With the unprecedented measures being taken to control the spread of COVID-19, small businesses, artisans, ranchers and traditional healers have been some of the hardest hit by the effects of actions taken. Many tribal businesses and entrepreneurs have been forced to temporarily close or significantly alter the way they do business. Now more than ever before, it is crucial to provide support to these businesses through  business interruption grants, assistance with navigating complex federal relief programs and/or providing education on ways to alter their businesses in order to be successful in the new COVID-19 environment.  Baker Tilly’s tribal small business advisors are ready to stand by you and help you provide direct and indirect relief to these tribally owned small businesses that have been devastated by the pandemic. We understand the challenges that come with staffing, cash flow, inventory management and the cost of safely bringing customers back into the marketplace. Now is the time to take a look at resources available to support your tribe’s small businesses as a first step to getting on the path to economic recovery and future prosperity.  The following are a few of the funding programs that have been made available to small businesses as direct tribal set-asides.  In addition, several other non-set aside programs under previous or newly signed legislation are available to support tribal small businesses, such as: Paycheck Protection Program Restaurant revitalization fund Employee retention credit Recently, Baker Tilly completed the administration of a $30 million small business grant program for a tribal government using CARES Act dollars as the source of funding. This program was administered via an online portal application process to allow for tribal small businesses on reservations as well as across the country apply during the height of the pandemic.  Some highlights of this effort included the following: Development of a customized online portal for application receipt and supporting documentation upload Communications and training on program to tribal stakeholders Development of compliance requirements and associated compliance framework Staff augmentation for application review and follow-up  Grant payment and processing Issuance of Form 1099 to grant recipients Program closeout and audit preparation for tribal government’s external auditors
Contact us today to discuss how we can support your tribe’s small business recovery efforts.

Our tribal small business advisors are here to help you navigate the complex federal relief programs and help your small business be successful in the new COVID-19 environment.

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Supporting tribal small businesses through the COVID-19 pandemic

Over the past year, many government stimulus programs were enacted to help businesses and individuals combat the financial impact of the COVID-19 pandemic. Restaurants have been one of the hardest hit industry segments and should explore any and all avenues possible to subsidize efforts to keep the doors open and employees on the payroll. One of the subsidies enacted within the Coronavirus Aid, Relief, and Economic Security (CARES) Act back in March 2020 was the Employee Retention Credit (ERC). It was overshadowed by the Paycheck Protection Program (PPP) because the law at the time stated if your company received a PPP loan, it was not eligible to also claim the ERC. Therefore, many companies disregarded the ERC as the PPP loan was a more advantageous program. In December 2020 this dynamic changed. Under the Consolidated Appropriations Act, taxpayers are now able to receive a PPP loan and claim the ERC. What’s more, this change was made retroactive to all of 2020. This change of law, along with an easing of the eligibility requirements, opens the door for many restaurants to claim this valuable credit.  How is the credit determined in 2020? The credit is equal to 50% of qualified wages determined on an employee-by-employee basis and must be calculated separately for each quarter the company is eligible during 2020. The maximum wages allowed in 2020 for all quarters for each employee is $10,000, thus allowing for a maximum credit of $5,000 per employee. Eligible wages generally include payroll and employer paid health plan expenses. A company may not, however, claim the credit on wages that were paid using a PPP loan that was forgiven or wages that were used to determine other payroll tax credits such as WOTC and FFCRA credits. There are many detailed considerations and calculations, including interplay with PPP funds, which need to be made. Restaurants should consult with their tax advisor for assistance to maximize their ERC.
I got a PPP loan, how much will my credit be? As can be seen in the example, the credit available to restaurants can be a meaningful portion of total payroll for the year in addition to the PPP loan that was received. This is because of two traits common among many restaurants during 2020:  Government orders forced most restaurants to limit in-store dining throughout the majority of the year. In many cases, the restaurant business would therefore qualify for the ERC as being “partially suspended” for the duration of the order [1]. Since PPP loans were designed to cover only 2.5 months of wages, there are sufficient wages remaining to also claim the ERC.  Many restaurant employees earn less than $10,000 per year. Therefore, a high percentage of the business total payroll costs qualify for the credit.  What are the eligibility requirements? To qualify, businesses must meet one or more of certain eligibility requirements, including a substantial decline in gross receipts and being suspended by a government order due to COVID-19. While generally obtainable to restaurants, these requirements must be reviewed thoroughly with an advisor to ensure the business is eligible.  How do I claim the credit? The credit is a payroll tax credit and is claimed on Form 941. Because all Forms 941 have been filed for 2020, eligible companies will need to adjust their quarterly payroll reports using Form 941-X to claim the credit.   What’s the impact on my income taxes? You do not need to claim the credit received as taxable income. However, the business must reduce the wage deduction on their income tax return by the amount of the credit received. If your income tax returns have already been filed, an amendment would be necessary.   Is this credit available in 2021? Yes! In fact, the credit is even higher in 2021. Businesses may claim a credit equal to 70% of qualified wages and the wage limits resets each quarter. The result is a maximum of $7,000 per employee per quarter for all of 2021. So, an employer could claim $7,000 per quarter or up to $28,000 per employee if they are eligible for all four quarters in 2021.  Once an afterthought, the ERC is now a valuable benefit to many restaurant owners. Although it requires detailed record keeping and careful calculation, the reward can help sustain your operations. Contact Baker Tilly’s Employee Retention Credit advisors for further guidance.
Resources: [1] Eligibility requirements should be reviewed thoroughly.  Safe harbor tests on gross receipts and other metrics may also apply.

One of the subsidies enacted within the Coronavirus Aid, Relief, and Economic Security (CARES) Act back in March 2020 was the Employee Retention Credit (ERC). Read this article to see how the credit is determined for your restaurant and if you qualify for it in 2021.

