Understanding the Federal Government’s Proposal for Opening Up Again

4 min read

Understanding the Federal Government’s Proposal for Opening Up AgainAfter seeing a peak and then a sustained decline in coronavirus cases, hospitalizations, and deaths resulting from COVID-19, the White House and the Centers for Disease Control and Prevention has rolled out a three-tier approach to get the nation back to its pre-coronavirus economic activities.

While this program is led by the Federal Government, it is ultimately up to governors how they will reopen states and localities. However, there are some universal criteria that states must follow to gradually reopen the economy.

Before transitioning from the stay-at-home orders to the three phases, certain criteria must be met. In order to move to less restrictive phases, there must be a dropping trend of documented cases over 14 continuous days or a downward trajectory of positive tests as a percent of total tests over 14 continuous days, according to guidelines set out by the White House and the CDC. Once the initial gating criteria are met, the local government can move into phase one.

Phase One

This stage will permit establishments such as places of worship, movie theaters, restaurants, and sporting arenas to reopen if they abide by strict social distancing guidelines. Along with recommending stringent sanitation guidelines for permitted establishments to reopen, this phase also suggests telework for employees and minimizing nonessential travel.

Phase Two

Schools, daycare centers, and camps (and similar events) could resume, along with nonessential travel. Establishments permitted to reopen in phase one can remain open and are now permitted to relax their physical distancing to a moderate level. Bars can start reopening, with diminished standing-room occupancy, and gyms can stay open with strict distancing and sanitation protocols.

Phase Three

This phase would come into force when the state and/or locality has no evidence of a relapse. Worksites would see normal staff protocols without restrictions. Large establishments will be able to function under limited social distancing protocols; gyms will operate with standard sanitation protocols, and bars would be able to run with increased standing room occupancy.

As states across the country are reopening, there are many preparations that businesses can implement to stay compliant with government mandates, including re-integrating their workforce and encouraging customers to return to establishments.

Sanitation

Along with social distancing, maintaining sanitation is equally important. Encouraging workers to wash their hands at every available opportunity, including upon arriving at work; before and after eating; after touching doors, desks, keyboards, and other materials; using the restrooms, etc.

Cleaning

Whether it’s an office environment or a retail/restaurant establishment, cleaning surfaces at least once a day is recommended, but more often for surfaces that are touched or used during the course of business. Examples of items to sanitize regularly throughout the day include handles, tables, elevator buttons, sinks, registers, and point of sale terminals.

Signage

Reminding employees and visitors to go home if they have symptoms or have been exposed to the coronavirus through signage is recommended. A protocol to contact the front office based on these circumstances should be implemented.

Encouraging Telework

Identifying tasks suitable for telecommuting versus in-office is helpful for task completion, as well as promoting social distancing. Look at the perspective of work from two buckets – solitary or collaborative – and telecommuting and office time can be split accordingly. If an employee is tasked with writing reports, performing research, or calling experts, he or she could easily work from home. While collaborative work can be done remotely, it is better to be done at the office.

Other Considerations

Along with face masks, there are other ways to reduce the potential for coronavirus transmission. Offices and other establishments can have fewer seats in common rooms, using tape to mark 6 feet or more of distance. When it comes to hallways, one way to stop face-to-face exposure is to have one-way corridors. While it might create longer days, staggering shifts to reduce the number of people in the office and rearranging breaks would also reduce unnecessary employee-to-employee interactions.

Ditching cash as an accepted form of payment is another way to reduce the likelihood of coming into contact with the coronavirus on currency, along with encouraging social distancing since cash doesn’t need to be exchanged. Using online/digital payments or credit cards only is one way to accomplish this. Using designated entrances for workers (or customers), coupled with designated entrances and exits can help reduce opposing traffic and people meeting face-to-face.

While research continues to create a vaccine and render the coronavirus harmless, until that happens, businesses have many tools to reopen their businesses for the foreseeable future.

Sources

https://www.whitehouse.gov/openingamerica/

In the Wake of the Coronavirus Pandemic, Congress Passes the Most Expensive Single Spending Bill in American History

3 min read

Paycheck Protection Program and Health Care Enhancement Act (HR 266) – This is a multilayered legislative bill divided into four distinct sections. Phase 1 authorized funding for coronavirus preparedness and response; specifically, for measures such as vaccine development and public health funding. Most of the money was allocated to the Department of Health and Human Services. Approximately 81 percent of funds were allocated domestically, with the other 19 percent allocated internationally.

