TTB Adds New Standards of Fill for Wine and Distilled Spirits
On December 29, 2020, the U.S. Tax and Trade Bureau (TTB) published a final rule in the Federal Register that, among other things, expands the number of available standards of fill (or container/bottle sizes) for wine and distilled spirits, effective immediately.
Under the final rule, wine may now use the following new standards of fill: 200 mL, 250 mL, and 355 mL. No previously existing standards of fill were removed. As a result, the complete list of available standards of fill for wine are: 50 mL, 100 mL, 187 mL, 200 mL, 250 mL, 355 mL, 375 mL, 500 mL, 750 mL, 1 L, 1.5 L, and 3 L. In addition, wine can also be bottled in containers larger than 4 L if such containers are filled and labeled in quantities of whole liters (e.g., 4L, 5 L, 6 L).
Similarly, distilled spirits may now use the following new standards of fill: 700 mL, 720 mL, 900 mL, and 1.8 L. No previously existing standards of fill were removed. As a result, the complete list of available standards of fill for distilled spirits are: 50 mL, 100 mL, 200 mL, 375 mL, 500 mL, 700 mL, 720 mL, 750 mL, 900 mL, 1 L, 1.75 L, and 1.8 L. In addition, distilled spirits in metal containers that are generally shaped and designed like a can (i.e., cannot be readily reclosed after opening), can be filled at the following sizes: 50 mL, 100 mL, 200 mL, and 355 mL.
Furthermore, the final rule codifies the TTB’s current policy that distilled spirits may be labeled with the U.S. equivalent measurement in addition to the mandatory metric measurement, and that malt beverages may be labeled with the equivalent metric measure in addition to the mandatory U.S. measure.
The TTB expressly declined to eliminate standard of fill requirements generally and also declined to adopt an administrative approval system that would have allowed the TTB to approve additional container sizes. The TTB also noted, however, that it was committing to a future rulemaking proposing new standards of fill for wine of 180 mL, 300 mL, 360 mL, 550 mL, 720 mL, and 1.8 L, in accordance with the U.S.-Japan Free trade Agreement.
This final rule provides greater flexibility for both importers and domestic producers. Importers may now import into the U.S. certain bottle sizes that are already standard in the global marketplace and approved in other countries. Likewise, domestic producers now have more options for bottling or canning their products. In particular, the newly available 250 mL and 355 mL container sizes for wine make canned wine more viable; these can sizes are readily available since they are already mass-produced for beer and soda, and cans are often preferable to glass or large containers at certain venues or occasions.
NEW Cal/OSHA Emergency Standards for COVID-19 Prevention
On November 30, the Office of Administrative Law reviewed and approved the Emergency Standards for COVID-19 Prevention proposed by the California Occupational Safety and Health Standards Board (Cal/OSHA). The new rule goes beyond Cal/OSHA’s guidance issued to date, and employers must comply immediately.
Cal/OSHA has indicated it plans to take enforcement action based on the new standards. As a result, employers need to critically review any existing COVID-19 policies and procedures and bring them in line with these new regulations.
Which employers must comply?
The emergency rule applies to all California employers and employees except:
- workplaces with one employee who does not have contact with others;
- employees that are working from home; and
- employees subject to Cal/OSHA’s Aerosol Transmissible Diseases standard (such as healthcare facilities, nursing homes, paramedics and emergency responders).
Written COVID-19 Prevention Program
Covered employers must maintain a written COVID-19 Prevention Program, which can be integrated into the employer’s IIPP or maintained in a separate document. The requirements of a written COVID-19 Prevention Program are extensive and will need to be tailored to each employer’s circumstances.
An employer’s COVID-19 Prevention Program must include the following categories of information summarized below. Employers should review the regulations for more details and reach out to legal counsel with any individual concerns.
1. System for Communicating
OSHA requires employers to communicate with employees about certain topics, including asking employees to report any symptoms, exposures or hazards in the workplace, providing information about access to testing and COVID-19 hazards, policies and procedures.
2. Identification of COVID-19 Hazards
Employers have an obligation to identify, evaluate and respond to hazards. The Prevention Program must include:
- A process for screening employees for COVID-19 symptoms (which can include self‑screening at home prior to reporting to work)
- Policies and procedures to respond to COVID-19 cases, taking into account a workplace-specific evaluation of potential COVID-19 hazards
- Strategy for maximizing quantity of outdoor air when possible and increasing filtration efficiency
3. Investigating and Responding to COVID-19 Cases
Employers must have an effective procedure to investigate COVID-19 cases in the workplace, including a procedure for verifying cases, collecting information and contact tracing to determine potential exposure to others.
An employer must give notice of potential COVID-19 exposure within one business day to any employees, contractors or other employers who may have been exposed without revealing personal identifying information. (This is the same requirement as AB-685.)
Cal/OSHA requires that employers offer COVID-19 testing, at no cost to employees during their working hours, if they have had a potential exposure in the workplace, and inform them of any benefits they may be entitled to (such as workers’ compensation and protected leave laws).
4. Correction of Hazards
Employers must implement effective policies and/or procedures for correcting unsafe or unhealthy conditions, work practices, policies and procedures in a timely manner based on the severity of the hazard.
Employers must provide training and instruction on the employer’s policies and procedures, how COVID spreads and how to minimize the spread using various methods.
6. Physical Distancing
The standard requires that employees must be separated by at least six feet, unless the employer can demonstrate that such separation is not possible, in which case employees should be as far apart as possible.
7. Face Coverings
Employers must provide face coverings and ensure they are properly worn by employees (over the nose and mouth when indoors, or outdoors and less than six feet away) with limited exceptions.
8. Other Controls and PPE
Based on the employer’s workplace environment, the employer must put controls and procedures in place to minimize transmission, such as disinfection and cleaning protocols, handwashing stations, erection of barriers and usage of PPE.
9. Reporting and recordkeeping
Employers must follow certain recordkeeping and reporting requirements, including reporting any COVID-19 case that results in the hospitalization or death of any employee to Cal/OSHA, and documenting steps taken to implement the COVID-19 Prevention Program and comply with Cal/OSHA regulations.
Employers must record and track all COVID-19 cases with the employee’s name, contact information, occupation, location where the employee worked, the date of the last day at the workplace and the date of a positive COVID-19 test, and this information shall be made available to employees with personal identifying information removed.
10. Exclusion of Cases
Employers must take steps to ensure COVID-19 cases are excluded from the workplace until return to work criteria is met.
Importantly, the regulation specifies that excluded employees must continue to receive earnings, seniority and other rights and benefits of employment as if they had not been removed from their job, with some exceptions.
11. Return to Work criteria
Generally, employees with symptoms cannot return to work until:
- At least 24 hours have passed since a fever of 100.4 or higher has resolved without the use of fever-reducing medications;
- COVID-19 symptoms have improved; and
- At least 10 days have passed since COVID-19 symptoms first appeared.
Employees without symptoms who test positive cannot return to work until a minimum of 10 days have passed since the date of specimen collection of their first positive COVID-19 test.
A negative COVID-19 test shall not be required for an employee to return to work. This has been interpreted by most in the community to mean that employers cannot require a negative test in order to return to work.
There is different return to work criteria when an employee is subject to an isolation or quarantine order, or when an employee’s removal would create an undue risk to community health or safety.
Response to Multiple Infections & Outbreaks
The Cal/OSHA regulations provide requirements in the event a workplace suffers from multiple COVID-19 infections or an “outbreak.”
An “outbreak” occurs (under the Cal/OSHA regulations and according to the California Department of Public Health) if there are three or more COVID‑19 cases within a 14-day period, or if a local health department identifies a workplace as an outbreak location. In the event of an “outbreak,” the employer must:
- Provide immediate no-cost testing to all employees at the exposed workplace who were present during the period of outbreak, and then another test one week later. Then, employers must provide continuous testing of employees who remain at the workplace at least once per week, until no new COVID cases are detected in the workplace for a 14-day period;
- Exclude any cases and exposed employees from the workplace;
- Investigate and determine possible workplace factors, implement any changes necessary, and document any steps taken;
- Notify the local health department within 48 hours after the employer discovers an outbreak . (This is the same timeframe as required by AB-685. Note that AB-685, and the regulation described above also requires employers notify any employees within one business day that they may have been exposed if they were on the worksite during the infectious period.)
Response to Major Outbreaks
The Cal/OSHA regulations provide requirements in the event a workplace suffers from a “major outbreak” which occurs when there are 20 or more COVID-19 cases in a 30-day period. In such instances, employers must provide testing at least twice weekly until there are no new cases detected in a 14-day period. In the event of a major outbreak, in addition to taking all the same steps for an “outbreak,” an employer must conduct a thorough investigation and take preventative steps such as installing high efficiency air filters and evaluating whether to halt some or all operations temporarily.
Requirements for Employer-Provided Housing & Transportation
The new Cal/OSHA regulations provide specific requirements for employers that have employer-provided housing and transportation, including prioritizing assignment of housing and transportation, cleaning and disinfection protocols, hand hygiene, physical distancing and the use of face coverings.
For more details, a full copy of the approved Cal/OSHA regulations can be found here.
HOW THE PASSING OF PROPOSITION 24 WILL CHANGE THE CCPA
In 2018, California adopted the most extensive privacy provisions in the United States, the California Consumer Privacy Act of 2018 (CCPA.) Emulating provisions adopted in Europe’s General Data Protection Regulation (GDPR), the CCPA gives California consumers of certain, generally larger, businesses rights relating to the use and sale of personal information like names, addresses or internet purchasing history. In general, the CCPA provides consumers with the right to learn what categories of personal information are collected or sold; to request businesses delete their personal information or opt-out of the sale of their personal information; and creates liability for failing to reasonably protect consumers’ personal information.
