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.
Guest Post: Employers May Provide Tax-Free Relief to Employees Affected by California Wildfires Through Qualified Disaster Relief Payments
Our friends at the accounting firm of Moss Adams drafted the following information on how employers can provide tax-free qualified disaster relief payments to employees affected by the wildfires. We thought this may be of interest to our Lex Vini readers.
On Tuesday, October 10, 2017, President Donald Trump declared the Northern California wildfires a qualified disaster. The declaration means employers may now provide tax-free relief to employees affected by the California wildfires through qualified disaster relief payments.
How it works
Congress created a special type of compensation under Internal Revenue Code (IRC) Section 139 known as qualified disaster relief payments following the attacks on the World Trade Center in New York on September 11, 2001.
A qualified disaster relief payment is a payment made:
- To reimburse or pay personal, family, funeral or living expenses;
- To reimburse or pay expenses incurred for the repair of a personal residence or replacement of its contents;
- By a common carrier because of the death of the individual or physical injuries sustained by the individual; or
- By a federal, state or local government to promote the general welfare; provided, in each case, that the payment is connected with a qualified disaster.
In 2003, the IRS issued Revenue Ruling 2003-12 to clarify that employers may reimburse their employees for costs during qualified disasters and that such payments will be treated as qualified disaster relief payments under IRC Section 139.
Employers can reasonably estimate their employees’ disaster-related expenses and reimburse employees for those expenses without having to obtain detailed receipts and documentation.
This is because the notes from Congress in passing Section 139 state that: “individuals will not be required to account for actual expenses in order to qualify for the [section 139] exclusion, provided that the amount of the payments can be reasonably expected to be commensurate with the expenses incurred.”
The notes from Congress also stated: “that payments excludable from gross income under [section 139] are still deductible to the same extent they would be if they were includable in income.” Consequently, employers can deduct qualified disaster relief payments made to employees.
Organizations making payments to affected employees should code each individual payment specifically as such on their financials when the payment’s made rather run it through their normal payroll process.
There’s no need for employers who make qualified disaster relief payments to employees to:
- Include the payments on any employee’s Form W-2
- Issue any employee Form 1099
- Withhold or pay payroll taxes on any of the payments
For more information about how your organization can provide tax-free relief to employees affected by the October 2017 California wildfires, contact your Moss Adams professional or Aaron Tompkins at 707-535-4102.