Answers That Count - Hosted By Charles Musgrove: Recent Episodes
Charles Musgrove
Welcome to the gritty inside truth to running your Main Street Business! Learn what it takes to start, run, scale, protect, and yes make a profit in your business from one of the leading experts in business today.
Charles Musgrove has guided countless Main Street Entrepreneurs through the pitfalls of running a profitable business. Now he shares this business insight through Answers That Count. Through his unique life experiences and entertaining interviews, you will discover the answers to the questions you have been asking!
inflation #economics #trouble
https://answersthatcount.com
Check out the video here: https://youtu.be/-1U7bYFZAGU
Inflation still rampant, along with lower than predicted employment numbers, doesn’t bode well for Q4
Dr. Melissa Hughes is back with nuggets about how the brain works and how the knowledge can help with marketing, negotiations and just everyday communications.
https://answersthatcount.com/
Check out the video here: https://youtu.be/iBFzXZ1aiuo
Why do we like what we like? Does numeric content impact decisions? These and many other neuroscience information that is beneficial for marketing and deal making. Check out this Podcast with Dr. Melissa Hughes. Charles: Hello and welcome back, everyone, to the Answers That Count Podcast. I’m your host, Charles, Musgrove, and thank you so much for joining us for another exciting show that I am really pumped up about this show. We have a returning guest to the show. Dr. Melissa Hughes is back today, but before we get started I wanted to ask you to do one thing. Hit the “subscribe” button. Also hit the “like” button and the notification bell, so that you’ll be notified when we post new videos to our podcast. Welcome back, Dr. Melissa Hughes. This is great. This neuroscience geek, extraordinary Dr. Melissa Hughes. Thank you so much for joining. This is going to be so cool. You know, I was at a Florida Restaurant Lodging Association conference recently and you were a double speaker there. You had two sessions and I know both those sessions were well-attended, and not only were they well-attended, the feedback you’re getting on one of those sessions, from what I hear, has just been remarkable, so a lot of interest. You know how to deliver a great message and people are always interested in learning about how the brain works, and we’re going to have another great conversation today about it. Melissa: It is so good to be here. It was great to see you at FRLA. It’s one of my favorite events of the year and you’re right, that session was amazing. First of all, it was packed and, I believe, most of us really want to know how the brain works and how to make it work better. Not everybody likes to dig into the research the way I do because I’m a little bit geeky that way and I, admittedly, I own that, but, I think, most of us want to know what we can do to make this three pound squishy mass between our ears - Charles: We do. I mean, it is just so cool to hear this and when you hear some of your tips and tricks and your brain hacks, it just - you think, “Wow, I get it. That makes sense. Now I understand why I think like I think.” I also want to give a shout-out. You were on TedTalks recently too and I think you said that was back in April and you’re getting a lot of good mentions on that. That’s getting a lot of good kickbacks around the internet, so congratulations on that.
inflation #GDP #economy
https://answersthatcount.com
Professor Joe breaks down the complicated numbers and technical jargon to give us plain speak economic news. Check out the video version here https://youtu.be/IpiH7nsUOQ4.
finance #inflation #interestrates
https://answersthatcount.com
Professor Joe provides an update on what is going on in the economy, from inflation to unemployment.
Check out the video here https://youtu.be/Q1MEIKH5D1A.
chairmanpowell #economics #inflation #fedrate
In this episode, Professor Joe Calhoun discusses the current state of the economy. He describes the role of the Fed Chairman and how Chairman Powell has to speak with caution, which sometimes seems like he is speaking in code. What if inflation gets to hot? What will happen to the consumer of the Fed raises rates? How will the Federal Government service the national debt if rates rise? Will a rise in rates effect pressure to raise tax rates? Check out this episode as we talk about these topics and more!
https://youtu.be/PB8YVWZ9e1E
In this episode, we have Tim Ligon, Partner with SeatonHill, a national outsourced CFO company. Tim has vast experience as CFO for national restaurant franchise brands. Tim's experience is the backdrop for his recommendations on how to prepare for the rising wages and costs in the industry. Tune in for tips about restaurant management.
Tim Ligon of SeatonHill on Answers That Count with Charles Musgrove. Covering the commission model that is proving valuable to restaurants and servers.
C: Hello! I am Charles Musgrove, host of the Answers That Count podcast. Thank you for joining us for another exciting show. Do me a favor before we get started, hit the subscribe button. Hit the like button because you know you’re going to love this podcast. It’s going to be a great podcast! We have some great content coming to you today. We have Tim LIgon with Seaton Hill. Tim, welcome to the show today. T: Good afternoon, how are you? C: I’m doing great. This is going to be a good show today. We’re going to talk about accounting, financial statements, and really we’re going to bring this to real life, real world current economic conditions. We’re going to talk about the minimum wage increase that we’re seeing across many of the states in the United States. We’re going to talk about inflationary costs that these restaurants are going through and really what the options are that the restaurant owner has to manage these costs increases over the long term. So, Tim this is going to be a great show, buckle up. Before we get started, I wanted to give a special shout out to Seaton Hill. So I know that is the company you’ve partnered with and John if you could put up that I want to read just a little bit of information about Seaton Hill to give them special props for today. Seaton Hill Partners, they are the fastest growing strategic CFO service firm in the nation. Can you believe that? Tim, you joined a big firm there. For more than a decade our client’s success is our mission at Seaton Hill. Seaton Hill Partners deliver the finance and operations expertise only a team of veteran business finance executives can bring. We position our clients for sustained long term growth and success in today’s complex business environment, experience matters. You want to call them for a no cost consultation (850) 524-0211 or check them out on seatonhil.com. So, Tim, you’ve joined up with a great company there at Seaton Hill. You bring with you a great amount of restaurant experience. Now I know you weren’t in the back kitchen flipping hamburgers and making salads and doing all that stuff. You were the financial guy so you were shoulder to shoulder with the owners of these large restaurant groups so you weren’t just the accountant or bean counter for one restaurant, you were part of a large organization. So tell us a little bit about the positions and experience you’ve had working with restaurants.
frla #answersthatcount #foodtech
The topic of how to manage the $15 minimum wage increase was the headliner at the June Board Meeting of the FRLA. Carol Dover, CEO of FRLA, kicks off the session with a reminder of the narrow margin that Amendment 2 was passed in November 2020. Now is the time for action to stop the slide down the slippery slope of regulations and cost increases.
In this session, the experts are employment attorney, Kevin Johnson, Mike Vinik with BJ's Restaurants and Chad Mackay, CEO of Fire & Vine Hospitality. Chad's group of restaurants are located in the Washington and Oregon where the push for $15 minimum wage began over 5 years ago. At that time, he implemented a commission base compensation plan for servers and bartenders while charging customers a service charge. Chad discusses the success of the plan along with the pros and cons of it.
Kevin Johnson provides an outline of the legal hurdles to classify employees as commissioned employees and the exclusion for paying overtime premium.
Mike Vinik discusses how BJ's is managing the wage increases in over 25 States. They are using a variety of tools, including technology, menu changes and product usage.
restaurants #minimumwage #answersthatcount #capserv360
In this episode, we highlight sections of previous podcasts featuring restaurant industry leaders. This podcast covers topics that are relevant today for owners and operators to consider and suggestions made from owners of restaurants in Florida, Washington and Oregon. Comments about the focus of technology is also included in this highlight podcast.
inflation #nfp #economy #indicators #answersthatcount
https://answersthatcount.com
Answers that Count with Professor Joe Calhoun In this video Professor Joe describes what the latest economic news on inflation means to your wallet. Highest indicators in 13 years sounds like we are in the middle of high inflation and economic problems. Is this true? Professor describes the fundamentals of economics and what that means today in light of the inflation indicators. Check out the video for information that will help you understand the flood of economic data that you see in the news.
unemployment #employment #answers #answersthatcount
Join Professor Joe Calhoun and Charles on Answers That Count
Joe Calhoun: Hey, great to be with you! Always a pleasure, Charles. Awesome. Not only are you a professor, you’re an economics professor, so - and we’re going to talk about one of our favorite subjects. We’re going to talk about economics. And what - what are we looking at in the news today? So, there’s a couple of points that we’re reading about, we’re seeing, and we’re actually feeling it in our pocket books. So, let’s talk. Let’s start with the unemployment numbers. You know, there’s a lot of chatter right now every time we turn on the TV, watch the news or we read the newspaper, social media, we see where...heck, if we just go out shopping, we see where employers, retail shops, restaurants, they’re looking for employees. They’ve got ‘help wanted’ stickers posted everywhere, but yet when we look at the unemployment records that are posted by the federal government, their unemployment is still high. So, it looks like - I mean, this is kind of a contrast - we have high unemployment, but yet the demand for employees to work is high also. So, help us out with understanding that.
vulnerable #nursinghome #legal
https://www.toomuchatstake.com
Mr. LeBoeuf is AV® Rated by Martindale-Hubbell®, the highest lawyer rating available based upon confidential reviews by local lawyers and judges. He has been named by Florida Trend Magazine as one of Florida’s Legal Elite (among the top 1.8 percent of attorneys in the state of Florida). Law & Politics Magazine has also repeatedly recognized him as a Super Lawyer among the top five percent of attorneys in the state, using peer review balloting and a blue ribbon panel as its selection process.
attorney #answersthatcount #brooksleboeuf
Dean R. LeBoeuf is the managing partner of the Brooks | LeBoeuf law firm. He focuses his practice on complicated civil litigation involving personal injury and all wrongful death matters, including accidents involving negligent motor vehicle drivers, medical malpractice cases, nursing home abuse, and neglect cases. In this Podcast we discuss how to select an attorney for representation. Getting this right, could be the most important decision you make about your representation and could have the biggest impact on the outcome of your case.
military #investment #answersthatcount #bayviewprivatewealth
Mark Dutram with Bayview Private Wealth talks about the unique challenges of providing investment options for military personnel, both active and retired. His firm specializes in providing plans that a customized for each military family. This focus is founded on his military service and seeing first hand the need to help military personnel. Once he began his professional career, he was able to fulfill the need he saw years earlier during active duty service.
Thank you Mark for your service and for creating a special niche in your firm to meet the needs of military personnel.
technology #minimumwage #frla #answersthatcount
Dan Murdoch an executive with Harri (https://harri.com/) a technology solutions provider for the hospitality industry. Dan provides solutions to restaurants across the entire USA including QSRs and FSRs. He has seen the struggles challenging the industry from wage increase, employee shortage, COVID and just the normal challenges of managing a restaurant. When he talks about the role technology plays, he speaks from experience. He has seen how it can be a difference maker in a businesses' success or failure. Dan provides great insight in this Podcast about the technology solutions that have been successful, the hot technology for today and the outlook for technology focus in the future. Check out this Podcast for the Nuggets of Knowledge to help your decision making about adapting to challenges of wage and cost increases. With the rising wages caused by the $15/hour minimum wage push and the current short supply of employees, attracting and keeping employees, in this economy is a challenge. In this Podcast, we discuss the importance of employees and how to attract and retain the best ones.
women #investor #insight
Great insight into women investors and various choices available at Bayview Private Wealth - Securities offered by Registered Representatives through Private Client Services, member FINRA/SIPC. Advisory products and services offered by Investment Advisory Representatives through RFG Advisory, a Registered Investment Advisor. RFG Advisory, BayView Private Wealth, and Private Client Services are unaffiliated entities. Destin Florida
Federal law requires employees earn at least the federal minimum wage, or the higher state or local number in 28 states and 55 municipalities. If the combination of the base wage and earned tips does not total the required minimum wage, the employer must pay the tipped employee more to make up the difference. Sunil Dharod, who owns 124 restaurants across four states, including Applebee’s locations, Sonic Drive-In stores and the Roy’s fusion chain, said he expected higher wages would lead to menu price increases and reduced service. In this podcast, Professor Joe Calhoun talks about how incentives drive behavior. He relates incentives of wait staff to make more money. Good service leads to better tips. So, servers are incentivized to provide great service to customers. The tip model of compensation and the commission model of compensation for servers and bartenders is a way to drive better customer service, higher sales and higher compensation to the servers and bartenders.
minimumwage #restaurants ##FRLA https://frla.org/
In this podcast we discuss changes that restaurants should consider when adjusting to the cost increases from the rising minimum wage. John talks about positive experience he has had going from counter service and no tipped wages to full-service and tipped compensation model for his wait staff.
Check out this episode to learn about what you should consider when adapting to the minimum wage increases. A veteran of Manatee County’s hospitality industry for nearly 40 years, John Horne began his career working summers at Fast Eddie’s Place while completing his Business Degree at Clemson University. He opened his own restaurant, Anna Maria Oyster Bar, on the City Pier in Anna Maria, FL in 1995. Four more restaurants followed and the AMOBs have become a well-known place to enjoy fresh, delicious seafood at a great value, served by a team of wonderful staff in a fun, family-friendly atmosphere.
JH - Thanks for having me on. Glad to be here, glad to help represent the Florida Restaurant Lodging Association.
CM - This is going to be great and John is from the, he’s down in the Bradenton, Florida area. He’s got four restaurants, the Anna Marie Oyster Bar, so he is basically at a destination location on the, you get to see the gulf coast too because you got an island restaurant, is that right?
JH - We do. We’re on the intercoastal on the Anna Marie Island in Bradenton Beach and so we’re watching the dolphins jump every day. It’s awesome.
CM - What a great place to be and great food and great hospitality and service there so this is going to be awesome and before we get started with today’s show, we want to make sure to give a special thanks to our sponsor Heartland Payment Systems. They have been awesome to sponsor this show, this podcast, so thank you Heartland. Heartland is the selected, the trusted source for payment solutions that they are representing the Florida Restaurant Lodging Association. So go to frla.org/Hearltand and you’ll see all the information about them. They’ve got the answer for payment solutions. They also do payroll and human, human resource services. So check with Heartland. They’re a great sponsor of the FRLA and they’re a great sponsor of this podcast, so thank you so much, Heartland. So John, with that, let’s get this thing going. So we know, this is a wave. So the wave is coming. There is a $15 per hour that’s going to be implemented in the state of Florida where the increases have already started. They started in January and they’re just gonna ramp up from there, so this is a fact. JH - It’s, it’s, it’s coming on us. We’re gonna have that tidal wave. It’s gonna hit us hard starting September 30th and every year subsequent to the point where we’re paying and you know we’re already paying our back of the house people well over minimum wage. Nobody in the restaurant industry has ever not wanted to pay our people properly.
investing #indexing
wealth #invest #answers https://www.bayviewwealth.com
Mark has more than 25 years of experience helping meet the financial, retirement and investment planning needs of families, business owners, and professionals. “We help people to define what success and happiness means to them. What seems like fairly easy definitions, turns out to be quite ambiguous and illusive for many. Their achievement requires more than the possession of assets.”
Contact information for Mark Dutram:
4476 Legendary Drive, Suite 201
Destin, Florida 32541
Cell: 850-865-7006
Main: 850-990-0618 Ext. 01
https://BayViewWealth.com
It’s not about how much money you earn. It’s what you do with the money that matters. In this video, I’m going to show you a business strategy on how to manage your money. I’m not gonna tell you what to invest in. That’s not my role. Here are the best ideas of what the best professionals do to manage their money.
bank #invest #insurance http://answersthatcount.com Ever wonder what banks do to get so rich? Well its not just because they're banks.. rather its about the way they think. That's what we uncover here in this podcast.. how to think like a bank. You don't need to be a banker or in the banking industry but you can still copy these strategies to help improve your financial life.
answersthatcount
In this episode, we are joined by returning guest, Melissa Hughes (https://www.melissahughes.rocks/), author, speaker and expert on how the brain works. She delivers the brain nuggets on this episode. It's a can't miss show. Melissa discusses the 4 Methods to Amplify your message, whether it is about business messages or just ways to communicate your personal message in everyday life. She also discusses Sketch Notes and provides the Sketch Notes for the content of this episode.
Merchant Cash Advance debt is an indication that a company has cash flow problems. MCA is normally the last alternative for financing. The MCA contracts do provide quick cash, they are easy to be approved and often times require both daily repayment and APR of over 200%.
On this episode, we we are joined by Marc Mellman, founder of MCA Stacking Solutions, for a discussion about how to get out of the rabbit hole of the MCA contracts, which often times the debtor will have multiple or 'stacked' MCA contracts. Marc talks about how New York is one of the states most favorable to the MCA contractor, and the most punitive to the debtor. This favorable preference is all based on how the contract is defined. Check it out to learn about this classification.
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housingbubble #debtbubble #easymoney
In today's show we are joined by Myles Bradley, Working Capital Finance VP with Capital City Bank. With all the recent chatter about collapse of the US Dollar, investing in 'scarce assets', the debt bubble and the Fed flooding the economy with $ trillions, we now get the perspective of a banker.
Myles brings great insight on the PPP 2.0, SBA 7A and the SBA 504 loan programs. These are great opportunities to help businesses that have taken a hit caused by COVID and the government restrictions imposed on them. Plus, the 7A and 504 loans provide a big boost to business to lock in low rates and invest in businesses. These are a big shot in the arm for the economy.
Check out this show to learn about government backed loans and the PPP program is there to help. These are record low interest rates along with amortization periods.
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accounting #cpa #success #business
Terrell Turner, CPA, business advisor, entrepreneur and podcaster joins our show today. We talk about the reasons every business needs reliable financial information to guide decisions. Even with easy to use and access accounting systems like QuickBooks on-line, businesses still need knowledgeable accounting professionals involved in the financial record making process.
Check out this show for some great information from two CPAs who have assisted entrepreneurial businesses for many years.
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Also, for more information, check us out at https://answersthatcount.com/ . We have articles of current, relevant information about business and economics.
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entrepreneur #hustle #opportunity
In this episode we are joined by entrepreneur, educator and podcaster, Chris Michael Harris https://chrismichaelharris.com/ . Chris drops some great tips for the entrepreneur in this show. Chris gives his personal story about one of his start-ups he ran from an apartment at the University of Georgia. The genesis of this start-up was from his college dorm at the University of Georgia helping fellow students move furniture. This boomed to a 7 figure income in a few short years. Hard work, hustle and solving a problem was the key to this success. In this episode we also talk about the P.A.D.E. strategy to overcome being 'stuck' or hitting a plateau which many entrepreneurs encounter. Also check out Chris' YouTube channel here https://www.youtube.com/channel/UCTOwDhQqFYEpG3qyznqVTLQ .
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bitcoin #minimumwage #$15/hour #easymoney #usdebt #economics
FSU Economics Professor Joe Calhoun is our special guest for this episode. We discuss a wide range of topics from the impact of the mandated increases in minimum wage, cancelation of student loans and the impending deflation of the US currency. What happens if the USD fails? Do we have historical precedence of a failed national currency? Will bitcoin hit $60K? Professor Joe's perspective of these topics is great and is a can't miss episode.
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leadership #leadership #business #answersthatcount Amie Schiess joins us for a look at how we got to where we are now with a gap in leadership. It's not a 2020 phenomenon caused by the pandemic. Maybe this focused us on the issue, but this has been developing over decades. Lack of trust in institutions, like the government and the media are signs of the problems. Even more so is the general lack of trust we have for each other, even our co-workers or employers. WHY? Does the threat of legal action create a barrier for people to hide behind? Are the 'rules' and definition of right and wrong too blurred? Check out this episode for Amie's perspective and a path forward to close the GAP.
investment #bitcoin #billgates #dollarcrash https://answersthatcount.com/
Mark Moss holds the record for making the two comma club in under 28 days.
Mark Moss, a full-time investor and entrepreneur for over 25 years. He has been through multiple market crashes, built multiple 7 and 8 figure business and investment portfolios, through the worst market cycles, giving him the experience and perspective the young bucks on YouTube are missing today. Check out Mark's YouTube channel here https://www.youtube.com/c/MarkMoss/featured.
In this session, Mark talks about investing in 'scarce assets' like Bitcoin (the ultimate scarce asset), farmland and beach front property. These investments are becoming more important now with the looming devaluation of cash on the horizon. Will our future currency be backed by gold or become a digital currency? Why is Bill Gates investing in US Farmland? Check out this episodes for Mark's perspective.
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Investment advice and wealth management strategies to help build wealth and asset protection strategies to help preserve it. Our services allow you to create the financial security you need to enjoy an active and independent retirement. We can assist you to define the legacy you want to leave your family and community and put plans in place to carry out that legacy.
check us out on www.answersthatcount.com
marketing #video
In this podcast, we are joined by Paul Vizard with 30A Media. We discuss the platforms available for videos, how to make videos from the inexpensive to expensive. There are many platforms available and some are more conducive for business purposes. The growth of the streaming TV market offers an additional venue for businesses to display video content. Check it out to learn the options that are best for your business.
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We have articles of current, relevant information about business and economics. For Apple Podcast, link here https://podcasts.apple.com/us/podcast/answers-that-count-hosted-by-charles-musgrove/id1479296350
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streaming #cutthecord #smarttv
In this episode, we are joined by Paul Vizard, CEO of 30A Media and 30ATV. Paul has first-hand insight to the TV Streaming industry that has just exploded in the past 5 years. His media companies are part of this 'cord-cutting' wave that is sweeping the globe now. Take Netflix for instance, in 2020 the US subscribers exceed 67 million and is approaching 200 million world wide. Much of this growth has happened in the last decade. So, WOW!
How can your business take advantage of the advertising opportunities that are available in this industry? What is available to you as the consumer for content to watch?
Check out this episode for the answers that count! Also, for more information, check us out at https://answersthatcount.com/.
We have articles of current, relevant information about business and economics.
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nationaldebt #financialcrisis
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Back for another episode, Professor Joe Calhoun joins us to provide perspective on the every growing US National Debt. We take a historic look at the annual debt and surplus since the early 1900's. As a % of debt to GDP, only in wary years has the % exceeded 10% ... until 2020 with the COVID-19 virus and economic shut-down. What a year 2020 has been. And, in 55 years, the US has incurred deficit spending in 51 of those years, thus only 4 years of surplus. Normally, this spells disaster. Will it lead to a financial crisis for the US?
Take a look and listen for the Professor's perspective and get his take on what he would do if he were in charge.
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kickthecan, #economics, #governmentintervention, #answersthatcount
Professor Joe Calhoun, Economics Professor at FSU joins us for another episode. We talk about the intersection of government into economics and how this is nothing new. Politicians often take the short-cut when intervening into the free-trade markets. Like, making loans easy to get for businesses suffering from COVID. The money issued by the Federal government in 2020 has been historic and created another bill to be paid by future generations. So, for 2020, we are stimulating the current economy with a $2 Trillion 'Can' to be paid back in the future. Check out this episode for some great nuggets of knowledge.
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stress #communication #leadership https://answersthatcount.com
Melissa Hughes joins us for this episode of Answers That Count and shares nuggets of knowledge about how the brain works and process uncertainty. The 'thinking' brain area actually shuts down during stress and uncertainty. The key to this fact is to know how to counter the 'shut down' and reduce the time that the thinking brain is not fully functional.
This is a great session to help us during the uncertainty created by COVID.
Check out Melissa Hughes' website here https://www.melissahughes.rocks/.
A recent blog she posted about how the brain works during threats can be seen here https://www.melissahughes.rocks/post/the-brain-s-primary-job-is-not-to-think
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economics #invisiblehand #government Professor Joe Calhoun, Economics Professor with FSU talks about the Invisible Hand in this episode. Here is the place that you can learn about the economic theory about an invisible hand. We kick this off with the discussion about current economic conditions, like the impact of COVID to the commercial real estate market. A big deal that we will feel for a while.
