Authored by Michael Wronsky and Pat Balthazor The Small Business Administration (SBA) and Department of the Treasury (Treasury) announced that the Paycheck Protection Program (PPP) will reopen for certain borrowers on Jan. 11, 2021, and released the applications for first- and second-draw loans. Additionally, two interim final rules were recently issued on the program. The first interim final rule (IFR) is intended to cover new first-draw PPP loans authorized by the Consolidated Appropriations Act, 2021 (CAA) as well as the forgiveness applications of existing PPP loans for which the forgiveness proceeds have not yet been remitted. The second IFR applies to second-draw PPP loans authorized by the CAA, highlighting key differences between first- and second-draw loans and providing that, unless stated otherwise, the guidance under the first IFR also applies to second-draw loans.   As part of the reopening announcement, SBA and Treasury said that at least the first two days of the loan application period will be open solely to submissions from community financial institutions to ensure underserved businesses have access to the program. These windows open for first-draw loans today, Monday, Jan. 11, and for second-draw loans, Wednesday, Jan. 13. The program will reopen for all other eligible applicants “shortly thereafter.”   Listed below are key takeaways from both sets of IFRs; we continue to analyze this guidance and will issue additional communications as needed. IFR 1 - PPP as amended by the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act (Economic Aid Act)  Consolidates previously issued IFRs and guidance into one IFR, and incorporates amendments made by the CAA (i.e., expanded costs eligible for loan use/forgiveness, a borrower can now choose the end of their covered period from any date on or between the dates that are eight and 24 weeks after the loan was disbursed) Allows borrowers to use 2019 or 2020 information to calculate their first-draw loan amount Allows certain borrowers to re-apply or request an increase in their first-draw PPP loan amount, including:
– Partnerships whose original loans did not include amounts for partner compensation 
– Borrowers who returned all or part of a PPP loan, or did not accept the full amount for which they were approved IFR 2 - PPP second-draw loans Eligibility requirements for a second-draw loan generally differ from the initial round as follows (though the same affiliation rules largely apply); a business must:
– Have 300 or fewer employees, though businesses in the accommodation and food service industries and eligible news organizations can have 300 or fewer employees per location; 
– Be able to demonstrate a 25% reduction in gross receipts during a calendar quarter in 2020, relative to the same quarter in 2019, or experienced a reduction in annual gross receipts of 25% or more in 2020 when compared to 2019 (if the business was in operation in all four quarters in 2019); and
– Have used or will use their entire first-draw PPP loan for eligible purposes. Appears to provide that the alternative size standard based on tangible net worth and average income after federal income taxes available to determine eligibility for a first-draw loan does not apply; a borrower must pass the 300 or fewer employee test referenced above.  Generally includes “all revenue in whatever form received or accrued (in accordance with the entity’s accounting method) from whatever source” in the definition of gross receipts for the purpose of assessing the 25% reduction test, though forgiven first-draw loan proceeds are specifically excluded. Provides the maximum loan amount is the lesser of (special rules apply for seasonal employers and “new entities”):
– 2 ½ months of the borrower’s 2019 or 2020 average monthly payroll costs (3 ½ months for businesses in the accommodation and food service industries), or
– $2 million ($4 million in the case of businesses that are part of a single corporate group). Please reach out to your Baker Tilly tax advisor to discuss how the above may affect your tax situation.
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.

The SBA and Treasury Department announced the Paycheck Protection Program would reopen to certain borrowers Jan. 11 and to others Jan. 13. They also issued two interim final rules related to the PPP that should clarify aspects of the first- and second-draw loans for borrowers. 

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PPP reopening announced, loan applications and interim final rules released

Video Through the passage of the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, additional Paycheck Protection Program loans will be available to qualifying organizations. View our on-demand webinar for an overview of the eligibility requirements as well as our PPP loan specialists’ insights on what you should be doing to prepare for a first time or second draw loan application. Additionally, Baker Tilly is working with CPA.com and the AICPA on an automated PPP loan application tool. This SOC-secured platform can expedite loan processing. The presenters will also provide participants with information about this tool and recommendations for your next steps regardless of your lender choice.
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View our on-demand webinar for an overview of the eligibility requirements as well as our PPP loan specialists’ insights on what you should be doing to prepare for a first time or second draw loan application.

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PPP2 is here. What does that mean for you?

For many of us, the past 9 ½ months, rolling out of bed and walking to our home office has started to feel like Groundhog’s Day. The impending release of a new round of Paycheck Protection Program loans (PPP2) has intensified that déjà vu feeling and flashbacks to the start of the pandemic.  The renewed PPP program is part of the “Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act,” which has an estimated price tag of $900 billion and marks the fourth package enacted in 2020 to provide continuing economic relief from the COVID-19 pandemic. This bill is part of the Consolidated Appropriations Act of 2021, which funds the federal government for the next fiscal year. This time around, however, and having learned some lessons from the difficult rollout of the original program, let’s hope that Congress and the Treasury Department have improved the program to help more businesses. The bill gives small businesses a second chance at PPP loans, expands the program to news and marketing organizations and provides grants to certain live performing arts organization operators, museum operators and motion picture theatre operators.  It’s hard to imagine now, but applications for the original PPP loan program were being processed just one week after the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed in March and everyone (small businesses, Treasury, the Small Business Administration (SBA), banks, CPAs and lawyers, to name a few) were scrambling. Now that PPP2 is here – what has changed, what have we learned and what are we doing differently?
Background The original PPP program offered loans to qualifying businesses with an interest rate of 1%. Loans issued prior to June 5, 2020 have a maturity of two years; loans issued after June 5, 2020 have a maturity of five years. Loan payments are deferred for borrowers who apply for loan forgiveness.  The PPP included three rounds of funding between March and August, when the program closed to new loans. During that time, the SBA approved $525 billion in loans to 5.2 million qualifying entities; $134 billion of the original amount allocated from the program was never disbursed. The average loan size was $100,729; 5,460 lenders have participated in the program. About 50% of the loans went to four sectors: healthcare, professional services, construction and manufacturing. As of late November, about 11% of companies that received a loan have filed for forgiveness. There is debate if PPP was the right program to roll out and success varies by company, but there is no debate that it helped support the economy and keep people employed. For some industries, such as restaurants, hotels, cinemas, travel and dry cleaners, the PPP was only a small life preserver and companies in these sectors struggled to meet the payroll threshold of 60% (which had been reduced from 75% in the original law). Other industries experienced unexpected growth during COVID-19; PPP loans helped with expansions and forgiveness was easily obtained. PPP “second draw” loans So, how does the new bill change the PPP? The goal of Congress was to get this second round of PPP to those that need it the most, so they added new qualifiers. Businesses will be eligible for a “PPP second draw” loan of no more than $2 million (with some exceptions) if they: Have 300 or fewer employees; Have used or will use the full amount of their first PPP; and Demonstrate at least a 25% reduction in gross receipts in any quarter of 2020 relative to the same 2019 quarter Borrowers generally may receive a loan amount of up to 2.5 times the average monthly payroll costs in the one year prior to the loan or the calendar year. Accommodations and food services companies (NAICS code 72) may receive loans of up to 3.5 times average monthly payroll costs. Businesses with multiple locations that are eligible entities under the initial PPP requirements may employ not more than 300 employees per physical location. Waiver of affiliation rules that applied during initial PPP loans apply to a second loan. Sec. 501(c)(6) organizations (typically Chambers of Commerce) and destination marketing organizations are also now eligible for PPP loans, if they meet certain conditions.  FCC license holders and newspapers with more than one physical location are now also eligible for PPP loans as long as the business has no more than 500 employees per physical location. The bill requires the SBA to release guidance to lenders within 17 days of enactment that allows borrowers who returned all or part of their PPP loan to reapply for the maximum amount applicable so long that they have not received forgiveness. This is especially relevant for partnerships that submitted applications in early April prior to regulations released later relating to eligibility of guaranteed payments.  The bill resumes the payment of principal and interest (P&I) on small business loans guaranteed by the SBA under the 7(a), 504 and Microloan programs established under the CARES Act. Emergency EIDL grants The bill extends the covered period for Economic Injury Disaster Loan (EIDL) grants through December 31, 2021. It extends time for SBA to approve and disburse Emergency EIDL grants from 3 to 21 days. The bill also repeals a provision that required PPP borrowers to deduct the amount of their EIDL advance from their PPP forgiveness amount. The SBA is required to issue rules that ensure borrowers are made whole if they received PPP loan forgiveness and their EIDL was deducted from that amount. Business deductions saved The bill also overrules the IRS to clarify that gross income does not include any amount that would otherwise arise from the forgiveness of a PPP loan, retroactive to the enactment of the CARES Act. This is a relief to the struggling businesses hoping to carryback net operating loss (NOL) and other businesses hoping to avoid bank financing for an April 15 payment. The bill expands expenses that are eligible and forgivable to include: Covered operations expenditures, including payment for any software, cloud computing, and other human resources and accounting needs Covered property damage costs, related to public disturbances that occurred during 2020 that are not covered by insurance. Covered supplier costs related to contracts, purchase orders or order for goods in effect prior to taking out the loan that are essential to the recipient’s operations at the time at which the expenditure was made.  Covered worker protection costs such as personal protective equipment and adaptive investments that help a loan recipient comply with federal and local health and safety guidelines  The bill also modifies rules for forgiveness by simplifying forgiveness documentation submission requirements for loans under $150,000; this change is designed to speed up the approval process and reduce burden on the banks. Borrowers will need to do all the calculations and maintain supporting documentation for up to four years; so still need to calculate those 24 different ways to maximize forgiveness. Additional expenses are not eligible for forgiveness including supplier and PPE costs; however, payroll is still required to make up 60% of the eligible costs; so adding additional eligible expenses will not impact many companies.  PPP learning curve The first round of PPP was a huge learning curve for everyone involved, so what did we learn? To start, the rules of engagement have been set for the most part. In March and April, new FAQs were coming out daily from the Treasury clarifying various issues (what’s included in payroll costs, net or gross payroll, clarification of who is eligible, among 50-plus FAQs). Today, most eligible borrowers have a solid grasp of how to calculate the month of payroll and 2.5 or 3.5 times for the loan amount. The trick will be which companies are eligible this time around.  The necessity question will rear its ugly head again this round. Back in April, almost every employer in the country felt uncertain about where we were headed, so obtaining the PPP was a no brainer. This time around, we have over nine months of operating results to look back on. If a company had sales less than 30% over the previous year in quarter two of 2020, but sales have since rebounded and are maybe higher than in previous years, do they still need additional PPP to support operations and pay employees? The answer will depend on each business’ situation but be certain the SBA will be doing selective reviews of loans during the funding process and how companies spent the money. Both the banking community and CPA firms are more prepared for this round of PPP loans. Banks have their portals and processes built, but not all will be anxious to participate in a new round of PPP loans. Fintech companies (think Intuit, Paypay, Biz2Credit, Cabbage) got invited late to the game for Round 1 but hope to lead the automation and funding in Round 2. The AICPA has been instrumental in making sure firms are ready this time and has partnered with multiple firms to make funding faster for clients. Check out Baker Tilly’s funding portal here to see just such an example. Remember, back in April 2020, the initial $350 billion of PPP funds was gone in two weeks, and a majority of that in the first weekend. So, if your business is struggling and needs this funding, be prepared. Gather your documents, talk to your CPA and find your funding source as quickly as you can. Also remember that the PPP under the CARES Act was significantly modified by regulation and guidance for several months; the new law when enacted will be subject to this modification also. In addition, with a new administration starting January 20, 2021, further changes to small business support may be coming. 
View additional resources: Preparing for PPP: CPA Business Funding Portal Paycheck Protection Program (PPP) solutions Small and family business coronavirus resources For more information on this topic, or to learn how Baker Tilly specialists can help, contact our team.