California residents voted 56%-44% in the November 2020 election to amend and expand the CCPA through the passage of Proposition 24, the California Privacy Rights Act (CPRA). Proposition 24 imports more of the GDPR’s provisions, providing additional consumer privacy rights over sensitive information. It also expands penalties established through the CCPA, and creates a new agency in California to oversee and enforce consumer data privacy laws. Most of the provisions of CPRA go into effect on January 1, 2023, although the creation of the new state agency and requirements for developing new regulations will immediately go into effect. Businesses must comply with the regulatory provisions of the CCPA until those new regulations are in place.
Most notably, the proposition 1) creates a new administrative enforcement agency and eliminates the existing 30-day period to cure CCPA violations to avoid penalties; 2) slightly narrows which businesses are subject to the consumer data privacy requirements; and 3) provides customers with new data privacy rights, including limiting the sharing of personal data.
Changes to Administrative Enforcement Procedures and Penalties
Under the existing CCPA, a business can be penalized for violation of the regulations only if it does not cure any alleged noncompliance within 30 days after being formally notified by the California Attorney General’s office. Prop 24 creates a separate agency to enforce the CPRA – the California Privacy Protection Agency — and eliminates the existing 30 day opportunity to cure compliance oversights (but provides instead for discretion in whether to impose penalties or allow time to cure), effective January 2023. As a result, all businesses subject to the CPRA will need to be in compliance with the CPRA to avoid the potential issuance of administrative fines once the provisions go into effect in 2023. The new California Privacy Protection Agency will be responsible for investigating violations and assessing administrative penalties, although violations will still be subject to enforcement actions brought by the Attorney General as well. Among other changes, Prop 24 also increases the penalty up to $7,500 on businesses that violate the consumer privacy rights of minors.
Changes which Businesses Must Comply with Consumer Data Privacy Laws
Proposition 24 changes which type of businesses will be subject to California’s consumer data privacy requirements. To be subjected to the CPRA, a business must either:
- Derive at least 50% of its annual revenue from selling or sharing (as opposed to just selling under CCPA) the personal information of California consumers;
- Have gross revenue over $25 million (unchanged); or
- Buy, sell, or share the personal information of more than 100,000 (increased from 50,000 under CCPA) California consumers/households. (Helpfully, the standard now counts only California consumers or households; the CCPA also counted “devices.”)
Other notable changes include:
- Delays the applicability of the CCPA to personal information of a business’s own employees and other business-to-business communications until 2023.
- Requires rulemaking for the protection of trade secrets from disclosure as a result of a consumer request.
- Expands consumer “right to know” requests beyond the prior 12-months, beginning with data collected after January 1, 2022.
IMPACT OF CALIFORNIA’S NEW MARKETPLACE FACILITATOR ACT ON ALCOHOL BEVERAGE LICENSEES
During all the chaos that has been 2020, alcohol beverage licensees and third party providers may have missed the enactment of a new law that actually went into effect near the end of 2019. The Marketplace Facilitator Act (the “Act”) has changed the rules and regulations regarding which businesses must collect and remit sales tax for transactions occurring on third party “marketplaces,” which include electronic platforms, apps or websites where a marketplace seller or third party provider sells or offers for sale tangible merchandise for delivery in California In brief, the Act provides that third party providers, referred to as marketplace facilitators, must collect and remit the sales tax for each sale facilitated through the third party provider’s website. The Act applies to marketplace facilitators that either (1) have physical presence in California or (2) have economic nexus with California (i.e. annual sales of tangible personal property delivered to California consumers greater than $500,000).
This new regulation may seem unusual and contrary to ABC requirements for alcohol beverage licensees, who are the actual seller of the alcohol beverage products on a third party provider website. Typically, where alcoholic beverages are sold on a third party provider’s website or marketplace, the third party provider of alcohol beverages does not hold a license from the California Department of Alcoholic Beverage Control (“ABC”). Because only licensees may sell alcoholic beverages and exercise license privileges, including sales and controlling all funds arising from such transactions, the third party provider would not be considered the seller of the alcoholic beverages since it does not hold a license. All sales of alcoholic beverages are made by the licensee. This is problematic since the Act defines the third party provider as the seller.
The ABC recently addressed this contradiction in an industry advisory. Finding that the collection and remittance of sales tax does not constitute sharing in the profits or revenue from the sale of alcoholic beverages, the ABC stated that the third party provider could be the seller for tax purposes, while the licensee would be the seller of the alcoholic beverages for purposes of exercising license privileges, ABC licensees must continue to keep control over the revenue from sales facilitated by the marketplace facilitator on the marketplace, but may segregate the sales tax component of the transaction and provide those funds directly to the marketplace facilitator for remittance.
As the seller under the Act, a third party marketer either located in California or with nexus in California must therefore register with the California Department of Tax and Fee Administration (“CDTFA”) for a Seller’s Permit or Certificate of Registration, and report and pay sales tax on all retail sales of alcoholic beverages sold on its platform for delivery to California customers. A licensee selling alcohol on a third party marketplace for delivery to consumers in California will also report such sales as part of its total sales to the CDTFA, but would claim an “other” deduction since no tax is owed. Note that these new provisions only apply to sales made for delivery in California, and thus a third party provider would not collect and remit taxes for sales made by alcohol beverage licensees for delivery outside of California.
TTB Increases Flexibility for Calorie Labeling and Advertising in Wine, Spirits, and Malt Beverages
On September 28, 2020, the U.S. Tax and Trade Bureau (TTB) issued TTB Ruling 2020-1 and TTB Procedure 2020-1 expanding the tolerance range for voluntary calorie statements in labeling and advertising alcohol beverages – making the TTB’s rules more consistent with the food labeling requirements of the US Food and Drug Administration (FDA).
The TTB permits alcohol beverage industry members to make voluntary nutrient content statements – such as calorie or carbohydrate content – on their products’ labels and advertisements, provided such statements are truthful and not misleading. The TTB periodically verifies nutrient content claims by analyzing samples of alcohol beverage products. In analyzing such claims, the TTB has certain “tolerance ranges” to allow for normal production and analytical variables, while continuing to ensure that the labeling or advertising does not mislead the consumer.
The new rules expand the TTB’s tolerance range for calorie content statements. Such statements will now be considered acceptable as long as the TTB’s analysis determines that the calorie content of the products are either:
- Within a “reasonable range” below the labeled or advertised amount (within good manufacturing practice limitations); or
- Not more than 20% above the labeled or advertised amount.
Previously, the TTB tolerance range for calorie content claims was only a range of plus 5 or minus 10 calories of the labeled or advertised amount. The new rules have no impact on the TTB’s tolerance ranges for carbohydrates and fats (20% tolerance for understatements) and proteins (20% tolerance for overstatements).
Importantly, the TTB clarified that industry members may use a number of reasonable methods to support their calorie content claims. Lab analyses of each product batch are not required; industry members may instead rely on databases and “typical value” charts. Regardless of the method used to support their calorie content claims, industry members remain responsible for ensuring that their claims are reliable, accurate, and fall within the tolerance ranges set by the TTB.
The new rules are a boon for both producers and restaurants. Producers now have greater flexibility for making calorie content claims on their labels and advertisements, if they choose to do so. Restaurants that are subject to the FDA’s menu labeling requirements also often rely on the nutrient content claims of alcohol beverage products, and the new rules may incentivize producers to provide calorie statements on more alcohol beverage products.
TTB Ruling 2020-1 is available here. TTB Procedure 2020-1 is available here. For questions regarding the above or general labeling questions, please contact Bahaneh Hobel (Partner) or Michael Mercurio (Law Clerk).
Napa County Moves to Orange Reopening Tier
On Tuesday, October 20, Napa County was approved to move to the Orange, Moderate Risk Level reopening tier under California’s Blueprint for a Safer Economy. As a result, effective Wednesday, October 21, many businesses will be able to expand their activities under the Orange Tier guidelines.
Wineries will begin to be allowed indoor tasting, with capacity limited to 25% or 100 people, whichever is less.
Restaurants will be allowed to increase their inside dining capacity to 50% or 200 people, whichever is less.
Bars, breweries and distilleries that have not previously been allowed to open without food service will be allowed to reopen, though only for outside activities.
Information on other businesses and their allowed activities under different tiers is available at https://www.countyofnapa.org/2739/Coronavirus-COVID-19
Napa County is expected to issue additional specific local guidance on reopening requirements in advance of the official change to Orange Tier operations. Additional information from the County and answers to Frequently Asked Questions can be found on the County website.
New Law Expands California’s Cannabis Geographical Indications And Mandates Terroir-Based Appellations of Origin
On September 29, 2020, Governor Gavin Newsom signed Senate Bill 67 into law, expanding the range of geographical indications for cannabis to include city of origin and limiting the use of appellations of origin to cannabis grown outdoors and in the ground. DP&F’s client, Origins Council, representing the legacy cannabis producing regions of California, worked tirelessly with legislators to promote and define terroir-based appellations.
The Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) required that the California Department of Food and Agriculture (CDFA) establish the standards by which a licensed cultivator may designate a county of origin and an appellation of origin for cannabis. These requirements are codified in Section 26063 of the Business and Professions Code (B&P).
Senate Bill 67, introduced by Senator Mike Maguire, who represents the 2nd Senate District – North Coast / North Bay, modifies the language of B&P Section 26063(a) to include a city, or city and county, of origin for cannabis products. The statute’s advertising, labeling, and marketing provisions were modified to encompass the city or city and county designation and to prohibit any use of a similar name that is likely to mislead consumers as to the kind of cannabis contained in a product, when the cannabis was not produced in that county, city, or city and county.