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Sustain your restaurant operations with Employee Retention Credit

Authored by Michael Wronsky On March 25, 2021, Congress passed the PPP Extension Act of 2021 (the Act), which keeps the loan program open through June 30, 2021. It was set to close March 31. The loan application deadline is also extended, but only to May 31, 2021. President Biden is expected to sign the Act into law.   The extension gives borrowers more time to apply for the popular loan program designed to assist businesses with weathering the continued economic effects of the coronavirus pandemic. While the program was formally extended to June 30, the Act prohibits the Small Business Administration (SBA) from accepting new first- or second-draw loan applications during June. For the remainder of the month, the SBA is only to process applications it has received from lenders before June 1, 2021.   We encourage you to reach out to your Baker Tilly advisor regarding 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.

Congress passed legislation to keep the Paycheck Protection Program open until June 30, 2021, after it was set to close at the end of March. 

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Congress extends Paycheck Protection Program through June 30, 2021

The American Rescue Plan Act of 2021 (the Act) passed the U.S. Senate and the House of Representatives and is on its way to being signed into law by President Biden. Of the $1.9 trillion spending bill, $28.6 billion is designated for the Restaurant Revitalization Fund, which is based on the Real Economic Support That Acknowledges Unique Restaurant Assistance Needed To Survive (RESTAURANTS) Act of 2020, will provide relief for small and midsize restaurants. 
 
With the passage of this new legislation, restaurant operators need to understand their eligibility and the benefits provided to them. Similar to the Paycheck Protection Program (PPP) loans, the borrower is required to make a good faith certification that the uncertainty of the current economic conditions makes the grant necessary to support their ongoing operations. Additionally, the business cannot apply for a Shuttered Venue Operators Grant. The eligible businesses that can apply for a grant include: Restaurants Food stands/trucks/carts Caterers Bars/taverns or similar drinking establishments Brewpubs/tasting or tap rooms To qualify for funding, restaurants must not be part of an affiliated restaurant or restaurant group with more than 20 locations. Public companies also are not eligible. Food and drink entities with 20 locations or fewer will qualify for grants equal to the difference between their 2020 and 2019 revenue, with alternative calculations for entities not in business all of 2019 or 2020. The amount of pandemic-related revenue loss is reduced by any amounts received under the PPP loan program. The Act will provide up to $10 million in relief per entity and affiliated businesses (limited to $5 million per physical location). Grants received under this program are exempt from federal income tax, and expenses paid with the funds are deductible. The first 21 days of the grant period will prioritize providing funding to entities owned and controlled by women, veterans and socially and economically disadvantaged small businesses. 

The list of eligible expenses is long, allowing every restaurant to determine their biggest need and seek the appropriate funding. The types of eligible expenses include: Payroll, including paid sick leave  Mortgage principal and interest (but not prepayment of the mortgage) Rent and utilities Maintenance, including construction to accommodate outdoor seating Supplies including protective equipment and cleaning supplies Food and beverages  Covered supplier costs and operational expenses Other costs determined by the administrator to be essential Baker Tilly professionals can help you take advantage of timely and important tax credits for the restaurant industry. 


The fifth federal COVID-19 relief bill is moving on to be signed by the president. The massive bill includes extensions to the employee retention credit, unemployment benefits, PPP qualification parameters among other programs, and it establishes a revitalization fund for restaurants. Read this article to learn more about how the Restaurant Revitalization Fund impacts restaurants. 

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Preparing your restaurant for the American Rescue Plan Act of 2021