With PPP renewed as part of the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, understand how the expansions and grants can give small businesses a second chance at PPP for the next fiscal year.

Preparing for PPP: CPA Business Funding Portal

PPP2 – Here we go again …

Authored by Paul Dillon, Michelle Hobbs, Mike Schiavo and Michael Wronsky On Dec. 21, 2020, Congress passed additional stimulus legislation. The Consolidated Appropriations Act, 2021 (the Act), which funds the federal government for the next fiscal year, consists of several bills that together mark the fourth package enacted in order to provide continuing economic relief from the COVID-19 pandemic. The stimulus provisions in total have an estimated price tag of $900 billion. It is expected to be signed into law within the next few days.   The legislative package also contains numerous tax-related items, including renewals of many popular tax extenders. Other provisions in this legislative package are: additional funding for and modifications to Paycheck Protection Program (PPP) loans (via the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act); an extension of the enhanced federal unemployment subsidy and resources for vaccine distribution; a second round of direct payments to many taxpayers; an extension of and revisions to the employee retention credit (ERC); and a temporary allowance for the full deductibility of business meals provided by restaurants.  The Act also overrides the Treasury Department’s guidance, allowing expenses funded by forgiven PPP loans to be deductible for federal income tax purposes.  Lawmakers on both sides of the aisle and President-elect Joe Biden also have discussed the need for additional stimulus legislation in 2021; however, the prospects for this coming together are unknown at this time. Key provisions  Small business loans  The PPP receives additional funding, but this round is more targeted than the first version introduced in the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Designed to target small businesses that have been particularly affected by the pandemic, the new stimulus package includes: Directing $284 billion to the Small Business Administration (SBA) to fund additional loans of up to $2 million  Targeting businesses with fewer than 300 employees and that have sustained a 25% revenue loss in any quarter in 2020 relative to the same quarter in 2019  Allowing small 501(c)(6) organizations that have 150 employees or less and are not lobbying organizations to apply for funding In addition, for loans that have not yet been forgiven, the Act extends the covered period for all first draw PPP loans up to March 31, 2021, and expands the list of expenditures eligible for forgiveness to include:  Supplier costs,  Software or cloud computing software that facilitates operations,  Costs related to property damage, vandalism or looting caused by public disturbances that occurred in 2020, that were not covered by insurance,  Investments in facility modifications and personal protective equipment, and  Other group insurance premiums were added to the list of payroll costs (previously, only group healthcare benefits were eligible premiums). The Act also provides a streamlined forgiveness process for borrowers with loans of $150,000 or less. Expenses associated with forgiven PPP loans The CARES Act provided that if taxpayers used PPP loans for certain eligible expenses, those loans would be forgiven. Further, any forgiveness would be excluded from gross income. Treasury subsequently stated in Notice 2020-32 (reiterated in November  in Revenue Ruling 2020-27 and Revenue Procedure 2020-51) that expenses funded with forgiven PPP loans would be nondeductible for federal income tax purposes. In a major win for taxpayers, the Act clarifies Congress’ previous intent that these expenses are deductible. Employee retention credit  The payroll tax credit available to employers experiencing full or partial suspensions or significant declines in gross receipts has been extended to apply to qualifying wages paid through June 30, 2021.   The Act also retroactively provides that recipients of PPP loans are eligible to claim the ERC.  Plus, eligible healthcare expenses can be considered qualifying wages regardless of whether they are allocable to an employee’s salary. The Act separately excludes wages taken into account in computing the credit from a PPP loan borrower’s payroll costs.   The Act also makes  prospective  changes to the credit, which include but are not limited to:  Increasing the amount of the credit to 70% of qualified wages from 50% Increasing the cap on the amount of qualifying wages per employee to $10,000 per calendar quarter from $10,000 for the calendar year An employer will qualify under the “gross receipts” test if their revenues in a calendar quarter are less than 80% of their revenues from the same quarter in 2019 (previously, revenues must have been less than 50% from the same quarter in 2019)  The employee limit for determining “small employer” status increasing to 500 employees from 100 employees Individual tax rebates Rebate checks of $600 per individual (including qualifying children) based on the earned income, Social Security benefits and retirement income of the taxpayer reflected on their 2019 returns. Check amounts will begin to phase out for individuals and couples earning $75,000 and $150,000, respectively.  100% business meals deduction The Act allows 100% deductibility for expenses for business meals provided by restaurants incurred over the next two tax years (2021 and 2022). The 50% limitation dates back to 1993 and will again be effective in 2023. Unemployment benefits The Act extends the $300 per week federal unemployment subsidy payment for 10 weeks, through March 14, 2021. Extender provisions Many so-called “extender provisions” were set to expire on Dec. 31, 2020; however, the Act renews them through 2025. These include, but are not limited to the: New Markets Tax Credit Exclusion from gross income for discharged mortgage debt on qualified principal residences (though the maximum amount is reduced to $750,000 from $2 million) Employer credit for paid family and medical leave Some provisions were made permanent by the Act including: Energy-efficient commercial building deduction under section 179D  7.5% adjusted gross income (AGI) threshold for determining the deductibility of individual medical expenses  Other tax provisions Taxpayers can use their earned income from 2019 to determine their earned income tax credit and refundable portion of the child tax credit. For employers that participated in the voluntary tax holiday, the employee portion of the Social Security payroll tax deferral repayment period was extended until December 2021. The original payback period ran through the first four months of 2021.  Individuals that do not itemize their deductions can deduct up to $300 in charitable contributions in 2021. Originally, this was solely allowed for 2020 returns. The 100% AGI limit for cash contributions to a qualified charity, which was also set to expire at the end of 2020, is extended through 2021.  The payroll tax credits for paid sick and family leave provided by the Families First Coronavirus Response Act are extended through March 31, 2021. Please reach out to your Baker Tilly tax advisor to discuss how these changes may affect your tax situation.
The information provided here is of a general nature and is not intended  to address the specific circumstances of any individual or entity. In  specific circumstances, the services of a professional should be sought.  Tax information, if any, contained in this communication was not  intended or written to be used by any person for the purpose of avoiding  penalties, nor should such information be construed as an opinion upon  which any person may rely. The intended recipients of this communication  and any attachments are not subject to any limitation on the disclosure  of the tax treatment or tax structure of any transaction or matter that  is the subject of this communication and any attachments.