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minimumwage, #amendment2, #florida https://answersthatcount.com
The Florida voters passed Amendment 2 on November 3, 2020 paving the way for a mandated increase in the minimum wage starting in 2021 and increasing to $15/hour over the next 5 years. Florida is not the first to pass such a measure and likely will not be the last. There is even talk about a Federal mandate to increase the minimum wage like Florida. In this episode we talk with Professor of Economics at FSU, Joe Calhoun. From an economics perspective we talk about the effects of the change that the workforce in Florida will likely experience. This subject is also discussed in "Common Sense Economics, Third Edition" a book that Professor Joe is a co-author. To quote from the book, "the basic postulate of economics indicates that a higher minimum wage will reduce the employment of low-skill workers. ... the weight of the empirical evidence indicates that each 10 percent increase in the minimum wage will reduce employment by between 1 and 2 percent.
Of course certain industries will be hit harder than others and there are many ripple effects of raising the minimum wage, like wage compression, increase in payroll related costs, like insurance, payroll taxes, etc.
Check out this show for an informative discussion about the far reaching consequences of minimum wage legislation. Be sure to click the Subscribe Button and Hit the Notification Bell https://www.youtube.com/channel/UC5U0invXUtqoyrAnniwDjhQ/?sub_confirmation=1
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insurance, #dogs, #COVID
We are joined on this episode by Scott Fjelstad, principal with Rogers Benefit Group. Scott has the knowledge and expertise of a career insurance agent specializing in health insurance for the North Florida region from Pensacola to Jacksonville, FL.
Scott shares humorous stories about his encounters with dogs and his unique fear of dogs. These stories are great and could be material for a SNL skit.
Scott provides important information about the changing health insurance market and what will be shaping the North Florida market in the coming months and 2021. These changes are also a snap shot of what is likely to happen to your community anywhere in the US.
Scott's email address is sfjelstad@rogersbenefit.com and the website for Rogers Benefit Group is https://www.rbgcal.com/.
vision, #destiny, #youth, #jesus, #ministry, #answersthatcount
In this episode we are joined by Chris Musgrove, founder and director of Future Now. Chris is well known for being the most entertaining person in any meeting, group or family. He is called a 'class clown' by some, but is known by all as a man in motion living out his calling to be an ambassador for Jesus Christ. He delivers this message to middle-school and high-school aged youth across the South East United States.
In this episode we talk about how COVID has altered the way he and Future Now deliver the message. Check this out and you will see how COVID has not deterred him from continuing to deliver the message that he has been called to deliver.
The Future Now website is https://futurenow.us/ and Chris' email address is cmusgrove@futurenow.us.
cannabis #prescriptioncannabis #california
In this episode we are joined once again by Steele Smith III, co-founder of C3 International and Idrasil, the world's first cannabis prescription. In this episode Steele shares his personal and painful story that lead him to be a leader in the prescription, medical cannabis. Steele recounts the 6 raids from the DEA and how he came to count on the annual 'October Surprise'. The raids were friendly and non-hostile (with the exception of the first one). Bottom line of the raids, no convictions, all charges dropped! This is a true description of the problems of conflicting Federal and State laws facing the cannabis industry, even medical and prescription cannabis.
A recent article by Total Prestige Magazine that featured Steele, titled the article as "The Disruptor. Steele Clarke Smith III, Pharmaceutical CEO. Pain Market Dominator". After you watch this episode of Answers That Count, you will understand this title and truly appreciate what Steele has done. Like many people that achieve great success, their drive and determination and heights of their success is based on a personal hardship. The hardship can take many forms. See the pain and health hardship of Steele and how he is overcoming this pain not just for himself, but for the multitude of patients that need relief and an alternative to relief drugs with terrible side effects, like opioids.
mca, #finance, #payday
When cash is tight and businesses are desperate for survival, Merchant Cash Advance provides immediate cash to live to fight another day. However, the 'life' they provide can be short-term and usually leads to stacking of more MCA loans. Normally, the first MCA loan creates a violation of terms of pre-existing loans.
MCA loans is a unique financing tool and is similar to the pay day loans, which are loans available for the individuals. Or, at least they were at one time until most states made them illegal. These type loans have been made illegal to the individual consumer because they have usurious rates. And, the MCA loans have similar qualities with rates (if you are able to calculate the rate) over 50% to over 1,000% APR.
In today's episode, we are joined by Marc Mellman of MCA Stacking Solutions https://mcastackingsolutions.com/. Marc's career has been in various capacities in the finance industry. From the traditional bank industry, then to the factoring industry, and most recently he has provided consulting services to businesses that have executed MCA agreements and need help to work out of them. Check out this episode for valuable information about how to survive and get out of MCA agreements.
covid, #liability, #tips
In this episode, we are joined by Dean LeBoeuf, founder of the Brooks LeBoeuf https://www.toomuchatstake.com/ law firm to discuss the legal implications to businesses caused by COVID. The fear can be so overwhelming that businesses don't re-open. Dean breaks down the risk into different categories and provides some simple tips to mitigate the risk a business owner may believe they might have.
Check out this episode for a big dose of 'stay calm and carry on'. If you own a business or manage a business, this is a can't miss episode.
government, #intervention
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FSU Economics Professor Joe Calhoun joins us for another episode. We discuss the current economic events in the news for the week, including the unintended consequences of government intervention into regular trade between producers and consumers. Of course, the Government has the best of intentions when they enact legislation, but many times the cost of the unintended consequences outweigh the benefits.
We have discussed the problems created by the cash for clunkers program in a recent podcast. We have discussed in several episodes the costs resulting from the COVID lockdown. And now, in the news this week we see where California Governor Newsome has enacted legislation banning the production of gas and diesel automobiles by 2035.
In this episode, we also discuss another economic theory from the book Common Sense Economics. This discussion is about the theory 'Economic progress comes primarily through trade, investment, better way of doing things and sound economic institutions'. Check out this episode to see how we relate this theory to every day life. You will be sure to find nuggets of knowledge in this episode.
cannabis, #medicalmarijuana, #california
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In this episode we talk with Steele Smith, III, a medical marijuana entrepreneur living in Anaheim, CA. Steel is a historian and expert about the marijuana industry. In fact, Steel's personal story is nothing short of remarkable. To say he is a pioneer in the industry is an incredible understatement. His mission for survival and relief of pain from suffering from a rare disease is shaping the industry and will lead to a better medical solution for many patients in the future. Check is personal story here https://steeleclarkesmith3.com/.
You can also take a look at the development medical product here https://c3internationalinc.com/. The product can be pre-ordered here at the product site https://www.idrasilrx.com/.
In this episode we talk about the evolution of the cannabis industry in California and how California impacted the rest of the US. The black market industry is alive and flourishing according to Steele and his belief is that this is being fueled by the nearby states that are 'dry', all cannabis sales are illegal. Check out this episode for an informative and entertaining show.
In this session, Professor Joe Calhoun joins us again on the September 11 anniversary of the attack on the US. We give recognition of the importance of the date in our history.
COVID is still a part of what we are dealing with in the economy as we see the government continue lifting restrictions on businesses. The most recent in the State of Florida is the opening of bars and lounges, with restrictions. Even with the lifting of some of the restrictions, many businesses will opt to remain close and not battle the restrictions on their business.
The economic recovery is fragmented and winners and losers will be determined post-COVID.
We also discuss the economic theory of 'profits direct businesses toward productive activities that increase the value of resources, while losses direct them away from wasteful activities that reduce resource value.'
Profit as calculated by the accountant is different than the economists calculation of profit. The explicit cost (accountants' calculation) plus the opportunity cost = the total economic cost. The economic cost is normally used by the entrepreneur to provide a baseline to make business decisions.
Economics Professor Joe Calhoun from FSU joins us for another episode to discuss the evolving changes in our economy resulting from the COVID impact. Even though the negative impact is significant, there have been positive changes in the economy also. In this episode we take a look at the upside impacts. Market segments, like real estate, home purchases show growth. The Florida market, specifically the NW Florida area have shown significant demand in 2020. It's almost like home owners are moving from large metro areas to sunny Florida and the beauty of the coast to work remote or work remote and do home schooling. We also chat about the monthly NFP report that was issued on September 4th revealing jobs added for the month and unemployment rate. These also show an economy that is improving with jobs added meeting expectations and the unemployment rate remaining below 10% at around 8.4%. The meat of the discussion is on the economic theory that prices bring the choices of buyers and sellers into balance. We break this down to every day examples to understand the importance of price in the market.
Theory of Price By CAROLINE BANTON Updated Feb 19, 2020 What Is the Theory of Price? The theory of price is an economic theory that states that the price for any specific good or service is based on the relationship between its supply and demand. The theory of price posits that the point at which the benefit gained from those who demand the entity meets the seller's marginal costs is the most optimal market price for that good or service. KEY TAKEAWAYS The theory of price is an economic theory that states that the price for any specific good or service is based on the relationship between its supply and demand. The optimal market price, or equilibrium, is the point at which the total number of items available can be reasonably consumed by potential customers. Supply may be affected by the availability of raw materials; demand may fluctuate depending on competitor products, an item's perceived value, or its affordability to the consumer market.
In this episode about Cyber Security Safeguards with Ben Graybar, we talk about the well known, large-scale public examples of cyber hacks as well as our personal experiences. The hacks that are public may seem like something that happens to someone else, but many times given the vastness of these hacks, we are caught up in them also. Usually, when we are caught in the public hacks that include tens of thousands, we just hope that we are the small fish in a large pond of bigger fish and that our data will not be hacked, even if our personal information has been compromised. Simple measures are the most effective ways to prevent being a victim of any type of hack. So, tune in to see how to safeguard your cyber security and not be a part of the hacked universe.
Cyber attacks seem very complex, and usually they are. However, simple measures are the most effective ways to prevent being victimized. Those simple measures include: (1) Password and (2) Public WiFi.
FSU Economics Professor Joe Calhoun joins the show again. In this episode we discuss the risk/reward decision process regarding COVID. What are you willing to risk when it comes to staying free of the COVID virus? Mental health, economic vitality, and normalcy are all a cost if we go 100% lock-down to avoid catching the COVID virus. We don't want the cost of avoiding COVID to be greater than the effect of COVID itself. We then discuss the outlook for FSU with on-campus attendance and the financial fall-out to Tallahassee for the reduction in attendance on-campus. This hit is not just a Tallahassee thing ... it will be seen on college campuses across the US.
We then spent the balance of the episode discussing the economic theory that decisions are made at the margin. Marginal benefit and cost what decisions are based. Check out this show to expand your understanding of this economic theory as Professor Joe uses the Diamonds and Water analysis comparing marginal value of a diamond and bottle of water. Interesting stuff ... check it out.
Professor Joe then turns this theory to the COVID situation and fully opening the economy vs. phased opening. He discusses the marginal cost and benefit of the lock-down continuing. He even applies the analysis to Mask mandates. Decisions are not all or nothing, they are made based on marginal costs/benefits.
Economic Key Element #2 – There are No Free Lunches In our continuing series of interviews with Professor Joseph Calhoun, Economics Professor at Florida State University, we talk about another key element of the Twelve Key Elements of Economics from the Third Edition of “Common Sense Economics, What Everyone Should Know About Wealth and Prosperity.” As the co-author of this book, public speaker and professor at a major university, Professor Joe provides a great perspective of how basic economic theories apply to current economic conditions.
In this interview we discuss key element #2, There is no such thing as a free lunch: Goods are scares and therefore we have to make choices. There are a couple of concepts we discuss in this episode that all relate to this key element, opportunity costs and prioritization of choices. Tune in and check out https://answersthatcount.com/ for articles and other episodes.
Economic Key Element #1 of 12 – Incentives Matter I recently interviewed Professor Joseph Calhoun, Economics Professor for Florida State University and co-author of the Third Edition of “Common Sense Economics, What Everyone Should Know About Wealth and Prosperity.” In this interview we talk about key element #1, Incentives Matter – Changes in benefits and costs will influence choices in a predictable manner.
There are similarities between the Incentives Matter concept to the Laffer Curve, an economics theory developed by Arthur Laffer. The simple description of the Laffer Curve is that reducing tax rates will increase total tax revenue … meaning Americans will work and earn more if taxes are lower than they would at a higher tax rate.
Here is a quote from Common Sense Economics, “Changes in incentives influence everyone’s choices, regardless of the mix of greedy, materialistic goals on the one hand and compassionate, altruistic goals on the other, that drive a specific decision.”
In this episode, we have guest Ron Coury, author of the recently published book entitled Tenacity. Ron talks about his business ventures in the early years in Las Vegas. He used a large dose of hospitality and tenacity to carve a path in the evolving casino and local tavern scene in Las Vegas. What a great story and great lessons in today's climate with COVID fears and realities.
Ron created the Cheers tavern and local gathering place before the hit TV sitcom. Check out this show about how Ron created a successful business in a place that was about to experience a tremendous economic transformation that would last for decades.
Born and raised in Brooklyn, New York, Ron Coury arrived in Las Vegas in 1973, following two years of service in the U.S. Marine Corps. Ron has been a casino dealer and a realtor, as well as a partner in restaurants and gaming bars, major graphics and glass companies, and several automobile dealerships throughout the western United States.
He is currently a board member of the Las Vegas Metropolitan Police Department Foundation, as well as several companies and charitable organizations. He has three children and five grandchildren and remains active in business and community service endeavors throughout Southern Nevada.
In these difficult times, businesses will be dealing with difficult vendor and employee decisions, Ron leaves us with the point that it is "never the wrong time to do the right thing". Be kind and considerate as you interact with others who are struggling with the COVID created business hurdles.
In this episode we talk with Whitney Lee, Founder of Social Lee PR & Media Co about the best practices of social media posting and sending the 'right' message to the target audience. We discuss a wide range of topics from adapting to business and COVID and how the business message should be modified to be sensitive to the conditions caused by COVID.
Here are 5 takeaways from the interview:
- Post quality content, don't post just to be posting something
- Use the social media platform that best matches your target audience
- Either use the platform and post to it, or close it down, don't ignore engagement or don't leave the platform unattended if you have a page on the platform
- Beware of the reaction to posting political positions
- Know the time of day to post to get the maximum engagement
Check out this episode for tips and information about communicating your business message the best way through social media and website.
In this episode, we are joined by Drew McLeod owner of the Savor restaurant in Tallahassee, FL and career restaurateur. His perspective is one that is reflective of so many businesses and restaurants across America that are suffering with the unintended consequences of COVID, lock-downs and masks.
Drew talks about the optimum business model for a restaurant and most businesses are started assuming full occupancy and serving as many customers as possible. Can a business survive if capacity serviced is cut by 50% or 25%? How long can a business survive in those conditions? Many have survived through the COVID so far with reliance of the Federal loan programs, specifically the CARES act and the PPP. Now that those funds have been used by most businesses, what does the future of the dine-in restaurant look like?
A can't miss episode of a real-life a real-life business coping with the struggles of the COVID fall-out.
In this episode we are joined by Sean Ammirati, entrepreneur, writer, venture capitalist, professor, researcher and public speaker. Yes, Sean has a lot of irons in the fire but he took the time to join us for an informative and exciting episode about entrepreneurship, how a process improves the chance of success and the impact of COVID.
Most Recently Sean was COO of ReadWriteWeb, one of the most influential sites about the future of technology and innovation. In December 2011, the company was acquired by SAY Media to strengthen its technology channel. Sean was previously co-founder and CEO of mSpoke, which was the first acquisition of LinkedIn.
Sean brings the unique experience of the person that has done it, the person that is in the arena now and the expert that teaches how to do the entrepreneur thing the right way. Check out this episode for valuable nuggets of knowledge!
With interest rates flirting with record lows and the SBA offering an incentive to pay debt service of both the SBA and bank portion for 6 months, now could be THE time for you to consider refinancing existing debt. On this session, we are joined by Ashley Vannoy, Vice President with First Bank of the Lake. She provides a very informative discussion about this program and the urgent time-line to take advantage of the SBA debt payment incentive. However, as she explains, even without this incentive, with low rates (in the 3.5%-3.9%) a 25 year amortization period and 90% LTV, this is an awesome program that can greatly improve cash flow.
Here are the highlights for the SBA 504 loans:
- Owner occupied real estate
- Down payment of owner investment of 10%
- SBA loan portion of up to 40%
- Bank financing of the remaining 50%
- 10 year amortization period for bank portion
- 25 year amortization for SBA portion
- Prepayment penalty, which is reduced to 0 over first 10 years of loan
Check out this episode for the details plus information on the SBA 7A program.
On this Episode, we talk with John Gautreau, founder of NextGen Consulting. John's experience as a CPA for over 30 years, owner of his own firm and now as a Certified Exit Planner provides him with an unique perspective on the importance of exit planning and execution. A good plan is critical to achieving a good outcome for the owners. Most (80%) don't plan, and many more fail to execute the plan properly. Check out the show for tips to help with your business dynamic.
In this episode our guest Tim Fitzpatrick, founder of Rialto Marketing, describes why marketing is an important part of any successful business and how to do it the right way. Tim explains this in an easy to understand, step-by-step process. Starting with the fundamentals followed by a dynamic, sprint-type execution plan that is 90 days or less.
Here is a link to the show topics and helpful information https://www.rialtomarketing.com/answers-that-count/.
The Marketing Strategy Trilogy - https://www.rialtomarketing.com/wp-content/uploads/2020/05/The-Marketing-Strategy-Trilogy.pdf
- Target Market
- Messaging
- System/Plan
A simple Marketing Plan Template - https://www.rialtomarketing.com/wp-content/uploads/2020/05/90-Day-Marketing-Plan-Template.pdf
The Ultimate Guide to Marketing Strategy - https://www.rialtomarketing.com/marketing-strategy/
The Marketing Hourglass (Customer Journey) - https://www.rialtomarketing.com/wp-content/uploads/2020/05/The-Marketing-Hourglass.pdf
Join us for this episode with Stephen Halasnik, Serial Entrepreneur, founder of numerous businesses including his current one, Financing Solutions https://financingsolutionsnow.com/. With the economic fall out from the COVID crisis and forced shut down of many businesses, a national recession is real and now is the time to examine if your business is ready for it. It's time to assess if your business is in an industry that will likely thrive or survive, or if it will suffer and face a significant challenge in a recession.
Stephen recounts the decision process he went through in determining whether to sell, close, expand or contract his businesses in the 2001 and 2008 recessions and the current 2020 COVID recession. Many of the decision processes applied to a business should also be applied to your personal budget. And, if you are a business owner, having your personal budget in order is even more important to making the right conclusions about how to best position your business for a recession.
In this episode, we are joined by attorney Chip Merlin, president of the Merlin Law Group, to provide the nuggets of knowledge about how to file a claim on your Business Interruption policy. Chip has dedicated his career and created his law firm to defend the policy holder, to protect the rights of the 'little guy' in the insurance arena. Chip is the author of Pay Up, which is a collection of experiences he has had with in his practice. A must-read book for sure.
Here are a couple of testimonies from the book.
“Chip Merlin has been a respected industry thought leader for over thirty-five years. I often seek his counsel on property insurance disputes and am confident that the wisdom he imparts in this book will provide great insight and value to consumers.” – Paul Handerhan, Former president, Florida Association of Public Insurance Adjusters “If anyone knows how to get an insurer to pay up, it’s Chip Merlin, a true policyholder advocate with an unmatched track record of righting insurance wrongs and helping people collect what they are owed.” – Amy Bach, Executive director, United Policyholders “Chip Merlin is a passionate advocate for policyholder rights. His widely read blog is relied upon as a leading national authority for guidance in claims handling and insurance trends. Whenever Chip is writing something about insurance, it should be read by all stakeholders in the insurance industry!” – Holly Soffer, General counsel, American Association of Public Insurance Adjusters
Here are a couple of quotes from the book:
“My impetus for writing this book, as well as my blog, is to share some of my knowledge about insurance practices, especially insurance company practices that harm policyholders. Most people simply don’t know much about insurance products, which are one of the most important classes of products all of us purchase. They certainly don’t know, yet fear, what the insurance companies may do when a loss happens and a claim is made. Most people don’t know about how the insurance industry has changed, often for the worse, over the last few decades. They also don’t know about policyholder advocates like me offering resources and recourse for them.” — Pay Up!: Preventing A Disaster With Your Own Insurance Company by Chip Merlin
The following is a link to a blog post suggesting businesses shut down from the Coronavirus should not give up on the possibility of having a claim paid in the future: https://www.propertyinsurancecoveragelaw.com/2020/03/articles/insurance/coronavirus-insurance-coverage-update-united-policyholders-says-do-not-give-up-while-georgia-insurance-commissioner-suggests-do-not-waste-your-time/
And a blog link to why people should be careful to select the best insurance agent they can find: https://www.propertyinsurancecoveragelaw.com/2011/06/articles/insurance/choose-insurance-agents-wisely-to-avoid-insurance-coverage-gaps/
The evolution continues with the Paycheck Protection Program (PPP). In this episode we discuss with Roxanne Sexton the newly released Forgiveness Application released by the SBA on May 15th. Many of the previously issued guidelines are clarified, new guidelines are provided and other questions remain. While there is talk and speculation about further changes to the rules, like extending the 8 week covered period and the 75%/25% split of how the money should be spent. However, at this point, those changes are just speculation.
SBA Releases PPP Forgiveness Application and Makes Critical Clarifications and Documentation Requirements
There is now improved guidance on calculation methods, definitions of forgivable expenses and the documents that must be submitted with the forgiveness request.
CONTRIBUTOR
CEO & Attorney at Directed IRA & Directed Trust Company
May 18, 2020 10 min read
Opinions expressed by Entrepreneur contributors are their own.
The SBA released its Paycheck Protection Program (PPP) Loan Forgiveness Application and clarified a few critical definitions and documentation requirements in their instructions. The forgiveness application is completed by the small-business borrower and is submitted to their bank or lender whom they received their PPP loan from. The application consists of 11 lines that when calculated results in the amount of forgiveness a small-business owner will be eligible for. The forgiveness component of PPP is what attracted small-business owners to take out PPP loans in droves, as the program promised forgiveness of amounts loaned so long as the small business used the funds for payroll, business mortgage interest, rent and utilities. For a summary on forgiveness rules please refer to my prior article here.
Three-Part Calculation Method
The application consists of a three-part calculation to determine the amount eligible for forgiveness. First, the application asks for the payroll and qualifying non-payroll costs that the business has spent over the eight-week period since it received its PPP funds (more on the updated definition of these costs later). The second step is a reduction in the forgiveness amount if you have reduced pay for employees greater than 25 percent or if you have not brought back the same number of full-time equivalent employees (more on that definition later). The full-time equivalent employee (FTE) rule requires a small business to reduce its forgiveness request if it does not bring back the same number of employees that it had pre-pandemic. The application does provide for a waiver of this reduction if the business failed to bring back its same employee count during its eight-week period but later brought back the same number of employees by June 30, 2020.
Step three is the 75 percent payroll cost test, which states that the forgiveness request must be comprised of at least 75 percent payroll costs. The other 25 percent can only be rent, mortgage interest debt and utilities. If the forgiveness request in step three exceeds 75 percent, then you will instead take the amount of your payroll costs and will divide that by .75, and this will give you your total forgiveness amount. For example, if you had payroll costs of $70,000 and non-payroll costs $30,000, you would only be at 70 percent and would not meet the 75 percent rule and the $30,000 in non-payroll costs would need to be reduced. The application calculation ($70,000 divided by .75) would bring the total forgiveness amount to $93,333. This calculation is effectively reducing the non-payroll costs from $30,000 to $23,333, and now the forgiveness request consists of 75 percent payroll costs ($70,000) and 25 percent non-payroll costs ($23,333).