Further, the bill prohibits the use of a name of a California county, city, or city and county, including any similar name that would be misleading to consumers, in advertising, labeling, marketing, or packaging of cannabis products unless 100% of the cannabis contained in the product was produced in the named geographic area. These new provisions would, for example, prohibit a licensed cultivator or manufacturer from labeling a product containing 5% cannabis from Riverside with the city or county name of “Mendocino”, even if the product contained 95% cannabis from the city or county of Mendocino.
Under MAUCRSA, CDFA was also tasked with establishing, by January 1, 2021, a process for licensed cultivators to establish appellations of origins which would encompass standards, practices, and cultivars specific to cannabis products from particular geographical areas in California. Currently, CDFA is engaged in rulemaking to develop appellation regulations that will govern the establishment as well as the enforcement of cannabis appellations of origin.
Senate Bill 67 establishes a terroir baseline for cannabis appellations of origin. Specifically, CDFA may not approve an appellation of origin unless the appellation requires that the cannabis is planted “in the ground in the canopy area.” The bill also prohibits the practice of “using structures,” including greenhouses, hoop houses, glasshouses, conservatories, hothouses, or any similar structure, or “any artificial light in the canopy area” to grow cannabis that qualifies for an appellation of origin. The practical impact of Senate Bill 67 is that only licensed outdoor cultivation with plants “in the ground,” flowering under full sun, will be able to establish an appellation of origin.
The bill also expands the advertising and marketing restrictions for appellations of origins to prohibit any use of a similar name that is likely to mislead consumers as to the kind of cannabis in any advertising, labeling, marketing, or packaging of cannabis. If an appellation of origin is used on a package or label, 100% of the cannabis contained in the product must meet the appellation of origin requirements, and 100% of the cannabis must be produced in the designated geographical area.
On October 2, 2020, CDFA announced modifications to the proposed appellations regulations which take into account Senate Bill 67. This is the second public comment period. Written comments on the proposed regulations will be accepted until October 19, 2020.
2020: The Year Testing Availability and Technology Failed Our Wine Industry Economy
Accurate, available and cost-effective diagnostic tools have never been more critical to economic survival than in 2020. While the world waits for a COVID-19 vaccine, large segments of our economy have been closed or hamstrung by government restrictions or voluntary measures implemented to slow the spread of the novel coronavirus. The lack of readily available, quick and accurate COVID-19 testing has been a primary contributor to the implementation of restrictions that have put millions out of work and slowed or recessed economic growth. Now, California and other west coast wine regions have been placed in another impossible situation as a result of the lack of testing resources and technologies available to make timely decisions about the quality of wine grapes.
The 2020 fires, the first round of which was caused by the lightning storms of August 16-19, occurred earlier in the harvest season than the fires and smoke exposure of previous years. The timing and breadth of these fires has caused an enormous demand for smoke taint testing at the go-to laboratory for smoke taint analysis- ETS Laboratories- although ETS and the Napa Valley Vintners have compiled a list of other testing resources available in state and abroad. Because of the enormous and unprecedented demand for ETS services, even with technicians working around the clock, some wineries and growers are shipping their samples overseas in hopes of getting results prior to the pick date.
Smoke taint tests primarily come in two forms: (a) whole berry testing where grape berries are analyzed for “free” guaiacol and 4-methylguaiacol (two of the primary indicators of smoke taint); and (b) wine tests where guaiacol and 4-methylguaiacol are measured in wine that has been fermented or micro-fermented. In the second test, where smoke taint is present, the guaiacol levels will be higher because some or most of the guaiacol that had been bound to sugars in the grapes will have released from the sugars through fermentation.
Whole berry testing was generally considered the most reliable testing option after the 2017 fires. However, it was known that smoke taint characteristics would increase after sugar bonds broke during fermentation and would continue to exacerbate through aging. In 2018, wineries started harvesting small batches of grape clusters to perform in-winery micro-fermentations to then test for smoke taint. Many growers objected to this process because of a lack of transparency regarding the micro-fermentation methodology or any uniformly recognized industry standard protocol. Some growers suspected that grape rejections were based on business factors, such as a wine supply glut, rather than actual smoke taint.
Now in 2020, the demand for testing is so intense that ETS is posting timing updates to receive test results on the landing page for their website. That is, please accept our condolences- ETS is currently reporting results from samples received on August 26 and samples received on September 10 will be reported by October 20.
This delay causes significant problems for wineries and growers. First, wineries cannot evaluate smoke impacts to grapes in real time to make informed grape harvest and acceptance decisions. Second, even if a winery will rely on an “old” test, the delay in receiving even dated information may result in grapes passing maturity and being subject to other defect liabilities. For growers, the problem is more severe and immediate. Growers across the state are watching grapes mature on the vines and many have no definitive answers from the wineries regarding a pick and delivery date or rejection.
In other cases, wineries are offering to process fruit but delay determination on quality until after fermentation. This risk for growers may payoff if smoke taint fears are worse than their reality, but if the fermented wine is ultimately rejected, some growers may be left without any compensation or insurance claim for an entire year of farming and nurturing the 2020 crop. Growers should be speaking regularly with their crop insurance agents and adjusters to determine whether they can maintain claim rights for rejections that occur in the winery, an option that had not previously been available.
In circumstances where pick decisions have not been made because of the lack of timely technical analysis, the delay will result in effective rejection and a much more complicated crop insurance claim process. For every fraction of increased Brix in grapes, the grapes also lose water, or desiccate, meaning that there will be lower tonnage, negatively impacting the purchase price for tonnage-based grape purchase agreements. Two extreme heat spikes over the past 30 days have further exacerbated the rate of desiccation. The delay in making informed pick or rejection decisions may also negatively impact growers’ ability to deliver sound and merchantable fruit and meet any contractual quality standards even if the grapes are shown not to be adversely impacted by smoke conditions.
For growers who have crop insurance, and want to make a claim for unharvested fruit, they need the winery to reject the crop, evidence of an independent analysis of the crop showing smoke taint, and the crop insurance adjuster to evaluate the tonnage of the crop in the vineyard. Any crop insurance payment will be based on either the contract price, or the average price set by the government-backed insurance program, multiplied by the crop tonnage and then reduced further by the policy coverage, which is based on the historic average yields on the vineyard, the amount of coverage purchased, the manner in which the farm units were defined by the policy and broken up by contract and less a deduction because the crop was not harvested. The longer that winery and grower are delayed in determining whether smoke taint is present, the lighter the tonnage and further reduced crop insurance claim. For growers who have recently planted vineyards, add to the insult the inability to show the progressive increase in crop yield on the vineyard for future crop insurance policies.
On top of all this, most Grape Purchase Agreements have provisions that allow for acceptance or rejection of grapes at the time of delivery, but while such a provision may be suitable to reject raisinated grapes or grapes that don’t meet the contractual Brix requirements, they are not well suited for rejection/acceptance based on smoke taint where meaningful inspection cannot occur on the crush pad at delivery. Even contracts that have specific smoke provisions, those provisions were predicated on the assumption that smoke taint test results could be obtained in a timely manner for a contract where time is of the essence in performance. With contracts that don’t adequately address the unexpected inundation of testing needs and a crop insurance program that doesn’t accommodate in-vineyard rejection without test results, wineries and growers are also challenged to consider contract amendments that attempt to mitigate the crop quality risks of this season.
I have always believed that strong relationships between wineries and growers are the cornerstone of this industry that I love and the basis for making beautiful wines that I love to drink. This harvest, like this year, is pushing many of us to the edge. And while testing resources are available and good people are doing their best, for a fire season that has cost lives and livelihoods, this 2020 harvest has shown that we do not have the testing and technology available to support the wine industry economy in the face of climate change.
The industry should demand and advocate for necessary and appropriate changes to crop insurance claim requirements that reflect the reality that smoke impacts are not like other grape defects that can be evaluated in the vineyard. For wineries that are partnering with their growers and taking the risk on grapes that they cannot adequately evaluate in the vineyard, a holistic approach is required to support these efforts and collaborations both on the production side and for the grower who has been left, in many cases, with no better option as a result of conditions they could not control. Much like the emergency relief put in place to allow businesses to adapt to the restrictions required to respond to the COVID-19 pandemic, state and local emergency action can support this industry now.
This year will end and that sounds great, but the challenges of climate change won’t go away on December 31. It is time to use our creativity and resources to prepare for the challenges of the future, at least so we can drink beautiful wine at the end of a long, hard-fought day trying to solve these problems.
Join DP&F’s Richard Mendelson for Free Webinar: Doing Business in the Time of COVID
DP&F’s Richard Mendelson will be the moderator for a star-studded panel of Napa business executives in a free Zoom webinar on Doing Business in the Time of COVID. Giving the perspective of the wine industry will be Jean-Charles Boisset, owner of Raymond Cellars and JCB Collection, and Emma Swain, CEO of St. Supery Estate Vineyards & Winery. They will be joined by Lindsey Gallagher, President and CEO of Visit Napa, who will address the tourism challenges of COVID on the Napa Valley. The webinar is being presented as part of the North Bay Business Journal’s Impact Napa conference and will take place on Wednesday, September 30, 2020 from 10:00-11:30 a.m. It is FREE for all to attend, just register at the following link:
Trademarks at the Supreme Court: The Court Extends Trademark Registration to “Generic.com” Brands
On June 30, 2020, the Supreme Court issued its second and final trademark opinion of the 2019 – 2020 term. The first opinion resolved a circuit split on the availability of profit remedies for trademark owners; the second determined the eligibility for trademark registration of compound generic marks.
In Romag Fasteners, Inc. v. Fossil, Inc., 140 S. Ct. 1492 (2020), decided in April, the Court addressed whether the Lanham Act required a plaintiff to show that the defendant willfully infringed in order to recover the defendant’s profits from a violation under 15 U.S.C. 1125(a). The parties in that case had entered into an agreement in which the plaintiff provided fasteners for the defendant’s leather goods. The plaintiff eventually discovered that the defendant’s manufacturers had been producing counterfeit fasteners under the plaintiff’s mark. It alleged and proved a violation under § 1125(a) for false or misleading use of a trademark. The trial jury found that, although the defendant had acted with “callous disregard” of the plaintiff’s trademark rights, it had not willfully infringed. Id. at 1494.
