety violation,
o Workers’ compensation claim
o FMLA claims, ADA issues, and other health issues
o Consult with legal counsel before making any final determinations

44. 44
Reminders Regarding Reductions in Workforce:
 Determine if any of the employees who are being
considered for the RIF have employment agreements that
may impact their terminations
o Guaranteed terms of employment
o For cause
o Provisions for specific severance
o Collective bargaining agreement
o If you provide severance, use legally compliant severance release
agreements

45. 45
Reminders Regarding Reductions in Workforce:
 Determine if the terminated employees are entitled to any
other pay and benefits
o Company severance plan
o Pay out of accrued time off—look at your polices and state law
o State laws may also mandate when you must pay terminated
employees
o COBRA notices

46. 46
Reminders Regarding Reductions in Workforce:
 If you have over 100 employees, there are WARN Act
issues to be aware of for significant reductions in force or
plant closings

47. Thank you
Sean A. Monson
801.536.6714
smonson@parsonsbehle.com

48. Recent Changes to Small Business
Bankruptcy Reorganization
J. Thomas Beckett

49. 49
Prior Bankruptcy Scheme
 Chapter 7 – liquidation; out of business.
 Chapter 11 – reorganization; but expensive and
lengthy; creditors had to be paid in full or prior
owners lost their ownership.
 Chapter 13 – pay as much as possible over 3-5
years, then get fresh start.

50. 50
Small Business Reorganization Act of 2019
added Subchapter V to Chapter 11
 Small business debtor remains in possession and
control of its business.
 No creditors committee; instead, a trustee to assist
the debtor.
 Small Business owners retain ownership if creditors
are paid disposable income for 3-5 years.
 U.S. Trustee fees waived.
 Time periods reduced, including plan in 90 days.

51. 51
CARES Act (Increased Eligibility)
 CARES Act raises eligibility for Subchapter V
o from $2.7 million in secured and unsecured debt to
o $7.5 million in non-coronavirus debt.
o CARES Act changes sunset in 1 year.

52. Thank you
J. Thomas Beckett
801.536.6603
tbeckett@parsonsbehle.com

53. 53
This disclaimer is extremely important. Things are changing
rapidly. We are working extremely hard to keep up with all that is
happening. This webinar is based on available information as of March
30, 2020, but everyone must understand that this webinar is not a
substitute for legal advice. If there are questions about the information
contained in the presentation and how it applies to your business, then
you should contact your legal counsel. This presentation is not
intended and will not serve as a substitute for legal counsel on these
issues. Given the complexity and rapidly changing landscape, you
must consult with your legal counsel on these issues.
Disclaimer

54. Thank you