As the legislative and regulatory landscape continues to shift day by day, East Bridgewater Insurance is working hard to provide our clients with information that will be important to protecting their business.

Many of you have reached out with questions regarding potential coverages on pandemic-related claims. While we do not have the direct answers to those question at this time, we can pass along that many national insurance trade associations have proposed a potential solution— a federal “Recovery Fund” to help businesses retain and rehire employees, maintain worker benefits, and meet operating expense obligations.

Letter from Joint Trades to President and Senate/House Leaders

Excerpt: “The COVID-19 Business and Employee Continuity and Recovery Fund (“Recovery Fund”) would be funded by the federal government and under the authority of a special federal administrator with the ability to enter into contracts with interested businesses to administer the Recovery Fund and facilitate the distribution of federal funds and liquidity to impacted businesses and their employees. The requested relief would be designed to help businesses retain and rehire employees, maintain worker benefits, and meet operating expense obligations. Strong anti-abuse provisions, including audits and Special Inspector General oversight, would be included.

We urge the Administration and Congress to continue to think broadly and holistically to address the catastrophic emergency that has caused these unprecedented economic challenges….”

EBIA supports the efforts of MAIA, NAIC, NCOIL to name a few, that are addressing the unprecedented hardships faced by small businesses, while preserving the integrity and fundamentals of risk management. We will follow-up with all our business clients when more information is available.

Stimulus Package & Small Businesses – Overview

We are sure all of you have heard about the recently passed 2.2 trillion-dollar stimulus package from the federal government. As part of this bill, small businesses will have access to funds to help them sustain during this time. $350 billion is being dedicated to preventing layoffs and business closures while workers are forced to stay home during the outbreak.

Here is an overview of the key provisions regarding businesses:

1. $500 Billion Stabilization Fund: $454 billion has been made available for loans to eligible businesses, states and municipalities.

2. Small Business Administration (SBA) Forgivable Loans and Grants: There is $350 billion allocated for the Small Business Administration to provide loans of up to $10 million per business. Any portion of that loan used to maintain payroll, keep workers on the books or pay for rent, mortgage and existing debt could be forgiven, provided workers stay employed through the end of June.

CARES ACT: FORGIVABLE SBA LOANS

The CARES Act creates a special program for low-interest rate SBA loans and provides loan forgiveness for qualified business operating expenses during this crisis. Businesses with fewer than 500 employees, including non-profits, sole proprietorships and self-employed individuals are eligible for these loans.

The maximum loan amount is 2.5 times the average total monthly payroll costs in the one-year period before the loan is made, with some exceptions for season employers and new businesses. Loans are capped at $10 million and businesses may use them for the following purposes:

• Payroll, including wages, salaries and other compensation to employees, group health benefits, payroll taxes and compensation to sole proprietors or independent contractors. Eligible compensation is capped at $100,000 per year, prorated for the covered period (February 15, 2020 to June 30, 2020).
• Group health care benefits during periods of paid sick, medical or family leave
• Rent/lease payments
• Utilities
• Mortgage interest payments
• Interest on any other debt obligations incurred before February 15, 2020

The program offers loan forgiveness equal to the amount spent in the 8 weeks following the loan origination date on payroll costs (capped at $100,000 per individual, prorated for 8 weeks), rent, mortgage interest and utilities. Forgiveness cannot exceed the principal of the loan.

The program reduces loan forgiveness for employers that terminate or reduce hours for employees during this time. However, loan forgiveness is reinstated if these employees are rehired or their wages are restored by June 30, 2020.

Loans will be offered and administered through commercial banks. We recommend that you check with your current bank or lender about how to apply for a loan. Applications should be available as early this week. Your team at Fineman CPA Group works with several banks that have strong SBA experience. Please reach out to us if you would like an introduction.

3. Employee Retention Tax Credits: Eligible employers may claim a 50% refundable payroll tax credit on wages (including health insurance benefits) of up to $10,000 that are paid or incurred from March 13, 2020 to December 31, 2020. Employer eligibility is based on operations being partially or fully suspended due to the COVID-19 pandemic, or a decline in gross receipts by 50% or more in the first quarter of 2020 as compared to the first quarter of 2019. The credit can be claimed for employees who are retained but not currently working due to the crisis for firms with more than 100 employees, and for all employee wages for firms with 100 or fewer employees.

4. Delay of Employer Payroll Tax Payments: Employers (including self-employed) can defer the employer portion of Social Security payroll taxes otherwise due in 2020 until December 31, 2021 for 50% of such taxes and December 31, 2022 for the other 50%.

5. Modifications of Tax Cuts & Jobs Act Provisions: The CARES Act rolls back several revenue-generating provisions of the Tax Cuts and Jobs Act (TCJA). This will help free up cash for some individuals and businesses during the COVID-19 crisis. The new law temporarily scales back TCJA deduction limitations on:

• Net operating losses (NOLs)
• Business tax losses sustained by individuals,
• Business interest expense, and
• Itemized charitable deductions by individuals and charitable deductions for corporations.

The new law also accelerates the recovery of credits for prior-year corporate alternative minimum tax (AMT) liability.

To encourage charitable giving, individuals who claim the standard deduction (rather than itemizing) can claim an above-the-line deduction of up to $300 for cash contributions to charities for tax years beginning after December 31, 2019.

The CARES Act also fixes a TCJA drafting error for real estate qualified improvement property (QIP). Congress originally intended to permanently install a 15-year depreciation period for QIP, making it eligible for first-year bonus depreciation in tax years after the TCJA took effect. Unfortunately, due to a drafting glitch, QIP wasn’t added to the list of property with a 15-year depreciation period — instead, it was left subject to a 39-year depreciation period (as under prior law). The CARES Act retroactively corrects this mistake and allows you to choose between first-year bonus depreciation for QIP expenditures or 15-year depreciation.

QIP refers to any improvement to an interior portion of a nonresidential building if the improvement is placed in service after the building was first placed in service. But it doesn’t include any improvement for which the expenditure is attributable to:

• Enlargement of the building,
• Any elevator or escalator, or
• The internal structural framework of the building.

We hope the information we have provided here helps our clients to have a little better understanding into all the opportunities that are available to you and your business. If you need any help regarding any of these programs, EBIA is working with many different business partners to help assist our clients. Please contact Peter Spagone Jr. at pspagonejr@ebinsuranceinc.com or call (508) 378-3991 with additional questions or needed support.