In the Wake of the Coronavirus Pandemic, Congress Passes the Most Expensive Single Spending Bill in American HistoryPhase 2 allocated $104 billion for three specific objectives: 1) Require private health insurance plans and Medicare to cover COVID-19 testing; 2) Expand unemployment insurance by $1 billion and loosen up eligibility requirements; 3) Provide for paid sick leave at an employee’s full salary, up to $511 per day, and paid family leave at two-thirds of a worker’s usual salary.

Phase 3 provided stimulus checks to individuals and “grants” to small businesses meeting specific criteria, such as keeping employees on the payroll for two months. This phase of the bill represents by far the most expensive single spending bill ever enacted in American history, at about $2.2 trillion.

And finally, the last phase of the bill provided funding to replenish the Paycheck Protection Program (PPP) for small businesses and shore up public health measures, such as virus testing and hospital funding. The bill was signed into law by the president on April 24.

VA Tele-Hearing Modernization Act (HR 4771) – This bill amended previous guidelines to allow appellants to appear in cases before the Board of Veterans’ Appeals by picture and voice transmission from locations outside the Department of Veterans Affairs. The bill was introduced by Rep. Joe Cunningham (D-SC) on Oct. 21, 2019, and signed into law by the president on April 10.

Safeguarding America’s First Responders Act of 2020 (S 3607) – Sponsored by Sen. Chuck Grassley (R-IA), this bill was introduced on May 5 and passed in the Senate on May 14. The legislation is designed to extend death benefits to public safety officers whose deaths are caused by COVID-19, and for other purposes. The bill is currently under consideration in the House.

Law Enforcement Suicide Data Collection Act (S 2746) – Sen. Catherine Cortez Masto (D-NV) introduced this legislation on Oct. 30, 2019. The act would require the director of the FBI to provide information on suicide rates in law enforcement, and for other purposes. It was passed in the Senate on May 14 and is currently being considered by the House.

HEROES Act (HR 6800) – This bill was introduced on May 12 by Rep. Nita Lowey (D-NY). In response to the COVID-19 outbreak, this bill is designed to provide emergency supplemental appropriations for a variety of applications, including assistance to state, local, tribal and territorial governments; further, expand paid sick days, family and medical leave; unemployment compensation; nutrition and food assistance programs; housing assistance; payments to farmers; and the Paycheck Protection Program. It also outlines several potential tax credits and deductions and requires employers to develop and implement infectious disease exposure control plans. The House passed this bill on May 15; it is currently in the Senate for consideration.

IRS Questions and Answers on COVID-19 IRA and 401(k) Loans & Distributions

3 min read

IRS Questions and Answers on COVID-19 IRA and 401(k) Loans & DistributionsThe CARES Act stimulus package substantially relaxed the rules around certain retirement account loan and distribution requirements, but with much confusion. As a result, the IRS recently put out a FAQ document to address the COVID-19 rule relaxation around IRA and 401(k) loans and distributions. This important information should come as welcome news for the nearly one percent of all retirement plan holders who have already taken a distribution under the new rules, according to Fidelity Investments.

Who’s eligible?

If you, a spouse or dependent tested positive for COVID-19, you automatically qualify. You also may qualify under less direct circumstances, such as experiencing economic hardship due to being quarantined, laid off, receiving a reduction in work hours, or missing work because you don’t have childcare. Business owners who are forced to close or reduce operating hours also qualify.

How Much Can I Take Out?

COVID-19 impacted individuals can take up to $100k in distributions without paying the 10 percent penalty imposed on early withdrawals by people under 59 1/2 years old. The $100,000 limit is the total for all the plans you have. For example, if you take $70k out of your 401(k), you can take only up to $30k out of your IRA under these rules. You will still owe taxes on the distributions as ordinary income; however, you are able to pay the taxes owed over a three-year period.

Can I Pay Myself Back?

