The COVID-19 pandemic and Biden Administration have brought change, and the potential for more change, for many manufacturers. Join Jim Dascenzo, CPA, Donald Trummer, CPA, and Amy Reynallt, MBA to discuss updates to COVID-19 relief options, policies that could affect manufacturers, and actions you can take now to be prepared for changes yet to come.

Discussion topics include:

• Updates to the Employee Retention Credit
• Updates to the Paycheck Protection Program
• Biden Administration Polices Affecting Manufacturers
• National Association of Manufacturing Policies
• Actions manufacturers can take to be prepared for the weeks and months ahead

Download materials.

The Consolidated Appropriations Act, 2021 includes several changes to the CARES Act’s Paycheck Protection Program (PPP) loan forgiveness process. The changes are reflected in new forgiveness applications issued January 19 by the Small Business Administration (SBA). The two applications can be found at: Standard Application: https://home.treasury.gov/system/files/136/PPP–Loan-Forgiveness-Application-and-Instructions–Form-3508-1192021.pdf EZ Application: https://home.treasury.gov/system/files/136/PPP–Loan-Forgiveness-Application-Instructions–Form3508EZ-1192021.pdf Criteria for using the standard application versus the EZ application remain the same. Key changes to the applications include:

• Checkboxes were added to select whether the forgiveness application is for the first draw or second draw loan.
• The Economic Industry Disaster Loan (EIDL) Advance Amount and EIDL Application Number fields were removed. Per the Act, the EIDL Advance no longer reduces the amount of PPP forgiveness.
• Lines were added to report new nonpayroll costs: covered operations expenditures, covered property damage costs, covered supplier costs, and covered worker protection expenditures.

On the standard application, the safe harbors for the FTE Reduction (Safe Harbor #2, Step 4), and Salary/Hour Wage Reduction (Step 2c) were updated so that borrowers who received a loan before December 27, 2020 (the date the Consolidated Appropriations Act was passed) have until December 31, 2020, to eliminate any reduction to their forgiveness amount, while those receiving a loan after December 27, 2020, have until the last day of their covered period to take this action. In addition, an updated 3508S application was released for borrowers who received loans of $150,000 or less: https://home.treasury.gov/system/files/136/PPP–Loan-Forgiveness-Application-Instructions–Form-3508S-1192021.pdf. Borrowers using the form are required to make two certifications: 1) confirm that they complied with the rules regarding the use of the funds, the proportion of funds used for payroll costs, and their calculations regarding forgiveness, and 2) that the information they are providing in the application is “true and correct.” Borrowers who received a PPP loan between $50,000 and $150,000 and borrowers of a loan of $50,000 or less who received, together with their affiliates, loans of $2 million or more are required to complete FTE and Salary/Wage Reduction tests that may reduce forgiveness. While the borrower is not required to submit this documentation, they are required to maintain it in order to provide it to the SBA upon request. Other Guidance

• An Interim Final Rule (IFR) on PPP Loan Forgiveness was issued in conjunction with these applications. The rule combines a number of previous IFRs and explains changes associated with the Consolidated Appropriations Act, 2021 and new forgiveness applications. A copy of the IFR can be found at https://home.treasury.gov/system/files/136/PPP–IFR–Loan-Forgiveness-Requirements-Loan-Review-Procedures-Amended-Economic-Aid-Act-1192021.pdf
• Borrowers of first draw PPP loans who received those loans before December 27, 2020, are also required to disclose if the U.S. President, Vice President, head of an Executive department as defined in 5 USC 101, or a member of Congress, or the spouse of any of these individuals directly or indirectly held a controlling interest in the borrowing entity at the time the PPP application was submitted to the lender. The SBA released a Disclosure of Certain Controlling Interest Form (Form 3508D) which can be found at https://home.treasury.gov/system/files/136/PPP–Borrowers-Disclosure-Certain-Controlling-Interests-1192021.pdf. Disclosures must be made by January 26, 2021.

For questions regarding your PPP loan and related forgiveness, contact your HBK Advisor.

As we enter a new year, COVID-19 continues to impact our businesses. The Consolidated Appropriations Act, 2021, which was enacted on December 27, 2020, provides a number or relief options – including extensions or expansions of current programs – to manufacturers. Join HBK Manufacturing Solutions team members Ben DiGirolamo, CPA, JD and Amy Reynallt, MBA, to discuss the details and latest updates to help you determine which provisions affect your business, and what steps you should take next to benefit from this stimulus legislation. Download the materials.

On December 27, 2020, the Consolidated Appropriations Act 2021 (CAA), also referred to as the Economic Aid Act or Omnibus Bill, was signed into law, providing new COVID 19 relief options for individuals and small businesses, including a second round of Paycheck Protection Program (PPP) loans and an extended and expanded Employee Retention Credit. Interested borrowers have been awaiting guidance, which the SBA and Department of the Treasury have begun to release. Join Amy Reynallt, MBA and Ben DiGirolamo, CPA, JD as they discuss the new guidance which includes:

• Interim Final Rules on the First and Second PPP Draws
• First Draw and Second Draw PPP Loan Applications
• Updates on the Employee Retention Credit

  Download the Materials.