The Court noted that the plain language of § 1117 did not require a “willful” violation of 1125(a) in order for the plaintiff to recover defendant’s profits and further noted that the Lanham Act was generally explicit when it wished to impose such a state-of-mind requirement on a violation or remedy. Defendants relied, instead, on the statute’s qualification that a plaintiff’s ability to recover a defendant’s profits under § 1117(a) was “subject to the principles of equity”; it asserted that courts of equity had long required a willful violation for plaintiffs to recover profits in trademark cases and that the Lanham Act had preserved this tradition. The Court did not find the case law on this point convincing, and concluded that the statute’s “principles of equity” language “more naturally suggests fundamental rules that apply more systematically across claims and practice areas.” Id., at 1496. Although the defendant’s mental state is relevant in a court’s determination of the appropriate remedy for a trademark violation, there is no requirement that a plaintiff alleging a violation of § 1125(a) show that the defendant acted willfully in order for the plaintiff to recover wrongful profits as remedy.
The Court’s opinion in U.S. Patent and Trademark Office, et al. v. Booking.com B.V., No. 19-46, 2020 WL 3518365 (U.S. June 30, 2020), considered whether the addition of a generic top-level domain to an already generic term, thereby creating a “generic.com” mark, necessarily results in a generic compound mark that is incapable of registration. The Patent and Trademark Office (“PTO”) had refused registration to the mark BOOKING.COM, basing its decision on the Supreme Court’s prior ruling in Goodyear’s India Rubber Glove Mfg. Co. v. Goodyear Rubber Co., 128 U.S. 598 (1888), that the simple addition of the corporate designation “Company” to an otherwise generic mark did not create a distinctive mark capable of registration. Such an addition “only indicates that parties have formed an association or partnership to deal in such goods.” Id. at 602. A top-level domain, the PTO reasoned, was equivalent to a corporate designation because it simply indicates that the parties operate a website for such goods.
The Court rejected the PTO’s absolute rule and concluded that whether a mark is generic ultimately rests on whether consumers perceive it as so. The Court distinguished the top-level domains in this case from the corporate designations in Goodyear, reasoning that a “generic.com” mark implied an exclusivity that was absent in a “Generic Company” mark because only one company can own a domain name while many companies can add the corporate designation “company” to a generic term. The exclusivity of “generic.com” carried source-identifying significance. The Court also stated that the PTO misunderstood Goodyear as creating an absolute rule that a compound of generic terms is necessarily generic; properly understood, Goodyear stands for the proposition that the combination of generic terms is itself generic “if the combination yields no additional meaning to consumers capable of distinguishing the goods or services.” Booking.com, 2020 WL 3518365 at *6 (emphasis in original). Survey evidence in this case indicated that consumers understood “booking.com” to refer to a single source of goods or services. Accordingly, the Court concluded that “booking.com” was not generic and that consumers did not necessarily perceive “generic.com” marks as generic such that an absolute rule was appropriate.
In his dissent, Justice Breyer disagreed that the case was distinguishable from Goodyear. It was not the non-exclusivity of “company” that animated the Court’s decision in Goodyear, said Breyer, but that “[t]erms that merely convey the nature of the producer’s business should remain free for all to use.” Id. at *12 (Breyer, J., dissenting). A top-level domain term was not capable of distinguishing a mark because it merely conveyed that the producer had an online presence. Therefore, adding “.com” to the generic term “booking” did not elevate the mark from generic to descriptive. Breyer also expressed concern about the anti-competitive effects of the majority’s decision. He worried that the doctrine of likelihood of confusion would not sufficiently preserve competition in generic terms if producers were able to appropriate “generic.com.” Finally, he noted that the survey evidence that the majority relied on was of little probative value in determining whether a mark was generic: evidence that consumers thought that “booking.com” was a brand name was evidence that consumers were familiar with the particular company Booking.com—“such association does not establish that a term is nongeneric” but merely that the business has advertised sufficiently to create the association. Id. at *13.
Both cases are victories for trademark owners. Romag Fasteners clarifies that a trademark owner need not show that a defendant acted willfully in order to recover the profits wrongfully gained through infringement. This decision enlarges the potential damage recoveries for successful infringement plaintiffs. However, willfulness remains relevant in determining the appropriate remedy for infringement, and it is unlikely that courts will often force innocent infringers to disgorge their profits. Booking.com is the more significant decision. It opens the door to trademark registration for companies that have built their brands around “generic.com” constructions and have advertised extensively to create strong consumer associations between domain names and their particular goods or services. By emphasizing that genericness is determined by reference to consumer associations, the Court has paved the way for registration of generic brand names.
The wine industry is already seeing the effects of the Booking.com decision. Wine.com, LLC, took an interest in the Booking.com proceedings and filed an amicus brief (as a member of the “Coalition of .com Brand Owners”) in support of Booking.com. The online wine retailer has been using the WINE.COM mark since the late 90s and has built considerable consumer goodwill in that mark, but the PTO denied registration of its WINE.COM word mark in 2003. Since the Court issued its Booking.com opinion in June, Wine.com has re-applied for registration of its domain name.
WINE.COM appears to be a good candidate for registration after Booking.com. But compound generic marks still face an uphill battle at the PTO—the owner of a “generic.com” domain name will need to show extensive use of the domain name as a trademark and strong consumer associations between the domain name and their company in order to obtain registration for this type of mark.
PPP Forgiveness Terms Substantially Relaxed
The terms of the usage of PPP loans were just substantially relaxed by the Paycheck Protection Program Flexibility Act of 2020 – H.R. 7010. PPP recipients now have 24 weeks (the “covered period”), to use the loan proceeds instead of the original eight weeks and still receive forgiveness of the loan amounts. However, recipients of already issued loans can elect to still use the original 8 week period for purposes of their forgiveness application calculations if that is more favorable.
The PPP Flexibility Act also provides significant relief involving the provisions that reduce loan forgiveness amounts where staffing levels have declined. It adds additional time to cure cuts in staffing or compensation levels that reduce forgiveness amounts, extending the deadline from June 30 to December 31, 2020. It also adds a provision that allows two exceptions to the forgiveness penalties for staffing reduction. Where the loan recipient can document that it was unable to rehire staff because their prior employees, and similarly qualified employees, were not available, the forgiveness reduction will not apply. It also will not apply where the recipient is unable to return to the same level of business activity as before February 15, 2020 due to sanitation, social distancing or any other customer or worker safety requirements related to federal COVID-19 requirements or guidance.
It also eases the prior restriction developed through the regulatory process that 75% of PPP loan funds were required to be spent on payroll costs. The new PPP Flexibility Act provision requires only 60% of funds be used on payroll costs, allowing 40% to be spent on other specifically allowed costs of mortgage interest, rent and utility payments.
Further, it substantially extends the original PPP loan payment deferral terms. Originally, no payments of principal, interest or fees were required for six months. Now, no payments are required at all until a forgiveness determination is made, so long as the forgiveness application is filed within 10 months of the end of the “covered period.” That works out to a total of more than 15 months from when the loan is originated without any payments – the 10 months begin to run after the end of the extended 24 week period for using the funds. If the forgiveness application is not filed by the 10 month deadline, payments on the loans begin.
Finally, the PPP Flexibility Act removes a restriction on those that receive PPP loan forgiveness from also taking advantage of a delayed payment of employer payroll taxes. Now, PPP loan recipients who seek loan forgiveness will also be able to use the deferred payroll tax payment provisions of Section 2302 of the CARES Act. Those provisions allow for payment of 50 percent of specifically defined applicable employment taxes for 2020 to be paid by December 31, 2021, and the remainder by December 31, 2022.
Updated PPP Guidance Deems Smaller Loans ‘Necessary’
Today, May 13, 2020, the Treasury Department issued a major revision to its interpretation of the Payroll Protection Program’s requirement that loans under the program be “necessary.” On April 24, it had issued proposed rules regarding the required certification that the “current economic uncertainty makes this loan request necessary,” and provided a safe harbor for entities that may have certified this under a misapprehension of the standard to return funds that were obtained previously. It emphasized that borrowers must “certify in good faith that their PPP loan request is necessary,” under the threat of potential criminal prosecution for certifications made without sufficient need.
In a near-complete reversal, it has now said, effectively, never mind. With a newly provided FAQ answer, Treasury now says that all PPP loan recipients of amounts of less than $2 million “will be deemed to have made the required certification concerning the necessity of the loan request in good faith.” While this gives additional comfort to those that accepted and retained loans in the past, it is too late and highly disappointing for those that, in good faith, considered the prior interpretation and decided to return their loans out of fear of the risk it could later be found to be unnecessary.
The potential risk for those with loans above the $2 million threshold has also been substantially pared back. The updated guidance tempers the potential consequences to repaying the funds: “If SBA determines in the course of its review that a borrower lacked an adequate basis for the required certification concerning the necessity of the loan request, SBA will seek repayment of the outstanding PPP loan balance and will inform the lender that the borrower is not eligible for loan forgiveness. If the borrower repays the loan after receiving notification from SBA, SBA will not pursue administrative enforcement or referrals to other agencies based on its determination with respect to the certification concerning necessity of the loan request.”
Potential Penalty Relief for Late Property Tax Payments Related to COVID-19
Property owners who missed the April deadline for paying the second installment of real property taxes because of the COVID-19 pandemic may be eligible for relief from late payment penalties. But to get this relief, you may need to act soon.