Authored by Paul Dillon, Christine Faris, Michelle Hobbs, Mike Schiavo and Michael Wronsky Both houses of Congress have now passed the American Rescue Plan Act of 2021 (the Act). In the process, the Senate made several substantive changes to the version the House passed at the end of February. The Act now heads to the White House where President Biden is expected to sign it into law prior to March 14, when unemployment benefits are set to expire.  Notable changes by the Senate include expansion of the employee retention credit (ERC), additional restrictions on executive compensation deduction limitations for public companies, tax exclusions for a portion of unemployment benefits, and a faster phaseout for the income threshold for individual tax rebates.  Key provisions Employee retention credit The ERC is extended to apply to qualified wages paid by eligible employers through Dec. 31, 2021. Beginning after June 30, 2021, the credit is expanded to apply to recovery startup businesses, defined as employers that began operations after Feb. 15, 2020, with average gross receipts of $1 million or less, and have not experienced a full or partial suspension or significant decline in gross receipts for the calendar quarter. Additionally, “severely financially distressed” employers, with gross receipts for a calendar quarter that have declined by more than 90% from the same calendar quarter in 2019, can claim the ERC on any wages paid to employees during the calendar quarter. The credit also becomes refundable against the Medicare tax after June 30, 2021. Paycheck Protection Program The Act further expands the PPP to include certain internet publishing organizations (NAICS code 519130) and increases program funding another $7.25 billion. The Act also creates new eligibility for certain not-for-profit organizations with not more than 300 employees and that spend less than $1 million or 15% of receipts and expenses on lobbying activities. In addition, charitable organizations can be eligible for PPP loans if they employ 500 or fewer employees per physical location.  Individual tax rebates The Act provides rebate checks of $1,400 per individual (including dependents) based on their adjusted gross income (AGI) reported on their 2019 tax return (or 2020 return, if filed). However, the final version accelerates the phase-out range of taxpayers no longer eligible for the direct payments.   Eligible individuals mean any individual other than nonresident aliens or individuals who are a dependent of another taxpayer at the beginning of the year. Trusts and estates are also ineligible. Restaurant Revitalization Fund The Act establishes the Restaurant Revitalization Fund. Through this program, the Small Business Administration (SBA) will provide grants to restaurants, food trucks, bars, brewpubs and other eligible entities to cover payroll, rent, utilities, food costs and other expenses essential to operations. Entities with more than 20 locations, publicly traded companies and entities that have applications pending under the grants for shuttered venue operators program are not eligible. Of the $28.6 billion appropriated for this program, $5 billion is earmarked for businesses with gross receipts of $500,000 or less. Further, during the initial 21-day period of the program, the Act directs the SBA to prioritize grants to small businesses owned by women, veterans, and socially and economically disadvantaged small businesses. Grants received under this program are exempt from federal income tax, and expenses paid with the funds are deductible.  Child tax credit and dependent care benefits enhancements The Act increases the child tax credit to $3,000 per qualifying child ($3,600 in the case of children under the age of 6 as of the close of the tax year) and makes it refundable for 2021. The increased credit over the $2,000 available under prior law would phase out at AGI levels of $150,000 for joint filers, $112,500 for head of household and $75,000 for all other taxpayers. The AGI phase-out levels for the $2,000 previously available credit remain the same ($400,000 for joint filers, $200,000 for all others). The Act additionally instructs the Treasury Department to establish a program under which taxpayers will receive periodic advance payments that in total equal 50% of the estimated credit they are entitled for the year. Paid leave payroll tax credits extensions Originally provided for by the Families First Coronavirus Response Act, the payroll tax credits for providing paid sick and family leave are extended through Sept. 30, 2021. Additionally, effective for calendar quarters beginning after March 31, 2021, the limit on wages that can be taken into account for computing the family leave credit with respect to all calendar quarters in total increases to $12,000 from $10,000, and the 10-day limit on the emergency paid sick leave credit resets. In other words, if, as of the end of the first calendar quarter of 2021, an employer reaches both of these respective limits for a given employee, the employer would be able to claim an additional family leave credit up to $2,000 of qualified family leave wages plus an emergency paid sick leave credit up to 10 days for qualified sick leave wages paid to that same employee during the second and third quarters of 2021.  Taxability of student loan forgiveness Student loans forgiven after Dec. 31, 2020, and before Jan. 1, 2026, can be excluded from gross income except in certain circumstances. The Act does not itself include student debt forgiveness, but it could be a sign that potential legislation may be on the horizon. Unemployment benefits The federal unemployment subsidy remains at $300 per week and is further extended through Sept. 6, 2021. For taxpayers with AGI of less than $150,000, the first $10,200 of unemployment benefits received in 2020 will not be subject to income tax (in the case of a joint return, the first $10,200 received by each spouse). Election to allocate interest expense worldwide repealed The Act repeals a provision allowing U.S. affiliated groups to elect to allocate and apportion interest expense on a worldwide basis to determine taxable income applied to foreign tax credit limitations. Section 864(f) was enacted as part of the American Jobs Creation Act of 2004, but its implementation has been deferred several times. This section is relevant in computing the foreign tax credit limitation, which is based on the amount of taxable income from foreign sources and the allocation and apportionment of deductions between U.S.- and foreign-source gross income from different limitation categories. Allocating and apportioning interest expense on a worldwide basis would generally result in increasing the ability to use foreign tax credits. Executive compensation deductibility limitations  The Act expands the executive compensation deduction, which is limited to $1 million each for the highest paid executives at public companies. The limitation will now apply to the CEO, CFO and the next five highest-paid employees. Currently, this limit applies to the CEO, CFO and the top three highest-paid employees.  The purpose of this provision is to offset the costs of providing funding relief to financially struggling multiemployer and single-employer pension plans as described below. It is effective for tax years beginning after 2026.  Excess business loss limitation First enacted in the Tax Cuts and Jobs Act (TCJA), the limitation of certain current trade or business losses of noncorporate taxpayers was extended through 2026. Indexed for inflation, the TCJA placed a $250,000 ($500,000 for married filing joint taxpayers) limit on using these losses originally through 2025. The Coronavirus Aid, Relief, and Economic Security (CARES) Act temporarily suspended the limitation for the 2018, 2019 and 2020 tax years. Pension plan relief The Act contains provisions to assist troubled multiemployer pension plans as well as single-employer pension plans. Multiemployer plans – The Act creates a special program to allow the Pension Benefit Guaranty Corporation (PBGC) upon application by plan sponsors to make direct cash payments to financially troubled pension plans to ensure they remain solvent. Applications must be submitted by Dec. 31, 2025. Single-employer plans – The Act provides that shortfall amortization bases for plan years beginning in 2019 and 2020 would be reduced to zero. For plan years beginning after Dec. 31, 2019, all shortfalls would be amortized over 15 years rather than seven years under current law. Cost-of-living adjustment freeze for qualified retirement plans The Act contains provisions to freeze cost-of-living adjustments for certain annual limitations beginning after Dec. 31, 2030. The 2030 dollar amount would remain in effect until further notice. Defined benefit plans – The limitation on annual benefits Defined contribution plans – The limitation on contributions and other additions Compensation – The limitation on the annual compensation taken into account under the plan  The freeze on the cost-of-living adjustments described above would not apply in the case of a plan maintained by one or more collective bargaining agreements.  The freeze on cost-of-living adjustments applicable to benefits, contributions and compensation is designed to: Raise revenue and help offset the cost of the multiemployer plan reforms. Fill a budget hole in the 10-year scoring window. The freeze may also serve to foreshadow future legislative proposals to cut back on tax incentives for retirement plans as revenue raisers to offset the cost of other policy proposals. Expanded 1099 reporting The Act expands the 1099 reporting threshold for third-party settlement organizations to $600 annually with no fixed number of transactions from $20,000 and 200 transactions per payee under current law. This provision would be effective for transactions after Dec. 31, 2021. This provision is intended to capture more of the money earned by independent contractors in so-called “gig economy” jobs. This will primarily affect companies like eBay, Airbnb, Amazon, but the final rules and ensuing guidance will need to be reviewed to see how expansive this change may be.   We encourage you to reach out to your Baker Tilly adviser regarding how any of 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 fifth federal COVID-19 relief bill is moving on to be signed by the president. The massive bill includes extensions to the employee retention credit, unemployment benefits, PPP qualification parameters among other programs, and it establishes a revitalization fund for restaurants.