Rent Includes Leases of Personal and Real Property
Many small-business owners and their accountants and lawyers were unclear whether the lease of personal property was an amount that could be included in rent, and thus forgiven. The forgiveness application specifically states that rent incudes the following: “Business rent or lease payments pursuant to lease agreements for real or personal property in force between February 15, 2020 (business rent or lease payments).”
It was clear that rental payments for office, storefront and other real property was going to be included, but the application now makes it clear that personal property items such as copiers, servers, autos and other common items of personal property that are leased by a business will be includable in the bucket of non-payroll costs that may be forgiven. Similarly, a business “mortgage interest payment” includes loans for real property and personal property, and as a result interest paid on loans for equipment, autos and other personal property items are includable and can be forgiven.
Utilities Definition Includes Internet, Transportation and Telephone
The application also defines what utility expenses may be added to the application. These expenses include “...electricity, gas, water, transportation, telephone or internet access, for which service began before February 15, 2020.”
Most of these utility expenses are straightforward. What falls under transportation is uncertain, but SBA guidance appears to define transportation costs as gas and other auto expenses that would usually be part of the auto deductions on the business-tax return.
Average FTE Calculation
In determining your full-time equivalent employees before the pandemic and during the eight-week period, the SBA has given two alternative methods of calculation. The first method takes some math and seems complex at first, but will give flexibility and will meet the intent of the rule — that those small business who retain or bring back all of their employees during the eight-week period or by June 30, 2020 will not have their forgiveness request reduced.
The first option is to take the average number of hours paid each week for each employee, divide by 40 and round the total to the nearest 10th. The maximum number of hours per employee is 40 or 1 FTE. Let’s run a quick example for a small business with three employees.
Employee 1 Average Weekly Hours = 40
40 hours divided by 40 = 1
1 FTE
Employee 2 Average Weekly Hours = 37
35 hours divided by 40 = .875
Round to nearest tenth = .9
.9 FTE
Employee 3 Average Weekly Hours = 21
20 hours divided by 40 = .525
Round to nearest tenth = .5
.5 FTE
Total FTE = 2.4 FTE
Since the calculation method tracks each employee by the hours they worked, and since it is the same method to use pre-pandemic and during the eight-week period, it will fairly reflect the small businesses payroll costs and the hours worked without having to worry about whether an employee makes the cut as a full-time equivalent or if they are part-time.
The SBA is also allowing for a simpler method that assigns 1.0 for employees who work 40 hours or more per week and .5 for employees who work fewer than 40 hours. While this may work for some small businesses, there can be some losers in this method, as you may have someone who worked working 35 hours who is now only being counted at .5 under the simple method but would be .9 under the traditional method.
Documentation of Payroll Costs
The application outlines what documentation will be required with the forgiveness request. For payroll costs, the business must outline these in a PPP Schedule A Worksheet and must identify each employee paid during the eight-week period. The business must also identify employees paid at an annualized rate below $100,000 in 2019 on one schedule and employees paid at an annualized rate over $100,000 on another schedule. The business owner’s compensation is included on a separate line on the forgiveness application, but still calculates into the application like any employee. Because of the per employee compensation restriction $100,000, no employee or owner can have cash/wage compensation that is forgiven greater than the annualized eight-week amount of $15,385. Consequently, the maximum cash compensation forgiveness request per employee on the Schedule A worksheet will be $15,385. Note that this $15,385 cap does not include health insurance and retirement contributions paid by the business.
The forgiveness application gives flexibility to small businesses who have a bi-weekly payroll, such that they will be able to ensure that they can get four pay periods of two weeks into their eight-week covered period regardless of when they receive their PPP loan funds and when their regular bi-weekly payroll schedule hits. This was an important provision and instruction in the application, as many businesses were realizing that their payroll schedules weren’t in synch with the eight-week period, and as a result of their loan funding date and their regular payroll dates, they were only going to have three pay periods representing six weeks covered.
To document the payroll costs, the SBA is requiring each of the following:
- Bank accounts or third-party payroll service reports documenting the cash compensation paid to employees.
- Tax forms (or equivalent third-party payroll service provider reports) for the periods that overlap with the Covered Period or the Alternative Payroll Covered Period. For tax forms, the SBA is requesting payroll tax forms (usually 941) and state quarterly wage and unemployment filings.
- Payment receipts, cancelled checks or account statements documenting the amount of employer contributions to employee health insurance and retirement plans.
For many small businesses, there will be a significant time lag from when their eight-week period will be up and when a small business will file its quarterly 941s. As a result, many small businesses may have to wait for a month or two after the eight-week period before filing their forgiveness loan application. For example, if your PPP loan was funded on May 15, your 8-week period will run into July and will be part of second quarter (April-June) and third quarter payroll reporting (July-Sept.). This means you won’t have complete 941s to submit to your bank with the forgiveness request until October even though your eight-week period was up in July. We will have to see what flexibility the SBA is going to allow in this instance or if small businesses will just have to wait until October to submit their forgiveness application.
It is unclear what documents a sole proprietor or partnership that does not have payroll and does not file 941s will use.
Documentation of Rent, Mortgage Interest and Utilities
To document the approved non-payroll costs of rent, mortgage interest and utilities, the SBA is requiring existence of the obligation/service prior to February 15, 2020 and evidence of payments during the eight-week period. To document a business mortgage obligation, the business would provide a lender amortization schedule and receipt of payments as well as statements from February 2020 and during the eight-week covered period.
To document rent or lease payments, a copy of the lease agreement must be produced showing it was in force before February 15, 2020. To document the payments, the small-business owner will need to produce copies of account statements from its landlord/lessor showing the payments or cancelled checks evidencing the payments made during the eight-week period. Small businesses who are paying rent monthly will generally be able to request two months worth of expenses during the eight-week period.
The documentation required for utility payments includes an invoice or statements from February 2020 showing the utility service in place. To document payments made during the eight-week period, the business can use account statements showing the payments made, cancelled checks or bank-account statements showing the payment.
Small-businesses owners will submit their forgiveness application and their supporting documentation to their bank, and their bank will have 60 days to approve or reject the forgiveness request. Attention to detail and a correctly completed forgiveness application will be key to ensuring the maximum amount forgivable. Understanding what is in the application now will greatly increase a small business's chances of receiving maximum PPP loan forgiveness. There are still many unanswered questions, but seeing the PPP forgiveness loan application is a big step ahead.
20,845 views|May 19, 2020,08:10am EDT
First Look At PPP Loan Forgiveness Application
Kyle WestawayContributor Entrepreneurs I write about entrepreneurship, innovation and impact.
On May 15, the Small Business Administration (SBA) released the long-awaited Payroll Protection Program Forgiveness Application. Under the Payroll Protection Program (PPP) entrepreneurs may apply to have up to 100 percent of their loan forgiven. However, the SBA has failed to give clear guidance on the details of loan forgiveness, and this has caused entrepreneurs to question what they need to do to prepare for PPP loan forgiveness.
The new application provides clarity on a few points.
Time Period for Forgiveness You must spend the money on authorized expenses in a specific period of time in order to be eligible for forgiveness. There has been a slight update to the time period in question. Historically the window was eight weeks from the day the loan hit your bank account. However, if you didn’t receive your money the day before your regularly scheduled payroll period, you may have trouble deploying the full amount of payroll within the eight-week period. So, the new guidance allows you to choose the eight-week period that begins on your first payroll date following the loan disbursement.
On May 18, restaurant owners met with President Trump and requested the SBA to extend the eight-week period to 24 weeks. This is especially important for restaurateurs since most of their restaurants are currently closed by government order. Trump seems to be considering it, noting that, “That should be easy," he said. "That's like one of the easiest requests I've ever heard."
$2M You must certify whether or not the total loan amount of your business, and/or your affiliated businesses, is $2M or above. The SBA has previously notified small businesses that loans of $2M or above will likely be audited, and the application shows how they will be flagging those companies.
Payroll Reduction Exemption
In general, you are required to maintain the average number of employees, and any reduction in headcount will result in a reduction in the forgivable amount. However, the new guidance makes it clear that your forgiveness amount will not be reduced for employee reductions related to:
- Individuals to whom the borrower has made a written offer in good faith to rehire but the employee declined (see FAQ 40);
- Employees whose employment was terminated for cause; or
- Employees who voluntarily resigned.
Owner’s Cap Many entrepreneurs have been struggling to calculate payroll costs because they pay themselves through owner’s draws, not a traditional payroll. SBA clarifies that any owner-employee or self-employed individual/general partner may calculate payroll costs as eight weeks of 2019 compensation. However, the total forgivable amount is capped at $15,385 per individual.
75/25 Rule The 75/25 Rule states that at least 75 percent of your total forgivable amount must be comprised of payroll costs, and only 25 percent can be authorized non-payroll costs. Though many small business groups and the SBA Inspector General are recommending removing this rule, the SBA has made no change at this time.
More Clarity Needed “It’s clear the application form and instructions provided yesterday are not enough,” said Erik Asgeirsson (president and CEO of CPA.com, and the American Institute of CPA’s business and technology arm) in a recent news release. “Some of the most pressing issues are not addressed. And in other areas, it appears new questions have arisen.”
This session's guest is Van Carlson with Strategic Risk Alternatives (https://strategicriskalternatives.com/). Mr. Carlson has over twenty five years of experience within the risk management industry. Van began his career with Farmers Insurance Group as an agent; eventually growing his book to be among the largest in his home state of Idaho. Van specializes in advising clients how best to manage risk. The Captive Insurance company is a frequently used product he recommends for, implements and manages for his clients. This risk management tool is governed by 831(b) of the Internal Revenue Code.
A few take-aways from this session:
- The use of a Captive is a great tool to provide for protection of a businesses cash flow that may not be available though standard insurance policies.
- Coverage offered through the Captive is in addition to the standard insurance coverage that you would purchase to manage risk.
- The insurance premiums paid to the captive are tax deductible to the insured company, up to $2.2 million.
- The insurance premiums received by the captive are not taxable revenue up to $2.2 million per insured.
- A captive can be an optimal tool to provide business interruption coverage for events like the COVID-19 pandemic.
The Basics of the 831(b) Election for Captives
January 25, 2017
By P. Bruce Wright, M. Kristan Rizzolo, Saren Goldner, and Christopher W. Schoen Sutherland Asbill & Brennan LLP
Section 831(b) was added to the Internal Revenue Code (IRC) in 1986 as part of an effort to more closely align the taxation of mutual and stock property and casualty ("P&C") insurance companies. Prior law provided for three layers of taxation for mutual P&C insurance companies depending on the quantum of their gross receipts but not for stock P&C insurance companies. Under section 831 as enacted in 1986, in general, both stock and mutual insurance companies that are not life insurance companies compute their tax as provided in IRC section 11, subject to the special rules for calculating taxable income that are contained in part II of subchapter L. In addition, the special rules that had applied to small mutual P&C insurance companies were extended to all small nonlife insurance companies.
Under section 831(b), small nonlife insurance companies that meet the requirements, including a premium limitations amount, may elect to be subject to an alternative tax based only on taxable investment income. Under this alternative tax, the underwriting profits of the electing insurance company are exempt from federal income tax.
In part as a result of perceived abuses, Congress changed the requirements for qualification under section 831(b) effective for taxable years ending after December 31, 2016, and at the same time increased the premium limitation amount. Section 831(b) now requires an electing company to
(1) be an insurance company;
(2) have net written premiums (or, if greater, direct written premiums) for the taxable year that do not exceed $2.2 million;1
(3) meet the diversification requirements described below; and
(4) make or have in effect, an election to be taxed under section 831(b).
The diversification requirements were added by Congress as anti-abuse measures to address estate and gift tax evasion issues; the amendments do not address federal income tax concerns. In general, to satisfy the diversification requirements, no one policyholder2 may pay more than 20 percent of a section 831(b) company's annual net written premiums (or, if greater, direct written premiums). For purposes of applying the 20 percent limitation, the amendments apply attribution rules under which all policyholders that are related within the meaning of sections 267(b) and 707(b), or are members of the same controlled group, are treated as a single policyholder. The new provisions also include an alternative diversification requirement that is an ownership-based test. Under the ownership test, the ownership of a section 831(b) company by "specified holders" (as defined below) must not be greater than (by more than a 2 percent de minimis margin) the ownership of the business or assets being insured. More specifically, an insurance company will have met this alternative diversification test if each specified holder that is an owner of the section 831(b) company has no greater interest in the section 831(b) company than he or she has in the insured business or assets (the "specified assets"). A specified holder is any individual who is a spouse or lineal descendant (including by adoption) of an individual who holds an interest (directly or indirectly) in the specified assets being insured.
In connection with amending the eligibility requirements for making an election to be subject to tax under section 831(b), Congress also added new annual information reporting requirements on electing companies, leaving the specifics of the required information up to the Internal Revenue Service (IRS).
In November 2016, shortly before the new provisions became effective for most electing companies, the IRS issued Notice 2016–66 indicating that certain section 831(b) companies are "transactions of interest" requiring information reporting under sections 6011 and 6111 as "reportable transactions." Notice 2016–66 provides that section 831(b) electing companies meeting the following requirements are "transactions of interest."
(1) A person ("A") directly or indirectly owns an interest in an entity (the "Insured") that conducts a trade or business;
(2) A, the Insured, or related person(s) directly or indirectly own at least 20 percent of the voting power or value of the section 831(b) electing company that contracts with Insured (or an intermediary) in a transaction that the section 831(b) electing company and the Insured treat as insurance or reinsurance of Insured; and
(3) Either
(a) section 831(b) electing company's incurred liabilities for losses and claims administration during the most recent 5 taxable years (or such shorter period if the company has been in existence only for such shorter period) are less than 70 percent of the company's premiums earned less policyholder dividends for the same period or,
(b.) during the same 5-year period, section 831(b) electing company has directly or indirectly made available or otherwise conveyed funds to A, the Insured or related person(s) in a transaction that did not result in taxable income or gain to the recipient of the funds.
Pursuant to Notice 2016–66, "material advisors" and all participants to the transactions are required to disclose information about the transactions to the IRS, including a description of the "insurance" coverage provided by the captive, the names and contact information of actuaries and underwriters, an explanation of how premium amounts were determined, a description of claims, and a description of the captive's assets. The initial report, for transactions from prior open years, originally was due January 30, 2017, but Notice 2017–08 extended the deadline for filing that initial report to May 1, 2017.
In February 2015, the IRS included section 831(b) companies on its "Dirty Dozen" list of tax scams. The IRS also has numerous audits of section 831(b) companies under way and cases docketed in the United States Tax Court. One of the concerns of the IRS is whether the transactions of section 831(b) electing companies are properly characterized as insurance. In order to be treated as insurance for federal tax purposes, a transaction must meet a four-part test that requires the presence of an insurance risk, risk shifting, and risk distribution and the recognition of the transaction as insurance in its commonly accepted sense (for more information on this topic, see "When Are Premiums Paid to a Captive Insurance Company Deductible for Federal Income Tax Purposes?").
P. Bruce Wright, M. Kristan Rizzolo, and Saren Goldner are partners and Christopher W. Schoen is counsel in the tax department of the law firm Sutherland Asbill & Brennan LLP. Mr. Wright and Ms. Goldner are located in New York, and Ms. Rizzolo and Mr. Schoen are located in Washington.
- The $2.2 million maximum is subject to increases for inflation, using 2013 as the base year for calculation.
- To date, there is not guidance on what is meant by a "policyholder," although Congress has proposed a technical corrections bill that would make it clear that a "policyholder" refers to the original direct insured.
The Benefits of Captive Insurance: Pros and Cons published by Alternative Risk Resources on their website 1. Flexibility in setting the cost of premiums 2. You may cover a huge variety of risks 3. You have more control! 4. They foster a greater safety culture 5. You get ongoing education 6. Risk management actually becomes profitable
Companies need to weigh the pros and cons of captive insurance to understand the potential benefit of insurance captives. Captive insurance allows your business to limit risk and retain what would have been insurance company profits. Unused premiums and income generated by your captive insurance company are returned to your business, turning what used to be an expense into a profit generating program.
Alternative Risk Resources’ group captive brokers make the process of understanding and joining a group captive insurance company a turnkey process.
Explaining the Basics of Group Captive Insurance
Access to underwriting profits and investment income are the most tangible benefits of joining a group captive program. The biggest benefit to joining, though, is the intangible safety culture captives foster.
Accidents and losses change from being something a business accepts will happen to avoidable events. Everybody in an organization insured through a captive becomes more safety conscious, changing the focus from minimizing claims to actively preventing accidents.
Long-term, proven cost savings and the increased profitability of group captive insurance programs make captives an attractive risk mitigation and investment solution for qualifying businesses. With a group captive, your company is in control of its insurance plan with underwriting profits and unused premiums returned as profit. A captive insurance program is a company providing insurance coverage and benefits exclusively to its member owners.
The businesses paying premiums are the same entities owning and profiting from the insurance company’s success.
Fewer claims and invested unused premiums translate directly into profit for the group captive’s member owners. The bottom line advantages over traditional insurance programs ensure that eventually every company qualifying for captive insurance will participate. The lack of knowledge about how group captive insurance programs work is often the only reason a qualified company is not a captive insured entity. Alternative Risk Resources’ professional brokers are here to help you understand the benefits of captive insurance.
In this episode of Business Matters, Roxanne Sexton with the Bean Team discusses the Paycheck Protection Program and more specifically, how to maximize the loan forgiveness provisions of the PPP. We outline and then discuss the 4 categories provided by the PPP to determine the amount of loan that will be forgiven. Of course, all of this is based on the guidelines issued through the time of the recording.
PAYCHECK PROTECTION PROGRAM LOANS
Frequently Asked Questions (FAQs)
The Small Business Administration (SBA), in consultation with the Department of the Treasury, intends to provide timely additional guidance to address borrower and lender questions concerning the implementation of the Paycheck Protection Program (PPP), established by section 1102 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act or the Act). This document will be updated on a regular basis.
Borrowers and lenders may rely on the guidance provided in this document as SBA’s interpretation of the CARES Act and of the Paycheck Protection Program Interim Final Rules (“PPP Interim Final Rules”) (link). The U.S. government will not challenge lender PPP actions that conform to this guidance,1 and to the PPP Interim Final Rules and any subsequent rulemaking in effect at the time.
- Question: Paragraph 3.b.iii of the PPP Interim Final Rule states that lenders must “[c]onfirm the dollar amount of average monthly payroll costs for the preceding calendar year by reviewing the payroll documentation submitted with the borrower’s application.” Does that require the lender to replicate every borrower’s calculations?
Answer: No. Providing an accurate calculation of payroll costs is the responsibility of the borrower, and the borrower attests to the accuracy of those calculations on the Borrower Application Form. Lenders are expected to perform a good faith review, in a reasonable time, of the borrower’s calculations and supporting documents concerning average monthly payroll cost. For example, minimal review of calculations based on a payroll report by a recognized third-party payroll processor would be reasonable. In addition, as the PPP Interim Final Rule indicates, lenders may rely on borrower representations, including with respect to amounts required to be excluded from payroll costs.
If the lender identifies errors in the borrower’s calculation or material lack of substantiation in the borrower’s supporting documents, the lender should work with the borrower to remedy the issue.2 Question: Are small business concerns (as defined in section 3 of the Small Business Act, 15 U.S.C. 632) required to have 500 or fewer employees to be eligible borrowers in the PPP?
Answer: No. Small business concerns can be eligible borrowers even if they have more than 500 employees, as long as they satisfy the existing statutory and regulatory definition of a “small business concern” under section 3 of the Small Business Act, 15 U.S.C. 632. A business can qualify if it meets the SBA employee-based or revenue-
As of May 3, 2020
based size standard corresponding to its primary industry. Go to www.sba.gov/size for the industry size standards.
Additionally, a business can qualify for the Paycheck Protection Program as a small business concern if it met both tests in SBA’s “alternative size standard” as of March 27, 2020: (1) maximum tangible net worth of the business is not more than $15 million; and (2) the average net income after Federal income taxes (excluding any carry-over losses) of the business for the two full fiscal years before the date of the application is not more than $5 million.
A business that qualifies as a small business concern under section 3 of the Small Business Act, 15 U.S.C. 632, may truthfully attest to its eligibility for PPP loans on the Borrower Application Form, unless otherwise ineligible.
- Question: Does my business have to qualify as a small business concern (as defined in section 3 of the Small Business Act, 15 U.S.C. 632) in order to participate in the PPP?
Answer: No. In addition to small business concerns, a business is eligible for a PPP loan if the business has 500 or fewer employees whose principal place of residence is in the United States, or the business meets the SBA employee-based size standards for the industry in which it operates (if applicable). Similarly, PPP loans are also available for qualifying tax-exempt nonprofit organizations described in section 501(c)(3) of the Internal Revenue Code (IRC), tax-exempt veterans organization described in section 501(c)(19) of the IRC, and Tribal business concerns described in section 31(b)(2)(C) of the Small Business Act that have 500 or fewer employees whose principal place of residence is in the United States, or meet the SBA employee-based size standards for the industry in which they operate.
- Question: Are lenders required to make an independent determination regarding applicability of affiliation rules under 13 C.F.R. 121.301(f) to borrowers?
Answer: No. It is the responsibility of the borrower to determine which entities (if any) are its affiliates and determine the employee headcount of the borrower and its affiliates. Lenders are permitted to rely on borrowers’ certifications.
- Question: Are borrowers required to apply SBA’s affiliation rules under 13 C.F.R. 121.301(f)?
Answer: Yes. Borrowers must apply the affiliation rules set forth in SBA’s Interim Final Rule on Affiliation. A borrower must certify on the Borrower Application Form that the borrower is eligible to receive a PPP loan, and that certification means that the borrower is a small business concern as defined in section 3 of the Small Business Act (15 U.S.C. 632), meets the applicable SBA employee-based or revenue-based size standard, or meets the tests in SBA’s alternative size standard, after applying the affiliation rules, if applicable. SBA’s existing affiliation exclusions apply to the PPP, including, for example the exclusions under 13 CFR 121.103(b)(2).
As of May 3, 2020
- Question: The affiliation rule based on ownership (13 C.F.R. 121.301(f)(1)) states that SBA will deem a minority shareholder in a business to control the business if the shareholder has the right to prevent a quorum or otherwise block action by the board of directors or shareholders. If a minority shareholder irrevocably gives up those rights, is it still considered to be an affiliate of the business?
Answer: No. If a minority shareholder in a business irrevocably waives or relinquishes any existing rights specified in 13 C.F.R. 121.301(f)(1), the minority shareholder would no longer be an affiliate of the business (assuming no other relationship that triggers the affiliation rules).
- Question: The CARES Act excludes from the definition of payroll costs any employee compensation in excess of an annual salary of $100,000. Does that exclusion apply to all employee benefits of monetary value?
Answer: No. The exclusion of compensation in excess of $100,000 annually applies only to cash compensation, not to non-cash benefits, including:
- employer contributions to defined-benefit or defined-contribution retirement plans;
- payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums; and
-
payment of state and local taxes assessed on compensation of employees.
-
Question: Do PPP loans cover paid sick leave?
Answer: Yes. PPP loans covers payroll costs, including costs for employee vacation, parental, family, medical, and sick leave. However, the CARES Act excludes qualified sick and family leave wages for which a credit is allowed under sections 7001 and 7003 of the Families First Coronavirus Response Act (Public Law 116–127). Learn more about the Paid Sick Leave Refundable Credit here.