The law also allows you to pay yourself back. Taxpayers can replace their distributions if they do so within a three-year timeframe. This means that if you take out a distribution in 2020, start to pay the taxes owed over the three-year rule and then pay back the distribution in 2022, you’ll be able to amend your 2020 and 2021 returns to get a refund, as well as not pay the tax you would have owed in 2022.

How Do Loans Work?

The maximum amount you can borrow increases from $50,000 to $100,000. You also can borrow the entire amount of your plan balance up to this limit (net of any outstanding loans). Moreover, for any loans you already have within the plan, the due date for payments due through the end of 2020 can be postponed for up to one year.

Is There Anything Else I Should Know?

Yes. First, there is more guidance coming from the IRS. Second, if you are eager to know what this formal guidance will look like, you can turn to the Hurricane Katrina relief rules from 2005 as this is what is expected will apply for the COVID-19 measures as well. Lastly, the IRS will generate a new form 8915E where taxpayers will report the repayment of COVID-19 covered distributions.

Payroll Protection Program Loan Forgiveness is Here

2 min read

PPP Loan Forgiveness Instructions

The first Payroll Protection Program (PPP) loans were made over eight weeks ago, which means they may be forgivable if the guidelines set forth by the Small Business Administration (SBA) and the United States Treasury Department are met.

In order to have a loan forgiven, borrowers need to complete the 11-page application made available by the Treasury Department. Applicants can complete the forms either in hard copy or via an online platform if provided by their lender. Large borrowers, or those who took out more than $2 million from the PPP program, are required to file even more paperwork.

Along with the application, borrowers need to submit a Forgiveness Amount Calculation. This calculation discloses the total eligible payroll costs paid during the program. Applicants will also need documentation, such as tax filing statements, utilities, PPP loan contracts, EIDL contracts, and any supporting documents that were used when applying for the PPP loan. 

Certification of the loan forgiveness amount requested is necessary to prove it was truly used to pay eligible costs, such as payroll, business mortgage interest, rent or lease payments, and utilities. Further, borrowers must report any declines in the number of full-time equivalent employees (FTEs) and/or wage reductions more than 25 percent. Failing to retain pre-program FTE headcount or wage reductions over this threshold will reduce the eligible amount of loan forgiveness.

The amount of paperwork necessary to substantiate the application can be daunting, especially for many “main street” businesses. In order to help you complete the application, the SBA has issued formal guidance that can be found here. And a more user-friendly guide giving detailed instructions on how to fill out your PPP forgiveness application form can be found here, provided by Bench. We can assist you with the application process itself and the required documentation. Give us a call to see how we can help instead of struggling through the process on your own.

 

COVID-19 Recovery Responses are Crucial for Companies to Thrive in the Future

4 min read

COVID-19 Recovery Responses are Crucial for Companies to Thrive in the FutureWith the coronavirus spreading across the globe, catching individuals and governments off guard, business owners have not fared any better. While the virus is having a grave impact on the health of millions across the globe, businesses have seen an equally serious impact on their bottom line. The virus is projected to hit businesses’ cash-flow and the ability to stay open post-pandemic.  

While different parts of the country have been hit harder than others, the nation’s businesses, their owners, and employees are all dependent on the national and global economy. Looking to those who have survived past crises, business owners are now tasked with guiding their organizations through the coronavirus pandemic.

Effective Attributes and Responses to Help with Recovery

Right now, more than ever, it is equally important that business owners empathize with their clients’ expectations and their employees’ needs while also taking steps to maintain their financial health.

Other attributes of effective business owners include making sound judgments in light of limited or incomplete data, along with providing a positive but realistic forecast of the situation to keep the employees motivated and productive. Lastly, leaders who see crises like the coronavirus as opportunities to identify trends for innovation and ways to problem solve can look to brighter days in the future.  

Protecting the Business’ Bottom-Line

Like other sustained business interruption events, there’s a three-pronged approach that businesses can implement to increase their chances of survival. The first is to manage the shock from the initial impact and establish a protocol for the new normal in order to preserve continuity. The next step is to learn from what has occurred and adapt to the way work is now being performed to serve clients as effectively as before. The final step is to identify future opportunities to operate differently, more efficiently, and gear up for the post-crisis new normal.  

To better mitigate major effects from a crisis and begin the adaptation process, the following are practical steps to emerge leaner and more efficient as the reopening process begins. Two primary actions that businesses must take is to first protect the well-being of workers, while also protecting the business financially.