Congress passed the fourth economic relief package with the enactment of the Consolidated Appropriations Act, providing additional funding to the Paycheck Protection Program, extending enhanced unemployment benefits and renewing some popular tax extender provisions.

Congress agrees to additional stimulus

Video The news surrounding PPP loans has been increasing steadily in the past few weeks as more businesses apply for forgiveness.   The IRS issued additional guidance clarifying their position that deductions related to forgiveness will not be deductible and the SBA is requiring an additional uncertainty questionnaire for loans over $2,000,000.
 
On this on-demand webinar, our PPP loan specialists discuss the above topics, as well as some further insights and takeaways. Topics also include: What Baker Tilly is hearing from banks during submission process Uncertainty with loans over $2 million Common PPP pitfalls and how to avoid them Potential for future stimulus and second round of PPP loans Panelists: Todd Bernhardt, Partner, Baker Tilly Pauline Dumas, Director, Baker Tilly Adam Goehring, Partner, Baker Tilly Tim Kosiek, Partner, Baker Tilly Expand the section(s) below to view the event notes.
For more information on this topic, or to learn how Baker Tilly specialists can help, see our PPP solutions or  contact our team.

The news surrounding PPP loans has been increasing steadily in the past few weeks as more businesses apply for forgiveness. In this on-demand webinar, our PPP loan specialists discuss PPP updates and potential future stimulus.

Recent Paycheck Protection Program (PPP) legislation and updates

Authored by Paul Dillon, Michelle Hobbs, Mike Schiavo and Michael Wronsky The Department of Treasury and the IRS released Revenue Ruling 2020-27, providing that taxpayers who received Paycheck Protection Program (PPP) loans cannot deduct expenses funded by the debt if forgiveness is reasonably expected. In other words, if the taxpayer has otherwise met the requisite conditions for loan forgiveness, associated expenses are nondeductible if forgiveness has not yet been approved by the lender or even applied for by the end of the borrower’s taxable year.  This addresses an issue outstanding since the IRS released Notice 2020-32 in April, which originally provided that expenses funded by forgiven loan proceeds are nondeductible (see our previous tax alert). As the Coronavirus Aid, Relief, and Economic Security (CARES) Act excludes PPP loan forgiveness from gross income, the IRS’ position under the notice was based on a general tax principle that disallows deductions for expenses incurred in the production of tax-exempt income. Given that borrowers have as long as 24 weeks to use the loan for eligible expenditures and Small Business Administration (SBA) rules give lenders and the SBA up to a combined five months to process forgiveness applications, the notice left unanswered the question of how expenses should be treated in the likely event that a loan was still outstanding at the end of the tax year in which the costs were incurred. See our 2020 year-end tax letter article on this topic for additional discussion. Revenue Ruling 2020-27 reiterates the position taken under the notice and applies it two separate fact patterns: A borrower with a calendar tax year incurs expenses that are eligible for forgiveness under the CARES Act and SBA guidance and applies for loan forgiveness in November 2020. The borrower otherwise meets all conditions for full forgiveness of the loan, but has not received a decision prior to year-end. The same facts as above apply, except the borrower has not applied for forgiveness as of year-end, rather, they expect to apply in 2021. In both instances, the taxpayer’s expenses are nondeductible. In addition to the revenue ruling, the Treasury and IRS concurrently released Revenue Procedure 2020-51, allowing taxpayers to deduct such expenses if forgiveness is fully or partially denied or if the borrower voluntarily withdraws its forgiveness application.  Congress may yet act to provide relief, either in the lame-duck or next session to address this issue as part of any additional economic stimulus package. Consequently, we recommend extending tax returns impacted by this guidance to allow for the possibility of legislative relief. We encourage you to reach out to your Baker Tilly tax advisor regarding how the above may affect your situation. For more information on this topic, or to learn how Baker Tilly specialists can help,  contact our team.
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.

Taxpayers who received Paycheck Protection Program loans cannot deduct associated expenses if they anticipate their loan will be forgiven in a subsequent year, according to new guidance from the Treasury and IRS. 

Treasury guidance disallows deductions related to PPP loan proceeds if forgiveness expected

Authored by Michael Wronsky The Small Business Administration (SBA) recently released draft questionnaires that must be completed by for-profit (Form 3509) and not-for-profit (Form 3510) organizations that, together with their affiliates, received Paycheck Protection Program (PPP) loans of $2 million or more. The questionnaires will be issued by lenders to verify the certification made by borrowers as part of the loan application process that “current economic uncertainty” made the loan request necessary to support business operations. Borrowers must return the completed questionnaires to the lenders within 10 days of their receipt, for subsequent submission to the SBA. The instructions indicate that failure to complete and return the questionnaire within the 10-day time frame could result in the SBA determining the borrower was ineligible for their loan or forgiveness. The questionnaires are not currently available on either the SBA or Department of Treasury (Treasury) websites, and it is unclear whether they will be finalized in their current form. While, as noted above, borrowers were required to certify in good faith that their PPP loans were needed to withstand the economic uncertainties created by COVID-19, little to no official guidance from the SBA or Treasury was previously available to identify how this certification would be examined for compliance. Presumably, these draft questionnaires provide insight into the facts and circumstances that will be evaluated. That said, the questionnaire requests information for several items (including supporting documentation in some instances) that do not bear any relevance to the determination of eligibility for a PPP loan or forgiveness under the Coronavirus Aid, Relief, and Economic Security (CARES) Act or subsequent guidance from the SBA or Treasury. These items include, but are not limited to: The borrower’s 2020 second-quarter revenue, relative to previous quarters, Whether the borrower’s operations were shut down or significantly altered by a government order due to COVID-19, Whether the borrower began any new capital improvement projects unrelated to COVID-19 between March 13, 2020, and the end of its covered period, The borrower’s cash and cash equivalents position on the last day of the calendar quarter that immediately preceded the date of their loan application, Whether the borrower made any dividend or other capital payments to its owners, apart from tax distributions,  Whether the borrower made any prepayments on its debts between March 13, 2020, and the end of its covered period, and Whether any of the borrower’s employees were compensated in an amount that exceeds $250,000 on an annualized basis during the covered period. The draft questionnaires indicate that the SBA may request additional information after receipt of the responses to complete their review of the loan and/or forgiveness eligibility and that the “determination will be based on the totality” of the borrower’s circumstances. It would appear that based on this language, the questionnaire will be used to assist the SBA in determining which loans should be reviewed with greater scrutiny. It should be noted borrowers will have the opportunity to appeal the SBA’s decision with respect to loan and forgiveness eligibility.  Lastly, it should also be noted that while not binding authority, pursuant to an SBA/Treasury FAQ, if the SBA does determine a borrower lacked adequate basis for the certification of loan necessity, the borrower will not face administrative enforcement or penalty if the loan is repaid upon receiving notice of ineligibility from the SBA. We encourage you to reach out to your Baker Tilly tax advisor regarding how the above may affect your situation. 
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.

The Small Business Administration released draft questionnaires for organizations that received Paycheck Protection Program loans of $2 million or more to prove their need for the funds. 

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SBA releases draft PPP loan necessity questionnaire