ALERT: On May 6, 2020, Governor Newsom issued Executive Order N-61-20, directing county tax collectors to waive, until May 6, 2021, all penalties, costs, and interest for late payment of the second installment of property taxes under the following conditions:
- The real property is owner-occupied residential property or owner-occupied “small business” property (this includes wineries with up to 1,000 employees);
- The taxes owed were not delinquent on March 4, 2020;
- The taxpayer timely files a claim for relief on a form prescribed by the county tax collector; and
- “The taxpayer demonstrates to the satisfaction of the tax collector that the taxpayer has suffered economic hardship, or was otherwise unable to tender payment of taxes in a timely fashion, due to the COVID-19 pandemic, or any local, state, or federal government response to COVID-19.”
As a result of Executive Order N-61-20, county tax collectors may revise the application forms, deadlines, and review process referenced below, so taxpayers should check the website of their county tax collectors for more information. A link to a list of all county tax collectors and their websites is below.
The second installment of real property taxes was due April 10, 2020. Missing that deadline normally results in a penalty of 10% of any unpaid taxes, and monthly interest of 1.5% also starts accruing on July 1. But, in light of the global COVID-19 pandemic, county tax collectors have indicated a willingness to cancel penalties where the failure to pay by the deadline “is due to reasonable cause and circumstances beyond the taxpayer’s control, and occurred notwithstanding the exercise of ordinary care in the absence of willful neglect.” This authority arises under Revenue and Taxation Code Section 4985.2(a), which allows tax collectors to cancel penalties, costs, and charges resulting from tax delinquency under certain circumstances.
While this is welcome news, tax payers should be aware that the grounds for relief are narrow, the current deadlines are tight (with Napa County’s application for penalty relief due on May 15, 2020), and all delinquent taxes will need to be paid to be eligible for penalty relief.
For example, Sonoma County’s tax collector had, before the governor’s executive order, issued guidelines providing that potential penalty relief requires that the property owner (“Owner”) sign a declaration under penalty of perjury that:
(a) Failure to make a timely payment is due to Owner’s experience of at least one of the following circumstances:
(i) A medical condition directly related to the COVID-19 disease;
(ii) The County Health Officer’s COVID-19 Shelter-in-Place Order No. C19-03, as amended by Order No. C19-05, (“Order”) precluded Owner from working or generating sufficient revenue/income, resulting in severe economic hardship;
(iii) Other reasonable cause or circumstance directly related to COVID-19 and/or the Order;
(b) The circumstance was beyond Owner’s control;
(c) Failure to make a timely payment occurred despite Owner’s exercise of ordinary care and without willful neglect.
Under the latest executive order, all counties will be able to use the same standard of impacts from COVID-19. Applicants will need to provide documents supporting their claim for relief.
Currently, deadlines to request relief are approaching, though those deadlines may change with the governor’s executive order. Napa County requires COVID-19-related penalty relief applications be filed by May 15, 2020, while Sonoma County property owners have until June 10, 2020 to file applications. Napa County does not require payment with the application, but if relief is granted, requires payment by June 10, 2020. In contrast, Sonoma County requires payment with the application. It is important to note that relief only applies to late payment of the second installment of property taxes; payment in full of any prior tax delinquencies plus applicable penalties and interest is required with the application in order to be eligible for relief.
Below are links, from prior to the governor’s order, to information and application forms for COVID-19-related late payment penalty relief, listed in order of the application deadlines.
- Napa County (Filing Deadline: May 15, 2020)
- Tax collector webpage on COVID-19, with links to FAQs and COVID-19 penalty relief application form.
- Payment deadline: June 10, 2020
- Sonoma County (Filing Deadline: June 10, 2020)
- Tax collector webpage on COVID-19, with links to COVID-19 penalty relief guidelines and application form.
- Payment required with application filing.
- Lake County (Filing Deadline: June 30, 2020)
- Tax collector webpage with links to COVID-19 FAQs and COVID-19 penalty relief application form.
- Payment required with application filing.
- Mendocino County (Filing Deadline: June 30, 2020)
- Tax collector webpage with link to COVID-19 penalty relief application form.
- Payment required with application filing.
For counties not listed above, a list of the websites for all California county tax collectors can be found here.
Highlights of Napa County’s Updated Shelter in Place Order Including Cloth Face Covering Requirement
Here are the key changes in the new Order:
- The Order requires wearing cloth face coverings when inside places of business and in workplaces when interacting with any person where six feet of physical distancing cannot be maintained.
- A Face Covering is Not Required When: at home; in your car alone or solely with members of your household; exercising outdoors provided you are staying at least six feet apart from anyone who is not a member of your household (but it is recommended that you have a face covering with you and readily accessible); when eating or drinking.
- Who Should Not Wear a Face Covering: Children 6 years old or younger may not need a face covering and children under 2 should not wear one; anyone who has trouble breathing or is unable to easily remove a face covering without assistance; anyone who has been advised by a medical professional not to wear a face covering.
- Essential businesses must require their employees wear a face covering in any area where others may be present, even if there are no customers or members of the public present at the time. Essential businesses should inform customers about the requirement of wearing a face covering, including posting signs at the entrance to the store or facility.
- All workers operating public transportation, or operating other types of shared transportation are required to wear a face covering when at work in most settings.
- Workers doing minimum basic operations, like security or payroll, essential infrastructure work, or government functions should wear a face covering when six feet of physical distance cannot be maintained.
- For more information on cloth face coverings, including links to guidance on how to make your own mask, see the Napa County requirement here.
- The Order states that businesses will be permitted to reopen within the State of California’s framework that identifies four-stages to reopening.
- Non-essential businesses will be permitted to reopen according to the State’s four-stage framework. It is anticipated that Early Stage 2 non-essential businesses may be able to open as early as Friday, May 8, 2020. The list of those businesses, and how they will be allowed to operate, will be provided by the State.
- Counties may be able to move into Deep Stage 2, but only after the State Public Health Officer provides criteria and procedures for doing so, as well as the template for submitting a “readiness plan” that requires self-certification by the Public Health Officer and approval by the Board of Supervisors.
- Stage 3 non-essential businesses will not be able to reopen until the Governor determines, on a statewide basis, that counties can move into Stage 3. The Governor has also said this stage is months away.
- The Order allows drive-in activities that can comply with physical distancing requirements.
- All construction is now allowed but it must comply with Construction Site Requirements to maintain social distancing and sanitation (see Appendix B to the Order).
- The Order allows outdoor recreation sports that can comply with physical distancing requirements; however, person-to-person contact sports are still prohibited.
- The list of approved outdoor recreation activities can be found here.
- Golfing, use of tennis courts, and use of swimming pools (public and semi-private) are permitted as long as they are used in compliance with social distancing protocols. (The specific, detailed requirements for golf courses remain the same – see Appendix C of the Order).
- You can exercise outdoors if you will not be in close contact with other people or using equipment that other people outside your household have touched. Fitness centers, gyms, recreational centers, fitness equipment at parks, climbing walls, basketball courts, and other shared sports facilities remain closed.
- Comment on the Short-Term Lodging Industry
- The Napa County Public Health Officer has advised the lodging industry that reservations beginning on and after June 1, 2020 may be accepted. However, this is not a guarantee that the reservations can be honored, and short-term lodging businesses should inform customers that their reservations will be cancelled if the local and/or state Shelter-At-Home orders continue to prohibit short-term lodging at that time. Further, lodging businesses should consider how they will provide appropriate sanitation and enforce physical distancing protocols when they are allowed to reopen.
- The Compliance Task Force will not engage in enforcement activities for lodging businesses that are currently accepting reservations for dates beginning June 1, 2020 and beyond, but making new reservations for dates in May is still prohibited and subject to enforcement.
For more information please contact Marissa Buck.
Managing Onsite Employees During COVID
Many of you have continued to have employees work at your facility and others are preparing to re-open and/or have employees return to the workplace. There are many key issues to consider in having onsite employees and we have attempted to address the majority of them below. Note that the specific requirements will vary depending on your work environment (i.e. an office setting versus a warehouse or production facility) and if you have specific questions you should contact us directly to discuss.
- Essential Workers Only
- You should continue to limit employees in the workplace to those who are essential to the onsite business needs. If you have employees returning to the workplace, make sure you know who is returning and when – if you have too many employees coming back on the same day it could be unsafe. It may be helpful to stagger shifts so you have less employees coming and going at the same time.
- If possible, you can phase in the return of employees but make sure to use non-discriminatory factors in determining who comes back when, such as seniority.
- To the extent you are able to keep all or part of your workforce remote you should continue to allow employees to work remotely. It is also possible to alternate work from home weeks or days so that you have less employees at the workplace at one time.
- Continue to stress to employees that they should not come to work if they are sick and to notify the appropriate person if they have been exposed to someone with COVID-19.
- Refusal or Inability to Return to Work
- Determine how to handle employees who are either unable or unwilling to return to work, whether it is because of fear, health concerns, family obligations, or employees that remain quarantined due to COVID-19 exposure.
- These will need to be handled on a case-by-case basis. It may be helpful to create a company policy beforehand on how to handle employees who are not in a protected category, but only if you are able to consistently follow that policy. At the very least designate one person to address these concerns so that consistency is more likely to be obtained.
- For employees in high risk groups, consider allowing them to stay remote or on leave and if they are able to return to work consider if additional PPE or other protections are available (i.e. a separate workstation away from other employees, fewer days in the workplace, etc.).
- Workplace Safety
- Social Distancing Protocol: As we provided in an earlier update, all of the Bay Area counties have issued required Social Distancing Protocols that need to be posted at the worksite. A copy of the sample protocol is attached to all relevant County Shelter in Place Orders and they are available in Spanish. If you don’t already have one, you need to create a protocol and post it where employees can see it when they return to the workplace. It is also helpful to circulate the protocol and any other updated safety policies and procedures to employees before the return to the workplace so employees know what to expect. (If you need us to resend the April 1 email let us know).