  1. Making decisions should be streamlined because a lack of certainty can give decision-makers analysis paralysis. This can slow down important steps needing to be made faster than during non-crisis times. Moving from a chain of command to collaborative teams to make decisions can increase speed by having fewer steps and faster decision-making processes.
  2. Documenting all cash the business holds, along with committed and uncommitted lines of credit, also is suggested. Be sure to include lines that are pre-established with banks or credit unions, plus any existing borrowing limits from lenders; this will provide a baseline for businesses to make crisis projections. Other liquidity measures might be negotiating to extend better payment terms and refinancing existing lines of credit for better short-term payments, potential new equity injections, etc.
  3. Quickly modeling different economic outlooks for existing markets that are served, depending on how mild, moderate, or severe the crisis impacts that business, can provide greater insight on a business’ financials. As conditions change, it will become evident how much cash is needed and what areas of a business might need to be scaled back or cut. Leaders should also look at the likelihood of not being able to serve outstanding debt, primarily as they look at liquidity and the profitability of the business’ operations.
  4. Determine the business’ mission-critical business segments. This looks at which services or products are most profitable and/or resource-intensive. This will help determine which ones are important to current and future cash flow and which segments could be impacted based on the length and severity of the crisis.
  5. Evaluate what businesses can do to reduce non-essential or discretionary expenses to positively impact its finances. This can be accomplished by reducing or forgoing landscaping a business’ exterior or holding off on repainting a building. It can also come in the form of reducing one shift or reducing spending on employee training.  

Since the coronavirus is a fluid crisis and there are many possible outcomes, business owners will implement different practices based on how this crisis evolves. Depending on the severity of the actual impact, different products or services can be stopped temporarily, employees’ hours can be reduced or a hiring freeze can be implemented.

Six Industries Hiring During the Shutdown

3 min read

Six Industries Hiring During CoronaVirusDuring the government shutdown as a result of COVID-19, sadly, millions have lost their jobs. However, there is a silver lining: there are some industries that, because of the shutdown, are actually hiring. Here are a few leads to help those who might have been affected.

Shipping and Delivery

This industry is hiring at what seems like warp speed. It’s reported that Amazon has created 100,000 jobs, specifically for fulfillment and delivery. UPS is hiring, as are courier services. Search “courier services hiring near me” to find opportunities. You might be surprised by what you find.

National Retailers

In addition to Amazon, there are other giants that are hiring, including CVS, Kroger, and Walmart. See the entire list here. The National Retail Federation also has a good list, which includes GE Healthcare, The Home Depot, and Instacart (the latter is a big one, as many don’t want to darken the doors of grocery stores). Access everything here.

Online Learning Companies

Now that scores of kids are at home, teachers are in demand to assist with online learning. Outschool is hiring thousands of teachers. GetEducated is also a great resource for finding a list of companies that are looking for online teachers. And if you’ve always wanted to be a teacher, now’s a good time as any because you can earn online credentials. The world always needs great educators!

Remote Meeting and Communication Companies

Since many companies must conduct business remotely, outfits such as Zoom, Slack, and Microsoft Teams are hiring. Furthermore, since aspects of COVID-19 are still unfolding and may require a longer stint of working at home, these companies could be hiring for a good while, meaning this burst of openings might not be just a flash in the pan.

Childcare

Now that many parents are working from home, they still need childcare. Though our situation changes daily, the California governor announced that schools likely won’t open before fall. Think about opening up your home with affordable, flexible options. It could become a whole new business for you.

Healthcare

While this might not be the first choice for some, it is a sector that’s hiring, not surprisingly. According to an article on LinkedIn, healthcare job postings spiked 35 percent compared to just a few months before the shutdown. Demand is intense in New York and New Jersey. However, California, Florida, Texas, and Arizona are growth markets as well. Check out your local hospitals or freestanding care clinics.

Think Outside the Box

Right now during a pandemic, there’s no shame in taking a job for which you might not be a perfect fit, or even overqualified. Money is money. However, if you feel you need to learn skills for a particular job or if you want to learn something new just because, now is the time to do so. Want to learn to code? Try your hand at the GRE? Pick up an online credential? There’s no time like the present. Go for it!