Congress passes latest round of stimulus legislation

Authored by Paul Dillon, Pat Balthazor and Michael Wronsky On March 3, 2021, the Small Business Administration (SBA) released additional Paycheck Protection Program (PPP) loan guidance, including a new interim final rule (IFR), frequently asked questions (FAQ) and updated loan application forms. The guidance accounts for changes made to the PPP by the Consolidated Appropriations Act, 2021 (CAA) and incorporates directives by the Biden administration to increase the maximum loan amounts available to Form 1040 Schedule C filers and to allow applicants and entities owned by individuals who have been convicted of nonfraud-related felonies or are delinquent or have defaulted on their student loans to be eligible for PPP loans.  This tax alert is a preliminary overview of critical points covered by the guidance. Baker Tilly continues to analyze the content in greater detail and will issue additional communications as warranted. Key takeaways  IFR on loan calculation amount and eligibility  A Form 1040 Schedule C filer’s maximum loan amount was previously calculated based on its net profit reported on Schedule C line 31 (in essence, deemed owner compensation), plus payroll costs, if the proprietor had employees. The deemed owner compensation component, redefined as “proprietor expenses,” can now be calculated using either line 31 or gross income as reported on Schedule C line 7. Proprietors with employees must reduce the gross income figure by any expenses for employee benefit programs (line 14), pension and profit-sharing plans (line 19) and wages (line 26), to avoid double counting as these amounts constitute payroll costs that factor into the maximum loan amount. To mitigate the risk of increased fraud that could arise from use of the gross income methodology, borrowers of loans calculated using gross income of more than $150,000 will not automatically be deemed to have made the loan necessity certification in good faith, and such certification may be subject to SBA review.  The SBA will review a sample of first-draw loans applied for based on Schedule C gross income, which will require the use of new application Form 2483-C (second-draw borrowers will use Form 2483-SD-C) to determine whether loans computed with gross income amounts of $150,000 or more were applied for in compliance with loan eligibility criteria, including the good-faith certification. The sample size is not specified in the IFR. The IFR removes certain restrictions from loan eligibility as directed by the Biden administration in February; specifically, applicants or owners of applicants who have been convicted of nonfraud-related felonies (fraud, bribery, embezzlement or making a false statement in a loan application or application for federal assistance) or are delinquent or have defaulted on their student loans are now eligible for the PPP. FAQ FAQ No. 46: Revised to provide that as second-draw borrowers must demonstrate a 25% reduction in gross receipts, they be automatically deemed to have made the good-faith certification that their loan is necessary. It additionally clarifies the requirement that all loans greater than $2 million are subject to SBA review for compliance applies only to first-draw loans.   FAQ Nos. 57 and 58: Defines lobbying activities for purposes of determining whether section 501(c)(6) and destination marketing organizations are eligible for loans, and provide that loan proceeds cannot be used for lobbying activities or expenditures, by referencing section 3 of the Lobbying Disclosure Act of 1995 (2 U.S.C. 1602).   FAQ Nos. 59 and 60: Clarify that if a first-draw loan borrower files for bankruptcy protection after disbursement of their loan, they are still eligible for forgiveness provided other eligibility requirements are met. However, the borrower will not be eligible for a second-draw loan pursuant to the prohibition against applicants being presently involved in any bankruptcy proceedings.   FAQ Nos. 61 and 62: Provide that if a second-draw applicant uses or will have used all of its first-draw loan proceeds on eligible expenses, but fails to meet the requirement that 60% of loan proceeds be used on payroll costs, it will still be eligible for a second-draw loan (though its first-draw maximum forgiveness amount will be reduced). Additionally, a first-draw borrower will not be rendered ineligible for a second-draw loan on account of receiving only partial loan forgiveness (i.e., for failure to meet the aforementioned 60% requirement or due to salary or headcount reductions). FAQ No. 63: Confirms that SBA size and alternate size standards are not available for determining eligibility for second-draw loans. FAQ No. 65: Confirms that borrowers are eligible for the employee retention credit, but cannot request forgiveness for payroll costs that were used to claim the credit.  First- and second-draw loan application forms – Forms 2483 and 2483-SD, respectively, are revised to account for the removal of certain restrictions on borrower eligibility as ordered by the Biden administration.  First- and second-draw loan application forms for Schedule C filers using gross income – Forms 2483-C and 2483-SD-C, respectively, are new for use by applicants using gross income as reported on Schedule C, discussed above. We encourage you to reach out to your Baker Tilly advisor with questions on how the above may affect your tax situation.

Newly released Paycheck Protection Program guidance includes a new interim final rule, an FAQ and updated loan application forms, reflecting changes that were made in December’s relief bill as well as directives from the Biden administration.