- Question: My small business is a seasonal business whose activity increases from April to June. Considering activity from that period would be a more accurate reflection of my business’s operations. However, my small business was not fully ramped up on February 15, 2020. Am I still eligible?
Answer: In evaluating a borrower’s eligibility, a lender may consider whether a seasonal borrower was in operation on February 15, 2020 or for an 8-week period between February 15, 2019 and June 30, 2019.
- Question: What if an eligible borrower contracts with a third-party payer such as a payroll provider or a Professional Employer Organization (PEO) to process payroll and report payroll taxes?
Answer: SBA recognizes that eligible borrowers that use PEOs or similar payroll providers are required under some state registration laws to report wage and other data on
As of May 3, 2020
the Employer Identification Number (EIN) of the PEO or other payroll provider. In these cases, payroll documentation provided by the payroll provider that indicates the amount of wages and payroll taxes reported to the IRS by the payroll provider for the borrower’s employees will be considered acceptable PPP loan payroll documentation. Relevant information from a Schedule R (Form 941), Allocation Schedule for Aggregate Form 941 Filers, attached to the PEO’s or other payroll provider’s Form 941, Employer’s Quarterly Federal Tax Return, should be used if it is available; otherwise, the eligible borrower should obtain a statement from the payroll provider documenting the amount of wages and payroll taxes. In addition, employees of the eligible borrower will not be considered employees of the eligible borrower’s payroll provider or PEO.
- Question: May lenders accept signatures from a single individual who is authorized to sign on behalf of the borrower?
Answer: Yes. However, the borrower should bear in mind that, as the Borrower Application Form indicates, only an authorized representative of the business seeking a loan may sign on behalf of the business. An individual’s signature as an “Authorized Representative of Applicant” is a representation to the lender and to the U.S. government that the signer is authorized to make the certifications, including with respect to the applicant and each owner of 20% or more of the applicant’s equity, contained in the Borrower Application Form. Lenders may rely on that representation and accept a single individual’s signature on that basis.
- Question: I need to request a loan to support my small business operations in light of current economic uncertainty. However, I pleaded guilty to a felony crime a very long time ago. Am I still eligible for the PPP?
Answer: Yes. Businesses are only ineligible if an owner of 20 percent or more of the equity of the applicant is presently incarcerated, on probation, on parole; subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction; or, within the last five years, for any felony, has been convicted; pleaded guilty; pleaded nolo contendere; been placed on pretrial diversion; or been placed on any form of parole or probation (including probation before judgment).
- Question: Are lenders permitted to use their own online portals and an electronic form that they create to collect the same information and certifications as in the Borrower Application Form, in order to complete implementation of their online portals?
Answer: Yes. Lenders may use their own online systems and a form they establish that asks for the same information (using the same language) as the Borrower Application Form. Lenders are still required to send the data to SBA using SBA’s interface.
- Question: What time period should borrowers use to determine their number of employees and payroll costs to calculate their maximum loan amounts?
As of May 3, 2020
Answer: In general, borrowers can calculate their aggregate payroll costs using data either from the previous 12 months or from calendar year 2019. For seasonal businesses, the applicant may use average monthly payroll for the period between February 15, 2019, or March 1, 2019, and June 30, 2019. An applicant that was not in business from February 15, 2019 to June 30, 2019 may use the average monthly payroll costs for the period January 1, 2020 through February 29, 2020.
Borrowers may use their average employment over the same time periods to determine their number of employees, for the purposes of applying an employee-based size standard. Alternatively, borrowers may elect to use SBA’s usual calculation: the average number of employees per pay period in the 12 completed calendar months prior to the date of the loan application (or the average number of employees for each of the pay periods that the business has been operational, if it has not been operational for 12 months).
- Question: Should payments that an eligible borrower made to an independent contractor or sole proprietor be included in calculations of the eligible borrower’s payroll costs?
Answer: No. Any amounts that an eligible borrower has paid to an independent contractor or sole proprietor should be excluded from the eligible business’s payroll costs. However, an independent contractor or sole proprietor will itself be eligible for a loan under the PPP, if it satisfies the applicable requirements.
- Question: How should a borrower account for federal taxes when determining its payroll costs for purposes of the maximum loan amount, allowable uses of a PPP loan, and the amount of a loan that may be forgiven?
Answer: Under the Act, payroll costs are calculated on a gross basis without regard to (i.e., not including subtractions or additions based on) federal taxes imposed or withheld, such as the employee’s and employer’s share of Federal Insurance Contributions Act (FICA) and income taxes required to be withheld from employees. As a result, payroll costs are not reduced by taxes imposed on an employee and required to be withheld by the employer, but payroll costs do not include the employer’s share of payroll tax. For example, an employee who earned $4,000 per month in gross wages, from which $500 in federal taxes was withheld, would count as $4,000 in payroll costs. The employee would receive $3,500, and $500 would be paid to the federal government. However, the employer-side federal payroll taxes imposed on the $4,000 in wages are excluded from payroll costs under the statute.3
3 The definition of “payroll costs” in the CARES Act, 15 U.S.C. 636(a)(36)(A)(viii), excludes “taxes imposed or withheld under chapters 21, 22, or 24 of the Internal Revenue Code of 1986 during the covered period,” defined as February 15, 2020, to June 30, 2020. As described above, the SBA interprets this statutory exclusion to mean that payroll costs are calculated on a gross basis, without subtracting federal taxes that are imposed on the employee or withheld from employee wages. Unlike employer-side payroll taxes, such employee-side taxes are ordinarily expressed as a reduction in employee take-home pay; their exclusion from the definition of payroll costs means payroll costs should not be reduced based on taxes imposed on the employee or withheld from employee wages. This interpretation is consistent with the text of the statute and advances the legislative purpose of ensuring workers
As of May 3, 2020
remain paid and employed. Further, because the reference period for determining a borrower’s maximum loan amount will largely or entirely precede the period from February 15, 2020, to June 30, 2020, and the period during which borrowers will be subject to the restrictions on allowable uses of the loans may extend beyond that period, for purposes of the determination of allowable uses of loans and the amount of loan forgiveness, this statutory exclusion will apply with respect to such taxes imposed or withheld at any time, not only during such period.
4 Questions 2 – 18 published April 6, 2020.
5 Questions 19 – 20 published April 8, 2020.
- Question: I filed or approved a loan application based on the version of the PPP Interim Final Rule published on April 2, 2020. Do I need to take any action based on the updated guidance in these FAQs?
Answer: No. Borrowers and lenders may rely on the laws, rules, and guidance available at the time of the relevant application. However, borrowers whose previously submitted loan applications have not yet been processed may revise their applications based on clarifications reflected in these FAQs.
- Question: Are PPP loans for existing customers considered new accounts for FinCEN Rule CDD purposes? Are lenders required to collect, certify, or verify beneficial ownership information in accordance with the rule requirements for existing customers? Answer: If the PPP loan is being made to an existing customer and the necessary information was previously verified, you do not need to re-verify the information. Furthermore, if federally insured depository institutions and federally insured credit unions eligible to participate in the PPP program have not yet collected beneficial ownership information on existing customers, such institutions do not need to collect and verify beneficial ownership information for those customers applying for new PPP loans, unless otherwise indicated by the lender’s risk-based approach to BSA compliance.4
- Question: Do lenders have to use a promissory note provided by SBA or may they use their own?
Answer: Lenders may use their own promissory note or an SBA form of promissory note.
- Question: The amount of forgiveness of a PPP loan depends on the borrower’s payroll costs over an eight-week period; when does that eight-week period begin?
Answer: The eight-week period begins on the date the lender makes the first disbursement of the PPP loan to the borrower. The lender must make the first disbursement of the loan no later than ten calendar days from the date of loan approval.5
- Question: Do lenders need a separate SBA Authorization document to issue PPP loans?
Answer: No. A lender does not need a separate SBA Authorization for SBA to guarantee a PPP loan. However, lenders must have executed SBA Form 2484 (the
As of May 3, 2020
to issue PPP loans and receive a loan number for each originated PPP loan. Lenders may include in their promissory notes for PPP loans any terms and conditions, including relating to amortization and disclosure, that are not inconsistent with Sections 1102 and 1106 of the CARES Act, the PPP Interim Final Rules and guidance, and SBA Form 2484.
As of May 3, 2020
Lender Application Form for the Paycheck Protection Program)6to issue PPP loans and receive a loan number for eachoriginated PPP loan. Lendersmay include in theirpromissory notes for PPP loans any terms and conditions, including relating to amortization and disclosure, that arenot inconsistent with Sections 1102 and 1106 of theCARES Act, the PPP Interim Final Rulesand guidance, and SBA Form 2484.
22.Question: I am a non-bank lender that meets allapplicable criteria of the PPP InterimFinal Rule. Will I be automatically enrolledas a PPP lender? What criteria will SBAand theTreasuryDepartmentuse to assess whetherto approvemy application to participate as a PPP lender?
Answer:We encourage lenders that arenot currently7(a) lenders to apply in order to increase the scope of PPP lending optionsand the speed with which PPP loanscan be disbursedtohelp small businesses across America.We recognize that financialtechnology solutionscan promote efficiency and financial inclusionin implementingthePPP. Applicants should submit SBA Form 3507 and the relevant attachments to NFRLApplicationForPPP@sba.gov.Submission of theSBA Form3507does notresult in automatic enrollmentin the PPP.SBA and the Treasury Department willevaluate each application from anon-bank or non-insured depository institution lenderand determine whetherthe applicant has the necessary qualifications to process, close,disburse, andservice PPP loans made with SBA’sguarantee. SBAmay requestadditionalinformation from the applicant beforemaking a determination.
23.Question: How do the $10 million cap and affiliationruleswork for franchises?
Answer:If a franchise brand islisted on the SBA Franchise Directory,each of itsfranchiseesthat meets the applicable size standardcan apply for a PPP loan. (Thefranchisor does not apply on behalf of its franchisees.)The $10 million cap on PPP loansis a limit perfranchisee entity,and each franchisee is limited to one PPP loan.
Franchise brands that have been denied listing on the Directory because of affiliation between franchisor andfranchisee may request listing toreceive PPP loans.SBA willnot apply affiliation rules to afranchise brand requesting listing on the Directory to participatein the PPP, but SBA will confirm that the brandis otherwiseeligible for listing on the Directory.
24.Question: How do the $10 million cap and affiliationruleswork for hotels and restaurants (and any business assigned a North American Industry Classification System(NAICS)code beginning with 72)?
Answer:Under the CARES Act,any singlebusinessentitythat is assigned a NAICScode beginning with 72 (includinghotels andrestaurants) andthat employs not more than 500employees perphysicallocationiseligible to receive a PPPloan.
6Thisrequirementissatisfiedbyalenderwhenthelendercompletesthe processofsubmitting aloan through the E-Transystem;notransmissionorretentionofaphysical copy of Form2484isrequired.
As of May 3, 2020
In addition, SBA’s affiliation rules (13 CFR 121.103 and 13 CFR 121.301) do not apply to any business entity that is assigned a NAICS code beginning with 72 and that employs not more than a total of 500 employees. As a result, if each hotel or restaurant location owned by a parent business is a separate legal business entity, each hotel or restaurant location that employs not more than 500 employees is permitted to apply for a separate PPP loan provided it uses its unique EIN.
The $10 million maximum loan amount limitation applies to each eligible business entity, because individual business entities cannot apply for more than one loan. The following examples illustrate how these principles apply.
Example 1. Company X directly owns multiple restaurants and has no affiliates.
- Company X may apply for a PPP loan if it employs 500 or fewer employees per location (including at its headquarters), even if the total number of employees employed across all locations is over 500.
Example 2. Company X wholly owns Company Y and Company Z (as a result, Companies X, Y, and Z are all affiliates of one another). Company Y and Company Z each own a single restaurant with 500 or fewer employees.
- Company Y and Company Z can each apply for a separate PPP loan, because each has 500 or fewer employees. The affiliation rules do not apply, because Company Y and Company Z each has 500 or fewer employees and is in the food services business (with a NAICS code beginning with 72).
Example 3. Company X wholly owns Company Y and Company Z (as a result, Companies X, Y, and Z are all affiliates of one another). Company Y owns a restaurant with 400 employees. Company Z is a construction company with 400 employees.
- Company Y is eligible for a PPP loan because it has 500 or fewer employees. The affiliation rules do not apply to Company Y, because it has 500 or fewer employees and is in the food services business (with a NAICS code beginning with 72).
-
The waiver of the affiliation rules does not apply to Company Z, because Company Z is in the construction industry. Under SBA’s affiliation rules, 13 CFR 121.301(f)(1) and (3), Company Y and Company Z are affiliates of one another because they are under the common control of Company X, which wholly owns both companies. This means that the size of Company Z is determined by adding its employees to those of Companies X and Y. Therefore, Company Z is deemed to have more than 500 employees, together with its affiliates. However, Company Z may be eligible to receive a PPP loan as a small business concern if it, together with Companies X and Y, meets SBA’s other applicable size standards,” as explained in FAQ #2.
-
Question: Does the information lenders are required to collect from PPP applicants regarding every owner who has a 20% or greater ownership stake in the applicant business (i.e., owner name, title, ownership %, TIN, and address) satisfy a lender’s obligation to collect beneficial ownership information (which has a 25% ownership threshold) under the Bank Secrecy Act?
As of May 3, 2020
Answer:
For lenders with existing customers: With respect to collecting beneficial ownership information for owners holding a 20% or greater ownership interest, if the PPP loan is being made to an existing customer and the lender previously verified the necessary information, the lender does not need to re-verify the information. Furthermore, if federally insured depository institutions and federally insured credit unions eligible to participate in the PPP program have not yet collected such beneficial ownership information on existing customers, such institutions do not need to collect and verify beneficial ownership information for those customers applying for new PPP loans, unless otherwise indicated by the lender’s risk-based approach to Bank Secrecy Act (BSA) compliance.
For lenders with new customers: For new customers, the lender’s collection of the following information from all natural persons with a 20% or greater ownership stake in the applicant business will be deemed to satisfy applicable BSA requirements and FinCEN regulations governing the collection of beneficial ownership information: owner name, title, ownership %, TIN, address, and date of birth. If any ownership interest of 20% or greater in the applicant business belongs to a business or other legal entity, lenders will need to collect appropriate beneficial ownership information for that entity. If you have questions about requirements related to beneficial ownership, go to https://www.fincen.gov/resources/statutes-and-regulations/cdd-final-rule. Decisions regarding further verification of beneficial ownership information collected from new customers should be made pursuant to the lender’s risk-based approach to BSA compliance.7
7 Questions 21 – 25 published April 13, 2020.
- Question: SBA regulations require approval by SBA’s Standards of Conduct Committee (SCC) for SBA Assistance, other than disaster assistance, to an entity, if its sole proprietor, partner, officer, director, or stockholder with a 10 percent or more interest is: a current SBA employee; a Member of Congress; an appointed official or employee of the legislative or judicial branch; a member or employee of an SBA Advisory Council or SCORE volunteer; or a household member of any of the preceding individuals. Do these entities need the approval of the SCC in order to be eligible for a PPP loan?
Answer: The SCC has authorized a blanket approval for PPP loans to such entities so that further action by the SCC is not necessary in the PPP program.
- Question: SBA regulations require a written statement of no objection by the pertinent Department or military service before it provides any SBA Assistance, other than disaster loans, to an entity, if its sole proprietor, partner, officer, director, or stockholder with a 10 percent or more interest, or if a household member of any of the preceding individuals, is an employee of another Government Department or Agency having a grade of at least GS-13 or its equivalent. Does this requirement apply to PPP loans?
As of May 3, 2020
Answer: No. The SCC has determined that a written statement of no objection is not required from another Government Department or Agency for PPP loans.
- Question: Is a lender permitted to submit a PPP loan application to SBA through E-Tran before the lender has fulfilled its responsibility to review the required borrower documentation and calculation of payroll costs?
Answer: No. Before a lender submits a PPP loan through E-Tran, the lender must have collected the information and certifications contained in the Borrower Application Form and the lender must have fulfilled its obligations set forth in paragraphs 3.b.(i)-(iii) of the PPP Interim Final Rule. Please refer to the Interim Final Rule and FAQ #1 for more information on the lender’s responsibility regarding confirmation of payroll costs.
Lenders who did not understand that these steps are required before submission to E-Tran need not withdraw applications submitted to E-Tran before April 14, 2020, but must fulfill lender responsibilities with respect to those applications as soon as practicable and no later than loan closing.8
8 Questions 26 – 28 published April 14, 2020.
9 Question 29 published April 15, 2020.
10 Question 30 published April 17, 2020.
- Question: Can lenders use scanned copies of documents or E-signatures or E-consents permitted by the E-sign Act?
Answer: Yes. All PPP lenders may accept scanned copies of signed loan applications and documents containing the information and certifications required by SBA Form 2483 and the promissory note used for the PPP loan. Additionally, lenders may also accept any form of E-consent or E-signature that complies with the requirements of the Electronic Signatures in Global and National Commerce Act (P.L. 106-229).
If electronic signatures are not feasible, when obtaining a wet ink signature without in-person contact, lenders should take appropriate steps to ensure the proper party has executed the document.
This guidance does not supersede signature requirements imposed by other applicable law, including by the lender’s primary federal regulator.9
- Question: Can a lender sell a PPP loan into the secondary market?
Answer: Yes. A PPP loan may be sold into the secondary market at any time after the loan is fully disbursed. A secondary market sale of a PPP loan does not require SBA approval. A PPP loan sold into the secondary market is 100% SBA guaranteed. A PPP loan may be sold on the secondary market at a premium or a discount to par value.10
As of May 3, 2020
- Question: Do businesses owned by large companies with adequate sources of liquidity to support the business’s ongoing operations qualify for a PPP loan?
Answer: In addition to reviewing applicable affiliation rules to determine eligibility, all borrowers must assess their economic need for a PPP loan under the standard established by the CARES Act and the PPP regulations at the time of the loan application. Although the CARES Act suspends the ordinary requirement that borrowers must be unable to obtain credit elsewhere (as defined in section 3(h) of the Small Business Act), borrowers still must certify in good faith that their PPP loan request is necessary. Specifically, before submitting a PPP application, all borrowers should review carefully the required certification that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” Borrowers must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business. For example, it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith, and such a company should be prepared to demonstrate to SBA, upon request, the basis for its certification.
Lenders may rely on a borrower’s certification regarding the necessity of the loan request. Any borrower that applied for a PPP loan prior to the issuance of this guidance and repays the loan in full by May 7, 2020 will be deemed by SBA to have made the required certification in good faith.11
11 Question 31 published April 23, 2020.
- Question: Does the cost of a housing stipend or allowance provided to an employee as part of compensation count toward payroll costs?
Answer: Yes. Payroll costs includes all cash compensation paid to employees, subject to the $100,000 annual compensation per employee limitation.
- Question: Is there existing guidance to help PPP applicants and lenders determine whether an individual employee’s principal place of residence is in the United States?
Answer: PPP applicants and lenders may consider IRS regulations (26 CFR § 1.121-1(b)(2)) when determining whether an individual employee’s principal place of residence is in the United States.
- Question: Are agricultural producers, farmers, and ranchers eligible for PPP loans?
Answer: Yes. Agricultural producers, farmers, and ranchers are eligible for PPP loans if: (i) the business has 500 or fewer employees, or (ii) the business fits within the revenue-based sized standard, which is average annual receipts of $1 million.
Additionally, agricultural producers, farmers, and ranchers can qualify for PPP loans as a small business concern if their business meets SBA’s “alternative size standard.” The
As of May 3, 2020
“alternative size standard” is currently: (1) maximum net worth of the business is not more than $15 million, and (2) the average net income after Federal income taxes (excluding any carry-over losses) of the business for the two full fiscal years before the date of the application is not more than $5 million.
For all of these criteria, the applicant must include its affiliates in its calculations. Link to Applicable Affiliation Rules for the PPP.
- Question: Are agricultural and other forms of cooperatives eligible to receive PPP loans?
Answer: As long as other PPP eligibility requirements are met, small agricultural cooperatives and other cooperatives may receive PPP loans.12
12 Questions 32 – 35 published April 24, 2020.
13 Questions 36 published April 26, 2020.
14 Question 37 published April 28, 2020.
- Question: To determine borrower eligibility under the 500-employee or other applicable threshold established by the CARES Act, must a borrower count all employees or only full-time equivalent employees?
Answer: For purposes of loan eligibility, the CARES Act defines the term employee to include “individuals employed on a full-time, part-time, or other basis.” A borrower must therefore calculate the total number of employees, including part-time employees, when determining their employee headcount for purposes of the eligibility threshold. For example, if a borrower has 200 full-time employees and 50 part-time employees each working 10 hours per week, the borrower has a total of 250 employees.
By contrast, for purposes of loan forgiveness, the CARES Act uses the standard of “full-time equivalent employees” to determine the extent to which the loan forgiveness amount will be reduced in the event of workforce reductions.13
- Question: Do businesses owned by private companies with adequate sources of liquidity to support the business’s ongoing operations qualify for a PPP loan?
Answer: See response to FAQ #31.14
- Question: Section 1102 of the CARES Act provides that PPP loans are available only to applicants that were “in operation on February 15, 2020.” Is a business that was in operation on February 15, 2020 but had a change in ownership after February 15, 2020 eligible for a PPP loan?
Answer: Yes. As long as the business was in operation on February 15, 2020, if it meets the other eligibility criteria, the business is eligible to apply for a PPP loan regardless of the change in ownership. In addition, where there is a change in ownership effectuated through a purchase of substantially all assets of a business that was in operation on
As of May 3, 2020
February 15, the business acquiring the assets will be eligible to apply for a PPP loan even if the change in ownership results in the assignment of a new tax ID number and even if the acquiring business was not in operation until after February 15, 2020. If the acquiring business has maintained the operations of the pre-sale business, the acquiring business may rely on the historic payroll costs and headcount of the pre-sale business for the purposes of its PPP application, except where the pre-sale business had applied for and received a PPP loan. The Administrator, in consultation with the Secretary, has determined that the requirement that a business “was in operation on February 15, 2020” should be applied based on the economic realities of the business’s operations.
- Question: Will SBA review individual PPP loan files?
Answer: Yes. In FAQ #31, SBA reminded all borrowers of an important certification required to obtain a PPP loan. To further ensure PPP loans are limited to eligible borrowers in need, the SBA has decided, in consultation with the Department of the Treasury, that it will review all loans in excess of $2 million, in addition to other loans as appropriate, following the lender’s submission of the borrower’s loan forgiveness application. Additional guidance implementing this procedure will be forthcoming.
The outcome of SBA’s review of loan files will not affect SBA’s guarantee of any loan for which the lender complied with the lender obligations set forth in paragraphs III.3.b(i)-(iii) of the Paycheck Protection Program Rule (April 2, 2020) and further explained in FAQ #1.15
15 Questions 38 – 39 published April 29, 2020.
- Question: Will a borrower’s PPP loan forgiveness amount (pursuant to section 1106 of the CARES Act and SBA’s implementing rules and guidance) be reduced if the borrower laid off an employee, offered to rehire the same employee, but the employee declined the offer?
Answer: No. As an exercise of the Administrator’s and the Secretary’s authority under Section 1106(d)(6) of the CARES Act to prescribe regulations granting de minimis exemptions from the Act’s limits on loan forgiveness, SBA and Treasury intend to issue an interim final rule excluding laid-off employees whom the borrower offered to rehire (for the same salary/wages and same number of hours) from the CARES Act’s loan forgiveness reduction calculation. The interim final rule will specify that, to qualify for this exception, the borrower must have made a good faith, written offer of rehire, and the employee’s rejection of that offer must be documented by the borrower. Employees and employers should be aware that employees who reject offers of re-employment may forfeit eligibility for continued unemployment compensation.
