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Developments in Response to COVID-19


Andrew Presti

Developments in Response to COVID-19

March 25, 2020

Dear Clients, Colleagues and Friends,

The following is a summary of current developments in response to COVID-19. Provisions are rapidly changing, however, we want to inform you of them as they stand today and have provided links to the applicable websites which may contain updated information. We will try to forward updates as they occur:

Federal SBA disaster relief loans

https://www.sba.gov

1.            This should be considered a “last resort”. This loan is meant for small businesses without other forms of loans, lines of credit or personal assets that could be contributed to the business.

2.            Apply online, in person at a disaster center, or by mail.

3.            Loans are expedited and payments can start in 1 to 3 weeks.

4.            Deadline to apply: 12/21/2020.

5.            Interest rates are: 3.75% for eligible businesses and 2.75% for eligible nonprofits.

6.            Loan maximum is $2,000,000.

NYC Small Business Continuity Loan Fund (not available yet)

https://www1.nyc.gov/site/sbs/businesses/covid19-business-outreach.page

1.            Must have 99 or fewer employees.

2.            Zero interest loans up to $75,000 for business continuity.

3.            Must be located in the 5 boroughs.

4.            Must be able to demonstrate a 25% decrease in revenue.

5.            This is not available yet; businesses can fill out a pre-application survey at this time.

NYC Employee Retention Grant Program

1.            Must have 1 to 4 employees to be eligible.

2.            This is a grant (not a loan) to cover 40% of payroll costs for two months (up to $27,000).

3.            Must be located in the 5 boroughs.

4.            Must be able to demonstrate a 25% decrease in revenue.

5.            Must have been in operation for at least 6 months.

Employer Provided Tax-Free Qualified Disaster Payments to Employees

https://www.irs.gov/

1.            Now that Covid-19 has been designated a disaster under the Stafford Act, Internal Revenue Code Section 139 (“IRC 139”) can allow certain payments made by employers to employees to be tax-free to the employee while remaining fully deductible for the employer.

2.            Generally state treatment will mirror the federal treatment, but confirmation will be needed on a state-by-state basis.

3.            Wage replacement such as paid leave or sick pay is not covered by IRC 139. These payments are still subject to income and payroll tax withholding.

4.            Payments must be for expenses that are reasonable and necessary.

5.            When applying the provisions of IRC 139 to Covid-19 related payments, employers may look to consider the following examples of tax-free qualified disaster payments:

a.            Medical expenses.

b.            Health-related expenses that are not medical expenses, such as over-the-counter medications, hand sanitizers.

c.             Child care and tutoring expenses due to school closings.

d.            Work-from-home expenses such as required technology equipment & increased utility costs.

e.            Critical care and funeral expenses.

6.            While guidance to date does not require employers to establish a written IRC 139 program, it may be favorable for employers to have a written program in place that outlines details related to the payment given by the employer to the employee.

7.            We expect more guidance to be given as to the applicability of IRC 139 to Covid-19.

Mortgage Relief

https://www.hud.gov/

1.            HUD authorizes Federal Housing Administration to implement an immediate foreclosure & eviction moratorium for single family homeowners with FHA-insured mortgage for the next 60 days.

2.            HUD recommends you contact your Mortgage Service Provider to work through your personal

situation.

Federal Student Loan Aid

https://studentaid.gov/

1.            President Trump has issued a freeze on interest for Federal student loans for at least 60 days starting March 13th. This includes Direct Loans, Federal Perkins Loans and Federal Family Education Loan Programs held by the US Department of Education.

2.            Contact your loan servicer online or by phone to determine if your loans are eligible. Your servicer is the entity to which you make your monthly payment. If you do not know who your servicer is or how to contact them, visit StudentAid.gov/login or call us at 1-800-4-FED-AID (1-800-433-3243; TTY for the deaf or hearing-impaired 1-800-730-8913) for assistance.

3.            Loan Forbearance is available:

a.            Going into forbearance (payment suspension) during this time will allow you to pause your student federal loan payments but not accrue any interest or penalties

b.            To request forbearance, borrowers must contact their loan servicer online or by phone. If you do not know who your loan servicer is, go to https://studentaid.gov/manage-loans/repayment/servicers#your-servicer

c.             In the event borrowers cannot get through to their lender, the department has authorized an automatic suspension of payments for any borrower more than 31 days delinquent.

4.            If borrowers choose to continue to make payments, 100% of their payment will be applied to the principal amount of their student loan.

5.            The 60-day student loan forgiveness does not apply to private student loan lenders. However, some private lenders will temporarily modify and reduce monthly payments based on financial hardship. In addition, a temporary reduction may lead to higher payments when the temporary modification ends. To find out your options regarding a private lender, please contact them directly.

6.            For more information, go to https://studentaid.gov/announcements-events/coronavirus#borrower-questions

NYS Essential Businesses

On March 18th, 2020, Governor Andrew Cuomo signed Executive Order 202.6, ordering the closure of all non-essential businesses in NYS through 04/17/2020. The order identifies essential businesses as essential health care operations including research and laboratory services; essential infrastructure including utilities, telecommunication, airports and transportation infrastructure; essential manufacturing, including food processing and pharmaceuticals; essential retail including grocery stores and pharmacies; essential services including trash collection, mail, and shipping services; news media; banks and related financial institutions; providers of basic necessities to economically disadvantaged populations; construction; vendors of essential services necessary to maintain the safety, sanitation and essential operations of residences or other essential businesses; vendors that provide essential services or products, including logistics and technology support, child care and services needed to ensure the continuing operation of government agencies and provide for the health, safety and welfare of the public.

If you have any questions or need further information, please contact your P&N professional directly, or dial 212-736-0055 for immediate help. Stay safe.

Presti & Naegele