Authored by Paul Dillon and Mike Schiavo It comes as no surprise that the unprecedented economic downturn caused by the COVID-19 pandemic is prompting many commercial tenants to seek rent relief. Cash-strapped businesses may be negotiating with their landlords for all kinds of concessions, in the hopes of surviving the coming weeks and months until economic activity picks up again. While modifying leases may be commonplace in the current economy, failing to factor in the tax considerations can lead to unintended consequences. At inception, generally all leases must be tested under IRC section 467. This section was enacted in 1984 primarily as an anti-abuse provision to stop tax-shelter-type transactions that were intended to take advantage of income and deduction timing differences between accrual and cash basis taxpayers. When such situations arise, section 467 may apply to eliminate timing differences and put both the landlord and tenant on the same terms for recognizing income and deductions. Generally, most standard commercial leases will not be subject to any complex calculations at inception.  However, many lease modifications in the current economy may inadvertently run afoul of these rules and result in significant tax modifications. Anytime there is a substantial modification to a lease, it must be retested under section 467, and that is when things could get tricky. The section 467 rules control the timing of rental income and expense for tax purposes in certain situations where there is significant deferred or prepaid rent and/or stepped rents. Depending on the magnitude of the changes, section 467 may require the landlord and tenant to use the accrual method to recognize rental income and expense regardless of their regular accounting method. Further, if the renegotiated lease has significant deferred (or prepaid) rent within the meaning of section 467, the regulations could deem that a loan exists between the parties, forcing them to recognize interest income and expense as well. In other words, the tax results may be much different than the business deal due to these complicated rules. By way of a brief illustration: Assume a tenant has a 10-year lease in place for $100,000 per month. They ask to defer 24 months of rent, which will be payable in the final year of the lease. In total, $2.4 million has been deferred, $1.2 million for 2019 and $1.2 million for 2020. This modification causes the lease to have deferred rent under section 467 and may require the parties to recognize rental income and expense under the proportional rental accrual approach. Assume the amount recognized as rent for 2019 under the proportional rental accrual method is $1 million. This means the landlord would recognize $1 million of gross rents in the current year and be deemed to make a loan back to the tenant in a like amount. Consequently, the tenant would receive a corresponding rental deduction. The $200,000 difference is treated as imputed interest that would be recognized by the parties over the term of the deemed loan. The regulations state that a lease modification is “substantial” if the legal rights and obligations that are altered and the degree to which they are altered is “economically substantial” based on all the facts and circumstances. There are some safe harbors for changes in lease terms due to lessor refinancing, CPI adjustments, expense pass-throughs and de minimis adjustments to fixed rent. But given the severity of the current economic situation, rent holidays, deferrals and/or restructured payment schedules may be significant enough to cross the substantial modification threshold. If this is the case, the modified lease is treated as a new lease as of the effective date of the changes and must be analyzed under section 467. A section 467 rental agreement is an agreement for the use of tangible property, that has total payments greater than $250,000, and that has prepaid rent, deferred rent and/or increasing or decreasing rent (“stepped rent”). Certain “disqualified” sale-leasebacks and long-term leases may also fall under section 467 if there is a tax avoidance motive behind the transaction. A few key concepts are likely to be relevant in the current round of commercial lease renegotiations. A lease “specifically allocates” fixed rent if it unambiguously specifies, for periods no longer than a year, the fixed amount of rent for which the lessee becomes liable, and the total amount of fixed rent specified equals the total amount of fixed rent payable under the lease for the same period. There is an important nuance here. If a disconnect exists between how rent is allocated under the lease and when it is due and payable, that could cause section 467 issues, including deferred rent. “Deferred rent” is a technical term of art in the section 467 world: If the cumulative rent allocated by the lease at the end of a calendar year is greater than the cumulative rent payable at the end of the following year, a lease has section 467 deferred rent. Unless the lease has adequate stated interest (110% of the applicable federal rate), rental income and expense, and interest income and expense must be recognized using present value calculations. This likely will come as an unpleasant surprise to landlord and tenant. The section 467 rules are complex, full of defined terms and may be unfamiliar to many landlords and tenants. Whenever you renegotiate lease terms, no matter how small the changes, it is important to consult your Baker Tilly advisor to make sure you do not trigger unintended tax consequences. -- The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments. 

The FASB issued guidance to help struggling businesses and their landlords treat rent concessions as if no changes to the lease contract were made, but they still have to consider section 467 rules for tax purposes.

Family Business

Retail

Lease modification: Beware of potential tax ramifications

Authored by Patrick Balthazor It should come as no surprise that the year 2020 will be a tough one for many taxpayers. A large number of businesses are struggling, particularly in certain sectors. The restaurant and hospitality industries have been particularly hard hit, and they are not alone. Many will show tax losses for 2020. While the losses are not favorable, they may provide somewhat of a lifeline to struggling entities. The ability to use these losses against taxable income from prior years or to offset income in future years may provide businesses with much-needed cash.  The Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was enacted in March 2020, provided stimulus measures to aid businesses that generate net operating losses. These losses may then be utilized to produce tax refunds via carrybacks of the losses to earlier tax years or to offset income in later tax years. Some of the more significant provisions in the CARES Act that can assist in creating refunds include: The temporary increase under section 163(j) in the percentage limitation on business interest deductions to 50% of adjusted taxable income (ATI) from 30% of ATI. This provision is discussed in more detail in this letter. The effective date for the provision that caps business losses for noncorporate taxpayers to $250,000 annually ($500,000 for joint filers) has been pushed back to taxable years beginning in 2021. This allows taxpayers to utilize the loss in the current year without the cap or to increase a net operating loss that may be carried back to prior tax years. For taxable years beginning before Jan. 1, 2021, the provision under the Tax Cuts and Jobs Act that limited the use of net operating losses to 80% of taxable income is not applicable. Thus, losses incurred and used in tax years before 2021 can offset 100% of taxable income. In addition, net operating losses for taxable years beginning after Dec. 31, 2017, and before Jan. 1, 2021, are allowed to be carried back to each of the five preceding taxable years. An election may be made to carry the losses forward. The prospect of carrying back the loss may seem attractive for taxpayers that have net operating losses in tax years 2018 through 2020. The taxpayer will likely receive the refund quicker if the loss is carried back as opposed to carrying it forward to future tax years. Some taxpayers (especially corporations) may have been in a higher tax bracket in prior years. However, the decision to carry the loss back versus electing to carry it forward should be based on a careful modeling of the consequences. Many factors, including the alternative minimum tax for individuals, repatriation income under section 965 and foreign tax credits must be considered. The application of these factors may result in a carryback refund at a much lower effective tax rate than if an election were made to carry the loss forward. As many practitioners have said: model, model, model. A lack of modeling may result in an inefficient use of the net operating loss. It should be noted that many states may not conform to the federal changes in the CARES Act. In some cases, federal conformity is automatic, but many states may require action by the legislature. Given the pandemic, some legislative bodies may not be in session. This complicates the situation for state purposes when taxpayers do not know if the state will allow some of the favorable changes made by the CARES Act. Modeling becomes much more difficult when it is uncertain how the states will react. Form 4466 Corporate taxpayers may also want to consider filing Form 4466 to obtain a refund of overpayments. This form can provide a quick refund of estimated taxes when a corporation has overpaid its tax. It may only be used by corporations that have an overpayment of at least 10% of their liability and at least $500. The form is filed after the end of the tax year and before the due date of the return (including extensions). While the filing of Form 4466 is not necessarily limited to corporations that have net operating losses, it is most often used in these situations. In many cases, corporations do not file their returns until many months following the end of their tax year. They may have made estimated payments during the year, but now they are finding they overpaid for the year. Filing Form 4466 before filing the federal income tax return will accelerate the tax refund as the IRS is required to act on the Form 4466 within 45 days after its filing. -- The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely.  The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.

Significant provisions in the CARES Act can assist in creating refunds for struggling businesses.

State & Local Tax

International Tax

Will refunds from losses become a lifeline for struggling businesses?