SBA releases new PPP IFR, FAQ and loan applications 

Authored by Paul Dillon, Christine Faris, Michael Wronsky and Devin Tenney On March 1, 2021, the IRS released Notice 2021-20, providing long-awaited guidance on the retroactive changes made to the employee retention credit (ERC) by the Consolidated Appropriations Act, 2021 (CAA). The notice is mainly in the form of 71 frequently asked questions (FAQ), most of which are similar to the ERC FAQ the IRS previously published on its website. Specifically, the notice outlines how Paycheck Protection Program (PPP) loan borrowers who have already applied for forgiveness can claim the ERC. Broadly, the ERC can be retroactively claimed for qualified wages reported on a forgiveness application that exceed the total reported payroll and nonpayroll costs needed to support the forgiven amount of the loan.  Further, the notice adopts the definition of “full-time employee,” initially provided by the IRS FAQ for use in determining an employer’s headcount to assess whether it is a large or small employer, without requiring either seasonal workers or part-time employees be included in the computation. It also defines key terms used in determining whether an employer is eligible under the suspension test. This tax alert is a preliminary overview of critical points covered by the notice. Baker Tilly will provide additional information in the coming weeks and months as we analyze the guidance in detail. Key takeaways The notice retains the FAQ format of the preexisting IRS guidance: updating it for retroactive changes made to the ERC by the CAA and making additional clarifications. The notice does not cover CAA updates to the credit that apply exclusively to 2021. While the guidance relies on the FAQ format, by being incorporated in a notice and formally published in the Internal Revenue Bulletin, it allows taxpayers to rely on the contents for penalty protection. Determining PPP loan recipient’s qualified wages: A PPP loan recipient is deemed to have made an election under the Coronavirus Aid, Relief, and Economic Security (CARES) Act to exclude qualified wages from its ERC determination for all wages that are reported on an application for forgiveness — up to the amount of total payroll and nonpayroll costs reported on the application needed to support the forgiven amount. The ERC can be claimed on qualified wages in excess of this figure, but not on any amounts for which the election is deemed made (unless forgiveness is ultimately denied). As stated in the notice, the IRS’ position is effectively that an employer “cannot reduce the deemed election by the amount of the other eligible expenses that it could have reported on its PPP Loan Forgiveness Application” (emphasis added); a potentially damaging blow to borrowers that have already filed a forgiveness application.  The borrower is not considered to have made the election for any qualified wages paid that are not included in payroll costs reported on the forgiveness application.  Example 1: Employer X received a PPP loan of $200,000 and is an eligible employer for ERC purposes who paid $250,000 in qualified wages during the second and third quarter of 2020 (which overlapped with X’s covered period). X reported $250,000 of payroll costs on its loan forgiveness application, which was ultimately approved by the Small Business Administration (SBA) in full. X is deemed to have made an election to exclude $200,000 of qualified wages from its ERC determination (the maximum reported payroll costs needed to support the $200,000 forgiven amount), and can claim the ERC for the remaining $50,000 of qualified wages in 2020’s second and third quarters. Example 2: Same facts as Example 1, except X additionally incurred and reported $80,000 of eligible nonpayroll costs on its forgiveness application. In this instance, X is deemed to have made an election to exclude $120,000 of qualified wages ($200,000 PPP loan principal * 60% minimum payroll cost requirement), the minimum amount of payroll costs together with the reported nonpayroll costs needed to support the $200,000 of forgiveness. X can therefore claim the ERC on $130,000 of qualified wages ($250,000 total, less $120,000 in reported payroll costs needed to support forgiven amount) in the second and third quarters of 2020. Example 3: Same facts as Example 2, except X did not report the $80,000 of eligible nonpayroll costs on its forgiveness application, despite incurring them during its covered period. As such, X is deemed to have elected to exclude $200,000 of qualified wages from its ERC determination (the maximum reported payroll costs needed to support the $200,000 forgiven amount) and can claim the ERC for the remaining $50,000 of qualified wages in 2020’s second and third quarters. FAQ definition of “full-time employee”: For purposes of the 2020 credit, an employer is considered a large employer if it had more than 100 average full-time employees in 2019 (for purposes of the 2021 credit, the 100 threshold is increased to 500). The notice retains the same definition of full-time employee provided by the original IRS FAQ for this purpose, which appears to limit the employees that need to be included in the calculation to those who performed an average of at least 30 hours of service per week or 130 hours of service in the month. References to part-time employees and seasonal workers remain absent from the definition.  “More than nominal portion” of employer’s operations defined: An essential business can be an eligible employer under the suspension test if based on the facts and circumstances that “more than a nominal portion” of its operations have been suspended by a government order. Per Q&A No. 11, a portion of an employer’s operations will be considered more than nominal for the quarter in which the employer is testing eligibility if either: The gross receipts from that portion of the business make up at least 10% of the employer’s total gross receipts (both determined using the gross receipts from the same calendar quarter in 2019), or The hours of service performed by employees in that portion of the business make up at least 10% of the employer’s total employee service hours (both determined using the service hours performed by employees in the same calendar quarter in 2019). “More than nominal effect” on employer’s operations defined: An employer can qualify under the suspension test if its operations are not shut down, but rather subject to a government-mandated modification that has “more than a nominal effect” on the operations under the facts and circumstances. Per Q&A No. 18, a modification will have more than a nominal effect if it results in a 10% or more reduction in an employer’s ability to provide goods or services in its normal course of business. The notice however does not appear to provide any parameters by which this reduction can be measured. Factors for defining “comparable operations” via telework provided: An employer subject to a government-ordered closure will not be eligible under the suspension test if it can maintain “comparable operations” via telework. Q&A No. 16 provides the following four factors for consideration in determining whether comparable operations have been maintained and allows for additional factors to be considered if relevant:  Telework capabilities – Determine whether an employer has adequate support (IT and otherwise) such that operations can continue from another location.  Portability of employees’ work – Determine the amount of work that is portable or otherwise adaptable to be performed from a remote location. Need for presence in employee’s physical workspace – If an employer’s physical workspace is so critical to its trade or business operations that central tasks cannot be performed remotely, this factor alone indicates the employer is unable to continue comparable operations. Examples of critical physical workspaces include laboratories or manufacturing involving special equipment or materials that cannot be accessed or operated remotely.  Transitioning to telework operations – A period of adjustment to telework is expected, and an employer will not be considered to have a suspension of operations while it experiences inefficiencies attributable to the transition. However, if an employer incurs a significant delay (for example, two weeks) in moving operations to comparable telework on account of a need to, for example, implement teleworking policies or provide employees with necessary equipment, the employer’s operations may be deemed subject to a partial suspension during such a transition period.  Some areas remain unclear: While much is covered by the notice’s 102 pages, questions and areas of uncertainty remain, most notably, whether foreign affiliates must be included for aggregation purposes.  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 IRS issued guidance regarding retroactive changes made to the employee retention credit, including how Paycheck Protection Program loan borrowers can claim the ERC – even if they already applied for forgiveness.