- Question: Can a seasonal employer that elects to use a 12-week period between May 1, 2019 and September 15, 2019 to calculate its maximum PPP loan amount under the interim final rule issued by Treasury on April 27, 2020, make all the required certifications on the Borrower Application Form?
As of May 3, 2020
Answer: Yes. The Borrower Application Form requires applicants to certify that “The Applicant is eligible to receive a loan under the rules in effect at the time this application is submitted that have been issued by the Small Business Administration (SBA) implementing the Paycheck Protection Program.” On April 27, 2020, Treasury issued an interim final rule allowing seasonal borrowers to use an alternative base period for purposes of calculating the loan amount for which they are eligible under the PPP. An applicant that is otherwise in compliance with applicable SBA requirements, and that complies with Treasury’s interim final rule on seasonal workers, will be deemed eligible for a PPP loan under SBA rules. Instead of following the instructions on page 3 of the Borrower Application Form for the time period for calculating average monthly payroll for seasonal businesses, an applicant may elect to use the time period in Treasury’s interim final rule on seasonal workers.
- Question: Do nonprofit hospitals exempt from taxation under section 115 of the Internal Revenue Code qualify as “nonprofit organizations” under section 1102 of the CARES Act?
Answer: Section 1102 of the CARES Act defines the term “nonprofit organization” as “an organization that is described in section 501(c)(3) of the Internal Revenue Code of 1986 and that is exempt from taxation under section 501(a) of such Code.” The Administrator, in consultation with the Secretary of the Treasury, understands that nonprofit hospitals exempt from taxation under section 115 of the Internal Revenue Code are unique in that many such hospitals may meet the description set forth in section 501(c)(3) of the Internal Revenue Code to qualify for tax exemption under section 501(a), but have not sought to be recognized by the IRS as such because they are otherwise fully tax-exempt under a different provision of the Internal Revenue Code.
Accordingly, the Administrator will treat a nonprofit hospital exempt from taxation under section 115 of the Internal Revenue Code as meeting the definition of “nonprofit organization” under section 1102 of the CARES Act if the hospital reasonably determines, in a written record maintained by the hospital, that it is an organization described in section 501(c)(3) of the Internal Revenue Code and is therefore within a category of organization that is exempt from taxation under section 501(a).16 The hospital’s certification of eligibility on the Borrower Application Form cannot be made without this determination. This approach helps accomplish the statutory purpose of ensuring that a broad range of borrowers, including entities that are helping to lead the medical response to the ongoing pandemic, can benefit from the loans provided under the PPP.
16 This determination need not account for the ancillary conditions set forth in section 501(r) of the Internal Revenue Code and elsewhere associated with securing the tax exemption under that section. Section 501(r) states that a hospital organization shall not be treated as described in section 501(c)(3) unless it meets certain community health and other requirements. However, section 1102 of the CARES Act defines the term “nonprofit organization” solely by reference to section 501(c)(3), and section 501(r) does not amend section 501(c)(3). Therefore, for purposes of the PPP, the requirements of section 501(r) do not apply to the determination of whether an organization is “described in section 501(c)(3).”
As of May 3, 2020
This guidance is solely for purposes of qualification as a “nonprofit organization” under section 1102 of the CARES Act and related purposes of the CARES Act, and does not have any consequences for federal tax law purposes. Nonprofit hospitals should also review all other applicable eligibility criteria, including the Interim Final Rules on Promissory Notes, Authorizations, Affiliation, and Eligibility (April 28, 2020) regarding an important limitation on ownership by state or local governments. 85 FR 23450, 23451.17
In this episode, we talk with FSU Economics Professor, Joe Calhoun about the impact COVID has had and will have on the economy. We discuss the Fed's tools to stimulate the economy, like creating money and dropping the interest rate and the likely impact these actions will have to inflation and recovery. Also, tools available to the legislative branch, like loan programs and the Paycheck Protection Program paired with the Fed's tools can have a significant impact on inflation, deflation, interest rates and other big picture economic measurements. Check out this episode for economics 101 mixed with COVID crisis.
BY KIMBERLY AMADEO
Updated February 13, 2020
Central banks have three main monetary policy tools: open market operations, the discount rate, and the reserve requirement. Most central banks also have a lot more tools at their disposal. Here are the three primary tools and how they work together to sustain healthy economic growth.1
- Open Market Operations
Open market operations are when central banks buy or sell securities. These are bought from or sold to the country's private banks. When the central bank buys securities, it adds cash to the banks' reserves. That gives them more money to lend. When the central bank sells the securities, it places them on the banks' balance sheets and reduces its cash holdings. The bank now has less to lend. A central bank buys securities when it wants expansionary monetary policy. It sells them when it executes contractionary monetary policy.12
Quantitative easing is open market operations on steroids.3 Before the recession, the U.S. Federal Reserve maintained between $700-$800 billion of Treasury notes on its balance sheet. It added or subtracted to affect policy, but kept it within that range.4 QE almost quintupled holdings of Treasury notes and mortgage-backed securities to more than $4 trillion by 2014.56
- Reserve Requirement
The reserve requirement refers to the money banks must keep on hand overnight. They can either keep the reserve in their vaults or at the central bank. A low reserve requirement allows banks to lend more of their deposits. It's expansionary because it creates credit.
A high reserve requirement is contractionary. It gives banks less money to lend. It's especially hard for small banks since they don't have as much to lend in the first place. That's why most central banks don't impose a reserve requirement on small banks. Central banks rarely change the reserve requirement because it's difficult for member banks to modify their procedures.7
Central banks are more likely to adjust the targeted lending rate than the reserve requirement. It achieves the same result with less disruption.
The fed funds rate is perhaps the most well-known of these tools. Here's how the fed funds rate works. If a bank can't meet the reserve requirement, it borrows from another bank that has excess cash. The interest rate it pays is the fed funds rate. The amount it borrows is called the fed funds.8 The Federal Open Market Committee sets a target for the fed funds rate at its meetings.9
Central banks have several tools to make sure the rate meets that target. The Federal Reserve, the Bank of England, and the European Central Bank pay interest on the required reserves and any excess reserves.10 Banks won't lend fed funds for less than the rate they're receiving from the Fed for these reserves.11 Central banks also use open market operations to manage the fed funds rate.12
- Discount Rate
The discount rate is the third tool.13 It's the rate that central banks charge its members to borrow at its discount window.14 Since it's higher than the fed funds rate, banks only use this if they can't borrow funds from other banks.
Using the discount window also has a stigma attached. The financial community assumes that any bank that uses the discount window is in trouble. Only a desperate bank that's been rejected by others would use the discount window.15
How It Works
Central bank tools work by increasing or decreasing total liquidity. That’s the amount of capital available to invest or lend. It's also money and credit that consumers spend. It's technically more than the money supply, known as M1 and M2. The M1 symbol denotes currency and check deposits. M2 is money market funds, CDs, and savings accounts. Therefore, when people say that central bank tools affect the money supply, they are understating the impact.16
Many More Tools
The Federal Reserve created many new and innovative tools to combat the 2008 financial crisis. Now that the crisis is over, it's discontinued most of them. They are ready for the Fed the next time a crisis looms.17
The Bottom Line
Central banks often hold three major monetary tools for managing money supply. These are:
- Open market operations
- Reserve requirement
- Discount rate
These tools can either help expand or contract economic growth.
Monetary policies are aimed to control:
- Inflation
- Consumption
- Liquidity
- Growth
Aside from the three traditional monetary tools, the Federal Reserve possesses new, innovative ones, most of which were contrived to cope with the 2008 recession.
On this episode of Business Matters, guest Mark Bonfanti, employment law attorney, discusses many new issues created by the COVID crisis and the new FMLA requirements included in the Families First Coronavirus Response Act signed on March 18, 2020.
Check out this episode for how to deal with these items:
- Compliance with Wage & Hour requirements in remote work settings
- Modifications that should be made to the employee handbook to address different work settings, requirements, etc.
- Are there exceptions to the Families First Coronavirus Response Act for employers with less than 50 employees
- How to compensate employees with Coronavirus illness
- How to report employees that refuse re-hire offer
- Does the new FMLA allow for sick pay to employees who are home bound because of school closure results in employee being at home for child-care
The Families First Coronavirus Response Act bill can be located at this link https://www.congress.gov/bill/116th-congress/house-bill/6201/text
COVID-19 and the Family and Medical Leave Act Questions and Answers
Please see Families First Coronavirus Response Act: Questions and Answers for questions specific to the application of the Families First Coronavirus Response Act and paid leave.
If you or your employees are out with the flu or are caring for ill family members, check with the Department of Labor (DOL) for information on whether such leave is covered under the Family and Medical Leave Act (FMLA). Under the FMLA, covered employers must provide employees job-protected, unpaid leave for specified family and medical reasons, which may include the flu where complications arise. Employees on FMLA leave are entitled to the continuation of group health insurance coverage under the same terms as existed before they took FMLA leave.
——————«»——————
Which employees are eligible to take FMLA leave?
Employees are eligible to take FMLA leave if they work for a covered employer and:
- have worked for their employer for at least 12 months;
- have at least 1,250 hours of service over the previous 12 months; and
- work at a location where at least 50 employees are employed by the employer within 75 miles.
Special hours of service requirements apply to airline flight crew employees and to breaks in service to fulfill National Guard or Reserve military service obligations pursuant to the Uniformed Services Employment and Reemployment Rights Act (USERRA). (See the U.S. Department of Labor Wage and Hour Division or call 1-866-487-9243 for additional information on FMLA.)
Must an employer grant leave to an employee who is sick or who is caring for a family member that is sick?
An employee who is sick or whose family members are sick may be entitled to leave under the FMLA under certain circumstances. The FMLA entitles eligible employees of covered employers to take up to 12 weeks of unpaid, job-protected leave in a designated 12-month leave year for specified family and medical reasons. This may include the flu where complications arise that create a “serious health condition” as defined by the FMLA. Employees on FMLA leave are entitled to the continuation of group health insurance coverage under the same conditions as coverage would have been provided if the employee had been continuously employed during the leave period.
Workers who are ill with pandemic influenza or have a family member with influenza are urged to stay home to minimize the spread of the pandemic. Employers are encouraged to support these and other community mitigation strategies and should consider flexible leave policies for their employees.
Can an employee stay home under FMLA leave to avoid getting pandemic influenza?
The FMLA protects eligible employees who are incapacitated by a serious health condition, as may be the case with the flu where complications arise, or who are needed to care for covered family members who are incapacitated by a serious health condition. Leave taken by an employee for the purpose of avoiding exposure to the flu would not be protected under the FMLA. Employers should encourage employees who are ill with pandemic influenza or are exposed to ill family members to stay home and should consider flexible leave policies for their employees in these circumstances.
What legal responsibility do employers have to allow parents or care givers time off from work to care for the sick or children who have been dismissed from school?
Covered employers must abide by the FMLA as well as any applicable state FMLA laws. An employee who is sick, or whose family members are sick, may be entitled to leave under the FMLA. The FMLA entitles eligible employees of covered employers to take up to 12 weeks of unpaid, job-protected leave in a designated 12-month leave year for specified family and medical reasons which may include the flu where complications arise that create a “serious health condition” as defined by the FMLA.
There is currently no federal law covering non-government employees who take off from work to care for healthy children, and employers are not required by federal law to provide leave to employees caring for dependents who have been dismissed from school or child care. However, given the potential for significant illness under some pandemic influenza scenarios, employers should review their leave policies to consider providing increased flexibility to their employees and their families. Remember that federal law mandates that any flexible leave policies must be administered in a manner that does not discriminate against employees because of race, color, sex, national origin, religion, age (40 and over), disability, or veteran status.
Is an employer required by law to provide paid sick leave to employees who are out of work because they have pandemic influenza, have been exposed to a family member with influenza, or are caring for a family member with influenza?
Federal law generally does not require employers to provide paid leave to employees who are absent from work because they are sick with pandemic flu, have been exposed to someone with the flu or are caring for someone with the flu, although pursuant to Executive Order 13706, some federal contractors may be required to provide such leave to employees under certain circumstances, such as if the employee or a family member is sick with the flu or seeking care related to the flu. Certain state or local laws may have different requirements, which should be independently considered by employers when determining their obligation to provide paid sick leave.
If the leave qualifies as FMLA-protected leave, the statute allows the employee to elect or the employer to require the substitution of paid sick and paid vacation/personal leave in some circumstances. Employers should encourage employees that are ill with pandemic influenza to stay home and should consider flexible leave policies for their employees.
May employers send employees home if they show symptoms of pandemic influenza? Can the employees be required to take sick leave? Do they have to be paid? May employers prevent employees from coming to work?
It is important to prepare a plan of action specific to your workplace, given that a pandemic influenza outbreak could affect many employees. This plan or policy could permit you to send employees home, but the plan and the employment decisions must comply with the laws prohibiting discrimination in the workplace on the basis of race, sex, age (40 and over), color, religion, national origin, disability, or veteran status. It would also be prudent to notify employees (and if applicable, their bargaining unit representatives) about decisions made under this plan or policy at the earliest feasible time.
Your company policies on sick leave, and any applicable employment contracts or collective bargaining agreements would determine whether you should provide paid leave to employees who are not at work. If the leave qualifies as FMLA-protected leave, the statute allows the employee to elect or the employer to require the substitution of paid sick and paid vacation/personal leave in some circumstances. (See the U.S. Department of Labor Wage and Hour Division for additional information or call 1-866-487-9243 if you have any questions.)
Remember when making these decisions to exclude employees from the workplace, you cannot discriminate on the basis of race, sex, age (40 and over), color, religion, national origin, disability, union membership or veteran status. However, you may exclude an employee with a disability from the workplace if you:
- obtain objective evidence that the employee poses a direct threat (i.e. significant risk of substantial harm); and
- determine that there is no available reasonable accommodation (that would not pose an undue hardship) to eliminate the direct threat.
(See the U.S. Equal Employment Opportunity Commission’s Enforcement Guidance: Disability-Related Inquiries and Medical Examinations of Employees under the Americans with Disabilities Act for additional information.)
May an employer require an employee who is out sick with pandemic influenza to provide a doctor’s note, submit to a medical exam, or remain symptom-free for a specified amount of time before returning to work?
Yes. However, employers should consider that during a pandemic, healthcare resources may be overwhelmed and it may be difficult for employees to get appointments with doctors or other health care providers to verify they are well or no longer contagious.
During a pandemic health crisis, under the Americans with Disabilities Act1 (ADA), an employer would be allowed to require a doctor’s note, a medical examination, or a time period during which the employee has been symptom free, before it allows the employee to return to work. Specifically, an employer may require the above actions of an employee where it has a reasonable belief – based on objective evidence – that the employee’s present medical condition would
- impair his ability to perform essential job functions (i.e., fundamental job duties) with or without reasonable accommodation, or,
- pose a direct threat (i.e., significant risk of substantial harm that cannot be reduced or eliminated by reasonable accommodation) to safety in the workplace.
In situations in which an employee’s leave is covered by the FMLA, the employer may have a uniformly-applied policy or practice that requires all similarly-situated employees to obtain and present certification from the employee’s health care provider that the employee is able to resume work. Employers are required to notify employees in advance if the employer will require a fitness-for-duty certification to return to work. If state or local law or the terms of a collective bargaining agreement govern an employee’s return to work, those provisions shall be applied. Employers should be aware that fitness-for-duty certifications may be difficult to obtain during a pandemic.
May employers change their paid sick leave policy if a number of employees are out and they cannot afford to pay them all?
Federal equal employment opportunity laws do not prohibit employers from changing their paid sick leave policy if it is done in a manner that does not discriminate between employees because of race, sex, age (40 and over), color, religion, national origin, disability, or veteran status. Be sure also to consult state and local laws.
In addition, you should consider that if your workforce is represented by a labor union and the collective bargaining agreement covers sick leave policies, you may be limited in either the manner in which you change the policy or the manner of the changes themselves because the collective bargaining agreement would be controlling. In a workplace without a collective bargaining agreement, employees may have a contractual right to any accrued sick leave, but not future leave.
Your sick leave policy also has to follow the requirements of the FMLA (if your employees are covered by the Act), and it needs to be consistent with federal workplace anti-discrimination laws, such as the Americans with Disabilities Act (ADA). (See the U.S. Department of Labor, Wage and Hour Division or call 1-866-487-9243 for additional information on FMLA. See the U.S. Equal Employment Opportunity Commission or call 1-800-669-4000 if you have questions on ADA.)
If an employer temporarily closes his or her place of business because of an influenza pandemic and chooses to lay off some but not all employees, are there any federal laws that would govern this decision?
The federal laws prohibiting discrimination in the workplace on the basis of race, sex, age (40 and over), color, religion, national origin, or disability may apply. (See the U.S. Equal Employment Opportunity Commission (EEOC) or call 1-800-669-4000 if you have questions.) Other specific Federal laws that prohibit discrimination on these or additional bases may also govern if an employer is a Federal contractor or a recipient of Federal financial assistance.
Additionally, the Worker Adjustment and Retraining Notification (WARN) Act helps ensure advance notice in cases of qualified plant closings and mass layoffs. For more information about the WARN Act see https://www.dol.gov/agencies/eta/layoffs/warn.
You may also not discriminate against an employee because the employee has requested or used qualifying FMLA leave. (See the U.S. Department of Labor, Wage and Hour Division for additional information or call 1-866-487-9243 if you have questions.)
In addition, you may not discriminate against an employee because he or she is a past or present member of the United States uniformed service. (See the U.S. Department of Labor, Veterans’ Employment and Training Service for additional information or call 1-866-889-5627 if you have questions.)
Some employees may not be able to come to work because they have to take care of sick family members. May an employer lay them off?
It depends. If an employee is covered and eligible under the FMLA and is needed to care for a spouse, daughter, son, or parent who has a serious health condition, then the employee is entitled to up to 12 weeks of job-protected, unpaid leave during any 12-month period. Some states may have similar family leave laws. In those situations, covered employers must comply with the federal or state provision that provides the greater benefit to their employees. (See the U.S. Department of Labor, Wage and Hour Division for additional information or call 1-866-487-9243 if you have questions.)
In lieu of laying off employees in this situation, we would encourage you to consider other options such as telecommuting and to prepare a plan of action specific to your workplace.
What types of policy options do employers have for preventing abuse of leave?
Both the FMLA and the Americans with Disabilities Act affect the provision of leave.
Under the FMLA, employees seeking to use FMLA leave are required to provide 30-day advance notice of the need to take FMLA leave when the need is foreseeable and such notice is practicable. In addition, employers may require employees to provide:
- medical certification supporting the need for leave due to a serious health condition affecting the employee or a spouse, son, daughter or parent, including periodic re-certification;
- second or third medical opinions (at the employer's expense);
- periodic reports during FMLA leave regarding the employee's status and intent to return to work; and
- consistent with a uniformly-applied policy or practice for similarly-situated employees, a fitness for duty certification. (Employers should be aware that fitness-for-duty certifications may be difficult to obtain during a pandemic.) (See also: “May an employer require an employee who is out sick with pandemic influenza to provide a doctor’s note, submit to a medical exam, or remain symptom-free for a specified amount of time before returning to work?”)
The FMLA also allows the employee to elect or the employer to require the substitution of paid sick and paid vacation/personal leave in some circumstances. (See the U.S. Department of Labor Wage and Hour Division for additional information on the FMLA or call 1-866-487-9243 if you have questions.)
Under the Americans with Disabilities Act, qualified individuals with disabilities may be entitled to unscheduled leave, unpaid leave, or modifications to the employer sick leave policies as “reasonable accommodations.” These are modifications or adjustments to jobs, work environments, or workplace polices that enable qualified employees with disabilities to perform the essential functions (i.e., fundamental duties) of their jobs and have equal opportunities to receive the benefits available to employees without disabilities. (See the U.S. Equal Employment Opportunity Commission’s Enforcement Guidance: Reasonable Accommodation and Undue Hardship under the Americans with Disabilities Act for additional information.)
For further information about Coronavirus, please visit the HHS’s Centers for Disease Control and Prevention.
In this episode we provide an update on the Paycheck Protection Program loan application process. We discuss the details of the application, the banks process and the timeline for funding the loans. We also discuss the SBA Disaster Loan program, the $10,000 grants that are available through this program and the Bridge Loan Program offered through the Florida Office of Economic Opportunity.
Roxanne Sexton, an Account Manager with the Bean Team has been in the trenches from day one with these different loan programs. She has stayed up with the evolving rules and how to advise clients. She has lead the project for Bean Team to coordinate the effort to help as many businesses respond appropriately to the options that are available.
Paycheck Protection Program/CARES Act
- Processed and funded by banks
- Based on past payroll (salary, hourly, vacation, sick, PTO)
- 2.5 X average monthly payroll
- Excludes payroll taxes (mostly)
- Excludes 1099 subcontractors
- Includes employer paid health insurance
- Includes employer paid 401K
- Excludes payroll greater than $100K annual
Other information for PPP Application
- Ownership disclosed – greater than 20%
- Affiliates disclosed
- No Personal Guarantee
- No collateral or security pledged
- SBA Form + Bank specific information provided
- Bank reviews package
- Bank approves package
- Bank uploads to SBA
- SBA reviews and approves package
- SBA ‘Allocates Funds’ for the requested loan
- Bank prepares loan documents, sets closing and executes
- E-Closing and Funds the loan
https://home.treasury.gov/system/files/136/PPP%20Borrower%20Information%20Fact%20Sheet.pdf
SBA Disaster Loan – Economic Injury Disaster Loan (EIDL)
- Processed and funded by SBA
- Up to $2.0 million
- Amount and terms to be determined by the SBA
- Grant of $10,000 available when completing on-line application
- The $10,000 is supposed to be funded within 3 days of submitting application (not reality though)
https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/economic-injury-disaster-loan-emergency-advance
Florida Bridge Loans
- Processed by SBDC funded by Florida Department of Economic Opportunity
- Standard request is $50,000
- However, if $25,000 or less is requested, the approval process is supposed to be within days, otherwise the approval and funding will be slow
- PG required by owner
- Loan made to the business owner, not the owner
- Interest free for 1 year, then interest applies
- Loan supposed to be repaid with SBA funds or other permanent financing when received
https://covid19.floridajobs.org/
In this episode we talk with Steve Stewart, entrepreneur and founder of tallahasseereports.com, which economic data and business trends.
Steve Stewart received his Masters degree in Political Science from FSU, and went on to work with the Office of Public Counsel . While at the Office of Public Counsel, Steve participated in major electric rate cases and provided testimony on behalf of the consumers of Florida before the Florida Public Service Commission. In 1999, he started a real estate marketing company, and since 2006 he has been the owner of a commercial marketing and printing business.
COVID 19 has impacted businesses in all areas of the US and all industries. We talk about the dramatic impact of the shutdown on businesses in North Florida. Business was strong, sales tax collections were at a record level, employment levels high and outlook was optimistic BEFORE the COVID crisis hit in mid-March. This Black Swan event really has changed all of the great economic news and optimism in a quick and dramatic way.
Check out this episode for real life examples of living in the COVID crisis and the outlook on how the way of business might change in the future.
https://tallahasseereports.com/2020/04/06/the-impact-of-social-distancing-in-florida-should-show-up-this-week/
The Impact of Social Distancing in Florida Should Show Up This Week
By Steve Stewart on April 6, 20202 Comments
According to experts, the impact of the mitigation actions taken in Florida to address the spread of the coronavirus should began to show up in the tracking numbers this week.