Authored by Mark Smith 2020 has been an interesting year for many reasons. As we approach year-end, we recommend doing a number of things from an estate and gift tax-planning standpoint. Those ideas are discussed below. However, with 2020 being a presidential election year, a significant planning opportunity might exist this year that otherwise may not occur again.  Background For 2020, the estate, gift and generation-skipping-tax exemption is set at $11.58 million per person and is scheduled to increase each year by a cost-of-living factor. However, that level of exemption is due to sunset after 2025, when it would return to half that amount. The $5 million level of exemption (adjusted annually by a cost-of-living adjustment or COLA) came into the law in 2011. Prior to then, the exemption level had reached $3.5 million. The estate tax law also allows an adjustment in basis to the date of death fair market value when one passes away. We normally think of this as a step-up in basis, since, most of the time, assets have increased in value from the time of purchase. This has been the law for many years. In this presidential election year, Democratic presidential nominee Joe Biden proposes, among other things, to “return the exemption levels to historic norms” and “eliminate the step-up in basis for inherited assets.” Whether historic exemption levels mean the $5 million level referred to above or the pre-2011 $3.5 million level is unclear.  Of course, the changes that Biden proposes would be possible only if he wins the presidency, and the Democrats take the Senate and retain majority in the House. In January 2021, new legislation could be introduced to effect these changes. New law could possibly be effective retroactively to Jan. 1, 2020. The next few months may be the last time individuals will have an exemption of $11.58 million. If it is used to shelter gifts in 2020, the use would likely be grandfathered even if the exemption level is reduced in the future. In this scenario, the use is the “excess” of the current level over what it might be reduced to, to be considered “used.” For example, gifts of $9 million in 2020 will use $4 of the “excess” over the $5 million level if the law is changed to reduce the exemption to $5 million. If gifts of only $5 million are made in 2020 and the exemption level is reduced to $5 million, the opportunity to use the “excess” will have been lost.  Use the “excess” exemption the current law provides Clients with the wealth to take advantage of this historically high exemption level have many ways to make gifts in 2020. While this article will not be able to discuss all the options in detail, there are ways to make gifts that are straightforward. Of course, there are also more complicated techniques requiring time and planning — and time is quickly running out to do so before year-end. The following strategies should be discussed with your estate planning advisors. Gifts of business interests in S corporations, partnerships or limited liability companies (LLCs) could take advantage of discounts when transferring minority interests in nonvoting stock, limited partnership interests or LLC membership interests. Use of discounts allows more value to be included in the gift.
–  This shifting of business ownership might already be part of succession planning for your business and now could be a good time to make this type of transfer. For those clients apprehensive about giving up the cash flow from assets gifted away, there are various techniques to address this, such as the spousal limited access trust (SLAT). The SLAT is an irrevocable trust which has the benefit of removing assets via gift from the estate, but allowing the spouse and other beneficiaries to have access to the assets and their income.
– The SLAT features of the trust can then be combined with longer trust terms, so the trust assets can benefit multiple generations. Finally, those trusts can be created as “grantor” trusts so the trust creator/settlor continues to pay the income taxes on the income generated by the trust assets. This allows the trust assets to grow, without the need to pay taxes, and the settlor’s taxable estate to be reduced further. 
– With a grantor SLAT, gifts can be made to the trust and assets can be sold to the trust, without recognition of gain on the sale. The sale is usually accomplished by the SLAT issuing a promissory note to the seller. 
– If the transfer is via a sale right now, that promissory note could be forgiven by Dec. 31, 2020, if there is a change in Washington that might threaten the exemption level. If the president is re-elected, the decision of what to do with the promissory note could be delayed until 2025.  Gifts by one spouse to a lifetime trust for the benefit of the other spouse is another planning option. However, this does not remove the assets from both spouses’ taxable estates like the SLAT does. Gifts to trusts for the benefit of the settlor’s children and future generations — not benefitting the settlor’s spouse. This trust could be generation skipping and could also be taxed to the grantor. Gifts to any of these types of trusts do not have to be with business assets. The gifts could be of investment assets, cash or any other type of transferable asset. Unfortunately, IRAs, annuities and other like assets cannot be transferred by gift during one’s lifetime.  Gifts into trusts for the benefit of the trust beneficiaries also provides asset protection for those beneficiaries and that should not be overlooked.  Finally, taxpayers who have already engaged in significant transfer planning in recent years (in response to earlier tax law changes) may have significant promissory notes still outstanding from earlier sales to grantor trusts. Those promissory notes, or some portion of them, can be forgiven by Dec. 31, 2020, to use the excess exemption.  Other estate-planning moves that should be considered before year-end Annual exclusion gifts: the limit for 2020 is $15,000 Medical bills of family members: pay directly to the medical provider, not to your family member for their use in paying their bill Tuition of a child or grandchild: pay directly to the educational institution Grantor retained annuity trust (GRAT): fund with an asset with a value that has been depressed by the current situation, but which has the potential to return to historic values; GRATs work well when the transferred assets grow at a rate greater than the current section 7520 rate (0.4% in October) Depressed value assets: make an outright gift to your children Personally owned life insurance policies: transfer into irrevocable trusts to remove the value of the policy from the taxable estate Higher interest rate notes: refinance those notes that have been created from prior transactions; current AFR rates for October 2020 are 0.14% for the short term (three years or less); 0.38% for midterm (four to nine years); and 1.12% for long term (more than nine years) Intrafamily loans: consider making new loans or refinancing existing loans to take advantage of the low AFR rates; this is not a transfer technique, but it is designed to slow the growth of assets in your estate if you loan money and take back a note with these low interest rates  Comparing the current income tax rates to estate and gift tax rates, the income tax basis of the assets used to make gifts is now more important than before. Gifting higher basis assets is more beneficial than lower basis assets because of the current step-up in basis that can occur on death with lower basis assets included in the estate. Basis needs to be considered in any gift strategy. However, transactions with grantor trusts may continue to give the donor flexibility to address this issue. In addition, if business assets are used in a succession planning situation, consider whether that asset will be sold in future generations when discussing the impact of basis. Finally, the possible elimination of the step-up in basis rules would change our thinking again on all transfers. Please consult your estate tax advisor before deciding which assets to gift.  Finally, there are states with their own estate tax regimes and those states usually do not have the same federal exemption level of $11.58 million. Only one state has a gift tax for lifetime gifts. Planning needs to also factor in the impact of lifetime giving in excess of those state exemptions. As long as the state does not require you to include those prior gifts in the state’s taxable estate calculation, you can move more asset value to heirs during lifetime with gifts than if you wait until death to transfer those assets. Again, consult your estate tax advisor.  -- The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely.  The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.

Estate and gift tax-planning is significant during 2020 presidential election.

Private Wealth

Personal Wealth Management Services

Wealth Management

Business Wealth Management Services

Family Office

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Time running out for year-end estate planning

Authored by Kathleen Meade On July 29, 2020, the IRS and Treasury Department released proposed regulations to implement the small business taxpayer simplified accounting method provisions enacted under the Tax Cuts and Jobs Act (TCJA) for tax years beginning after Dec. 31, 2017. The proposed regulations clarify the gross receipts test requirements and provide guidance for implementing the small business taxpayer simplified method provisions. However, positions taken on the treatment of syndicates and the inventory accounting exception are likely to be less favorably received and may create additional uncertainty, complexity and administrative burden for affected taxpayers. Although these regulations are not yet effective, taxpayers may rely on them for taxable years beginning after Dec. 31, 2017, provided they consistently implement all the applicable rules for each adopted provision. Background  The TCJA favorably amended certain small business taxpayer methods of accounting to increase the gross receipts test threshold to $25 million, index it for inflation and eliminate the requirement that the test be met for all prior tax years. These changes enable more taxpayers to use the cash method of accounting and can exempt them from the often costly and onerous uniform capitalization (UNICAP) requirements, comply with the percentage-of-completion method (PCM) rules and accounting for inventories. However, under the TCJA small business taxpayer provisions, tax shelters (including syndicates) remain ineligible for the small business taxpayer simplified methods regardless of their gross receipts levels. For purposes of this rule, a syndicate is defined as a partnership or other entity (other than a C corporation) which allocates more than 35% of the entity’s losses for the taxable year to limited partners or limited entrepreneurs.  UNICAP exception The proposed regulations, which are generally taxpayer favorable, remove the now obsolete small reseller exemption and replace it with the UNICAP small business taxpayer exception enacted under the TCJA.  The 2017 tax reform increased the gross receipts threshold to $25 million from $10 million and extended the UNICAP exception to producers as well as resellers. However, unlike the small reseller definition that generally included only receipts from sales of goods and services, the small business taxpayer test includes income from other sources such as interest, dividends, rents and royalties. This has implications for other simplifying conventions under the UNICAP rules. For example, the addition of receipts from other sources may cause a taxpayer to exceed the threshold and require an accounting method change. There are also special rules for farm trades or businesses. Cash method of accounting The proposed rules reflect amendments made by the TCJA to the gross receipts test for taxable years beginning after Dec. 31, 2017. As noted, the TCJA increased and indexed the gross receipts test threshold but left other cash method provisions unchanged, such as the short year and aggregation rules and the exclusion of tax shelters from using the cash method. Unfortunately, the proposed rules also contain unfavorable provisions that may significantly limit use of the cash method in certain circumstances. Syndicates  Consistent with pre-TCJA rules, syndicates are classified as tax shelters ineligible to use the cash method. Syndicate status will only apply for a year in which the entity has a loss and not in a year the entity is profitable and meets the gross receipts test. Thus, a syndicate’s eligibility for the small business taxpayer methods may change yearly and, further, may not be determinable until after year-end, which can significantly complicate tax planning and delay tax reporting for these entities.  Syndicates, or tax shelters, are defined much more broadly than one would anticipate. A “tax shelter” for this purpose is an entity, other than a C corporation, if more than 35% of the losses during the taxable year are allocated to limited partners or limited entrepreneurs. A “limited entrepreneur” is a person who has an interest in an entity (other than a limited partnership interest) and who does not actively participate in the management of the entity. The proposed regulations may actually increase the likelihood of an entity becoming a syndicate because the section 163(j) business interest limitation does not apply to small business taxpayers. Although intended to simplify the process of determining an entity’s syndicate status, this rule may also create a trap for the unwary if the entity is profitable after taking into account the interest limitation, but has a loss and is a syndicate under the 35% loss rule because the interest deduction is not limited for this purpose.  Affected entities may need to evaluate the trade-offs of implementing strategies to avoid a tax loss (e.g., election to opt out of bonus) versus losing eligibility for the favorable small business taxpayer simplified methods of accounting. To allow adequate time for planning, the proposed regulations provide an election that permits a taxpayer to apply the 35% loss rule by electing to use the allocated taxable income or loss of the immediately preceding taxable year, rather than the current-year amounts.  Taxpayers should carefully consider whether the election is beneficial because it applies for all purposes for which status as a tax shelter is relevant (e.g., section 163(j) interest deduction limitation) and is irrevocable unless the taxpayer obtains IRS permission.  In summary, the proposed rules related to syndicates are generally unfavorable and have implications beyond the small business taxpayer simplified methods (e.g., section 163(j) small business taxpayer provisions). Additionally, entities that move in and out of syndicate status may be prevented from making frequent changes back to the cash method in years they cease to be a syndicate. Consequently, entities treated as syndicates may derive limited or no benefit from the favorable small taxpayer provisions if the proposed rules are finalized in their current form. The Treasury Department and the IRS continue to study the definition of a tax shelter, which may indicate that changes to these rules could be forthcoming. Inventory exception The TCJA provided welcome simplification by permitting eligible small business taxpayers to either treat inventory as non-incidental materials and supplies or, alternatively, to follow the inventory method of accounting used in its applicable financial statements (AFS) or, if the taxpayer does not have an AFS, in the books and records prepared in accordance with the taxpayer's accounting procedures. The proposed regulations provide guidance for implementing this inventory accounting exception for small business taxpayers. However, several proposed provisions limit book/tax conformity, potentially resulting in added complexity and administrative burden and undermining the legislative intent to simplify inventory accounting for small business taxpayers.  For example, the proposed regulations allow small business taxpayers to treat non-incidental materials and supplies as “used or consumed” in the later of the year the taxpayer provides the item to the customer or the year the items are paid for (cash method) or incurred (accrual method). The regulations also permit taxpayers to use most inventory accounting methods to identify these non-incidental materials and supplies, with the exception of the last in, first out (LIFO) and lower of cost or market (LCM) valuation methods. Finally, guidance is provided on the definition of AFS, the types and amounts of costs that can be recovered for tax purposes, and when such costs may be taken into account. Some of the additional requirements and restrictions are surprising and contrary to the simplification purpose expressed by the Treasury Department and the IRS. If finalized in their current form, these provisions could require significant taxpayer resources to analyze and reconcile differences between book and tax inventory and accounting records, which may effectively reduce or eliminate the benefit of using the small business simplified inventory method for many. Long-term contract exceptions The proposed regulations incorporate amendments made by the TCJA that modify the small construction contract PCM exception and homebuilder UNICAP exemption to increase the gross receipts threshold and revise the PCM lookback rules to reflect the repeal of corporate alternative minimum tax (AMT) and the enactment of base erosion and anti-abuse tax (BEAT). Notably, the modified lookback rules apply to both small and large taxpayers. Additionally, the proposed rules clarify when and how a taxpayer adopts a method of accounting for a long-term contract and provide guidance for determining the classification of long-term contracts when a taxpayer becomes a small business taxpayer or ceases to qualify as a small business taxpayer.  Accounting method changes   The proposed regulations provide no method change procedures and generally direct taxpayers to use existing guidance to implement changes to and from the small business taxpayer simplified methods.  In August 2018, the IRS issued procedures for eligible small business taxpayers to obtain automatic IRS consent to change to the small business taxpayer simplified methods, generally effective for tax years beginning after Dec. 31, 2017.  Under these procedures, the rule prohibiting the filing of an automatic method change if the same item was changed within the past five tax years (including the year of change) is temporarily waived for changes filed for a taxpayer’s first, second or third taxable year ending on or after Dec. 31, 2017. Thereafter, a taxpayer requesting a change within the five-year waiting period is required to apply under the more onerous and costly advance consent procedures. Although the TCJA favorably modified the gross receipts test so taxpayers could requalify for the small business taxpayer simplified methods, the proposed rules unfortunately appear to limit a taxpayer’s ability to make such changes on a frequent basis.  -- The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely.  The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.