IRS updates, formalizes ERC guidance 

Authored by Paul Dillon, Christine Faris, Michelle Hobbs and Michael Wronsky By the end of February, the House of Representatives is expected to pass the American Rescue Plan Act of 2021 (the Act), a combination of several bills making up the fifth stimulus legislation package designed to provide further economic relief from the continuing COVID-19 pandemic. The Senate is expected to begin discussions the first week of March when it is likely the legislation will be modified and sent back to the House. While the Act contains an increase of the minimum wage to $15 per hour, this provision was deemed to violate the Senate reconciliation rules. Additionally, other elements of the Act may not have unanimous support of all Democratic senators.  Both chambers of Congress are using budget reconciliation to pass the Act. In the Senate, this means the Act is not subject to filibuster and only a simple majority is needed to pass it. Therefore, ratification can occur without any Republican votes if no Democratic senator dissents. The final bill is expected to be signed into law by President Biden shortly after passage by both chambers. From a tax perspective, what is not included in the Act is perhaps as important as what is included. The Act contains no tax increases, including those that had been outlined in President Biden’s campaign proposals. At this time, individual, corporate and capital gains rates are unchanged, and no adjustments were made to the estate and gift tax regime. During a CNBC interview earlier this month, Treasury Secretary Janet Yellen said any tax increases sought by the Biden administration would be introduced gradually, suggesting these would come later in 2021 as part of a larger legislative package and be phased in slowly. Meanwhile, the Act does include several tax provisions such as an extension of the employee retention credit, another round of individual tax rebates and enhancements to the child tax credit. Notable nontax provisions include modifications to the Paycheck Protection Program (PPP), an increase to and continuation of the federal unemployment subsidy as well as funding for primary school and higher education institutions, and vaccine distribution.  Key provisions Employee retention credit The refundable quarterly payroll tax credit, designed to assist employers experiencing full or partial suspensions or significant declines in gross receipts in keeping employees on their payroll, was extended to apply to qualified wages paid through Dec. 31, 2021. Beginning after June 30, 2021, the credit will become a refundable payroll tax credit against the Medicare tax, otherwise known as the hospital insurance tax. Paycheck Protection Program The Act further expands the PPP to include certain internet publishing organizations (NAICS code 519130) and increases program funding another $7.25 billion. The Act also creates new eligibility for certain not-for-profit organizations with not more than 300 employees and spend less than $1 million or 15% of receipts and expenses on lobbying activities. In addition, charitable organizations can be eligible for PPP loans if they employ 500 or fewer employees per physical location. Finally, the SBA affiliation rules will no longer apply to not-for-profit organizations.  Individual tax rebates The Act provides rebate checks of $1,400 per individual (including dependents) based on their adjusted gross income (AGI) reported on their 2019 tax return (or 2020 return, if filed). Payment amounts will begin to phase out for single filers with AGI of $75,000 or higher ($150,000 for joint, $112,500 for head-of-household filers).  EIDL grants and other loan proceeds Under the Act, Economic Injury Disaster Loan (EIDL) grants as well as restaurant revitalization grants would be exempt from federal income tax. Further, similar to forgiven PPP loans, these exclusions from taxable income would not result in a loss of tax deductions for expenses funded by those grants. Child tax credit and dependent care benefits enhancements The Act increases the child tax credit to $3,000 per qualifying child ($3,600 in the case of children under age 6 as of the close of the tax year) and makes it refundable for 2021. The increased credit over the $2,000 available under prior law would phase out at AGI levels of $150,000 for joint filers, $112,500 for head of household, and $75,000 for all other taxpayers. The AGI phase out levels for the $2,000 previously available credit remain the same ($400,000 for joint filers, $200,000 for all others). The Act additionally instructs the Treasury Department to establish a program under which taxpayers will receive monthly advance payments of the credit they are due, from July through December 2021. Paid leave payroll tax credits extensions Originally provided for by the Families First Coronavirus Response Act, the payroll tax credits for providing paid sick and family leave are extended through Sept. 30, 2021. Additionally, effective for calendar quarters beginning after March 31, 2021, the limit on wages that can be taken into account for computing the family leave credit with respect to all calendar quarters in total increases to $12,000 from $10,000, and the 10-day limit on the emergency paid sick leave credit has been reset. In other words, if, as of the end of the first calendar quarter of 2021, an employer reached both of these respective limits for a given employee, they would be able to claim the family leave credit on up to an additional $2,000 of qualified family leave wages and another 10 days of the emergency paid sick leave credit for qualified sick leave wages paid to that same employee during the second and third quarters of 2021.  Unemployment benefits The federal unemployment subsidy increases to $400 per week from $300 and is further extended through Aug. 29, 2021.  Election to allocate interest expense worldwide repealed The Act repeals a provision allowing U.S. affiliated groups to elect to allocate and apportion interest expense on a worldwide basis to determine taxable income applied to foreign tax credit limitations. Section 864(f) was enacted as part of the American Jobs Creation Act of 2004, but its implementation has been deferred several times. This section is relevant in computing the foreign tax credit limitation, which is based on the amount of taxable income from foreign sources and the allocation and apportionment of deductions between U.S.- and foreign-source gross income from different limitation categories. Allocating and apportioning interest expense on a worldwide basis would generally result in increasing the ability to use foreign tax credits. Pension plan relief The Act contains provisions to assist troubled multiemployer pension plans as well as single-employer pension plans. Multiemployer plans – The Act creates a special program to allow the Pension Benefit Guaranty Corporation (PBGC) upon application by plan sponsors to make direct cash payments to financially troubled pension plans to ensure they remain solvent. Applications must be submitted by Dec. 31, 2025. Single-employer plans – The Act provides that shortfall amortization bases for plan years beginning in 2019 and 2020 would be reduced to zero. For plan years beginning after Dec. 31, 2019, all shortfalls would be amortized over 15 years rather than seven years under current law. Cost-of-living adjustment freeze for qualified retirement plans The Act contains provisions to freeze cost-of-living adjustments for certain annual limitations beginning after Dec. 31, 2030. The 2030 dollar amount would remain in effect until further notice. Defined benefit plans – The limitation on annual benefits Defined contribution plans – The limitation on contributions and other additions Compensation – The limitation on the annual compensation taken into account under the plan    The freeze on the cost-of-living adjustments described above would not apply in the case of a plan maintained by one or more collective bargaining agreements.   For more information about how these issues may affect you, connect with your Baker Tilly tax professional.
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 House passed the fifth federal COVID-19 relief bill. Carrying a hefty price tag – $1.9 trillion – and facing an uphill battle as it moves to the Senate.