Sources

https://www.themuse.com/advice/industries-hiring-during-coronavirus-outbreak

https://www.fastcompany.com/90478987/who-is-hiring-during-the-coronavirus-try-these-industries-if-you-need-a-job-now

https://wccoradio.radio.com/articles/radiocom/list-of-companies-hiring-during-the-covid-19-outbreak

https://www.forbes.com/sites/advisor/2020/03/31/websites-to-find-work-from-home-jobs-hiring-during-the-covid-19-crisis/#26d899d23c43

https://www.cnbc.com/2020/04/03/these-companies-are-hiring-right-now-even-amid-the-coronavirus-pandemic.html

Prospects for Investing in the 2020s

4 min read

Investing in the 2020The third decade of the 21st century started out with a vigorous economy, record low unemployment levels, and benign inflation. But late in the first quarter over the span of two weeks, investors faced the fastest stock market correction in history.

With an unpredictable assailant like a global virus, short-term actions by Congress and the Federal Reserve will need time to see if they are effective. Ultimately, the fate of the U.S. and global economies, which in turn will impact the investment markets, is dependent on how long the COVID-19 outbreak continues and if there is a second wave. Clearly, both supply and demand have been dramatically reduced, with a ripple effect on companies, workers, consumers, and investors. Once the crisis has passed, we will learn which sectors, industries, and individual companies remain financially viable with a business model built to sustain this unprecedented economic fallout.

Amid this backdrop, wealth managers must read the tea leaves to anticipate what the investment markets will look like post-coronavirus. The challenge is how to best position assets to take advantage of future gains without giving up ground now and turning paper losses into permanent shortfalls.

For individual investors, it comes down to what you want to accomplish in the next decade – or what your money can accomplish for you. Are you nearing retirement? Will you remain in the accumulation phase, wherein you can afford to take on market risk? Are you just starting out, and are you risk-averse due to the two major economic declines experienced in your relatively short life, or are you prepared to invest in future prospects – wherever they may lie?

Anyone already in or nearing retirement would do well to invest for a steady stream of income. While the DJIA initially took a beating, many blue-chip stalwarts continue to grow and payout dividends as they have long term, through thick and thin. However, pay attention here, as there are some long-standing dividend-paying companies that are starting to suspend or substantially cut dividend payments.

Growth-oriented investors would do well to look at companies that were well-positioned to survive the pandemic, because they may well represent commerce of the future. This includes the well-established FAANG stocks (Facebook, Apple, Amazon, Netflix, and Google), which have become masters of fast and reliable delivery of online content and physical delivery of essential and discretionary products. Unfortunately, the stock prices of these companies have soared in recent years, so it’s time to consider what the “next big thing” in this arena will look like and who are the frontrunners.

With that in mind, take a look at 2020 demographics. Millennials recently surpassed Baby Boomers as the largest generation in the United States, but they aren’t expected to hold this mantle for long. Generation Z/Centennials are on track to enter the workforce in higher numbers during the next decade. This is a generation that has never known life without cell phones and the internet, so expect the technology sector to ramp up not just with consumer innovations, but with ways to help other industries enhance data management, blockchain supply chains, and artificial intelligence – which might become as omnipresent as retail strip malls.

In a post-pandemic world, employers seeking to strengthen their business models might come to embrace the idea of foregoing healthcare and other expensive benefits offered to employees. A subsequent world of higher pay and more public options could spur the growth of entrepreneurship and new small businesses. By taking advantage of remote employees, low overhead expenses, and emerging technologies, smaller companies or conglomerates might be able to compete with the likes of Amazon in both domestic and global markets.

As a short-term precaution, consider how you might defend your portfolio against the possibility of inflation as we stumble out of the pandemic economy. The federal government’s generous stimulus packages combined with a continued easing of monetary policy by the Federal Reserve could lead the United States to higher inflation. This could be exacerbated by the recent shutdown of production in many industries; the initial low supply of products also might contribute to price escalation. During this interim, investors may want to consider investing in commodities and Treasury Inflation-Protected Securities for inflation protection.

As always, it’s best to seek the advice of a professional in this ever-changing environment.