- PPE: Depending on the work environment and the Shelter in Place Order for your County, you may need to provide PPE for your employees, such as gloves, masks, face shields, or goggles. Employers are required by OSHA to provide and pay for PPE. Increasing the availability of hand sanitizer throughout the workplace and sinks with soap is also helpful.
- Additional Resources: CDC guidance on cleaning and disinfecting facilities can be found here: https://www.cdc.gov/coronavirus/2019-ncov/community/disinfecting-building-facility.html, as well as additional guidance from OSHA on protecting workers during a pandemic: https://www.osha.gov/Publications/OSHAFS-3747.pdf.
- Symptom Checks Including Temperature Readings
- The EEOC has stated that doing employee symptom checks, including taking employee temperatures, before they enter the workplace is allowable under the ADA because COVID-19 presents a direct threat to other employees, customers, and the general public. Employers can also ask employees if they have COVID-19 related symptoms. The CDC recently updated the list of COVID-19 symptoms, stating that people with the following symptoms may have COVID-19:
- shortness of breath, or difficulty breathing; OR
- at least two of the following symptoms: fever, headache, chills, sore throat, repeated shaking with chills, new loss of taste or smell, and muscle pain.
- All information collected about employee illness is considered confidential medical information and must be treated as such by the employer.
- Particular Issues Regarding Temperature Checks:
- While temperature checks are permitted, the EEOC notes in their guidance that employers should be aware that some people with COVID-19 do not have a fever. Temperature checks should be done in conjunction with other symptom checks and/or questions related to high-risk factors such as being in close quarters with a person who has COVID-19 or traveling to a high risk area in the last 14 days.
- If you send an employee home because they have a temperature they should be paid for reporting to work that day to limit potential liability. Additionally, you should have a policy for what to do if an employee refuses to have their temperature taken.
- It is not required that you have a medical professional take temperatures, however, the person doing it should be trained, have proper PPE (mask, gloves, face shield or goggles, and a gown), use a no-touch thermometer (and know how to use it), and understand the confidentiality considerations.
- An employee’s temperature is confidential medical information, thus the temperature check needs to be done as privately as possible to keep the information confidential. Employees should not line up and wait to have their temperature taken, both for privacy reasons and for social distancing purposes.
- Although you are allowed to take temperatures, you should consider this step carefully to determine if you want to start this process. For now, you are not required to take temperatures and unless or until it is required, you may want to hold off given the logistical issues and the confidentiality concerns.
- For more information on symptom checks and other issues regarding return to work procedures, the EEOC’s Question and Answer page can be found here: https://www.eeoc.gov/eeoc/newsroom/wysk/wysk_ada_rehabilitaion_act_coronavirus.cfm.
- The EEOC has stated that doing employee symptom checks, including taking employee temperatures, before they enter the workplace is allowable under the ADA because COVID-19 presents a direct threat to other employees, customers, and the general public. Employers can also ask employees if they have COVID-19 related symptoms. The CDC recently updated the list of COVID-19 symptoms, stating that people with the following symptoms may have COVID-19:
- Potential or Actual COVID-19 Exposure in the Workplace
- Create a plan for how to respond if an employee becomes sick at work including sending the employee home, cleaning and disinfecting the workplace, and identifying all employees who had contact with the sick employee starting 2 days before the employee showed symptoms.
- The CDC provided guidelines for permitting essential employees to continue working following potential exposure to COVID-19 if they remain asymptomatic and additional precautions are implemented (see below). Potential exposure means living with or having close contact (w/in 6 ft.) of an individual with confirmed or suspected COVID-19 beginning 48 hours before the individual showed symptoms.
- Pre-screen the employee before they enter the workplace by taking their temperature and assessing symptoms
- As long as no temperature or symptoms, the employee should self-monitor under the supervision of the employer’s occupational health program
- The employee should wear a face mask at all times in the workplace for 14 days after the last exposure (face mask provided by employer)
- The employee should maintain 6 ft. and practice social distancing whenever possible in the workplace
- Clean and disinfect all areas such as offices, bathrooms, common areas, shared electronic equipment routinely
- If the employee becomes sick during the day they should be sent home immediately and their workplace should be cleaned and disinfected
- Compile information on all persons who had contact with the ill employee during the time the employee had symptoms and 2 days prior, including anyone who was w/in 6 ft. of the employee during this time period
- Determining when an employee can return to the workplace after having COVID-19 should be an interactive process between the employer and the employee and their healthcare provider. For more information on when an individual with COVID-19 can discontinue home isolation see the CDC’s guidance here: https://www.cdc.gov/coronavirus/2019-ncov/hcp/disposition-in-home-patients.html.
- Additional resources for employers in planning and responding to COVID-19 can be found here: https://www.cdc.gov/coronavirus/2019-ncov/community/guidance-business-response.html.
CA ABC and TTB Provide Guidance to Wineries on Virtual Tastings
In light of the wide-spread shut-downs and disruptions resulting from the Covid-19 pandemic, both the California Department of Alcoholic Beverage Control and the Alcohol and Tobacco Tax and Trade Bureau have recently provided guidance to wineries that are now venturing into the new world of “virtual” wine tastings that occur online.
ABC’s latest Notice of Regulatory Relief on Virtual Wine Tastings, issued on Friday April 24, provided certain guidelines for wineries conducting such virtual tastings while their licensed wine premises or tasting rooms are closed:
- Samples or tastes for wine tastings cannot be given for free to consumers. Such samples or tastes must either be sold to the consumer, or included as part of a sale of wine or other products to the consumer.
- Any wine shipped to consumers, including small tasting samples, must be sent in a manufacturer sealed container.
- While there are no limits on the size of the tasting sample, any containers in which the tasting samples are sent must meet the federal regulatory guidelines for both labeling and standards of fill and any applicable state labeling regulations.
- Acceptable standards for fill for wine under federal law include the following: 3 Liters, 1.5 Liters, 1 Liter, 750ml, 50ml, 375ml, 187ml, 100ml (3.4 fl. oz.) and 50ml (1.7 fl. oz).
- Importantly, this means that shipping “tastes” to consumers in small vials that do not meet the above criteria would not be legal under federal or state law.
- Such shipments are subject to sales and/or other applicable taxes, just as typical direct to consumer sales would be.
- In accordance with ABC’s previous regulatory guidance, ABC is temporarily allowing the free shipment of wine to consumers, including samples for virtual wine tastings, during the Covid-19 emergency.
- Finally, it should be noted that the ABC’s latest Notice of Regulatory Relief specifically applies to the sale and shipping of wine and tasting samples within California. Any sales and shipments of wines, including tasting samples, to consumers outside of California will need to comply with the laws of the applicable state to which the wines will be shipped.
The full text of the Third Notice of Regulatory Relief can be found here.
In response to an inquiry by Wine Institute, TTB provided guidance regarding virtual tasting samples being provided by wineries to consumers. (see – https://wineinstitute.org/news-alerts/tasting-samples-for-virtual-winery-experiences-approved-by-ttb/ )
Per Wine Institute, TTB has stated that it will treat these wines just like any other taxable removals, subject to standard production and labeling requirements, payment of excise tax and applicable reporting. TTB’s guidance included the following:
- As noted above, samples must be provided in an approved standard of fill.
- Wine tasting containers must be properly labeled.
- If the tasting sample is a wine that already has an approved Certificate of Label Approval (“COLA”), the winery is permitted to change the net contents on the wine as an allowable revision without having to submit a new COLA. If no COLA was previously obtained, the winery must apply for and obtain COLA approval prior to labeling of the wine tasting sample.
- As a reminder, domestic wines must include the following information on the brand or back label as required under the regulations: Brand name, Class and type designation, Appellation of origin (if required), Alcohol content, Bottler’s name and address statement, Government health warning statement, Net contents and Sulfite declaration. Assuming that the tasting samples being sent to consumers are in containers smaller than 187ml, please note that the minimum type size for all of the foregoing under federal regulations is 1mm.
- As noted above, wines use for tasting samples are treated just like any other removals for sales or consumption – the wines must be tax paid, all required records must be kept and all required reports must be filed. Shipments of these containers must be treated the same as other types of removals from bond – for example, the wine must be tax-determined, and wineries must maintain the required removal from bond records.
Additional Paycheck Protection Program Funding Approved; Disaster Loan Program Expanded To Farmers
On April 24, H.R. 266, the Paycheck Protection Program and Health Care Enhancement Act, was signed into law. In addition to providing significant funding for health care providers ($75 billion) and testing ($25 billion), the stimulus package revives the CARES Act’s Paycheck Protection Program (PPP) with an additional $310 billion in funding for forgivable loans. This expanded stimulus and relief package sets aside a portion of that funding for smaller lenders. The additional funding does not change the limits on the availability of the PPP’s forgivable loans, nor change the priority of borrowers in obtaining those loans.
However, in reaction to various reports on public companies obtaining PPP loans, the Treasury Department updated its PPP FAQs and this morning, April 24, issued additional proposed rules regarding the required certification that the “current economic uncertainty makes this loan request necessary,” and provided a safe harbor for entities that may have certified this under a misapprehension of the standard to return funds that were obtained previously. Borrowers must “certify in good faith that their PPP loan request is necessary.”
The legislation also makes one significant change to the CARES Act, by now allowing agricultural enterprises (i.e., farmers) to seek Economic Injury Disaster Loans. The SBA’s EIDL Program is typically not available to agricultural enterprises, which would normally turn to the USDA’s FSA Emergency Farm Loan program in a natural disaster. However, that program covers actual damages to crops. With the change to the provision made in H.R. 266, agricultural enterprises can now seek EIDLs from the SBA for economic losses, including a $10,000 advance that does not need to be repaid. However, even with the additional funding whether new applicants will be able to obtain EIDLs is unclear. Applications are processed on a “first come, first served” basis, and reports indicate a very large volume of applications that have not been funded already. The SBA had paused accepting applications for EIDLs pending additional funding. Details on the EIDL program are available on the SBA’s website here.