On December 27, 2020, the Consolidated Appropriations Act 2021 (CAA), also referred to as the Economic Aid Act or Omnibus Bill, was signed into law, providing new COVID 19 relief options for individuals and small businesses, including a second round of Paycheck Protection Program (PPP) loans. Interested borrowers have been awaiting guidance, which the SBA and Department of the Treasury have begun to release.

New Guidance

Two Interim Final Rules (IFRs) were released on January 6. The first, titled “Interim Final Rule on Paycheck Protection Program as Amended by Economic Aid Act,” combines guidance from several previous IFRs with new provisions in the CAA. A second IFR, “Interim Final Rule on Second Draw Loans,” provides guidance on eligibility and loan details for the new round of loans. Highlights of that second IFR include:

Eligibility criteria. In general, eligible entities must employ 300 or fewer employees, have received a First Draw PPP loan that they have used or will use to pay eligible expenses, and must have experienced a gross receipts reduction of 25 percent or greater in at least one 2020 quarter compared to the same quarter in 2019. Other eligibility criteria may also apply.

Defining gross receipts. For eligible nonprofits, veterans, nonprofit news, 501(c), or destination marketing organizations, gross receipts are defined in section 6033 of the Internal Revenue Code of 1986. For other entities, the IFR defines gross receipts per the SBA definition in 13 C.F.R. 121.104, and notes that it includes “all revenue in whatever form received or accrued (in accordance with the entity’s accounting method) from whatever source, including from the sales of products or services, interest, dividends, rents, royalties, fees, or commissions, reduced by returns and allowances.” Exclusions include “taxes collected for and remitted to a taxing authority if included in gross or total income (such as sales or other taxes collected from customers and excluding taxes levied on the concern or its employees); proceeds from transactions between a concern and its domestic or foreign affiliates; and amounts collected for another by a travel agent, real estate agent, advertising agent, conference management service provider, freight forwarder or customs broker.” Additionally, proceeds from forgiven PPP loans are excluded from the definition of gross receipts.

Determining the loan amount. Eligible borrowers may generally borrow up to two-and-a-half months of their average monthly payroll cost, up to $2 million. Businesses that are entities of a corporate group are limited in aggregate to $4 million of Second Draw Loans. Those with a NAICS code beginning with 72 (generally hospitality industry organizations) at the time of disbursement can calculate their loan amount by using three-and-a-half months of their average monthly payroll cost. Average payroll costs can be based on 2019, 2020, or for borrowers who are not self-employed, a sole proprietor, or an independent contractor, the precise one-year period before the date on which the loan is made.

Other loan details. Second Draw PPP loans will carry a 1 percent interest rate and five-year maturity, with no collateral or personal guarantees required. Loans will be available on a first-come, first-served basis and can be funded through the sooner of March 31, 2020, or when funding is depleted.

Applications

In addition to the new guidance, the SBA also released two new applications and instructions for new First Draw and Second Draw Loans.

For First Draw Loans, the application and instructions can be found at: https://home.treasury.gov/system/files/136/PPP Borrower Application Form.pdf.

For Second Draw Loans, the application and instructions can be found at: https://home.treasury.gov/system/files/136/PPP Second Draw Borrower Application Form.pdf.

As with previous PPP loan applications, many lenders will require borrowers to submit their applications through online portals. Community Development Financial Institutions (CDFIs) and Minority Depository Institutions (MDIs) are authorized to begin accepting applications the week of January 11 with larger banks to follow.

Take Action Now.

The PPP provisions in this legislation, as well as in other economic and tax relief provisions, are complex and must be used specifically. Interested parties should take immediate action to review their business and financing needs as some options are time-sensitive.

Many of the factors determining whether your business qualifies for these loans or should apply for the new round of PPP funding are organization-specific. There are also legal implications for applying and using PPP funds. We encourage interested parties to consult with their legal counsel regarding questions on eligibility under the terms of this latest round of legislation.

We recognize that the effects of the COVID-19 pandemic on businesses are ongoing and we remain committed to supporting you. If you would like assistance with evaluating your opportunity to participate in COVID-19 tax and/or economic relief measures, please contact your HBK Advisor.

As Senate leaders continue to progress towards passing a new stimulus package, many business owners and individuals are anxious to learn how a potential deal may support them through the ongoing COVID-19 pandemic. HBK CPAs and Consultants is following these negotiations and will provide details if legislation is signed into law. Proposed changes to the Paycheck Protection Program (PPP) include:

• Clarification of the tax treatment of forgiven PPP loans allowing a deduction for business expenses paid with PPP loan proceeds, and used to substantiate forgiveness.
• *Note that as these changes are not final, PPP loan borrowers should still plan for the possibility that expenses paid with PPP loan proceeds and used to substantiate forgiveness will not be deductible.
• A new round of PPP loans for eligible borrowers. Congress may target smaller businesses impacted by COVID-19, which means that new eligibility criteria may be used. Interested borrowers will need to reconsider whether they are eligible for the next round of loan funding.
• Simplified forgiveness application processes for certain borrowers.