Why now?
It has been approximately two weeks since Governor DeSantis issued Executive Orders aimed at blunting the spread of the coronavirus.
On March 20th an Executive Order was issued that shut down restaurants, bars and gyms through-out the state. In addition, another Executive Order put in place more stringent actions aimed at South Florida, including closing beaches in Palm Beach and Broward counties.
Medical experts indicate that it takes approximately two weeks for social distancing measures to have an impact. This means the benefits of social distancing should be evident in reporting during the first part of April in Florida.
In a recent interview, David Hutton, an associate professor of health management and policy at the University of Michigan School of Public Health and an expert in mathematical modeling of diseases and pandemic planning, explained the rationale.
“It takes almost a week or so before symptoms develop, and then it takes another few days for someone to go to the hospital, and then another few days for them to actually get tested and get their test results back,” said Hutton. “So there is going to be a natural lag or delay between when you implement successful interventions to reduce the spread of disease and when you see the actual number of reported cases peak or begin to drop.”
So what numbers should we be watching?
A decline in the rate of positive tests will be an indication of the impact of mitigation actions. These are the numbers being analyzed at the national level by the Coronavirus Task Force.
However, the timing of this impact on the reported numbers could be beyond two weeks, due to the lag in completing the testing process.
TR has begun tracking these rates for the 25 largest Florida counties. TR reported that Florida was experiencing a positive test rate of approximately 10.8% through April 4th.
Also, the number of new hospitalizations is another measure that should begin to decline after successful mitigation actions. From April 1-4, Florida reported an average of 150 new hospitalizations each day. The mitigation actions should cause these numbers to decline.
Join us for this episode with guest Michelle Rehwinkel Vasilinda. Michelle is a former member of the Florida House of Representatives, representing the 9th District, which includes most of Leon County, from 2008 to 2016. Her insight into State politics, current bills, and how all of this impacts citizens, employees and businesses is unique and interesting. In this session we chat about the ending of the 2020 Florida Legislative Session, E-Verify and the Florida budget. How will Florida's budget suffer in the COVID crisis and economic shutdown? What is the silver lining in all of this? Is it the right time to look for a new and better way to conduct business and service our clients? Check out this episode for a wide range of topics.
In this episode we discuss the newly signed Cares Act aimed at providing aid to businesses and individuals that have been impacted by the Coronavirus and the resulting economic shut-down. The application process for the Cares Act loans will take the form of a modified 7a SBA loan and will be processed through SBA approved lenders.
On this episode, we have bank representatives, employment attorney, FSU Economics professor and business leaders in the restaurant industry.
A recent post re: the summary of the Cares Act:
Senate Passes the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”)
26 March 2020 Coronavirus Resource Center Blog
Authors: Frank S. Murray Jr Jared B. Rifis Leah R. Imbrogno Jamie N. Class Matthew E. Sierawski Julia Di Vito Kaitlyn M. Foley
As the coronavirus outbreak continues to wreak havoc on markets and industries in the United States and around the world, businesses are now confronting significant and unique challenges. Successful navigation of these challenges will require thoughtful and comprehensive planning. Foley has created a multi-disciplinary and multi-jurisdictional team, which has prepared a wealth of topical client resources (see Foley’s Coronavirus Resource Center) and is prepared to help our clients meet the legal and business challenges that the coronavirus outbreak is creating for stakeholders across a range of industries, including manufacturing, technology, solar, hospitality and travel, healthcare, food, fashion and apparel, and sports and entertainment.
The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) – Summary of Bill Language and Key Takeaways
On March 25, 2020, the Senate unanimously passed (96-0) the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), commonly known as “Phase Three” of coronavirus economic relief. The CARES Act provides much needed stimulus to individuals, businesses, and hospitals in response to the economic distress caused by the coronavirus (COVID-19) pandemic.
The bill passed on March 25 is not yet law. Until the CARES Act is passed by the House of Representatives and signed into law by the President, it is subject to revisions. The bill will now go to the House, which is currently not in session. The House may reconvene to address the bill or pass the bill by unanimous consent agreement. The House is expected to pass the bill without changes on March 27, and it will then be presented to the President for his signature.
Additional information, updates, and analysis regarding the CARES Act will be posted on Foley’s Coronavirus Resource Center. Please check back frequently for updates. Foley is available to assist in interpretation of the CARES Act for your business and can help you find ways to claim and/or use available funding for your company.
The CARES Act
Top 10 Takeaways:
- Provides stimulus to individuals, businesses, and hospitals in response to the economic distress caused by the coronavirus (COVID-19) pandemic.
- Creates a $349 billion loan program for small businesses, including 501(c)(3) non-profits and physician practices. These loans can be forgiven through a process that incentivizes companies to retain employees.
- Allocates $500 billion for assistance to businesses, states, and municipalities, with no more than $25 billion designated for passenger air carriers, $4 billion for air cargo carriers, and $17 billion for businesses critical to maintaining national security. The remaining $454 billion may be used to support lending to eligible businesses, states, and municipalities.
- Allocates $130 billion in relief to the medical and hospital industries, including for medical supplies and drug and device shortages.
- Expands telehealth services in Medicare, including services unrelated to COVID-19 treatments.
- Provides $1,200 to Americans making $75,000 or less ($150,000 in the case of joint returns and $112,500 for head of household) and $500 for each child, to be paid “as rapidly as possible.”
- Expands eligibility for unemployment insurance and provides people with an additional $600 per week on top of the unemployment amount determined by each state.
- Expands the Defense Production Act, allowing for a period of two years when the government may correct any shortfall in resources without regard to the current expenditure limit of $50 million.
- Provides the Secretary of the Treasury with the authority to make loans or loan guarantees to states, municipalities, and eligible businesses and loosens a variety of regulations prior legislation imposed through the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Economic Stabilization Act of 2008, and others.
- Accompanied by supplemental appropriations to help the government respond to this pandemic.
Summary of the CARES Act:
- Division A - Keeping American Workers Paid and Employed, Healthcare System Enhancements, and Economic Stabilization
- Title I – Keeping American Workers Paid and Employed Act Foley Title I Contacts: Jamie Class, Erin Toomey, Jessica Glatzer Mason, and Frank Murray
- Paycheck Protection Program
- The Paycheck Protection Loan Program, at a price tag of $349 billion, covers the period February 15, 2020 through June 30, 2020 and greatly expands SBA loan eligibility. The loan program will allow businesses suffering due to the coronavirus outbreak to borrow money for a variety of qualified costs related to employee compensation and benefits, including (i) payroll costs, (ii) continuation of health care benefits, (iii) employee compensation (of those making less than $100K), (iv) mortgage interest obligations, (v) rent, (vi) utilities and (vii) interest on debt incurred before the covered period.
- The legislation greatly expands the number of businesses (including non-profits) that are eligible for SBA loans and raises the maximum amount for such a loan by 2.5 x the average total monthly payroll costs, or up to $10 million. The interest rate may not to exceed 4%.
- Companies that employ no more than 500 employees are (or a greater number based on the size standard applicable to the industry) may be eligible. Certain companies in the Accommodation and Food Services Industry (NAICS Code 72) may be eligible if they have no more than 500 employees per physical location. In most cases, the number of employees is counted together with all affiliates.
- Waives affiliation rules under 13 C.F.R. 121.103 for any business with less than 500 employees in the Accommodation and Food Services Industry, certain franchise businesses and small businesses that receive financing through the Small Business Investment Company Act. Affiliation rules otherwise apply to determine eligibility.
- Waives the credit available elsewhere, personal guaranty and collateral requirements.
- For eligibility purposes, requires lenders to determine whether a business was operational on February 15, 2020, and had employees for whom it paid salaries and payroll taxes, or a paid independent contractor. (This is likely to be interpreted to replace the determination of repayment ability which is not possible during the crisis.)
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All or a portion of the loan may be forgivable and debt service payments may be deferred for up to 1 year.
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Entrepreneurial Development
- Provides funding to educate small businesses and their employees regarding (i) Federal resources available during this time, (ii) Hazards of COVID-19 and (iii) best practices around teleworking to prevent the spread of COVID-19.
iii. State Trade Expansion Program
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Allows for federal grant funds appropriated to support the State Trade Expansion Program (STEP) in FY 2018 and FY 2019 to remain available for use through FY 2021.
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Waiver of Matching Funds Requirement under the Women’s Business Center Program
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Eliminates the non-federal match requirement for Women’s Business Centers for a period of three months.
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Loan Forgiveness
- Establishes that the borrower under the Paycheck Protection Program shall be eligible for loan forgiveness equal to the amount spent by the borrower during an 8-week period after the origination date on (i) rent, (ii) payroll costs for workers making less than $100K, (iii) interest on a mortgage, and (iv) utility payments. The amount forgiven may not exceed the principal of the loan.
- Incentivizes companies to retain employees by reducing the amount forgiven proportionally by any reduction in employees retained compared to the prior year.
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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.
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Minority Business Development Agency
- Empowers the Department of Commerce, through the Minority Business Development Agency, to provide grants to minority business centers and minority chambers of commerce to provide education, training and advising related to accessing federal resources.
vii. United States Treasury Program Management Authority
- The Department of the Treasury, consulting with the Small Business Administration and the Chairman of the Farm Credit Administration shall establish criteria to allow other lenders to participate in the Paycheck Protection Program, so long as such participation does not threaten the safety and soundness of the lender, as determined in consultation with the relevant federal banking agencies.
viii. Emergency Economic Injury Disaster Loans (“EIDLs”)
- For the period between January 31, 2020 and December 31, 2020 (the “covered period”) EIDL eligibility is greatly expanded to include any business with not more than 500 employees operating under a sole proprietorship or as an independent contractor, and any cooperative, ESOP and tribal small business concern with not more than 500 employees. The number of employees is determined together with affiliates.
- Furthermore, EIDLs may be approved solely on the bases of an applicant’s credit score or by use of alternative methods to gauge the applicant’s ability to repay. Additionally, applicants may request an advance of up to $10,000 within three days after the Administrator receives the application, subject to verification that the entity is eligible under this program. The advance may be used for any allowable purposes under §7(b)(2) of the Small Business Act and is not subject to repayment, even if the loan request is ultimately denied.
- Importantly, the CARES Act waives: (1) the requirement of personal guarantees for loans up to $200,000, (2) the requirement that the applicant must be in business for a year (but must be in operation on January 31, 2020), and (3) the credit elsewhere test.
- Establishes that an emergency involving Federal primary responsibility determined to exist by the President under Section 501(b) of the Stafford Disaster Relief and Emergency Assistance Act qualifies as a new trigger for EIDLs.
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Importantly, the CARES Act waives: (1) the requirement of personal guarantees for loans up to $200,000, (2) the requirement that the applicant must be in business for a year (but must be in operation on January 31, 2020), and (3) the credit elsewhere test.
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Subsidy for Certain Loan Payments
- For loans under §7(a) of the Small Business Act, Title V of the Small Business Investment Act, and for loans made by an intermediary using §7(m) loans or grants, the Administrator shall pay the principal, interest, and fees owed for loans in regular servicing status for any such loans, whether on deferment or not, that were made before the enactment of the Act for the following 6-month period, and for any such loans that were made between the date of enactment of the Act and six months from such date. This does not apply to Payroll Protection loans or EIDL loans which have separate subsidy and repayment requirements.
- The payments shall be made not later than 30 days from when the first payment is due and shall be applied such that the borrower is relieved of any obligation to pay that amount. The Administrator shall coordinate with relevant banking agencies to request that lenders not be required to increase reserves because of these payments.
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The Administrator will waive limits on the maximum loan maturities for loans given deferral and extended maturity during the year following enactment. The Administrator will extend lender site visit requirement timelines as necessary because of COVID-19, to within 60 days of a non-default adverse event, and 90 days of a default. $17 billion is appropriated for the foregoing.
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Bankruptcy
- Section 1182(1) of Title 11 is amended to define “debtor” as persons engaged in commercial or business activities and their affiliates (excluding persons who primarily own single asset real estate) that have aggregate, noncontingent, liquidated secured and unsecured debts (at the date of petition filing or the order for relief) of $7,500,000 or less (excluding debts owed to affiliates or insiders), half or more of which arose from those activities.
- Exempt from this new definition are any members of a group of affiliated debtors that has aggregate, noncontingent, liquidated secured and unsecured debts over $7,500,000 (excluding debt owed to affiliates or insiders); corporations subject to 1934 Act reporting requirements; and affiliates of an issuer under the 1934 Act.
- National Emergency Act payments for COVID-19 by the President are exempted from “current monthly income” and “disposable income” when determining the power of courts to approve debtor plans rejected by trustees or claim holders.
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Debtors that have experienced material financial hardship due to COVID-19 can modify a plan confirmed prior to this Act’s enactment date if approved after notice and hearing, but only if that plan doesn’t provide payments more than seven years after the first payment was due under the original plan, and follows requirements of 1322(a)-(c) and 1325(a). This modification terminates one year after the enactment of this Act.
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Title II – Assistance for American Workers, Families, and Businesses Foley Title II Contacts: Julie Lutfi, Ashley May, and Dick Riley
- Subtitle A: Unemployment Insurance Provisions
- Eligibility
- The law expands the scope of individuals who are eligible for unemployment benefits, including those who are furloughed or out of work as a direct result of COVID-19, self-employed or gig workers, and those who have exhausted existing state and federal unemployment benefit provisions.
- The only individuals expressly excluded from coverage are those who have the ability to telework with pay and those who are receiving paid sick leave or other paid benefits (even if they otherwise satisfy the criteria for unemployment under the new law).
- Administration of Benefit
- The benefits are administered by each state and upon the state’s written agreement with the Secretary of Labor to provide the specific benefits. States that enter into such an agreement with the Secretary of Labor will be reimbursed in whole or in part for the cost of the benefits plus administrative expenses
- Types of Benefits Provide
- The law provides an increase of $600 per week in the amounts customarily available for unemployment under state law. This increase applies for unemployment payments made from the date of the law’s enactment through July 31, 2020 (approximately four months).
- States can agree to provide pandemic emergency unemployment compensation to individuals who have either exhausted all of the benefits available to them under existing state and federal law or who are not otherwise eligible for benefits under existing state and federal law. Individuals must be able and available to work and actively seeking work, unless they are unable to do so as a result of COVID-19 illness, quarantine, or movement restriction.
- States can agree to waive the waiting period for receipt of benefits so that individuals do not experience gaps in income.
- The federal government will temporarily fund short-time compensation under existing state plans. States that do not yet have short-time compensation plans in place may agree to implement a plan, provided that employers who enter into short-time compensation plans must be required to pay to the state half of the short-time compensation paid under the plan
- Time Periods for Expanded Benefits
- The law provides unemployment benefit assistance to covered individuals who are not otherwise entitled to benefits under existing state or federal law for weeks of unemployment, partial unemployment, or inability to work caused by COVID-19 during the period January 27, 2020 through December 31, 2020. This includes any waiting periods for benefits under applicable state law.
- The total benefit may not extend beyond 39 weeks (including any unemployment benefits or extended benefits received under existing state or federal law), unless, after the law is enacted, the duration of extended benefits is extended, in which case the total benefit may extend beyond 39 weeks by that same additional period of extended benefits.
- The $600 weekly benefit increase will be applicable to weekly payments made through the end of July 2020.
- Protections Against Fraud and Overpayment
- Any fraudulent intent or misrepresentations to obtain payments to which an individual is not entitled will result in ineligibility for any other unemployment compensation benefits under the new law as well as criminal prosecution. Overpayments may be clawed back by the state agencies.
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Social Security Treatment
- The additional unemployment compensation provided is not considered “income” for purposes of Medicaid and CHIP.
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Subtitle B: Rebates and Other Individual Provisions
- Tax Credits
- Beginning in 2020, "eligible individual" taxpayers can benefit from a tax credit equal to the sum of: (i) $1,200 for single filers ($2,400 for those filing a joint return) plus (ii) an amount equal to th eproduct of (a) $500 multiplied by (b) the number of qualifying children. However, the aforementioned tax credits will be “phased-out” by 5% (but not below 0) when such eligible taxpayer’s adjusted gross income exceeds: (i) $150,000 for joint-filers, (ii) $112,500 for heads of household, and (iii) $75,000 for all other types of filers.
- This means, for example, the tax credit will phase out entirely at $198,000 for joint-filers with no children.
- “Coronavirus-Related Distribution”
- A “coronavirus-related distribution,” as defined under the CARES Act, is generally defined as any distribution from an eligible retirement plan made: (i) on or after January 1, 2020 and before December 31, 2020, (ii) to an individual (a) who is diagnosed with COVID-19, (b) whose spouse or dependent is diagnosed with COVID-19, or (c) who experiences adverse financial consequences as a result of being quarantined, furloughed, laid off, had hours reduced, or other factors as determined by the Secretary of the Treasury during the COVID-19 pandemic.
- Tax Treatment of Coronavirus-Related Distributions
- Individuals who elect to receive a “coronavirus-related distribution” will not be subject to the traditional 10% tax penalty imposed under the Internal Revenue Code of 1986, as amended (the “Code”) for early withdrawals from eligible retirement accounts,unless the aggregate amount of such distributions from all plans maintained by the employer (and any member of any “controlled group” which includes the employer) to such individual exceeds $100,000.
- Coronavirus-related distributions made from both traditional eligible employer sponsored retirement plans and individual retirement accounts (“IRAs”) may be excluded from gross income.
- Repayments of Coronavirus-Related Distributions
- Any individual who receives a coronavirus-related distribution may generally, at any time during the three (3) year period beginning on the day after the date such coronavirus-related distribution was received, make one (1) or more contributions in an aggregate amount not to exceed the amount of such distribution to an eligible retirement plan of which such individual is a beneficiary . The aforementioned repayments of coronavirus-related distributions for eligible retirement plans, will, to the extent of the amount of the contribution, be treated as having received the coronavirus-related distribution in an eligible rollover distribution,” and as having transferred the amount to the eligible retirement plan in a direct trustee to trustee transfer within sixty (60) days of distribution.
- Effects on the Limits on Loans from Qualified Employer Plans
- The limitation on loans from any qualified employer plan made to qualified individuals will be increased from $50,000 to $100,000, and should the due date of any such loan occur between the date of enactment of the CARES Act and December 31, 2020, it will be delayed for one (1) year.
- Effects on Minimum Distribution Threshold
- The CARES Act temporarily waives the minimum distribution requirements for all “eligible deferred compensation plans.” This includes: (i) certain contribution plans (e.g. an employer purchased annuity contract), (ii) deferred compensation plans that are maintained by an eligible employer, or (iii) IRAs. This applies for all distributions made on or after January 1, 2020.
- However, if this section applies to any pension plan or contract amendments, such pension plan or contract amendments will not fail to be treated as being operated in accordance with the terms of the plan during such period, solely because the plan operates in accordance with the CARES Act, so long as the amendment or contract in question has been in effect from its effective date until December 31, 2020.
- Any plan or contract amendments to which Section 2203 of the CARES Act (the section on temporary waiver of required minimum distribution rules) applies will not fail to meet the requirements of either the Internal Revenue Code or the Employee Retirement Income Security Act as a result of making such an amendment. However, this provision only applies to those amendments which are in effect during the period beginning on the effective date of the amendment until December 31, 2020.
- Tax Treatment of Charitable Donation
- The CARES Act allows taxpayers to take an above-the-line tax deduction for charitable contributions of up to $300 for the tax year beginning in 2020.
- Additionally, except for certain exclusions specified below, the percentage and excess carryover restrictions on charitable and other “qualified contributions” (e.g. a contribution to a corporation, trust, a state, or an organization of war veterans, etc.) are disregarded.
- Exceptions to the CARES Act General Disregard of the Percentage and Excess Carryover Restrictions on Qualified Contributions
- The CARES Act treats individuals and corporations differently regarding the aforementioned exceptions, and such different treatments are described below.
- Qualified contributions for individuals will be allowed as deductions to the extent that the combined contributions do not exceed (i) the excess of the taxpayer’s adjusted gross income over (ii) the amount of the charitable contributions made by the individual under certain other provisions of the CARES Act (e.g., donations to a church, educational organization, private foundation, etc.). If such contributions exceed the foregoing limitation, they will be added to the qualified contribution excess, which is eligible to be treated as charitable deductions for up to the next five (5) successive tax years.
- Any qualified contributions made by corporations will be allowed as deductions only if these contributions do not exceed 25% of the taxable income of the corporation over the amount of all other charitable contributions allowed under the CARES Act. To the extent a corporation exceeds this limit, it will carry over the excess which will be eligible to be applied as charitable contribution deductions for the subsequent five tax years. This is provided that the excess qualified contribution amounts in question meet certain other restrictions, specifically, they must not exceed the lesser of: (i) 10% of the corporation’s taxable income or the total charitable deductions taken by the corporation during the taxable year over the sum of the contributions made in such year plus the aggregate of the excess contributions which were made in taxable years before the contribution year and which are deductible under this subparagraph for such succeeding taxable year; or (ii) in the case of the first succeeding taxable year, the amount of such excess contribution, and in the case of the second, third, fourth, or fifth succeeding taxable year, the portion of such excess contribution not deductible under this subparagraph for any taxable year intervening between the contribution year and such succeeding taxable year.
iii. Subtitle C: Business Provisions
- Employee Retention Credit for Employer Subject to Closure Due to COVID-19
- Eligible employers will receive a credit against applicable employment taxes for each calendar quarter in an amount equal to 50% of the qualified wages with respect to each employee. The amount of qualified wages taken into account for each eligible employee, however, will not exceed $10,000 per calendar quarter and the credit will not exceed the applicable employment taxes owed for such calendar quarter. The aforementioned credit is not applicable if the employer is alto taking advantage of the small business interruption loan.
- An eligible employer is defined as any employer: (i) which was carrying on a trade or business during calendar year 2020, and (ii) with respect to any calendar quarter for which, (a) the operation of their trade or business was fully or partially suspended due to governmental order as a result of COVID-19, or (b) the calendar quarter is within the period beginning with (1) the calendar quarter after December 31, 2019 for which gross receipts for the calendar quarter are less than 50% of the gross receipts for the same calendar quarter of the prior year and the ending with (2) the calendar quarter following the first calendar quarter beginning after the calendar quarter described in (1) for which gross receipts of the employer are greater than 80% gross receipts for the same calendar quarter in the prior year.
- Delay of Payment of Employer Payroll Taxes
- The CARES Act will allow for most employers to defer paying their share of applicable employment taxes from the time the CARES Act is signed into law through December 31, 2020. Half of this deferred amount would be due on December 31, 2021 and the other half by December 31, 2022.
- Modifications for Net Operating Losses (“NOL”)
- There will generally be a temporary repeal of taxable income limitation including (i) in the case of a taxable year beginning before January 1, 2021, the aggregate of the net operating loss (“NOL”) carryovers to such year, plus the NOL carrybacks to such year, and (ii) in the case of a taxable year beginning after December 31, 2020, the sum of (a) the aggregate amount of NOLs arising in taxable years beginning before January 1, 2018, carried to such taxable year, plus (b) the lesser of (1) the aggregate amount of NOLs beginning after December 31, 2017, carried to such taxable year, or (2) 80% of the excess of certain taxable income.
- In the case of any NOL arising in a taxable year beginning after December 31, 2017, and before January 1, 2021, whereby (i) such NOL will be a net operating loss carryback to each of the five (5) taxable years preceding the taxable year of such loss and (ii) certain rules applicable to farming losses and insurance companies shall not apply. There are additional rules that apply specifically to “real estate investment trusts” and life insurance companies.