The IRS and Treasury Department released proposed regulations to implement the small business taxpayer simplified accounting method provisions enacted under the Tax Cuts and Jobs Act (TCJA)

Accounting Methods

Proposed regulations issued to implement TCJA small business taxpayer simplified accounting methods

Authored by Michael Wronsky The Small Business Administration (SBA) recently released a procedural notice that outlines the requirements Paycheck Protection Program (PPP) loan borrowers must follow when closing a change of ownership transaction. The notice defines a change in ownership for these purposes, stipulates when a transaction requires SBA approval, clarifies that the borrower remains responsible for all obligations under the loan and the related compliance requirements, and provides procedures to follow when both parties to a transaction have outstanding PPP loans.  Change in ownership defined A change in ownership is deemed to occur when a PPP borrower:  Sells or transfers 20% or more of its common stock or other ownership interest, including to an affiliate or existing owner (all transactions post-PPP loan approval must be measured in the aggregate in determining whether the 20% threshold has been met),   Sells or transfers 50% or more of its assets, measured by fair market value (as above, all post-loan approval transactions must be measured in the aggregate), or  Merges with or into another entity. General requirements and SBA approval procedures Before closing on any of the above-described transactions, the PPP borrower must notify its lender in writing and provide a copy of the proposed agreements and any other related documentation. The subsequent approval process varies, depending on the circumstances of the borrower and the proposed transaction. Neither the lender nor the SBA will place any restrictions on the transaction if prior to closing, the borrower repaid the loan in full, or the forgiveness process has been completed and the lender has received funds from the SBA, accordingly (or additionally from the borrower in the case of partial forgiveness). If the PPP loan has not been settled, the lender can approve the transaction without approval from the SBA in the following instances: If the transaction is a sale or transfer of common stock or other ownership interest, or as a merger:
– If the sale or transfer is of 50% ownership or less, or
– The borrower completes a forgiveness application and remits it along with the supporting documentation, and an interest-bearing escrow   account is established with the lender in the amount of any unpaid proceeds.  If the transaction is an asset sale, the borrower must similarly complete a forgiveness application and establish an escrow account as described above.  Any change of ownership transaction not described above must be approved by the SBA before it can be effected. The lender must submit the approval request along with certain information, including the reason the borrower cannot satisfy the loan or establish an escrow account, a copy of the executed PPP note and the details of the transaction. The SBA will approve or deny the transaction within 60 calendar days from when it receives the request.  Continued responsibilities of the borrower After a change of ownership transaction closes, the PPP loan borrower remains responsible for:  The performance of all loan obligations, The certifications made pursuant to the loan application, Obtaining, preparing and retaining all required PPP loan forms and supporting documentation, and remitting to the lender or SBA upon request, and Compliance with all other applicable PPP requirements.  When both parties have outstanding PPP loans Broadly, in such instances, each party is responsible for segregating and delineating funds and expenses attributable to their respective PPP loans and must submit documentation to demonstrate compliance with the program as otherwise required. In the case of a merger, the successor entity bears these responsibilities. It is unclear whether the activities of one entity would impair the ability of the other to have its loan forgiven, or have a bearing on the deductibility of the associated expenses.  We encourage you to reach out to your Baker Tilly advisors with questions on how any of the above may affect your situation.   
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.

Paycheck Protection Program loan borrowers have new requirements when they make a change in ownership transaction thanks to a new procedural notice issued by the Small Business Administration.

SBA provides guidance on M&A transactions and PPP loan compliance 

Authored by Michael Wronsky Late last week, the Department of Treasury (Treasury) and Small Business Administration (SBA) jointly announced that borrowers of Paycheck Protection Program (PPP) loans of $50,000 or less (to include self-employed borrowers) are eligible for a streamlined loan forgiveness application process. Pursuant to an interim final rule, such borrowers can apply using a new pared-down SBA Form 3508S and will not need to reduce their forgiveness amount for any reductions in employee headcounts or salaries.  The application still requires the borrower make certain certifications to the accuracy of the information reported and submit documentation to support the use of the loan proceeds was for eligible costs. Borrowers who together with their affiliates (as determined under SBA rules) received loans of $2 million or more are ineligible to use the streamlined application. For example, if an entity has a loan of $50,000 and its parent corporation has a loan of $1.95 million, the former would not be able to use Form 3508S to apply for loan forgiveness. Treasury and the SBA cited the need to relieve the compliance burden on both borrowers and lenders by affording them the use of this comparatively straightforward process for determining forgiveness of “de minimis” loans.  Form 3508S and its accompanying instructions are posted on the SBA’s website.  Please contact your Baker Tilly advisor regarding how the above may affect your situation.
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.

The Treasury Department and the Small Business Administration introduced a streamlined loan forgiveness application process for borrowers of Paycheck Protection Program loans of $50,000 or less.