Other stimulus discussions include:

• Direct stimulus payments of $600 to eligible individuals
• The renewal of certain unemployment benefits
• Other support for COVID-19 protection and prevention programs, such as funds for vaccine development and testing

Congress has indicated negotiations may continue into the weekend. Therefore, these changes are not yet law, and those using current stimulus funds, whether through the PPP program or other COVID-19 relief funds, should continue following the rules that are available. For legislative updates, visit www.hbkcpa.com/covid19 or contact your HBK Advisor.

Last month, Paycheck Protection Program (PPP) borrowers learned about Loan Necessity Questionnaires (SBA Form 3509 and SBA Form 3510) that were released from the SBA to lenders. SBA indicated that these forms would be provided to borrowers that, together with their affiliates, received loans of $2 million or more in an effort to evaluate their good-faith certification that current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant”. Because no guidance was issued and the forms were initially not published with other PPP guidance on the SBA or Treasury websites, many borrowers raised questions about these forms and how they would be used by SBA.

While the SBA and Treasury have now posted these forms, they also released a new Frequently Asked Question (FAQ). In the answer, SBA confirms that a request to complete these forms does not indicate that the SBA is questioning the borrower’s certification of economic uncertainty or need for the loan.

SBA continues by explaining that “this certification is required to have been made in good faith at the time of the loan application, even if subsequent developments resulted in the loan no longer being necessary.” SBA may review the borrower’s “circumstances and actions both before and after the borrower’s certification to the extent that doing so will assist SBA in determining whether the borrower made the statutorily required certification in good faith at the time of its loan application.” SBA reserves the right to request additional support, which may allow borrowers to provide more detailed responses or narratives regarding their circumstances.

Borrowers expecting to receive these forms may consider the following actions:

• Review the available forms and prepare your responses.
• Consider additional narratives that may be important for the SBA to consider.
• If you receive the form from your lender, submit your response within 10 business days of receipt.

For questions regarding the PPP or Loan Necessity Questionnaires, please contact your HBK Advisor.

The Office of Workforce Transformation in Ohio will open a new round of TechCred applications from January 4 through January 29, 2021 at 3:00 PM.

Since the program’s inception, TechCred has completed six rounds of funding. In the most recent funding round, which ended in October, 246 Ohio employers were approved, which allows funding for 3,000 credentials.

TechCred provides employers with the opportunity to support employees through the advancement of their technological skills. Employees can earn credentials in subject matter including manufacturing technology, construction technology, business technology, cybersecurity, robotics, and information technology fields. A list of eligible credentials is available at https://techcred.ohio.gov/wps/portal/gov/techcred/about/credential-list/.

Employers may also request approval for credentials not included on this list. Eligible credentials must meet the following criteria:

• Industry-recognized
• Short-term (the program must be able to be completed in less than one calendar year and consist of fewer than 900 clock hours or 30 credit hours)
• Technology focused
• Includes certificates, which are earned by successfully completing training or courses, or certifications, which are earned by passing a standardized test recognizing an individual’s competency in a particular field.

Due to the ongoing status of the COVID-19 pandemic, online and distance-learning programs are encouraged.

Interested employers should visit https://techcred.ohio.gov/wps/portal/gov/techcred/apply to apply for the TechCred program. The Ohio Development Services Agency reviews applications and awards funding. Businesses can be awarded up to $2,000 per credential and $30,000 per funding round, which is reimbursed to the employer when the employee obtains the approved credential or completes the approved program.

To learn more about Ohio’s TechCred program, visit techcred.ohio.gov. For questions about this program or other support for manufacturers, contact a member of HBK Manufacturing Solutions by calling 330-758-8613 or emailing manufacturing@hbkcpa.com.

For the third time this year, the Board of Directors of the Ohio Bureau of Workers’ Compensation (BWC) has approved relief in the form of a dividend for Ohio employers. The payments are intended to support businesses experiencing financial pressures related to the COVID-19 pandemic. This round of dividends will total approximately $5 billion, bringing the total COVID-19 relief payments issued by the BWC to nearly $8 billion.

The year’s first dividend payment, announced in April, provided $1.6 billion to the state’s eligible employers. A September dividend delivered an additional $1.5 billion in payments.

Eligible private employers are expected to have the payments first applied to unpaid balances with the Ohio BWC. The agency said it will likely distribute checks for the remaining balances by mid-December.

To read the news release announcing this dividend, visit: https://info.bwc.ohio.gov/wps/portal/gov/bwc/news-and-events/news/bwc-board-approves-5-billion-dividend. To review frequently asked questions regarding this latest dividend, visit: https://info.bwc.ohio.gov/wps/portal/gov/bwc/for-employers/all-employer-resources/5BillionDividend-QandA.

To discuss this dividend or other COVID-19 relief options, please contact your HBK Advisor or call 330-758-8613.