A number of new and expanded programs have been created the last few weeks to provide relief to businesses and individuals as a result of the devastating Coronavirus (COVID-19). In this memorandum, we highlight some of the key provisions affecting businesses. As you can tell by reading this, some of the provisions are complex and require much more analysis to see to whom the provisions apply and whether or not a particular company may benefit. We are here to help! We can assist with analyzing your particular circumstance in these troubling times and assist you in applying for the new loans and grants discussed and in applying the new rules to help you obtain tax credits. The following are brief recaps of some of the federal and Maryland state new programs.

U.S. Small Business Administration

Small business owners in all U.S. States are currently eligible to apply for a low-interest loan due to Coronavirus. The SBA’s Economic Injury Disaster Loan (EIDL) program provides small businesses with working capital loans of up to $ 2 million that can help small businesses overcome the temporary loss of revenue they are experiencing. Eligibility is based on the financial impact of the COVID-19. The interest rate is 3.75% for small businesses, and 2.75% for private non-profit organizations. The loans may provide longterm repayments of up to a maximum of 30 years and are available to entities without the financial ability to offset the adverse impact without hardship. These loans may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact. Employers may go online at https://disasterloan.sba.gov/ela and fill out an application or call 1-800-659-2955 for assistance. The deadline to apply for an EIDL in the state of Maryland is December 21, 2020. Companies with more than 500 employees cannot apply. Different annual receipts limits exist for different industries.

Maryland Programs

Maryland offers two programs: an emergency relief grant fund and an emergency relief loan fund.

Maryland Small Business COVID-19 Emergency Relief Grant $ 50M Fund offers working capital to assist Maryland small businesses and nonprofits with disrupted operations due to COVID-19. The program provides for grants up to $ 10,000, not to exceed 3 months of cash operating expenses for Maryland businesses and nonprofits impacted by the COVID-19. Annual revenues of the business or nonprofit must not exceed $5 million.

You can apply at this site: https://commerce.maryland.gov/fund/maryland-small-business-covid-19-emer…

Maryland Small Business COVID-19 Emergency Relief $ 75 M Loan Fund offers working capital to assist Maryland small business disrupted operations due to COVID-19. Loans up to $ 50,000, not to exceed three months of cash operating expenses is open to Maryland businesses impacted by the COVID-19. The loans bear interest of 0% for the first 12 months, and 2% for the remaining 36 months. Payments are deferred for the first 12 months, with straight amortization beginning in the 13th month through the 36th month. Businesses must provide two years of historical financial statement and the most recent interim statement to benchmark revenue against.

You can apply at this site: https://commerce.maryland.gov/fund/maryland-small-business-covid-19-emer…

To qualify under either program, the business must be established prior to March 9, 2020, be in good standing, and have 50 or fewer W-2 employees.

Eligible uses of funds include working capital to support payroll expenses, rent, mortgage payments, utility expenses or similar expenses that occur in the ordinary course of operations. Examples include:

Notices from tenants closing operations and not paying rent caused by loss of income
Notice of inability to make loan payments due to reduced sales, suspended operations
Increased costs related to COVID-19 prevention measurers
Notice of disrupted supply network leading to shortage of critical inventory or materials
Other circumstances subject to review on a case by case basis

Federal Programs in Addition to the SBA

Families First Coronavirus Response Act (Federal)/Amendments to the Family Medical Leave Act. This Act provides for payroll tax credits to employers who are required to pay sick leave for various circumstances related to the coronavirus. The amendments to the Family Medical Leave Act (FMLA) create a new category of leave, which may be used when an employee is unable to work (or telework) due to sickness or a need to care for the employee’s son or daughter because the child’s school has closed (elementary or secondary only) or the child’s child care provider is unavailable to provide care, due to a “qualified” public health emergency. A qualified public health emergency is one declared by a federal, state, or local authority with respect to COVID-19.

Employers with less than 500 employees are required to provide leave under this new category, which is available to all employees who have completed 30 days of employment, regardless of work location. As for most FMLA leave categories, public health emergency leave is for up to 12 weeks.

Federal CARES Act

The Coronavirus Aid, Relief, and Economic Security (CARES) Act contains a host of tax measures as part of a $ 2 trillion aid package. Some of the key business related elements include:

Payroll tax credit refunds: The Act provides for advance refunding of the payroll tax credits enacted as part of the Families First Coronavirus Response Act.

Employee retention credit: The Act creates an employee retention credit for employers that close due to the coronavirus pandemic. Eligible employers are allowed a credit against employment taxes equal to 50% of qualified wages (up to $10,000 in wages) for each employee. Eligible employers are employers who were carrying on a trade or business during 2020 and for which the operation of that business is fully or partially suspended due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings due to the COVID-19 outbreak. Employers that have gross receipts that are less than 50% of their gross receipts for the same quarter in the prior year are also eligible, until their gross receipts exceed 80% of their gross receipts for the same calendar quarter in the prior year. For employers with more than 100 employees, wages eligible for the credit are wages that the employer pays employees who are not providing services due to the suspension of the business or a drop in gross receipts. For employers with 100 or fewer employees, all wages paid qualify for the credit.

Payroll tax delay: The bill delays payment of 50% of 2020 employer payroll taxes until Dec. 31, 2021; the other 50% will be due Dec. 31, 2022. For self-employment taxes, 50% will not be due until those same dates. Loan forgiveness recipients cannot participate.

Small business loans: The bill establishes a new Paycheck Protection Program, providing $349 billion in SBA 7(a) loans through December 31, 2020, for businesses with less than 500 employees, including sole-proprietors, independent contractors, self-employed individuals and certain not-for-profit entities. There are revenue limits by industry also, as listed in the Code of Federal Regulations. Key elements include:

Loan Calculation. Loans are equal to 250% of an employer’s average monthly payroll, capped at $10 million. Payroll includes salary, wages, cash tips, employee group health care benefits, insurance premiums, retirement contributions, and covered leave. Expenses can be calculated based on payroll and interest/rent/utilities that existed prior to February 15, 2020. Wages per person up to $ 100,000 qualify.

Allowable Uses. Loans shall be used for payroll support, such as salaries, paid sick or medical leave, insurance premiums, and mortgage, rent, and utility payments (and cover the period from February 15, 2020, through June 30, 2020)

Loan Forgiveness. Loans that are used for payroll costs less than an annual rate of $100,000 in compensation per person, interest payments on any mortgage costs, rent, or utilities, may be forgiven. The amount of loan forgiven is proportionally reduced by any reduction in employees or payroll compared to the prior year. Employers must make a good faith certification that the loan is necessary due to the uncertainty of current economic conditions caused by COVID-19. The loan forgiveness under this Act is TAX FREE!

Re-Hiring. To encourage employers to rehire any employees who have been already laid off, those who rehire workers will not be penalized for having a reduced payroll at the beginning of the loan period.

Administration. The loans are to be serviced through SBA-certified lenders, including banks and credit unions, as well as additional avenues Treasury may provide, and waives all borrower and lender fees. In addition, the legislation increases eligibility for SBA Economic Injury Disaster Loans (EIDL) for harm due to COVID-19 (discussed above). And finally, the small business provisions of the bill require the SBA to pay all principal, interest, and fees on existing SBA products (not related to the above) for the next six months.