Streamlined forgiveness application for PPP loans up to $50,000

Authored by Paul Dillon, Michelle Hobbs and Michael Wronsky The Small Business Administration (SBA) released an interim final rule covering Paycheck Protection Program (PPP) loan forgiveness attributable to owner-employee compensation and certain nonpayroll costs. Specifically, the guidance provides a 5% threshold for determining C and S corporation employee ownership and adds potentially significant limitations on amounts eligible for forgiveness relating to rent and lease arrangements.  Key takeaways C and S corporation owner-employees Compensation paid to employees with less than a 5% ownership stake in a C or S corporation will not be subject to the more stringent forgiveness limitations. Since Congress did not intend windfalls to owners applying for PPP loans, previous guidance placed additional limits on business owner pay. The SBA explains this new 5% exception is to prevent the more strict limitations from applying to compensation of “owner-employees who have no meaningful ability to influence decisions over how loan proceeds are allocated.”  Whether this exception also applies to noncash compensation paid to such owner-employees is unknown. Pursuant to a previous interim rule, payments for noncash compensation are not forgivable if included in the owner-employee’s wages (as a matter of general tax principles). For example, health insurance premiums paid on behalf of an S corporation employee would be included in their wages if their ownership stake in the business was greater than 2% and, thus, these premiums would not be eligible for forgiveness. We expect further guidance to explain whether the exception applies solely to cash compensation. Nonpayroll costs attributable to borrower’s tenant or subtenant not forgivable PPP loan forgiveness applications cannot include costs attributable to tenants or subtenants of the borrower. To illustrate, the rule uses an example: a PPP borrower rents office space for $10,000 per month and subleases a portion to another business for $2,500 per month. In this instance, forgiveness for the borrower’s rent expense is limited to $7,500. This limitation would also apply to any mortgage interest or utilities expense attributable to the subtenant. Finally, loan forgiveness may not include household expenses associated with home-based businesses. Rent and mortgage interest payments to a related party Rent or lease payments to a related-party landlord can be forgiven. However, eligible amounts cannot exceed the amount of mortgage interest owed on the property attributable to the rented space during the covered period. This can be particularly problematic as some businesses rent from related-party owners that do not have a mortgage on the property.  For these purposes, the rule considers any common ownership between the business and the property owner as constituting a related party, with no de minimis exception. Conversely, mortgage interest paid to a related party is not eligible for forgiveness. The SBA rationalizes that the PPP is intended to cover certain nonpayroll-related payments owed to third parties and should not apply to payments that arise merely due to how the business is structured. This appears to be the case whether the common ownership is 1% or 100%, although it is not certain this is the intended result. We are hopeful clarifying guidance on this, as well as the owner-employee noncash compensation issue, will be is forthcoming ahead of when 24-week covered periods will begin expiring in September.  Expenses funded by forgiven loan proceeds remain nondeductible As a reminder, while Congress continues to consider the issue, expenses related to any loan forgiveness remain nondeductible for federal tax purposes. It is unclear whether this will be addressed when lawmakers return from their August recess.  We encourage you to reach out to your Baker Tilly tax advisor to discuss how the above may affect your tax situation.
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.

The Small Business Administration released guidance related to the Paycheck Protection Program’s loan forgiveness limitations for owner-employees and nonpayroll costs.

New PPP guidance addresses owner-employee compensation, nonpayroll costs

Authored by Paul Dillon, Michelle Hobbs and Michael Wronsky On Aug. 8, 2020, the president declared a payroll tax holiday via a presidential memorandum. The memorandum directs the Department of Treasury (Treasury) to exercise its authority to temporarily suspend the withholding, deposit and payment of some employees’ share of the payroll tax. The suspension is effective for taxes due on wages paid between Sept. 1, 2020, and Dec. 31, 2020.  Critical details surrounding the holiday remain outstanding, and guidance from Treasury is needed. However, in the interim, this tax alert highlights the minimal information available and the significant questions and issues that must be addressed.  This payroll tax holiday is essentially a loan that will need to be repaid (likely through additional withholdings from employee paychecks in 2021), unless Congress acts. It is not a full relief of the payroll tax as was enacted in 2009 following the financial crisis. To date, neither chamber of Congress seems inclined to enact similar legislation. Accordingly, we strongly recommend against acting to utilize this deferral in the absence of guidance and clarification from Treasury.  Key takeaways Employer participation is optional. Treasury Secretary Steven Mnuchin informally remarked on Aug. 12 that employers would not be required to suspend withholding from employee salaries and can continue to withhold and remit payroll taxes as usual. It is unclear whether employers will have the authority to allow individual employees to opt in or out of any payroll tax holiday. Not all employees qualify. The memorandum provides the deferral for employees whose wages or compensation “payable during any bi-weekly pay period generally is less than $4,000, calculated on a pre-tax basis,” which equates to a $104,000 annual pre-tax salary. Employers must continue to withhold for employees earning above this threshold.  The taxes are still owed. The memorandum strictly defers payment; the payroll taxes must be paid after Jan. 1, 2021. This could create hardships for employers in ensuring they can sufficiently withhold in the next year. Further, repayment of four months’ worth of deferred taxes could create significant economic hardships for lower-income taxpayers, materially reducing or eliminating paychecks likely beginning in January (depending on the employee’s compensation level and amount deferred). Outright forgiveness of these liabilities would require action by Congress, but a payroll tax holiday has been spurned by lawmakers on both sides of the aisle during recent economic stimulus negotiations. Program creates potential compliance issues. It is unclear whether an employer would still be responsible for remitting an employee’s deferred taxes in the event the employee leaves employment before they become due. Further, if that employee takes a new job, their new employer may not have the necessary documentation or information to determine whether the employee is still eligible for deferral.  Memorandum constitutionality is questionable. It does not appear that the president has the authority under Article I, Section 8 of the Constitution to defer, implement or set tax rates. In addition, existing IRS regulations appear to prohibit any deferral of payroll taxes, which may preclude Treasury from unilaterally allowing a payroll tax holiday.  We anticipate Treasury will release guidance on the presidential memorandum prior to or shortly after the Sept. 1, 2020, effective date. In the meantime, expect this to be an evolving issue and look for additional updates from Baker Tilly as warranted. Please contact your Baker Tilly tax advisor with questions on how the above affects your tax situation. 
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.

A presidential memorandum declaring a payroll tax holiday is raising many questions, including if it’s even constitutional, but if it is, employers could stop withholding employee payroll taxes starting Sept. 1, 2020. 

President’s payroll tax holiday generates questions

Authored by Timothy Kosiek and Christopher DeMarco The small business owner's guide to the CARES Act For borrowers with a straightforward PPP loan compliance environment, we have developed a self-service, Excel-based loan forgiveness calculator. But if your situation is more complex, or you have limited staffing available to support the loan requirements, we can provide an automated approach to forecasting eligible spend, monitoring specific payroll exceptions, and managing compliance with final documentation requirements.
Business owners have been strongly affected by COVID-19 and are left with many questions. The programs and initiatives in the Coronavirus Aid, Relief, and Economic Security (CARES) Act passed by Congress are intended to assist them in overcoming the current challenges. Baker Tilly developed the below FAQs to guide business owners as well as certain not-for-profits and other employers during this uncertain time.  NOTICE: Baker Tilly is providing updated information as it becomes available. Due to the nature of the emerging and rapidly evolving information from government and non-government relief programs, some requirements and offerings may change before they are listed here. Please consult with your loan officer for the most current details. Paycheck Protection Program (PPP) loans The program provides cash-flow assistance through 100% federally guaranteed loans to employers who maintain their payroll during this emergency. If employers maintain their payroll, the loans are forgiven up to the full principal amount of qualifying loans guaranteed under the PPP, which would help your workers remain employed, as well as help your small businesses and our economy to snap back quicker after the crisis.  PPP has a host of attractive features, such as forgiveness of up to eight weeks of payroll based on employee retention and salary levels, no SBA fees and at least six months of deferral with maximum deferrals of up to a year. Small businesses and other eligible entities will be able to apply if they were harmed by COVID-19 between Feb. 15, 2020, and June 30, 2020. This program would be retroactive to Feb. 15, 2020, to help bring workers who may have already been laid off back onto payrolls.  View the PPP application Expand the section(s) below to view the FAQ.
Baker Tilly COVID-19 support During this uncertain time, Baker Tilly is ready to help you with practical advice on informing and supporting your employees as well as keeping your business running. 
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.

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Paycheck Protection Program (PPP) FAQ

Video Watch our complimentary on-demand webinar for a discussion and Q&A with special guest Anirban Basu, chairman & CEO of Sage Policy Group, Inc. and Monica Modi Dalwadi, Baker Tilly’s managing partner of the D.C. metro region. In this entertaining and informative webinar, these two leaders discussed the current economic circumstances and the post-recovery outlook. Anirban answered pressing questions and gave his thoughts on economic hot topics.  Questions discussed:  What does it take for the economy to recover to January 2020 levels, by when will that occur, and what shaped recovery do you predict? What do you see as the single-most-important thing that businesses can/should do to help get the economy restarted? What are some things we shouldn’t be doing for the next 12-24 months? Why do you think the stock market doing better than might be expected at this time? Where is the inflation?  Can you comment on the intersection of the timing of economic reopening and political climate of an election year? If there is a change in the White House how do you see it affecting the markets? What is the economic impact of the dramatic decline in live sports? How do you see the US economy handling the backtracking of the easing of COVID-19 restrictions? Do you think the downward unemployment trend will reverse as cases spike? Do you foresee a complete change in the landscape for cities with the potential emptying of office space and possible flow of people to suburbs? What potential repurposing can be done for high rises that are emptying? SPEAKERS: Monica Modi Dalwadi, Managing Partner, Baker Tilly Anirban Basu, Chairman & CEO, Sage Policy Group, Inc.