CA ABC Provides Additional Coronavirus Regulatory Relief; CA ABC and TTB Postpone Due Dates for Certain Payments and Filings
Over the past forty-eight hours, the California Department of Alcoholic Beverage Control (“CA ABC”) has provided additional regulatory relief to licensees, including information relevant to industry members engaged in fundraising in connection with Coronavirus-related charities. In addition, CA ABC and the Alcohol Tobacco Tax and Trade Bureau (”TTB”) announced that industry members will be permitted to delay certain payments and filings. We have summarized each of these notices below, but the full text of these notices can be accessed through the links below:
- CA ABC Second Notice of Regulatory Relief
- CA ABC Notice re Renewal Fees
- TTB Industry Circular re Postponement of Payments and Filings
1. CA ABC Second Notice of Regulatory Relief
CA ABC issued a Second Notice of Regulatory Relief on April 1, 2020 (the “Second Notice”) temporarily loosening it’s enforcement of certain regulations during the period that shelter-in-place restrictions are in place.. CA ABC had previously announced certain regulatory relief measures in its first Notice of Regulatory Relief (“First Notice”) on March 19, 2020 and we summarized that notice in this blog post.
Below is a summary of ABC’s Second April Notice.
FREE DELIVERY OF ALCOHOLIC BEVERAGES TEMPORARILY ALLOWED: ABC has temporarily provided licensees that can ship or deliver alcoholic beverages, whether pursuant to the ABC Act or pursuant to the First Notice, the right to deliver or ship to consumers for free, without violating Business and Professions Code Section 25600, which prohibits licensees from providing any “premium, gift, or free goods” in connection with the sale or marketing of alcoholic beverages.
DELIVERY HOURS OF ALCOHOL TO RETAILERS EXTENDED TO MIDNIGHT: Licensees (including manufacturers, winegrowers, and wholesalers) may now deliver alcoholic beverages to retailers between 12 AM and 8 PM (rather than starting at 3AM). The prohibition against Sunday deliveries remains in effect. Note that if a retail licensee has a condition on its license limiting the hours during which it may allow deliveries, such condition shall remain in full effect.
CERTAIN CHARITABLE PROMOTIONS RELATED TO SALES OF ALCOHOL: The CA ABC is relaxing its enforcement of restrictions on charitable promotions during this challenging time. Manufacturers, wholesalers, or other supplier-type licensees may advertise that a portion of the purchase price of the alcoholic beverages will be donated to a specified charitable organization related to Coronavirus-related relief, subject to the following limitations:
- The donation and promotion involve a bona fide charitable organization providing relief related to the COVID-19 pandemic;
- The promotion is in connection with the sale of sealed containers and does not encourage or promote the consumption of alcoholic beverages; and
- The donation and promotion do not identify, advertise, or otherwise promote or involve any retail licensee.
Any promotions under this provision must conclude no later than June 30, 2020. ABC has stated it will reassess this measure at that time and determine if it should be extended further.
ABC previously stated in its FAQs that donations to nonprofits benefiting restaurant and hospitality workers in general are permissible, so long as it is just a donation to an organization and does not identify or involve any quid pro quo with specific retailers. In addition, gifts or donations (such as meals or gift cards) may not be made directly to retailer employees.
DISTILLED SPIRITS MANUFACTURERS PROVIDING HIGH-PROOF SPIRITS FOR DISINFECTION PURPOSES: Licensed distilled spirits manufacturers (Type 04) and craft distillers (Type 74) may produce denatured high proof spirits if such distilled spirits are produced for use in accordance with guidance from the Food and Drug Administration, which may be found in the FDA’s Policy (PDF). Undenatured distilled spirits are not included in this relief as they are considered alcoholic beverages. Licensees may provide such distilled spirits for free to any person, including retail licensees, if they are not used to promote the manufacturer’s alcoholic beverage products and are not provided in exchange for an agreement to purchase anything produced or distributed by the manufacturer.
Licensees should note that all of the above changes are only temporary and ABC will provide the industry 10 days’ notice before these guidelines terminate. And although these provisions relax ABC’s enforcement of certain provisions of the ABC Act, the ABC did remind industry members that “[a]ll provisions of the Alcoholic Beverage Control Act, including …tied-house and trade practice restrictions, remain in effect and subject to enforcement unless the Department has provided express notice that specific provisions will not be enforced.”
As we noted in our earlier post, local regulations and restrictions may restrict the ability of licensees to engage in these activities, so you should always confirm that any activity in which you engage is permitted by local zoning or use permits.
2. CA ABC Grants 30 Day Grace Period for License Renewal Fees and Penalties
The CA ABC is providing licensees a 30 day grace-period for paying their annual renewal fees.
For Licensees who have previously missed their license renewal deadline and owe penalties as a result of failing to pay their renewal fee in a timely manner, the ABC is also granting a 30 day grace period.
The ABC has provided helpful tables in its notice that lay out the exact deadlines that have been extended and new due dates for license renewals.
3. TTB Postpones Tax Payment and Filing Deadlines
To help ease the burden on the alcohol beverage industry dealing with the impact of COVID-19 the TTB is postponing several filing and payment due dates for 90days where the original due date falls on or after March 1, 2020, through July 1, 2020. The TTB’s relief actions include:
- Postponing tax payment due dates for wine, beer, distilled spirits, tobacco products, cigarette papers and tubes, firearms, and ammunition excise taxes.
- Postponing filing due dates for excise tax returns.
- Postponing filing due dates for submission of operational reports.
- Postponing filing due dates for claims for credit or refund by producers.
- Postponing filing due dates for claims by manufacturers of non-beverage products.
- Postponing due dates for submission of export documentation.
- Considering emergency variations from regulatory requirements for affected businesses on a case-by-case basis.
- Reviewing requests for relief from penalties based on reasonable cause.
For a list of Coronavirus related resources, please see our Resources Page.
Additional Information on Paycheck Protection Program and SBA Disaster Loan Programs
The U.S. Department of the Treasury announced today, March 31, that the SBA and the Treasury expect the CARES Act programs to be up and running by this Friday, April 3, 2020. You can find resources related to the CARES Act programs on Treasury’s website here, which is updated often and currently includes an application for borrowers for the Paycheck Protection Program (PPP). Additionally, the SBA has a resource page for small business that can be accessed here.
Significantly, the SBA is now indicating that 75% of PPP loan amounts will need to be spent on payroll as opposed to other allowed uses in order to qualify for loan forgiveness. It has also provided details on the loans, which will have relatively short, two year terms for the balance that is not forgiven, but with very low interest rates of 1%.
The Treasury and the IRS also have posted resources regarding the Employee Retention Tax Credit. But note that you cannot receive the payroll tax credit if you receive a PPP loan. Additional information on the tax credit is now on Treasury’s Frequently Asked Questions page here, and on the IRS FAQ page here. The IRS has created a new tax form for advance credits and is currently in the process of finalizing the instructions for the form.
Here are some additional details on the available loan programs:
The Paycheck Protection Program (PPP) in the CARES Act will be administered under the U.S. Small Business Administration’s loan provisions. The SBA and Treasury Department will be releasing additional regulations and guidance to lenders on the program. The loans will be obtained directly from banks, so you should contact your bank to learn if and how it plans to participate in the program.
Eligible employers can borrow 2.5 times their monthly payroll costs and other specific costs as described below. Loan amounts can be up to $10 million. An employer must either already meet the list of eligibility by number of employees maintained by the SBA, or have up to 500 employees, whichever is greater. Wineries can have up to 1,000 employees; other employers can check their industry size limit at https://www.sba.gov/size-standards/.
The PPP loans have significant benefits, most notably that 8 weeks of payroll costs and other specific expenses will be forgiven as long as the employer maintains its prior headcount, with some ability to reduce salary levels (discussed below). Employers that have already reduced headcount can rehire employees and still obtain the full forgiveness amount. The loans are capped at 4% interest, and have deferred payments for at least six months, and up to one year. The interest on the loans will not be forgiven, so some payments on the loans need to be made. The loans can have up to 10 year terms; have no recourse to a businesses’ shareholders, partners or members; and require no collateral or personal guarantee.
The PPP is a separate program from the SBA’s existing Economic Injury Disaster Loan (EIDL) program. Businesses apply directly to the SBA for these loans, at https://covid19relief.sba.gov. The EIDL program provides loans of up to $2 million to cover economic injuries incurred in a disaster. The CARES Act has broadened the eligibility for those loans as well, similar to the Paycheck Protection Program. For now, a borrower can apply for an EIDL loan and also be eligible for a Paycheck Protection Loan, and can refinance the EIDL loan into a future paycheck protection loan. However, the EIDL loan is still a loan, and needs to be paid back. It will not be forgiven, and the proceeds of an EIDL cannot go to cover payroll or other costs that a business would seek to borrow and have forgiven under the PPP. Note that once the PPP loans become available, business will no longer be eligible for both programs, and there is thus a narrow window to obtain an EIDL and still participate in the PPP. Also, participants in the PPP loan forgiveness will not be able to use the employment tax credit or payroll tax deferrals in section 2301 and 2302 of the CARES Act.