State & Local Government

House expected to advance latest round of stimulus legislation

SBA PPP loans have been getting all the press.  However small businesses looking for an unforgiven traditional loan have two other potentially favorable SBA loan options available at the moment, courtesy of the Small Business Administration – an SBA 7(a) loan and an SBA 504 loan.  The basics of the 7(a) loan are that it can be used to, purchase equipment, acquire or start a business or obtain working capital. They have a maximum loan amount of $5 million, and have lower fees than 504 loans, which have payouts ranging from $125,000 to $20 million but require a 10% down payment by the business owner. The intention of 504 loans is for businesses to finance owner occupied commercial real estate or large equipment purchases. To qualify for these programs, a business must have fewer than 500 employees and generally less than $7.5 million in revenue. What are the positives? SBA loans usually involve significant fees and additional information/disclosure requests. However, as part of the CARES Act, the SBA is agreeing to waive those fees and pay several months of payments for loans approved through October 1, 2021. So, that is a nice benefit for small business owners.  Even if business owners don’t have all the equity conventional financing programs may require, they likely can qualify here, as long as they meet the basic requirements and have a good business plan. The biggest positive with these loans, however, is that the SBA is authorized to pay three months of principal (was 6 months but changed as of February 16, 2021 and could change again), interest and any associated fees that borrowers owe for all 7(a), 504 and microloans reported in regular servicing status (excluding PPP loans). Borrowers need not apply for this assistance. Up to $9,000/month in payment for a potential total of $27,000 per loan can be covered, although the SBA reserves the right to decline requests due to a lack of funds. It’s also important to note that these are payments on the company’s behalf, not deferrals. That type of money savings obviously can be huge for a start-up company or any small business. Finally, there is a potential for longer amortizations resulting in additional operating cash flow and flexibility for owners during these uncertain times.  What are the negatives? In terms of drawbacks, loan recipients are likely going to have to deal with a significant amount of red tape or additional requirements and disclosures that will require a personal guarantee by all owners. Additionally, there are loan maximums of $5 million. The loan limits may be a little less than what is available through conventional financing or for large businesses.  What can you do today? For starters, we recommend that you get the process started. Awareness and proactive planning are critical parts of this process. You should be prepared to discuss your business plan and how your business will succeed and grow post-COVID-19. If you’re potentially interested in refinancing, check on any prepayment matters that might be involved. If you need to involve additional decision-makers at your company, bring them into the loop as soon as possible. Be sure to discuss the loan opportunities with your banker. And of course feel free to reach out to members of the Baker Tilly Advantage team if you’re unsure if these opportunities are right for you. We can advise on the pros and cons of each loan type. We can analyze along with management your specific situation to help you make the best possible choice. Our Value Architects are here to help you maximize your opportunities today, for tomorrow.

SBA PPP loans have been getting all the press.  However small businesses looking for an unforgiven traditional loan have two other potentially favorable SBA loan options available at the moment, courtesy of the Small Business Administration – an SBA 7(a) loan and an SBA 504 loan. 

Preparing for PPP: CPA Business Funding Portal

SBA loan administration staffing augmentation

SBA loans: The basics of 7(a) and 504 loans

Employer payroll tax credits, loans, and other Consolidated Appropriations Act incentives There are numerous relief programs available to lessen the burden of employee expenses and help businesses survive. The Consolidated Appropriations Act, 2021 (“CAA”), funds the government for the next fiscal year and consists of several bills that together mark the fourth economic stimulus package designed to help taxpayers continue to weather coronavirus-related closures. The CAA extends and enhances many relief provisions that were included in the Families First Coronavirus Response Act (FFCRA) and Coronavirus Aid, Relief, and Economic Security (CARES) Act. Each business must determine which relief programs will have the most positive impact on their business, while also ensuring the benefits they choose can work together. Baker Tilly’s coronavirus benefit coordination matrix not only explains who can use each benefit but also how each benefit coordinates with others. 
A preview of the matrix is shown below, highlighting the Paycheck Protection Program: 
Download the matrix to learn more about which benefits may help your business during this challenging time, such as: PPP – second draw loans Employee retention credit – 2021 version Emergency Paid Sick Leave credit Emergency Paid Family and Medical Leave credit  Work Opportunity Tax Credit  Shuttered Venue Operators grant Restaurant Revitalization Fund grant Emergency Economic Injury Disaster Loan R&D credit payroll tax offset

Understand Coronavirus benefit and relief programs, who is eligible and how the benefits coordinate with other programs.

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Not-for-Profit

Not-For-Profit Coronavirus Resources

Relief Funding Assistance

Coronavirus benefit coordination matrix

Authored by Paul Dillon and Michelle Hobbs Borrowers receiving a Form 1099-MISC, “Miscellaneous Information,” that includes as income certain payments on loans authorized under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, such as the Paycheck Protection Program (PPP), may need to request a corrected 1099-MISC from their lenders. If income relating to these types of loan forgiveness is incorrectly included in a Form 1099, it could result in IRS correspondence to borrowers regarding underreported income. The IRS released Announcement 2021-2 directing lenders to issue corrected Forms 1099-MISC within 90 days if payments of principal, interest and associated fees on a loan subsidized by the Small Business Administration are reported as income to the borrower. Directions for filing corrected Forms 1099-MISC can be found in the 2020 filing instructions. Failure to do so could result in penalties assessed to the lender. Taxpayers that received Forms 1099-MISC from a lender that supplied CARES Act funding should carefully scrutinize the amounts reported to ensure such payments are not being reported as income. If this occurs, they should immediately contact the lender and request a corrected Form 1099-MISC. In January 2021, the IRS previously waived any requirement by lenders to issue Forms 1099-MISC reporting payments of principal, interest and associated fees on CARES Act funding.  For more information about how these issues may affect you, connect with your Baker Tilly tax professional.
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.

Borrowers of loans subsidized by the SBA via the CARES Act, including PPP loans, should confirm Forms 1099-MISC sent by their lenders were corrected to indicate the principal, interest and related fees on those loans were not reported as income.

IRS requires corrected 1099s for CARES Act loans

Video The news surrounding Paycheck Protection Program (PPP) loans has been increasing steadily the past few weeks as more businesses apply for forgiveness.  Further the Consolidated Appropriations Act, 2021 (the Act) not only creates additional funding for and modifications to PPP loans,  it also overrides the Treasury Department’s guidance, thus allowing expenses funded by forgiven PPP loans to be deductible for federal income tax purposes.      In this on-demand webinar, hosted in association with ALA (Association of Legal Administrators), our PPP loan specialists discuss the above topics, as well as further insights and takeaways.  Topics include: What Baker Tilly is hearing from banks during the submission process Uncertainty with loans over $2 million Common PPP pitfalls and how to avoid them  Presenters: Pauline Dumas, Director Adam Goehring, Partner Jessica Mastropietro, Partner
Additional resources: Paycheck Protection Program (PPP) solutions Small and family business coronavirus resources

View our on-demand webinar for an overview on PPP loan forgiveness, tax implications of COVID-19 legislation and PPP round 2.