Economist reflects on the pandemic’s impact and getting back on track Companies that manage both their cash and their talent well are in the best position to bounce back strongly from the pandemic-affected economy, according to Anirban Basu, chairman and CEO of Sage Policy Group. Stock market The pandemic has driven some big winners on the stock market – Amazon, Apple, Walmart and Zoom – which in turn has driven the stock market higher. With interest rates so low, where else can investors put their money? With most professional and college sports closed, some think that the stock market has done so well because people can’t bet on sports. Plus, no one wants to miss out on the rally when the vaccine is announced.  Economic reopening and politics Since the initial pandemic outbreak was generally in cities in the North, generally controlled by Democrats, many states in the South saw this as a northern problem. When the first COVID related stimulus packages were being debated in March, there was some discussion along the lines of “Do we really want to bail out Illinois and New Jersey?” The Northern states then flattened their infection curve successfully and now cities in the South and Southwest have outbreaks. As some of these states consider rolling back their reopenings, the politics of the next stimulus package has changed.  Unemployment The labor participation rate has slumped in the last few months after being stable for several years even as baby boomers have started to retire. The economy had been so strong it was drawing people into the workforce. The recently employed who have become unemployed die to the pandemic may drop out the labor market altogether. Shifting immigration policy and a lower birth rate indicates not much labor growth in the future. In addition, productivity growth has dropped. This combination of lower labor force participation and lower productivity leads to a slower growing economy. Recession The chances of a double-dip recession are very high. Prior to the pandemic, there were vulnerabilities in the economy. Not all parts of the economy, such as agriculture, had participated in the expansion. Manufacturing had several months of recession in 2019, and the auto industry peaked in 2016. Add to that the ongoing trade wars. The biggest vulnerability, however, is preexisting indebtedness by corporations, households and the U.S. government. As the existing stimulus (such as one-time stimulus checks and extra unemployment benefits) run out, the preexisting vulnerabilities will rise up and cause a double-dip recession. Mortgages Mortgage delinquencies are high because people lost jobs and people are conserving cash. On the other hand, mortgage applications are quite strong, which can be attributed to the combination of people wanting to social distance, millennials coming of age, low mortgage rates and the need for a home office. Commercial real estate There is a commercial real estate crisis in the U.S.: empty office suites, abandoned storefronts, shuttered restaurants and the increasing awareness by many workers that they can work remotely and be productive. During the expansion, many businesses moved from Class B to Class A and A+ office space. This was partially to stroke the ego of the CEO showing off a nicer space, but also because businesses could afford the space and it was an effective recruitment tool for new talent. Now, with unemployment high and the economy uncertain, many companies may consider a move back to a Class B, suburban setting. National debt The national debt isn’t a crisis until the bond market says it is, and it isn’t saying that yet. Maybe the debt won’t be a crisis until 2026, when the Medicare trust fund is estimated to become insolvent. At that point, Congress may have to pass legislation to push closer to a balanced budget.  Getting back on track It will take a vaccine – or some type of efficacious treatment – to get the economy back on track. Behavior change, like mask wearing and social distancing, will not be enough. Even without a vaccine, the U.S. was on track for a V-shaped recovery, with May and June job growth accounting for about a third of the jobs lost in March and April. The recovery plateaued, however, as local economies opened up.   In the meantime, businesses have to conserve cash and hold onto their top talent. Economies grow when companies deploy cash aggressively and hire people aggressively. Because when the recovery starts, you will need that top talent to leverage fully the expansion to come. Good performance comes from great leadership, and great leaders working together. The hope is that the radical center can emerge and people can talk across the aisles, start to make some good policy and think of the role of the U.S. in the global economy and figure out how to train a 21st century workforce. For more information on this topic, or to learn how Baker Tilly specialists can help, contact our team. 

Watch Baker Tilly’s complimentary on-demand webinar on the current economic circumstances and the post-recovery outlook with special guest Anirban Basu, chairman & CEO of Sage Policy Group.

EconTalk with Anirban Basu: a 30-minute economic fireside chat 

Wading through the tidal wave of information related to COVID-19 relief efforts to understand if and how your organization is eligible for these benefits can be overwhelming. Baker Tilly has developed three decision trees to help you determine eligibility for the following mandatory and optional relief efforts through the Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid Relief and Economic Security (CARES) Act: FFCRA - This mandated federal relief must be made available by applicable employers from April 1, 2020 through Dec. 31, 2020. The decision tree can help you determine if you qualify and what benefits are owed your employees when you do. CARES Act: Employee Retention Credits – The decision tree can help you determine if you qualify for these employee retention credits available to employers of any size (including tax-exempt organizations) whose business is financially impacted by COVID-19. It applies to wages paid beginning March 13, 2020 and through Dec. 31, 2020. CARES Act: SBA Paycheck Protection Loan Program – In the final decision tree we concentrate on the low interest (and sometimes forgivable) loan dollars available that can be applied to expenses incurred between Feb. 15, 2020 and Dec. 31, 2020 and help you determine if you qualify and if you should expect your application to be challenged or forgivable amount adjusted.
For more information on this topic or to learn how Baker Tilly specialists can help, contact our team.

Determine if and how your organization can use certain relief efforts from the Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief and Economic Security (CARES) Act.

FFCRA and CARES Act Decision Tree

Authored by Paul Dillon and Michael Wronsky Before recessing for the Fourth of July break, Congress passed an extension of the Paycheck Protection Program (PPP) for small businesses, which was set to close down Tuesday, June 30, with more than $130 billion in funding left over.  The extension to Aug. 8, 2020, was introduced in the Senate, where it passed by unanimous consent on Tuesday. The House also passed it unanimously on Wednesday night.  The Small Business Administration stopped accepting new applications at 11:59 p.m. Tuesday. More than 4.8 million loans totaling $520.6 billion had been approved as of June 30. Any remaining program funds would have had to be returned to Treasury, unless repurposed by Congress.  Please reach out to your Baker Tilly tax advisor to discuss how this may affect your tax situation.
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.

Both houses of Congress unanimously approved an extension of the Paycheck Protection Program (PPP) application deadline. Eligible small businesses now have until Aug. 8, 2020, to apply for a loan through the popular program. 

PPP application deadline extended by Congress

video The recently passed Paycheck Protection Program (PPP) Flexibility Act of 2020 amends the Coronavirus Aid, Relief, and Economic Security (CARES) Act and eases rules on how and when small businesses can use loans and still be eligible for forgiveness. With the program’s principal purpose being to help employers retain their employees on the payroll, these loans are designed to now cover payroll and related expenses paid or incurred during the 24-week period (recently updated from an eight-week period) that follows the date the loan proceeds are received, or from that date through Dec. 31, 2020, whichever is shorter. As a result, on June 17, the Small Business Administration (SBA) released two new versions of the application borrowers of a PPP loan must use to determine the amount of the loan that may be “forgiven” by their lender. There is a modified version of the full loan forgiveness application and a new, shorter “EZ” form that can be used by some borrowers.  Presenters Adam Goehring, Partner, Baker Tilly
Todd Bernhardt, Partner, Baker Tilly
Tim Kosiek, Partner, Baker Tilly Download the presentation Still have questions on PPP loans or need help with forgiveness calculations?  Connect with us for assistance. For more information on this topic, or to learn how Baker Tilly specialists can help,  contact our team.  

Join Baker Tilly for an overview of the new and modified PPP applications, as well as other key insights from the PPP Flexibility Act. 

PPP loan forgiveness update: changes from the Flexibility Act and new applications

The spread of COVID-19 continues to impact small and family businesses nationwide. 

With the unprecedented measures being taken to control the spread, many small and family businesses are being forced to temporarily close or significantly alter the way you do business.  It is more important than ever to understand the critical components of your business and prioritize action steps moving forward. 

Baker Tilly’s small and family business advisors are ready to stand by you and help you through this difficult time.  We understand you are dealing with staffing, cash flow, inventory, and loan agreements, among many other things.  Now is the time to take a look at your business’s critical operations and prioritize the steps you need to take to get through these difficult circumstances. 

We have developed a collection of resources to help you prioritize and navigate your next move.  From a 13-week cash flow analysis to strategies to reorganize your organization, our team will continue to keep you updated on the impacts to your business. 

Video: Accessing SBA loans through the CARES Act

Chris Anderson, Baker Tilly Managing Partner, sits down with Tim Kosiek, a partner in Baker Tilly's financial services group, to discuss how to access SBA loans through the CARES Act.

View the state and local government program matrix

What federal, state and local programs are now available to businesses impacted by COVID-19? Baker Tilly is maintaining an easy to use program guide. Check back often for new program information.

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The importance of cash flow during uncertain times

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COVID-19 resource center designed to protect and enhance the value of your organization

Baker Tilly has developed a comprehensive set of solutions that are readily available to assist qualifying businesses that have received, or will receive, loan proceeds that may be eligible for forgiveness under the PPP.

In association with the American Institute of Certified Public Accountants (AICPA), CPA.com and Biz2Credit, Baker Tilly launched a new tool to help businesses navigate the next round of the Paycheck Protection Program (PPP)