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Modification of Limitation on Losses for Taxpayers Other Than Corporations
- For any taxpayer other than a corporation:
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For a taxable year beginning after December 31, 2017 and before January 1, 2026, subsection (j) (relating to a limitation on excess farm losses of certain taxpayers) would not apply; and
ii. For any taxable year beginning after December 31, 2020 and before January 1, 2026, any excess business loss of the taxpayer for the taxable year will not be allowed. * In regard to treatment of capital gains and losses for purposes of calculating “excess business losses”:
- Deductions for losses from sales or exchanges of capital assets will not be taken into account.
- The amount of gains from sales or exchanges of capital assets taken into account will not exceed the lesser of (1) the capital gain net income determined by taking into account only gains and losses attributable to a trade or business, or (2) the capital gain net income.
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The amendments made in the aforementioned section shall apply to taxable years beginning after December 31, 2017.
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Modification of Credit for Prior Year Minimum Tax Liability of Corporations
- The corporate alternative minimum tax (AMT) was repealed as part of the Tax Cuts and Jobs Act, but corporate AMT credits were made available as refundable credits over several years, ending in 2021.
- The CARE Act accelerates the ability of companies to recover those AMT credits, permitting companies to claim a refund now and obtain additional cash flow during the COVID-19 emergency.
- Modification of Limitation on Business Interest
- The CARES Act temporarily increases the amount of interest expense businesses are allowed to deduct on their tax returns, by increasing the 30-percent limitation (as imposed under the Tax Cuts and Jobs Act) to 50 percent of taxable income (with adjustments) for 2019 and 2020. As businesses look to weather the storm of the current crisis, this provision will allow them to increase liquidity with a reduced cost of capital, so that they are able to continue operations and keep employees on payroll.
- Qualified Improvement Property
- The CARES Act enables businesses, especially in the hospitality industry, to write off immediately costs associated with improving facilities instead of having to depreciate those improvements over the 39-year life of the building. The provision, which corrects an error in the Tax Cuts and Jobs Act, not only increases companies’ access to cash flow by allowing them to amend a prior year return, but also incentivizes them to continue to invest in improvements as the country recovers from the COVID-19 emergency.
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Temporary Exception from Excise Tax for Alcohol Used to Produce Hand Sanitizer
- For distilled spirits removed after December 31, 2019 and before January 1, 2021, such distilled spirits will be free of tax for use in or contained in hand sanitizer produced and distributed in a manner consistent with any guidance issued by the FDA related to the outbreak of COVID-19.
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Title III – Supporting America’s Health Care System in the Fight Against the Coronavirus Foley Title III Contacts: Rachel O’Neil, Erin Horton, Anil Shankar, and Paul Joseph
- Subtitle A, Part I: Addressing Supply Shortages
- Provides for the National Academies to examine and report on the security of the U.S. medical product supply chain in order to assess U.S. dependence on critical drugs and devices sourced outside of the U.S., and to develop recommendations to improve resiliency of the U.S. supply chain for critical drug and devices.
- Requires the Strategic National Stockpile to include certain types of medical supplies, including personal protective equipment (PPEs), and identifies respiratory protective devices as covered countermeasures for use during a public health emergency.
- Prioritizes the review of drug applications to mitigate emergency drug shortages.
- Creates additional reporting requirements for drug manufacturers to report a discontinuation and disruption of the sourcing of active pharmaceutical ingredients.
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Requires manufacturers of certain drugs and medical devices critical to public health during a public emergency to develop, maintain, and implement risk management plans related to shortages, creating an annual notification requirement of the same. Such manufacturers are also subject to shortage-related inspections by the Secretary of Health and Human Services (HHS).
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Subtitle A, Part II: Access to Health Care for COVID-19 Patients
- Permits group health plans and insurers to cover and reimburse providers of diagnostic testing relating to COVID-19 at pre-emergency-period negotiated rates, and sets reimbursement rates in instances without previously negotiated rates equal to the cash price for services listed on a publicly-available website or the plan or insurer can negotiate with a provider for a rate lower than such cash price. All providers of a diagnostic test for COVID-19 are required to publicize cash price for such tests. Failure to comply with these requirements could result in HHS assessing a civil monetary penalty of up to $300 per day.
- Requires health plans and issuers to provide for rapid coverage of “qualifying coronavirus preventative services” – an item, service, or immunization intended to prevent or mitigate coronavirus—and vaccines for coronavirus.
- Appropriates $1.3 billion for FY 2020 for supplemental awards to health care centers for the prevention, diagnosis, and treatment of COVID-19.
- Amends Section 330I of the Public Health Service Act, relating to Telehealth Network and Telehealth Resource Centers Grant Programs, and Section 330A of the Public Health Service Act, relating to the Rural Health Care Services Outreach, Rural Health Network Development, and Small Healthcare Provider Quality Improvement Grant Programs—an individual or entity affected by these grant programs should seek out an attorney to examine the effect of such amendments.
- Limits potential state and federal liability for volunteer health care professionals—who provide services without compensation or other thing of value—for harm caused to patients relating to the diagnosis, prevention, or treatment of COVID-19. This provision expressly preempts more restrictive state or local law.
- Amends certain federal regulations governing the confidentiality and disclosure of substance use disorder patient records (Part 2), including allowing certain re-disclosures to covered entities, business associates, or other programs subject to HIPAA after obtaining the patient’s prior written consent.
- Permits a state agency or area agency on aging to transfer, without prior approval, not more than 100% of the funds received by the agency to meet the needs of the state or area served, and provides that the same meaning shall be given to an individual unable to obtain nutrition due to social distancing as one who is homebound due to illness.
- Provides that within 180 days of the passage of the Act, the Secretary of HHS shall issue guidance on the sharing of patients’ protected health information (PHI) related to COVID-19, including guidance on compliance with HIPAA regulations and applicable policies.
- Provides that the Secretary of HHS shall carry out a national awareness campaign relating to the importance and safety of blood donation, and the need of for donations for the blood supply during a public health emergency.
iii. Subtitle A, Part III: Innovation
- Provides for using competitive procedures to enter into transactions to carry out public-health emergency health related projects and prohibits canceling those contracts solely because the emergency ends.
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Includes new provisions to expedite the development and approval of drugs to prevent or treat diseases in animals that are could have significant adverse consequences for humans.
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Subtitle A, Part IV: Health Care Workforce
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Approves appropriations for a variety of health professions-related programs, with particular focus on programs serving medically underserved populations (rural and geriatric).
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Subtitle B: Education Provisions
- Waives requirement for certain higher education institutions to match federal funding and allows certain institutions to transfer unexpended allotment.
- Permits certain higher education institutions to use their allocations of Supplemental Educational Opportunity Grants for emergency financial aid for students.
- Permits certain higher education loan borrowers flexibility in repaying loans or returning grants during a qualified emergency.
- Permits certain students to complete distance education and certain students of foreign institutions to take classes in the United States.
- Allows the Secretary of Education to issue waivers upon request relating to assessments, accountability, and related reporting requirements, and requirements for state and local educational agencies and Indian Tribes to receive funding.
- Allows the Secretary of Education to grant a deferment to an institution that received a loan under Part D of Title III of the Higher Education Act.
- Payments on student loans held by the Department of Education are suspended for 6 months, and the Secretary of Education shall suspend all involuntary collection activities during the period of payment suspension.
- The Corporation for National and Community Service can allow individuals to accrue service hours and may permit certain grants funds.
- Not more than 20% of the total amount allocated to a local area under 29 U.S.C. 3151 et seq. may be used for administrative costs.
- For the program year 2019, not more than 20% of the total amount allocated to a local area under 29 U.S.C. 3151 et seq., may be used for administrative costs of carrying out certain local workforce investment activities, if the portion of the total amount that exceeds 10% of the total amount is used to respond to qualifying emergency. For the program year 2019, certain unobligated funds reserved by a governor for statewide activities under the Workforce Innovation Opportunity Act may be used for statewide rapid response activities, or in certain circumstances, released to local boards impacted by the coronavirus.
- Gives the Secretary of Education authority to waive certain eligibility requirements, wait periods, and allotment requirements under the Higher Education Act for a period of time.
- Authorizes the Secretary of Education to modify the required and allowable uses of funds for grants and to modify any federal share or other financial matching requirement for a grant awarded under certain provisions of the Higher Education Act to an institution of higher education or other grant recipient (not including an individual recipient of Federal student financial assistance) as a result of a qualifying emergency.
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Allows the Secretary of Education to modify the categories of extenuating circumstances under which a grant recipient may be excused from fulfilling a portion of a service obligation under title IV of the Higher Education Act and must consider teaching service that is part-time or temporarily interrupted due to the emergency to be full-time service. Requires the Secretary of Education to waive certain years of teaching service requirements under the Higher Education Act in certain circumstances.
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Subtitle C: Labor Provisions
- Paid Public Health Emergency Leave Minimums
- Employers may, but are not required to, pay any more than $200 per day and $10,000 in the aggregate for each employee for public health emergency leave under section 110(b)(2)(B) of the Family & Medical Leave Act of 1993 as amended by the Emergency Family and Medical Leave Expansion Act.
- Rehire Eligibility for Paid Public Health Emergency Leave Employers
- For purposes of public health emergency leave under the Emergency Family and Medical Leave Expansion Act, an eligible employee is an employee who has been employed for at least 30 calendar days by an employer with respect to whom leave is requested. The employee must be employed for at least 30 calendar days, which includes an employee who was laid off by that employer on or after March 1, 2020, had worked for employer for not less than 30 of the last 60 calendar days prior to the employees layoff, and was rehired by the employer.
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Emergency Paid Sick Leave Minimums
- Employers may, but are not required to, pay any more than:
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$511 per day or $5,110 in the aggregate for each employee when taking emergency paid sick leave if the employee is subject to a federal, state or local quarantine or isolation order related to COVID-19, the employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19, or the employee is experiencing symptoms of COVID-19 and seeking medical diagnosis; or
- $200 per day or $2,000 in the aggregate for each employee when taking emergency paid sick leave if the employee is caring for an individual who is subject to a federal, state or local quarantine order, or is caring for an individual who has been advised to self-quarantine due to concerns related to COVID-19, the employee is caring for the employee's son or daughter, if the child’s school or childcare facility has been closed or the child’s care provider is unavailable due to COVID-19 precautions, or the employee is experiencing any other substantially similar condition specified by HHS in consultation with the Department of the Treasury and the Department of Labor.
- Advance Refunding of Payroll Credits for Required Paid Sick Leave and Required Paid Family Leave
- Employers can apply a credit in the amount calculated under subsection (a) of section 7001 or 7003 of the Family First Coronavirus Response Act, subject to the limitations placed by subsection (b) of section 7001 and 7003, both calculated through the end of the most recent payroll period in the quarter. In anticipation of a credit, the credit may be advanced according to forms and instructions to be provided by the Secretary of Labor. The Act ensures employers that the Secretary of Treasury shall waive any penalty under section 6656 of the Internal Revenue Code of 1986 for failure to make a deposit of the tax imposed under section 3111 (a) or 3221(a) of such Code if failure was due to anticipation of credit allowed.
vii. Subtitle D: Finance Committee
- An additional safe harbor provision is added to section 223(c)(2) of the Internal Revenue Code, providing that a plan shall not fail to be treated as a high deductible health plan (HDHP) by reason of failing to have a deductible for telehealth and other remote care services. Section 223(c)(1)(B) of the Internal Revenue Code is adjusted to include “telehealth and other remote care.” This addition allows an individual to have an insurance plan (for plan years beginning on or before December 31, 2021) that includes telehealth and other remote care without disqualifying the individual from owning an HDHP.
- Inclusion of Certain Over-the-Counter Medical Products as Qualified Medical Expenses
- Menstrual care products are now included under the term “qualified medical expenses.”
- Increasing Medicare Telehealth Flexibilities During Emergency Period
- The amendment removes some limiting qualifications to section 1320b-5(b)(8), which allows for the Secretary of HHS to temporarily waive or modify the application of portions of the Social Security Act in the case of a telehealth service furnished in any emergency area during an emergency period. The provision that sets out the defined term “qualified provider,” which limited 1320b-5(b)(8), is removed in its entirety.
- Enhancing Medicare Telehealth Services for Federally Qualified Health Centers and Rural Health Clinics During Emergency Period
- A new provision is added under Section 1834(m) of the Social Security Act (42 USC 1395m(m)), enhancing payment for telehealth services furnished via a telecommunications system by a federally qualified health center (FQHC) or rural health clinic (RHC) during an “emergency period” notwithstanding that the FQHC or the RHC providing the telehealth service is not at the same location as the beneficiary. Payment methods for FQHCs or RHCs that serve as distant sites shall be based on payment rates similar to the national average payment rates for comparable telehealth services under the physician fee schedule under section 1848.
- Temporary Waiver of Requirement for Face-to-Face Visits Between Home Dialysis Patients and Physicians
- Amended section 1395rr(b)(3)(B) to allow the Secretary of HHS to waive the requirement that individuals with end stage renal disease receiving home dialysis must receive certain periodic face-to-face (non-telehealth) clinical assessments in order to be eligible to receive end stage disease-related clinical assessments via telehealth.
- Use of Telehealth to Conduct Face-to-Face Encounter Prior to Recertification of Eligibility for Hospice Care During Emergency Period
- Section 1395f(a)(7)(D)(i) is amended to allow a hospice physician or hospice nurse practitioner during an “emergency period” to conduct a face-to-face encounter via telehealth to determine recertification for continued eligibility for hospice care.
- Encouraging Use of Telecommunications Systems for Home Health Services Furnished During Emergency Period
- During an emergency period, the Secretary of HHS shall consider ways to encourage the use of telecommunications systems.
- Improving Care Planning for Medicare Home Health Services
- Certain Medicare sections are expanded from being limited to the services of a physician to include services of nurse practitioners, clinical nurse specialists, and physician assistants that provide home health services.
- Adjustment of Sequestration
- A temporary suspension of Medicare sequestration put into effect during the period of May 1, 2020 through December 31, 2020. The Medicare programs under title XVIII of the Social Security Act shall be exempt from reduction under any sequestration order during the period.
- Medicare Hospital Inpatient Prospective Payment System Add-On Payment for COVID-19 Patients During Emergency Period
- The Secretary of HHS will increase the weighting factor for coronavirus-diagnosed patients discharged during the emergency period. The weighting factor is used by the Secretary of HHS to reflect the relative hospital resources used with respect to discharges for a particular group compared to discharges within other groups.
- Increasing Access to Post-Acute Care During Emergency Period
- During the emergency period, the Secretary of HHS will waive the requirement that patients of inpatient rehabilitation facilities receive at least 15 hours of therapy per week. For long-term care hospitals furnishing services during the emergency period, the Secretary of HHS will further waive discharge percent requirements and the general application of site neutral payment rates.
- Revising Payment Rates for Durable Medical Equipment Under the Medicare Program Through Duration of Emergency Period
- The Secretary of HHS shall apply the transition rule, described in 42 C.F.R. § 414.210(g)(9)(iii), to items and services furnished in rural areas and noncontiguous areas as planned through December 31, 2020, and through the duration of the emergency period. For areas other than rural and noncontiguous areas, the Secretary of HHS shall apply the transition rule described in 42 C.F.R. § 414.210(g)(9)(iv) through the remainder of the emergency period.
- Coverage of the COVID-19 Vaccine Under Part B of the Medicare Program Without Any Cost-Sharing
- The term “medical and other health services” is expanded to include “COVID-19 vaccine and administration.” The deductible described in section 1395l(b) shall not apply with respect to a COVID-19 vaccine and its administration.
- Requiring Medicare Prescription Drug Plans and MA-PD Plans to Allow for Fills and Refills of Covered Part D Drugs for up to a 3-Month Supply
- During the emergency period, a prescription drug plan or MA-PD plan shall permit a part D eligible individual reenrolled in such plan to obtain a single fill or refill the total day supply prescribed for such individual for a covered part D drug.
- Providing Home and Community-Based Services in Acute Care Hospitals
- The prohibition that nothing in section 1395a allows the Secretary of HHS authorization to limit the amount of payment that may be made under a plan for home-and-community care is expanded to include home and community-based services, self-directed personal assistance services, or home and community-based attendant services. The provision is also expanded to clarify that the section shall not be construed to prohibit receipt of any care or services specified in paragraph (1) in an acute care hospital, provided certain requirements are met.
- Clarification Regrading Uninsured Individuals
- The Families First Coronavirus Response Act, enacted last week, added subsection (ss) to section 1396a, which defined “uninsured individual” as those not described in section 1396a(a)(10)(A)(i) and not enrolled in certain health care programs. The CARES Act amends this definition to exclude subsection VIII if the individual is a resident of a state that does not furnish medical assistance as described.
- Clarification Regarding Coverage of COVID-19 Testing Products
- The Families First Coronavirus Response Act, enacted last week, added COVID-19 testing to section 1396d, which provides medical assistance payments under certain conditions. The CARES Act amends this section by removing the requirement that the in-vitro diagnostic products administered are approved, cleared, or authorized under sections 510(k), 513, 514, or 564 of the Federal Food, Drug, and Cosmetic Act.
- Amendment Relating to Reporting Requirements with Respect to Clinical Diagnostic Laboratory Tests
- The CARES Act extends the dates by one year for the reporting periods in section 1395m-1(a)(1)(B). The applicable prohibition that payment amounts determined under section 1395m-1 shall not result in a reduction in payments, as defined by the subsection, for a clinical diagnostic laboratory test is expanded to 2017 through 2024. The applicable percentages used to determine the limits on reductions in payment defined in 1395m-1(b)(3)(A) are adjusted to include a new clause for 2021, which makes the new applicable percentage zero (0) for 2021.
- Expansion of Medicare Hospital Accelerated Payment Program During the COVID-19 Public Health Emergency
- Mandates that the Secretary of HHS expand the accelerated payment program to hospitals experiencing significant cash flow problems during the “emergency period.”
- Exception for Certain States from Enhanced FMAP Requirements
- Provides that states may receive the temporary increase of Medicaid Federal Medical Assistance Percentage (FMAP) (authorized under the Families First Act enacted last week) notwithstanding the requirement to not impose premiums on beneficiaries, for a period of 30 days.
viii. Subtitle E, Part I: Medicare Provisions
- Extension of Funding for Quality Measure Endorsement, Input, and Selection
- The Social Security Act is amended to increase the amount allotted for this fiscal year ending on October 1, 2020 from $4,830,000 to $20,000,000 and for the period beginning on October 1, 2020 and ending on November 30, 2020, the amount equal to the pro rata portion of $20,000,000.
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Extension of Funding Outreach and Assistance for Low-Income Programs
- The amount allocated for state health insurance programs shall be $13,000,000 for this fiscal year. For the period beginning on October 1, 2020 and ending on November 30, 2020, the amount available will be equal to the pro rata portion of $13,000,000.
- The amount allocated for area agencies on aging shall be $7,500,000 for the fiscal year of 2020. For the period beginning on October 1, 2020 and ending on November 30, 2020, the amount available will be equal to the pro rata portion of $7,500,000.
- The amount allocated for aging and disability resource centers shall be $5,000,000 for fiscal year 2020. For the period beginning on October 1, 2020 and ending on November 30, 2020, the amount available will be equal to the pro rata portion of $5,000,000.
- The amount allocated for grant or contract with national center for benefits and outreach enrollment is now $12,000,000 for the 2020 fiscal year ending on October 1, 2020. For the period beginning on October 1, 2020 and ending on November 30, 2020, the amount available will be equal to the pro rata portion of $12,000,000.
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Subtitle E, Part II: Medicaid Provisions
- Extension of the Money Follows the Person Rebalancing Demonstration Program
- The Deficit Reduction Act of 2005 section 6071(h)(1)(G) is amended to allocate $337,500,000 for the period beginning on January 1, 2020 and ending on September 30, 2020. For the period beginning on October 1, 2020 and ending on November 30, 2020, the amount available will be equal to the pro rata portion of $337,500,000.
- Extension of Spousal Impoverishment Protections
- Extends the protections through November 30, 2020.
- Allows the State to disregard the income of a spouse and conduct an analysis solely on an individual’s eligibility for medical assistance on the basis of reduction of income.
- Delay of DSH Reductions
- This section removes the $4 billion DSH reductions for federal fiscal year 2020 and delays the cuts from taking effect December 1, 2020.
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Extension and Expansion of Community Mental Health Services Demonstration Program
- Expands the Protecting Access to Medicare Act of 2014.
- According to this section not later than 6 months after the date of enactment, the Secretary shall select two states, in addition to the eight States already listed, to participate in two-year demonstration programs that meet the requirements of this subsection.
- The requirements are states that:
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Were awarded planning grants,
- Applied to participate in the demonstration programs under this subsection but were not selected
- The Secretary shall use the results of its evaluation of the state’s original application and shall not require the submission of any additional application.
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If a state is selected it is required to:
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Submit a plan to monitor certified community behavioral health clinics under the demonstration program to ensure compliance with certified community behavioral health criteria during the demonstration period; and
- Commit to collecting data, notifying the Secretary of any planned changes that would deviate from the prospective payment system methodology outlined in the state’s demonstration application, and obtaining approval from the Secretary of any such change before implementing change.
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The Federal matching percentage applicable to amounts expended by states participating in the demonstration program under this subsection shall apply to amounts expended by the state during the fiscal period that begins on January 1, 2020 if the state was participating in the demonstration program as of January 1, 2020 and shall apply to amount expensed by the state during the first fiscal period the state participates if the state was selected pursuant to the expansion.
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Subtitle E, Part III: Human Services and Other Health Programs
- Extension of Sexual Risk Avoidance Education Program
- Section 510 of the Social Security Act is amended to extend the time through 2020 instead of ending in May 22, 2020 and to change the fiscal year to 2021.
- Extension of Demonstration Projects to Address Health Professions Work-Force Needs
- Activities authorized by section 2008 of the Social Security Act shall continue through November 30, 2020.
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Extension of the Temporary Assistance for Needy Families Program and Related Programs
- Activities authorized by part 1 of title IV and section 1108(b) of the Social Security Act shall continue through November 30, 2020.
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Subtitle E, Part IV: Public Health Provisions
- Extension for Community Health Centers, the National Health Service Corps, and Teaching Health Centers that Operate GME Programs
- The amount allocated for community health centers under the Patient Protection and Affordable Care Act is increased to $4,000,000,000 for fiscal year 2020 and $668,493,151 for the period beginning on October 1, 2020 and ending on November 30, 2020.
- The amount allocated for the National Health Service Corps is now $310,000,000 for fiscal year 2020 and $51,808,219 for the period beginning on October 1, 2020 and ending in November 30, 2020.
- The amount allocated for teaching health centers that operate graduate medical education programs now extends through fiscal year 2020 and $21,141,096 is allocated for the period beginning on October 1, 2020 and ending on November 30, 2020.
- Diabetes Programs
- The amount allocated under the Public Health Service Act for Type I will extend through the fiscal year of 2020 and $25,068,493 will be allocated for the period beginning on October 1, 2020 and ending on November 30, 2020.
- The amount allocated under the Public Health Services Act for Indians will extend through the 2020 fiscal year and $25,068,493 will be allocated for the period beginning on October 1, 2020 and ending on November 30, 2020.
xii. Subtitle F, Part I: Over-the-Counter Drugs
- Amends Chapter V of the Federal Food, Drug, and Cosmetic Act (FD&C Act) to insert a new section regulating certain nonprescription drugs that are marketed without an approved drug application under section 505 of the FD&C Act. This new section primarily achieves two goals: (1) reforms the regulatory process for over-the-counter (OTC) drug approvals permitting the FDA more flexibility to make changes administratively, rather than through the time-consuming full notice and comment rulemaking process; and (2) incentivizes pharmaceutical companies to research and manufacture innovative drug products by providing an 18-month market-exclusivity period to reward investments for new OTC drugs.