As for the PPP loans, the loan amount can include 2.5 times the prior year’s average total monthly payroll costs (modified for seasonal employers or new businesses), subject to important limits below. Payroll costs include:
(aa) the sum of payments of any compensation with respect to employees that is a—
(AA) salary, wage, commission, or similar compensation;
(BB) payment of cash tip or equivalent;
(CC) payment for vacation, parental, family, medical, or sick leave;
(DD) allowance for dismissal or separation;
(EE) payment required for the provisions of group health care benefits, including insurance premiums;
(FF) payment of any retirement benefit; or
(GG) payment of State or local tax assessed on the compensation of employees; and
(bb) the sum of payments of any compensation to or income of a sole proprietor or independent contractor that is a wage, commission, income, net earnings from self-employment, or similar compensation and that is in an amount that is not more than $100,000 in 1 year, as prorated for the covered period…
Importantly, in calculating the payroll costs, the total does not include:
(aa) the compensation of an individual employee in excess of an annual salary of $100,000, as prorated for the covered period;
(bb) taxes imposed or withheld under chapters 21, 22, or 24 of the Internal Revenue Code of 1986 during the covered period;
(cc) any compensation of an employee whose principal place of residence is outside of the United States;
(dd) qualified sick leave wages for which a credit is allowed under section 7001 of the Families First Coronavirus Response Act (Public Law 116–127); or
(ee) qualified family leave wages for which a credit is allowed under section 7003 of the Families First Coronavirus Response Act (Public Law 116–127)….
Thus, in determining eligible loan amounts, the pro rata monthly portion of salary for an employee earning over $100,000 per year is not included (but the amount under $100K annualized is included.)
The loan proceeds can be spent on a variety of business costs and expenses set out in the SBA Act; however only a narrow category of costs can be forgiven under the CARES Act. These are the amounts incurred and payments made over the 8 weeks after the loan is obtained (not to exceed the principal amount of the loan) for:
(1) Payroll costs.
(2) Any payment of interest on any covered mortgage obligation (which shall not include any prepayment of or payment of principal on a covered mortgage obligation).
(3) Any payment on any covered rent obligation.
(4) Any covered utility payment.
PPP loan proceeds used for any other purpose will not be forgiven. The lender will require documentation to prove that the funds to be forgiven were spent on allowed items. The Treasury Department will be providing regulations as to how the loan forgiveness program is to be implemented.
The amount of forgiveness will be reduced if the business reduces its employee headcount below its previous average full-time employee level, based on the average number of full-time equivalent employees for each pay period within a month, either during the period from February 15, 2019 to June 30, 2019; or from January 1, 2020 to February 29, 2020, at the business’s election. Seasonal employers are required to use the February to June period. Employers have the opportunity to re-hire employees that have been released as a result of the current crisis and still take advantage of the full loan forgiveness amount, as long as employee full-time equivalent returns to their prior levels by June 30, 2020.
There is more flexibility as regards to salary reductions without losing the full forgiveness amount. The amount of forgiveness will be reduced by the amount of any reduction in salary that exceeds 25%, but only for each employee that did not make more than $100,000 on an annualized basis during any single pay period in 2019. In other words, salaries for those making less than $100,000 per year can be reduced by up to 25% without impacting the loan forgiveness amount. This also means employees who earned more than $100,000 on an annualized basis in any pay period in 2019 (even those that received a raise to $100,000 annualized only in the last pay period of 2019) could have their salaries reduced by more than 25% without decreasing the available loan forgiveness. Employers also have the opportunity to remedy any reductions in salary by June 30, 2020 as well.
For a list of Coronavirus related resources, please see our Resources Page.
Employer Focused CARES Act Summary
While numerous summaries and reports on the stimulus bill enacted on Friday are circulating, the following are the key provisions in the CARES Act that will impact employers, and small employers in particular. “Small” under the CARES Act includes all business of up to 500 employees in addition to the existing definition of small business maintained by the U.S. Small Business Administration. For wineries, that limit is 1,000 employees. Other employers can check their industry limits at https://www.sba.gov/size-standards/.
Important Changes to Families First Coronavirus Response Act (“FFCRA”):
- Allows an employee who was laid off by an employer on March 1, 2020 or later to have access to paid leave under the EFMLA if they are rehired by the employer and they worked for the employer for at least 30 of the last 60 calendar days prior to being laid off.
- Allows employers to receive an advance of the payroll tax credit provided under the FFCRA for qualified wages paid for EMLA and EPS leave. Forms and instructions for this process are to be provided by the Secretary of the Treasury.
- Emergency increase in unemployment compensation benefits:
- Provides an additional $600/week recipients of UI benefits or Pandemic Unemployment Assistance from the date the State enters into the agreement with the Secretary of Labor through July 31, 2020.
- Payments will be processed through each State along with regular state UI benefits and can be provided in the same check or a separate check, but must be provided on a weekly basis.
- Federal Funding For First Week of Unemployment Period with No Waiting Period:
- Provides 100% reimbursement to States for benefits paid during the first week of unemployment if States waive the one week waiting period for UI benefits. California has already waived the 1 week waiting period.
- Pandemic Unemployment Assistance Program:
- Creates a new Pandemic Unemployment Assistance program (through December 31, 2020) to help those not traditionally eligible for unemployment insurance (UI) benefits, including self-employed individuals, independent contractors, those with limited work history and those who are unable to work as a result of the coronavirus public health emergency.
- Pandemic Emergency Unemployment Compensation:
- Provides an additional 13 weeks of UI benefits to those who remain unemployed after all weeks of state unemployment are no longer available.
- The amount provided is the same as above – the regular amount provided by the State plus an additional $600/week.
SBA Loan and Loan Forgiveness Provisions
- Creates a loan program for employers with fewer than 500 employees and other SBA defined small businesses to borrow up to 2.5x their monthly payroll (with a maximum loan amount of $10 million). Sole proprietors and independent contractors are also eligible.
- Loans can be used to cover payroll and other specified compensation including: healthcare costs, mortgage interest (but not principal), rent, utilities, and interest (but not principal) on other preexisting debt obligations.
- Payroll costs means any compensation given to employees that is a salary, wage, commission, payment of cash tip or equivalent, payment for vacation, family, medical, or sick leave (but not wages paid under the FFCRA), allowance for dismissal or separation, health care benefits including premiums, retirement benefits, and state or local tax assessed on compensation.
- Payroll costs cannot exceed $100,000 annually for an individual employee (prorated).
- Payroll costs do not include qualified sick and family leave wages under the FFCRA for which a credit is already allowed, among other specified exclusions.
- Interest rates cannot exceed 4%, and all payments must be deferred for at least 6 months and up to 1 year. Note that interest on the loans will not be forgiven.
- Loans do not require a personal guarantee or collateral, and are nonrecourse to businesses’ shareholders, partners and members. Employers are also not required to show that they were unable to obtain credit elsewhere.
- The principal amount that is used to cover payroll, mortgage interest, rent and utilities (but not the other allowed uses) for the 8 weeks following the loan approval will be forgiven as long as employee numbers and payrolls are maintained
- Allows forgiveness for extra wages provided to tipped employees.
- The forgiveness amount is reduced proportionately by any decrease in the number of employees as compared to the prior year. Forgiveness is also reduced if any employee who earns under $100K on an annualized basis has their wages reduced by more than 25%. There may be de minimis exceptions to these restrictions described in forthcoming regulations.
- Exemption for Re-Hires: To encourage employers to rehire any employees who have already been laid off due to the COVID-19 crisis, borrowers that re-hire workers previously laid off will not be penalized for having a reduced payroll at the beginning of the period. This applies to a reduction in force or reduction in salary for 1 or more employees during the period beginning on February 15, 2020 and ending 30 days after the enactment of the Act. Employers must re-hire employees (or eliminate the reduction in wages) no later than June 30, 2020.
- The remaining balance after forgiveness can have a maturity up to 10 years. Prepayment penalties are not allowed.
Additional Business Provisions
- Payroll Tax Credit for Employee Retention:
- The provision provides a refundable payroll tax credit for 50 percent of wages paid by employers to employees during the COVID-19 crisis. The credit is available to employers whose: (1) operations were fully or partially suspended, due to a COVID-19-related shutdown order, or (2) gross receipts declined by more than 50 percent when compared to the same quarter in the prior year.
- The credit is based on qualified wages paid to the employee.
- For employers with greater than 100 full-time employees, qualified wages are wages paid to employees when they are not providing services due to the COVID-19-related shutdown order.
- For eligible employers with 100 or fewer full-time employees, all employee wages qualify for the credit, whether the employer is open for business or subject to a shutdown order.
- The credit is provided for the first $10,000 of compensation, including health benefits, paid to an eligible employee. This does not include any wages paid to employees under the FFCRA for EFMLA or EPS leave.
- The credit applies to wages paid after March 12, 2020, and before January 1, 2021.
- The credit is reduced by any amounts credited under the FFCRA for wages paid under EMFLA or EPS leave.
- Employers who receive a covered loan from the SBA (see above) are not eligible for the credit under this section.
- Delay of payment of payroll taxes:
- Allows employers to defer payment of the employer share of the Social Security tax they otherwise are responsible for paying to the federal government with respect to their employees.
- The deferred employment tax is required to be paid over the following two years, with half of the amount required to be paid by December 31, 2021 and the other half by December 31, 2022.
- The payroll tax deferral period runs from the date of enactment of the Act until December 31, 2020.
- This section does not apply if an employer had their indebtedness forgiven under the provisions of this Act for a covered SBA loan.
- Modification of Net Operating Losses (“NOL”):
- An NOL arising in a tax year beginning in 2018, 2019, or 2020 can be carried back five years. It also temporarily removes the taxable income limitation to allow an NOL to fully offset income.
- Modification of Limitation on Business Interest:
- Temporarily increases the amount of interest expense businesses are allowed to deduct on their tax returns, by increasing the 30-percent limitation to 50 percent of taxable income (with adjustments) for 2019 and 2020.
- Amendment Regarding Qualified Improvement Property:
Enables businesses, especially in the hospitality industry, to write off costs associated with improving facilities immediately, instead of having to depreciate those improvements over the 39-year life of the building.
For a list of Coronavirus related resources, please see our Resources Page.