PPP update: loan forgiveness and tax implications

Authored by Paul Dillon, Michelle Hobbs and Michael Wronsky This week, the Small Business Administration (SBA) and Department of Treasury released several items of guidance on Paycheck Protection Program (PPP) loans:  An updated interim final rule on loan forgiveness, to account for changes to the PPP made by the Consolidated Appropriations Act, 2021 (CAA) Two sets of frequently asked questions (FAQ) about how to calculate the maximum loans available under the first- and second-draw programs, how to calculate the 25% revenue reduction required for eligibility for the latter, and what documentation is needed to be submitted with the loan applications  Updated loan forgiveness applications:
– Form 3508S (for use by borrowers of loans of $150,000 or less)
– Form 3508EZ (for use by borrowers who maintained specified levels of employee salaries and headcounts)
– Form 3508 (for use by borrowers ineligible to use the above forms) Links to the documents are included above and a summary of their contents follows below. We will continue to analyze this guidance and issue additional communications as appropriate. We encourage you to reach out to your Baker Tilly advisor regarding how the above may impact your situation. Interim final rule (IFR) on loan forgiveness: Consolidates previously issued IFRs on loan forgiveness and makes necessary updates to conform to the CAA’s amendments to the program, Provides that for second-draw loans in excess of $150,000, the borrower must submit its loan forgiveness application for their first-draw loan (even if the requested amount is $0) either before or simultaneously with the second-draw forgiveness application, and on separate applications, Clarifies the limit on forgiveness for owner compensation must be prorated based on the length during which the compensation is paid or incurred. For example, if a covered period of 10 weeks is chosen by the borrower, the maximum amount of owner compensation eligible for forgiveness is calculated as $100,000 divided by 52 weeks multiplied by 10 weeks ($19,231). The $20,833 maximum limit previously in effect applies to covered periods exceeding 2.5 months.    FAQ: Provide detailed instructions for how self-employed individuals with and without employees, farmers, ranchers, partnerships, S and C corporations, eligible not-for-profit organizations, eligible not-for-profit religious institutions, veterans organizations and tribal businesses calculate their maximum first- and second-draw loan amounts  Outline the following primary sets of documentation that must be submitted with the second-draw loan application (or forgiveness application, if the loan is $150,000 or less) to support a 25% gross receipts reduction: Quarterly financial statements (if not audited, the first page must be signed and dated by the applicant attesting to their accuracy),  Quarterly or monthly bank statements showing deposits from the relevant quarters, Annual IRS tax filings and further provides the amounts required to compute gross receipts by entity tax return type, including:
– Self-employed individuals other than farmers and ranchers: Form 1040, Schedule C – sum of lines 4 and 7
– Partnerships: Form 1065 – sum of lines 2 and 8, minus line 6
– S corporations: Form 1120-S – sum of lines 2 and 6, minus line 4
– C corporations: Form 1120 – sum of lines 2 and 11, minus the sum of lines 8 and 9
– For not-for-profit organizations: Form 990: the sum of lines 6b(i), 6b(ii), 7b(i), 7b(ii), 8b, 9b, 10b and 12 from Column A of Part VIII Note: these instructions require that for-profit entities exclude net gains or losses on business asset sales, in addition to capital asset sales. The exclusion of business asset sales appears to be in conflict with the definition of gross receipts provided within the FAQ (as well as the definition under Treas. Reg. section 1.448-1T(f)(2)(iv)(A)). It is unclear whether this is intentional or an oversight.  Provide that if payroll costs for the prior 12 months were used to compute a borrower’s first-draw loan amount, those same payroll costs cannot be used to compute that borrower’s second-draw amount. Loan forgiveness applications:  Of particular interest is the loan amount threshold for determining eligibility to file the paired-down Form 3508S increased to $150,000 from $50,000. Applicants do not need to show the computation of their requested forgiveness amounts, but still must attest to the accuracy of the information reported and submit documentation to support the use of loan proceeds on eligible costs. Borrowers of loans of $50,000 or less do not need to reduce their forgiveness amount for any reduction in employee headcounts or salaries.   For more information about this topic, please visit our comprehensive set of Payroll Protection Program Solutions.
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 and Treasury Department released new guidance and updated loan forgiveness applications for the Paycheck Protection Program. 

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Real Estate Investors

Real estate coronavirus resources

Additional PPP guidance, forgiveness applications released

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. 

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.
View additional resources: Paycheck Protection Program (PPP) solutions Small and family business coronavirus resources

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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Construction coronavirus resources

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Not-for-profit coronavirus resources

State and local government coronavirus resources

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 now 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.

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. 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.

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. 

SBA releases draft PPP loan necessity questionnaire

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.

State and local government financial assistance

Todd Bernhardt, partner, has been with Baker Tilly since 1999. He specializes in auditing, financial reporting and tax consulting for mid-market retail companies. Todd serves as the firm’s retail growth leader and local personnel leader for the Madison commercial team.

Gary Plaster, principal with Baker Tilly, leads the family business strategy group. Gary is a nationally recognized thought leader in growth strategy with more than three decades of experience advising family business owners and C-suite executives. He previously served as managing partner of strategy consulting and chief strategy officer for another national accounting firm.

Tim Kosiek, partner in the financial services group with Baker Tilly joined the firm in 2009. Tim focuses on depository institutions, credit intermediaries and specialty/structured finance entities. He began his public accounting career in 1980 with an international firm, where he exclusively served financial services companies until 2000. In addition, between 2000 and 2007 Tim served as the Chief Financial Officer of a $5 billion diversified financial service company.

Baker Tilly’s small and family business advisors have developed a collection of resources to help you prioritize and navigate your next move during the COVID-19 pandemic.

The importance of cash flow during uncertain times

Helping family businesses achieve their full potential through growth strategies, succession planning and next generation leadership development.

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)