Understanding the High-Low Method

3 min read

Cost Accounting High-Low MethodWhen it comes to cost accounting, the high-low method is an approach that’s used to break mixed costs into either a variable or fixed cost. Although it’s straightforward, it’s important to do multiple analyses because outlier costs from the available data can sometimes misconstrue operating costs. This calculation occurs by looking at the periods with the most and least activity, as well as the total costs for both the high and low periods.

In order to get results for the high-low method, the variable cost and the fixed cost must be determined first. Once these are established, they are entered into the cost model formula.

Variable Cost is determined as follows:

VC = Highest Activity Cost – Lowest Activity Cost / Highest Activity Units – Lowest Activity Units

The next step is to calculate the Fixed Cost as follows:

FC = Highest Activity Cost – (VC x Highest Activity Units)

Now that the fixed and variable costs are known, the high-low cost can be determined:

High-Low Cost Model = Fixed Cost + (Variable Cost x Unit Activity)

Understanding it Through a Real-World Example

Looking at a furniture manufacturer, it’s good to focus on one product to see how the high-low method works:

The first step is to list production that includes each month, the product produced (let’s say it’s tables), and how much it cost to produce all tables each month. The list could be as follows:

Months Units Produced Total Cost ($)
January 153 6,650
February 106 5,653
March 120 6,185
April 126 6,120
May 100 4,888
June 133 6,650
July 113 5,852
August 93 4,988
September 153 6,783
October 166 7,382
November 146 6,783
December 160 7,581

The greatest output or activity for the furniture store happened in October when it produced the highest number of tables: 166 at a cost of $7,382. In August, the furniture store produced the fewest number of tables at 93, manufactured at a cost of $4,988.

Even though the cost may not be the greatest for the peak and valley of production, the corresponding costs for those respective figures is what will be used.

Now that we’ve identified the relevant data, the first task is to determine the variable cost.

VC = Total Cost of High Activity – Total Cost of Low Activity / Highest Activity Unit – Lowest Activity Unit

VC = $7,382 – $4,988 / 166 – 93  

VC = $2,394 / 73 = $32.80 per table

Then fixed costs must be calculated:

Total Cost = (VC x Units Produced) + Total Fixed Cost

$7,382 = ($32.80 x 166) + TFC

$7,382 = $5,444.80 + TFC

TFC = $7,382 – $5,444.80 = $1,937.20

It’s important to remember that variable costs are per unit.

Now that we have the total fixed cost, we can then create the total cost equation:

Total Cost = Total Fixed Cost + (VC x Units Produced)

Total Cost = $1,937.20 + ($32.80 x 166) = $7,382

This demonstrates the comprehensive costs for the tables made by the furniture store.

Further Considerations

The high-low method is a quick way to analyze costs. Since it only necessitates the peak and lulls of production data and costs, it can be done more often, along with helping companies plan with limited data to estimate future unit costs.

It’s important to run multiple types of cost analysis because high and low measurements might not give a full picture of costs. Although these two data points may not be the best overall picture of costs a business experiences at those volume levels, it can be an effective measurement until more data becomes available.

More Coronavirus Relief, Plus Beefed-Up Security for Technology, the Elderly, and Children Born to U.S. Citizens Serving Overseas

3 min read

HR 748, S 893, S 1822, HR 4344, HR 4803Coronavirus Aid, Relief and Economic Security Act (HR 748) – This legislation provided $2 trillion of stimulus relief in response to the coronavirus crisis. Provisions of the bill include:

  • $1,200 for each American making up to $75,000 a year
  • Additional $600 a week in unemployment benefits for up to four months
  • $100 billion available for hospitals and health providers; increase Medicare reimbursements for treating COVID-19
  • $750 million for food banks and food assistance to American Indian reservations, Puerto Rico and other territories
  • $500 billion in loans or investments to businesses, states, and municipalities
  • $32 billion in grants to the airline industry
  • Relief for homeowners with federally backed mortgages
  • Delay for student loan payments

This bipartisan bill was signed into law by the president on March 27.

Secure 5G and Beyond Act of 2020 (S 893) – Sponsored by Sen. John Cornyn (R-TX), this bill authorizes the development of a strategy to secure and protect next-generation mobile telecommunications (5G) and future generations systems and infrastructure within the United States. These protections should include assistance via mutual defense treaty allies, strategic partners, and other countries to maximize security and operations, as well as protect U.S. competitiveness, consumer privacy and the integrity of regulatory bodies. The bill was introduced on March 27, 2019, and signed into law on March 23, 2020.

