construction industry guide to paycheck...construction industry guide to paycheck protection program...

Construction Industry Guide to Paycheck Protection Program and Unemployment Benefits Under the CARES Act

April 21 at 1:30 p.m.Replay will be available following presentation

GHBA General Counsel

IAN FARIA Bradley Arant

FEATURING

Labor & Employment Partner

STEPHANIE GASTON Bradley Arant

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Coronavirus Aid, Relief, and Economic Security (CARES) Act

• Paycheck Protection Program

• SBA’s Economic Injury Disaster Loan Program

• Unemployment Benefits

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Eligibility: Generally employers with fewer than 500 employees; includes nonprofits, independent contractors, and self-employed

Term: Up to 2 years; 6 months to 1 year forbearance

Maximum Principal: Lesser of $10 million or 2.5 times the average monthly payroll for the 12 months prior to the funding of the loan

Payroll compensation includes tips, medical insurance costs, paid leave (sick/vacation), severance pay, group health care benefits, retirement plan contributions, and state and local employment taxes

Individual employee compensation limited to $100,000 per year

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Paycheck Protection Loan Program (Sec. 1102)

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• Forgiveness

• Loan will be fully forgiven to the extent it is expended during the first eight weeks if:

1. Average number of employees during “benefit period” (on an FTE basis) is not changed from the average number of employees from:

(a) February 15, 2019 through June 30, 2019 or

(b) January 1, 2020 through February 29, 2020

If employees separated between February 15 and April 26 are rehired by June 30, 2020, they will be treated as having been employed through the entire period

2. No employee’s compensation during such period is reduced by more than 25%

3. To the extent either condition is violated, a proportionate share of the loan will remain outstanding and balance will be forgiven

4. Not more than 25% of the loan forgiveness amount may be attributable to non-payroll costs

• Under CARES Act 1106(i), forgiven portion of the loan is not taxable for federal tax purposes

• Non-forgiven Portion

• Repayable over maximum period of up to 2 years

• Interest rate capped at 1%; No Loan Fees; No prepayment fee (However, SBA can establish application fee caps for lenders)

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Loan Forgiveness for Paycheck Protection Loans (Sec. 1106)

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• Payroll Costs (as previously defined)

• Continuation of group heath care benefits during periods of paid sick, medical or family leave & insurance premiums

• Salaries, commissions

• Payment of interest on any mortgage obligation incurred prior to 2/15/20; (does not include payment of principal; does not include prepayment of interest)

• Rent on leases dated prior to 2/15/20

• Utility payments under service agreements dated prior to 2/15/20

• Interest payments on any other debt obligation incurred prior to 2/15/20

• Specific Guidance for Self-Employed, 1040A, Schedule C Filers: https://home.treasury.gov/system/files/136/Interim-Final-Rule-Additional-Eligibility-Criteria-and-Requirements-for-Certain-Pledges-of-Loans.pdf

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What Can Loan Proceeds be Used For?

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Historically SBA has offered disaster relief to business, homeowners and renters affected by Natural Disasters

Due to COVID-19 international pandemic, this program has been expanded

$10,000 Loan Advance

Within 3 days of Approval

Does not have to be repaid

Maximum Loan Amount: $2 Million

Term: Up to 30 Years

Deferral: Up to 1 year

Interest Rate:

Business pay 3.75%

Non-Profits pay 2.75%

Expansion of the SBA’s Economic Injury Disaster Loan Program

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Unemployment Benefits

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• Most states including Texas, have passed legislation to expand state unemployment benefits during the COVID-19 pandemic

• Work Search Requirements are currently waived

• The CARES Act provides up to 39 weeks of benefits for unemployment, partial unemployment, or inability to work due to COVID-9 issues between January 27, 2020 and December 31, 2020

• The Act also expands eligibility requirements to part-time employees, those who have exhausted their unemployment insurance benefits, and those who self-certify that they are unemployed, partially unemployed, or unable to work because of COVID-related issues

• No waiting period to receive benefits AND an additional $600 per week from the federal government through July 2020

• $600 per week is in addition to the base amount per week allowed under state unemployment insurance programs

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Unemployment Compensation Programs

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• The CARES Act provides three enhancements to Texas’s existing unemployment insurance benefits :

• Pandemic Emergency Unemployment Compensation (PEUC) — applicable to claimants who have exhausted their regular unemployment insurance benefits (26 wks), and extends regular state-level benefits by an additional 13 weeks.

• Pandemic Unemployment Assistance (PUA) — applicable to claimants who are ineligible for regular unemployment insurance benefits, such as part-time workers, independent contractors, gig workers, and self-employed individuals. Provides for unemployment benefits to these otherwise ineligible individuals for up to 39 weeks.

• Federal Pandemic Unemployment Compensation (FPUC) — provides an additional $600 per week in unemployment benefits to individuals who qualify for regular state-level benefits, PEUC, or PUA. These benefits are available only until July 31, 2020 (unless extended by congress).

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CARES Act – Pandemic Unemployment Assistance (PUC)

Key Takeaways:

Closely Review Conditions for Self-Employed PPP Loans

Follow up with Lender Re: Application for Loan Forgiveness

Recordkeeping and Required Documents

QUESTIONS?

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