Broadband DATA Act (S 1822) – Sen. Roger Wicker (R-MS) introduced this legislation on June 12, 2019, and it was enacted by the president on March 23, 2020. The Act mandates that the Federal Communications Commission (FCC) change the way broadband data is collected, verified, and reported. Going forward, the FCC must collect and distribute broadband maps from wired, fixed-wireless, satellite, and mobile broadband providers by establishing the Broadband Serviceable Location Fabric (a dataset of geocoded information for all broadband service locations) as the centralized vehicle for reporting broadband service availability data.

Supporting Older Americans Act of 2020 (HR 4344) – This bill supports programs relating to care for the elderly, as administered by the Department of Health and Human Services and the Department of Labor. It reauthorizes funding through the fiscal year 2024 for informational services, such as pension counseling; nutritional services, such as meal delivery; disease prevention and health promotion services; community and workforce training for elder care; promotion of independent living and the reduction of social isolation for the elderly; as well as prevention services for abuse and neglect. The bill was introduced by Rep. Suzanne Bonamici (D-OR) on September 16, 2019, and signed into law by the president on March 25, 2020.

Citizenship for Children of Military Members and Civil Servants Act (HR 4803) – This bill was introduced on October 23, 2019, by Rep. Jerrold Nadler (D-NY). In an effort to clarify a rule change initiated by the Trump Administration, this bipartisan legislation guarantees citizenship for anyone born to a U.S. citizen parent stationed overseas, including military members and federal workers. The new law does not apply to children born to non-U.S. citizens stationed overseas working in a role on behalf of the United States.

Be Right About Free Money: Potential Legal Risks of the Paycheck Protection Loan Program

3 min read

Paycheck Protection Loan ProgramOne of the most important provisions of the CARES Act for small businesses is called the Paycheck Protection Program (PPP). The PPP is a $349 billion program designed to assist small businesses (fewer than 500 employees) facing financial difficulties as a result of the COVID-19 pandemic through specifically structured loans.

The loan program offers funding to cover payroll for up to eight weeks, with the intent of stemming from unemployment. These loans can be forgiven and essentially become a grant if your business meets certain criteria with no need to repay the money.

As the old saying goes, there’s no such thing as a free lunch – or in this case, free government money. There are potential legal risks that could jeopardize the forgivability of the loan.

Conditional Grants

Another way to look at the PPP loans is as conditional grants. The U.S. Small Business Administration (SBA) notes that loans will be forgiven in full if the funds are used for appropriate costs. Covered costs include payroll, mortgage interest, rent, and utilities. Further, the payroll costs must account for at least 75 percent of the loan proceeds used. The employer needs to maintain or quickly rehire employees and maintain wage and salary levels in order to receive 100 percent forgiveness.

The Devil’s in the Certification Details

The loan application process requires certain certifications. Businesses that are still operating need to certify that the current economic uncertainty makes the loan necessary to keep operations going.

If this seems vague, it’s because it is. There probably isn’t a small business out there that is not facing significant uncertainty in the current climate. The problem is that the certification standard the PPP lays out is extremely subjective. As a result, with the encouragement for businesses to apply, many may do so under the impression that they will have their loan fully forgiven to only run into trouble later if they don’t meet the certification standards.

Legal Risks

By not providing any definition about the nature or extent of the required impact to operations that would make the loan request “necessary to support ongoing operations,” the SBA is making both applicants and lenders apprehensive.

Some law firms are even warning clients via their newsletters about potential legal exposure under the False Claims Act (FCA). Legal counsels are cautioning that a misrepresentation included in an application could result in FCA liability. Businesses must navigate between being as aggressive as possible to bolster their application while staying within the rules of the program.

More Certification Guidance is Needed

The government agencies involved need to provide more clear and objective guidance on the conditions needed to meet the certification requirements of the loan application process. Without clear and definable guidance as to what constitutes facing economic uncertainty, small businesses could face problems in the future.

Objective criteria such as a percentage of revenue decline or order capacity would provide a rather bright-line test and give both guidance to businesses and confidence in the process.