- Amends Section 502 of the FD&C Act, to clarify that an OTC drug which does not comply with the requirements of its OTC monograph, which is essentially an approved recipe for a drug product, is considered misbranded. The FD&C Act prohibits the introduction of misbranded drugs into interstate commerce.
- Clarifies that nothing in the CARES Act will apply to drugs previously excluded by the FDA from the Over-the-Counter Drug Review under the original 1972 Federal Register document.
- Clarifies that sponsors of sunscreen ingredients with pending orders have the option to see review in accordance with the Sunscreen Innovation Act (SIA) or to see review under the new monograph review process. The election must be made within 180 calendar days of the date of enactment of the CARES Act.
- Provides an annual procedure to update Congress on the appropriate pediatric indication for certain OTC cough and cold drugs for children under the age of six. The evaluation consists of conditions under which nonprescription drugs are generally recognized as safe and effective.
- Makes technical corrections to the FDA Reauthorization Act of 2017 (Public Law 115-52).
xiii. Subtitle F, Part II: User Fees
- Declares that the fees paid pursuant to this section will be dedicated to FDA review of over-the-counter monograph drugs as set forth in the goals section and in letters from the Secretary of HHS to certain congressional committees.
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Establishes a new FDA user fee to allow the agency to hire additional staff members to ensure there is adequate agency oversight to approve changes to OTC drugs.
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Title IV – Economic Stabilization and Assistance to Severely Distressed Sectors of the United States Economy Foley Title IV Contact: Christopher Swift
- Title IV of the Coronavirus Aid, Relief, and Economic Securities Act provides the Secretary of the Treasury with the authority to make loans or loan guarantees to states, municipalities, and eligible businesses and loosens a variety of regulations created in the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Economic Stabilization Act of 2008, and others.
ii.Subtitle A – Coronavirus Stabilization Act of 2020
- Emergency Relief and Taxpayer Protections
- The Act authorizes the Treasury Secretary to make up to $500 billion worth of loans and loan guarantees to eligible businesses, states, and municipalities. The term “eligible business” includes passenger air carriers or any other business that has not already received adequate economic relief in the form of loans or loan guarantees under other provisions of the Act.
- The Act reserves $46 billion to support passenger air carriers, air cargo carriers, and businesses important to maintaining national security.
- The Act establishes a $454 billion credit facility for Federal Reserve programs designed to support lending to eligible businesses, states, and municipalities. This program contemplates various loans and loan guarantees for distressed businesses.
- Businesses that receive loans through these Federal Reserve programs are prohibited from paying dividends or repurchasing stock (or other outstanding equity interests) while the loan or loan guarantee is outstanding, as well as for the 12 months following repayment. These businesses are subject to the same employee compensation restrictions as listed for air carriers, air cargo carriers, and businesses deemed important to maintaining national security. Although the Treasury Secretary can waive these restrictions, he must identify and explain the rationale for such waivers in testimony before Congress.
- Businesses that receive loans or loan guarantees through these Federal Reserve programs can only make loans (or other advances) to business that are incorporated in the United States. Transfers to subsidiaries and affiliates incorporated outside the United States are prohibited.
- The Act directs the Treasury Secretary to establish a program to provide low-interest loans for eligible businesses (including nonprofit organizations) with between 500 and 10,000 employees. Although these loans will require no repayment for at least six months, businesses and non-profit organizations seeking this support must provide a good-faith certification that they meet the following criteria:
- The company intends to maintain at least 90 percent of their current workforce;
- The company will not pay dividends or repurchase stock (or other equity securities);
- The company will not outsource or offshore jobs during the loan period or two years thereafter;
- The company will not abrogate existing collective bargaining agreements with labor unions; and
- The company will remain neutral regarding current or future union organizing activity.
- Limitation on Certain Employee Compensation
- The Act also imposes certain compensation caps for officers and employees at companies receiving loans or loan guarantees. Under these caps, officers or employees that received $425,000 or more in total compensation in 2019 will have their future compensation capped at the amount they received that year. This cap applies while the loan or loan guarantee is in effect, as well as to the 12 consecutive months after the loan or loan guarantee is no longer outstanding. The same restriction also applies to severance payments or other compensation received upon termination from businesses participating on the loan and loan guarantee programs.
- Additional caps apply for officers and employees whose total compensation exceeded $3,000,000 in 2019. Under the Act, these individuals may receive compensation up to $3,000,000 plus 50 percent of the excess over $3,000,000 of the total compensation received by the officer or employee in 2019. For example, an officer or employee whose total 2019 compensation was $3,000,010 would be restricted to total compensation of $3,000,005 in subsequent years. Like the lower cap discussed above, this restriction applies while the loan or loan guarantee is in effect, as well as to the 12 consecutive months after the loan or loan guarantee is no longer outstanding.
- Continuation of Certain Air Services
- The Secretary of Transportation may require any air carrier receiving loans or loan guarantees under Section 4003 to maintain scheduled air transportation services as the Secretary deems necessary to maintain service to any destination the carrier served before March 1, 2020. The Secretary of Transportation is to consider the needs of “small and remote communities” and “health care and pharmaceutical supply chains” when enforcing this portion of the Act.
- Suspension of Certain Aviation Excise Taxes
- The Act suspends the imposition of aviation excise taxes as otherwise required under the Internal Revenue Code through December 31, 2020.
- Debt Guarantee Authority
- In order to backstop solvent depository institutions, it appears that the CARES ACT allows the FDIC to establish a program to insure these institutions without regard to a maximum amount. All such guarantees are to last at least until December 31, 2020.
- Temporary Government in the Sunshine Act Relief
- In the event that unusual and exigent circumstances continue to exist, the Board of Governors of the Federal Reserve System may conduct meetings with less restrictive and formal meeting notification and record-keeping requirements until December 31, 2020.
- Temporary Hiring Flexibility
- Without regard to certain statutory hiring requirements, the Secretary of Housing and Urban Development and the Securities Exchange Commission are given flexibility to recruit and appoint candidates for temporary and term appointments as necessary to prevent, prepare for, or respond to COVID-19 during the “covered period” of the CARES Act.
- Temporary Lending Limit Waiver
- Enlarges exception to requirement on the maximum amount of loans and extensions of credit by a national banking association to include a nonbank financial company (as defined in Section 102 of the Financial Stability Act of 2010) and allows the Comptroller of Currency to exempt any transaction or series of transactions from the total maximum amount of loans and extensions of credit upon a finding by the Comptroller that the exemption is in the public interest and consistent with the purposes of 12 U.S.C. 84.
- Temporary Relief for Community Banks
- The federal banking agencies shall issue an interim final rule that sets the Community Bank Leverage Ratio (as defined in Section 201(a) of the Economic Growth, Regulatory Relief, and Consumer Protection Act) to 8% and provides qualifying community banks falling below this threshold a reasonable grace period to satisfy the leverage requirement.
- Temporary Relief from Troubled Debt Restructurings
- Allows financial institutions to suspend GAAP requirements and loan determinations related to loan modifications that would be categorized as a troubled debt restructuring, if such loan modifications are related to COVID-19. Such suspensions cannot be applied to loans that were more than 30 days past due as of December 31, 2019.
- Optional Temporary Relief from Current Credit Losses
- Suspends the requirement to comply with the Financial Accounting Standards Board’s rules regarding the “Measurement of Credit Losses on Financial Instruments” during the covered period.
- Non-applicability of Restrictions on ESF During National Emergency
- Removes certain restrictions on the Exchange Stabilization Fund (ESF) until December 31, 2020, namely, the requirement the Treasury reimburse the ESF for any funds that are used for the Treasury Money Market Funds Guaranty Program and the prohibition of the establishment of any future guaranty program for the money market mutual fund industry. It further makes an appropriation to reimburse the ESF for any losses it incurs from the Treasury Money Market Funds Guaranty Program.
- Temporary Credit Union Provisions
- The Act broadens the definition of the kinds of credit unions to beyond only those serving “natural persons” and the eligibility requirements for those institutions to receive assistance from the National Credit Union Central Liquidity Facility. Specifically, a credit union may access liquidity if the obligation does not exceed 16 times the subscribed capital stock and surplus of the facility itself. The present restriction is 12 times the capital stock and surplus. These loosened restrictions will expire December 31, 2020.
- Increasing Access to Materials Necessary for National Security and Pandemic Recovery
- The Act loosens the limitations of the Defense Production Act of 1950. For a period of two years from the enactment of the Act, the government may take any action to correct a “shortfall” in “industrial resources” without regard to the current expenditure limit of $50 million.
- Similarly, the Defense Production Act currently limits the amount of money that may exist in the “fund” the law authorizes to $750,000,000. This limitation is similarly waived for a period of two years from enactment of the Act. For a period of one year from the enactment of the Act, the $50 million limit on government loans to correct industrial shortfalls is waived.
- Special Inspector General for Pandemic Recovery
- Establishes within the Department of the Treasury the Office of the Special Inspector General for Pandemic Recovery. The Special Inspector General shall be appointed by the President, with the advice and consent of the Senate, and shall conduct, supervise, and coordinate audits and investigations of the making, purchase, management, and sale of loans, loan guarantees, and other investments made by the Treasury Secretary under this Title.
- The Special Inspector General shall keep Congress informed through quarterly reports that provide the details of all such loans, loan guarantees, or other investments.
- Conflicts of Interest
- Any company in which the President, Vice President, an Executive Department head, Member of Congress, or any of such individual’s spouse, child, son-in-law, or daughter-in-law own over 20% of the outstanding voting stock shall not be eligible for loans, loan guarantees, or other investments provided under this Title.
- Congressional Oversight Commission
- Establishes a Congressional Oversight Commission charged with oversight of the implementation of this Title by the Department of the Treasury and the Board of Governors of the Federal Reserve System, including efforts of the Department and the Board to provide economic stability as a result of coronavirus.
- The Oversight Commission shall consist of five members as follows: one member appointed by the Speaker of the House of Representatives; one member appointed by the House Majority Leader; one member appointed by the Senate Majority Leader; one member appointed by the Senate Minority Leader; one member appointed by the Speaker of the House and Senate Majority Leader, after consultation with the Senate Minority Leader and House Minority Leader.
- Credit Protection During COVID-19
- Requires that furnishers to credit reporting agencies who agree to account forbearance, or agree to modified payments with respect to an obligation or account of a consumer that has been impacted by COVID-19, report such obligation or account as “current” or as the status reported prior to the accommodation during the period of accommodation unless the consumer becomes current.
- Applies to accounts for which the consumer has fulfilled requirements pursuant to the forbearance or modified payment agreement.
- Such credit protection is available beginning January 31, 2020 and ends 120 days after the date the national emergency declaration related to the coronavirus is terminated.
- Foreclosure Moratorium and Consumer Right to Request Forbearance
- Prohibits foreclosures on all federally-backed mortgage loans for a 60-day period beginning on March 18, 2020.
- Provides up to 180 days of forbearance for borrowers of a federally-backed mortgage loan who have experienced a financial hardship related to the COVID-19 emergency.
- Applicable mortgages include those purchased by Fannie Mae and Freddie Mac, insured by HUD, VA, or USDA, or directly made by USDA.
- Forbearance of Residential Mortgage Loan Payments for Multifamily Properties with Federally Backed Loans
- Provides up to 90 days of forbearance for multifamily borrowers with a federally backed multifamily mortgage loan who have experienced a financial hardship.
- Borrowers receiving forbearance may not evict or charge late fees to tenants for the duration of the forbearance period.
- Applicable mortgages include loans to real property designed for five or more families that are purchased, insured, or assisted by Fannie Mae, Freddie Mac, or HUD.
- Temporary Moratorium on Eviction Filings
- For 120 days beginning on the date of enactment, landlords are prohibited from initiating legal action to recover possession of a rental unit or to charge fees, penalties, or other charges to the tenant related to such nonpayment of rent where the landlord’s mortgage on that property is insured, guaranteed, supplemented, protected, or assisted in any way by HUD, Fannie Mae, Freddie Mac, the rural housing voucher program, or the Violence Against Women Act of 1994.
- Reports
- Requires the Secretary of the Treasury to publish on the Department’s website detailed information about each transaction authorized by this Act, within 72 hours of the time such transaction is executed.
- The Comptroller General shall conduct a study of the loans and loan guarantees and report the same no later than nine months after enactment of the Act to various congressional committees. The Comptroller General shall continue making such reports annually through the year succeeding the previous year as loans or loan guarantees remain outstanding.
iii. Subtitle B – Air Carrier Worker Support
- Pandemic Relief for Aviation Workers
- Provides financial assistance for the exclusive use of employee wages, salaries, and benefits in the amounts of up to $25 billion for passenger air carriers, up to $4 billion for cargo air carriers, and up to $3 billion for airline contractors.
- Provides for $100 million for administrative fees associated with providing the financial assistance.
- Procedures for Providing Payroll Support
- Provides the formula by which the Secretary will allocate financial assistance. The formula is based on the salaries and benefits reported by an air carrier pursuant to part 241 of Title 14, CFR, for the period from April 1, 2019, through September 30, 2019 be used as the basis of support.
- Smaller air carriers and contractors that do not file part 241, must document wages, salaries and benefits for the same time period.
- Required Assurances
- To be eligible for a financial assistance, recipients enter into an agreement with the Secretary of the Treasury that it will not, until September 30, 2020, conduct furloughs, reduce pay rates, buy back stock, pay dividends, and must meet requirements of Sections 4115 and 4117.
- Protection for Collective Bargaining
- Restricts the Secretary from conditioning financial assistance on a carrier’s implementation of measures to enter into negotiations with the certified bargaining representative of a class of employees regarding pay.
- Taxpayer Protections
- Provides for Secretary of Treasury to receive warrants, options, stock and other financial instruments to provide appropriate compensation for the government for the assistance.
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Limitation on Certain Employee Compensation
- Financial assistance is dependent upon compensation limits.
- Pay above $425,000 is frozen for two years.
- No retirement or severance packages can exceed twice the maximum total compensation during 2019. Further, no officer or employee whose total compensation exceeded $3,000,000 in 2019 may receive in excess of $3,000,000 and 50% of the excess over $3,000,000 of the total compensation received in 2019.
- Defines “total compensation” to include salary, bonuses, awards of stock, and other financial benefits.
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Title V – Coronavirus Relief Funds
i.Coronavirus Relief Fund
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Provides $150 billion to states, territories, and tribal governments to use for expenditures incurred due to the public health emergency with respect to COVID-19 in the face of revenue declines, allocated by population proportions, with a minimum of $1.25 billion for states with relatively small populations.
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Title VI – Miscellaneous Provisions
i.COVID-19 Borrowing Authority for the United States Postal Service
- The Secretary of the Treasury may lend the U.S. Postal Service up to $10 billion for current operating expenses but not to pay any existing debt obligations. The postal service shall prioritize delivery of products for medical purposes and may establish temporary delivery points in order to protect employees or individuals receiving the deliveries.
Appropriations
In addition to the above stimulus provisions, the Senate passed supplemental appropriations to help the government respond to the COVID-19 pandemic. Below is a quick summary of the appropriations provisions that are most likely to impact your business:
- USDA/Food and Nutrition Service – $25.06 billion. Child Nutrition Programs – $8.8 billion. The bill provides additional funding for food purchases and demonstration projects to increase flexibility for schools. Supplemental Nutrition Assistance Program (“SNAP”) – $15.51 billion. The bill provides additional funding for SNAP to cover waiver authorities granted in H.R. 6201 and anticipated increases in participation as a result of coronavirus.
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U.S. Department of Agriculture (USDA)/Office of the Secretary – $9.5 billion. The bill provides $9.5 billion in emergency COVID-19 response funding to support agricultural producers impacted by COVID-19, including producers of specialty crops, producers that supply local food systems, and livestock producers.
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Commodity Credit Corporation (“CCC”) – The bill includes language that replenishes the CCC borrowing authority by $14 billion.
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Rural Business Cooperative Service – $20.5 million. The bill provides the necessary subsidy to make $1 billion in lending authority available for the Business and Industry Loan Guarantee Program, which provides much-needed financing to business owners who might not be able to qualify for a loan on their own.
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Food and Drug Administration – $80 million. The bill provides additional funding to support the development of necessary medical countermeasures and vaccines, advance domestic manufacturing for medical products, and monitor medical product supply chains.
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Distance Learning, Telemedicine (DLT) and Broadband Program – $25 million. The bill provides additional funding for the DLT grant program, which supports rural communities’ access to telecommunications-enabled information, audio, and video equipment, as well as related advanced technologies for students, teachers, and medical professionals.
For more information about recommended steps, please contact your Foley relationship partner. For additional web-based resources available to assist you in monitoring the spread of the coronavirus on a global basis, you may wish to visit the CDC and the World Health Organization.
Foley will continue to monitor and keep you apprised of relevant developments. Foley’s Coronavirus Resource Center provides continuous and updated insights and resources to support your business during this challenging time.
We are grateful to the many Foley & Lardner attorneys who contributed to this summary, including: Jackie Acosta, Melina Bales, Josh Barrom, Lauren Carboni, Jamie Class, Julia Di Vito, Mike Donadio, Kate Foley, Debbie Green, Jake Heller, Erin Horton, Leah Imbrogno, Paul Joseph, Adam Kleinfeld, Sunny Levine, Justin Lauria-Banta, Tom Leonard, Peter Loh, Julie Lutfi, Jessica Glatzer Mason, Brandon Marx, Ashley May, Rachel O’Neil, Leslie Pinney, Jared Rifis, Dick Riley, E.J. Risley, Anil Shankar, Matthew Sierawski and Brantley Smith.
Billy Boughey is our special guest today. Billy is a speaker, author of Culture Reconstructed and CEO of Elevate Experiences. In this episode we have an uplifting discussion about how these times of crisis brings out the best in people and entrepreneurs. Those that are creative with solutions, bring value to people and can 're-imagine' their fit and value will not only survive during this hardship, but they will excel. In this episode Billy describes that we are all facing CPR decisions right now ... to Cancel, to Postpone or to Re-imagine. This is a great time to be positive, be creative and re-imagine our business and even personal purpose and value to others. Check out Billy's YouTube channel here https://www.youtube.com/channel/UCKW9xBUxFRz3JVqS0IkYCpQ
Billy Bougheyhttps://billybspeaks.com/ is a nationally recognized host and speaker who has led events for Delta, Coca-Cola, FIFA, The John Maxwell Company and many other notable organizations. He is the Founder and President of the Atlanta based company, Elevate Experiences https://elevateexperiences.com/. Billy’s passion is to build a world with no unequipped leaders. His talents include keynote speaking, culture coaching and consulting groups on how to make their team members smile and their customers rave. Billy is also the author of Culture Reconstructed https://amazon.com/author/billyboughey , a start-where-you-are guide to building a remarkable team dynamic. He hosts his own podcast titled Created for Experience https://open.spotify.com/show/1aO7Kn7ZSd4Gf3fK4loy4Q and is a certified Kolbe consultant, helping companies understand how each employee strives to get work done. Billy has participated in many freestyle hip hop events and loves rap as a creative art form. Put on a beat and watch his passion to create come to life in vivid technicolor. Billy is married to Jenn and has three energetic children that you might see dancing on a stage near you!
excerpt from the "Why this book?" section of his book:
What is culture? How do you define it? Culture is a set of beliefs, systems, traditions, actions, interactions, structures, non-verbal communication, and activities an organization allows. It’s everything you see, hear, and do. Every organization and group of people have a culture. Sometimes a culture is toxic, sometimes it’s healthy. For many workplaces, the only time culture is top of mind is in a theoretical sense or when there is an event outside of the normal work. The aim of this book is to shift from theory to practice so you can benefit for years to come.
Signs of a healthy culture: People show up on time
Meetings are energized and focused
Projects have momentum and creativity
Collaboration is welcomed and encouraged
New positions are filled with the right team members
People feel valued and heard
Team member expectations are clear
Team members post positively on social media about where they work
Signs of a toxic culture:
Meetings are not focused and lack energy
People are focused more on their own needs, not the needs of a collective team
New ideas are not welcomed
Creativity is stifled
Revenue plateaus
Team members get burned out quickly
There is a lack of clarity on expectations
Team members complain on social media about where they work
am about to state the obvious, but doesn’t a healthy culture sound better?
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In this episode, business man, author, father, husband, Christian and current candidate for District 3 of the US Congress covers a wide range of topics. Of course we talk about the Coronavirus and how it has already impacted businesses. How will our State and Federal Governmental Agencies provide aide to those businesses and citizens that are damaged from the Coronavirus fall-out. Businesses like restaurants, hotels, the cruise and airline industries have been hit hard and more losses will be sustained. What is the role of Government in situations like this? Is this similar to the Auto Industry bail out or is this the responsibility of the Government.
Check out this episode to hear Ryan's take on why the US House and Senate is ineffective and how to change the broken parts of the policy making process. Can someone with real business experience make a difference in Washington? More business people with practical experience, not political experience, has to be an improvement to the Swamp.
Ryan Chamberlin is an Author, Speaker, and Consultant based in Marion County, Florida, but serving businesses and CEO’s nationwide. http://www.ryanchamberlin.com
For the past 20 years, he has worked with thousands of entrepreneurs, assisting them in growing their influence and profitability through focused strategies of leadership, improved productivity and by revolutionizing their marketing strategies and corporate cultures.
Ryan has worked with Success Magazine, speaks regularly at national conferences, and was featured recently at the Marion County TEDX Ocala as a guest speaker. (https://www.youtube.com/watch?v=HLNvYsSUyK0)
In 2010, Ryan authored his first book titled Now You Know, a book to help entrepreneurs build better teams through common sense principles that focus on growth. He authored an entrepreneur’s story, The Mentor, with Frank Viscuso, best selling author and former New Jersey Fire Chief. In addition, Ryan had the privilege of writing a book with the late relationship expert Gary Smalley titled The Rich You Formula, and recently co-wrote a book with Tony Jeary, coach to the world’s top CEOs. The Rich You Formula was endorsed by former governor and Presidential candidate Mike Huckabee. (Ryan’s Books are available on Amazon or http://www.ryanchamberlin.biz)
On February 4, 2020 Ryan launched his campaign for US Congress District 3, Florida, and at the date of this recording is a full time candidate. You can connect with Ryan on Social Media and Follow/Support his campaign at http://www.ryanchamberlin.com
In this episode, Charles Musgrove talks with FSU Economics Professor and author, Joe Calhoun about the economic impact the Coronavirus will have on the US economy. We talk about the the expected economic recovery period, the pent up demand that will help the recovery and the fall-out. We also talk about the decision for FSU to move to on-line education delivery for the remaining of the Spring semester.
From the book that Joe coauthored, Common Sense Economics: What Everyone Should Know About Wealth and Prosperity
From Introduction:
Life is about choices, and economics is about how incentives affect those choices and shape our lives. Choices about our education, how we spend and invest, what we do in the workplace, and many other personal decisions will influence our well-being and quality of life. Moreover, the choices we make as voters and citizens affect the laws or “rules of the game,” and these rules exert an enormous impact on our freedom and prosperity. To choose intelligently, both for ourselves and for society generally, we must understand some basic principles about how people choose, what motivates their actions, and how their actions influence their personal welfare and that of others. Thus, economics is about human decision-making, the analysis of the forces under lying choice, and the implications for how societies work.
Element 1.1 Incentives Matter:
All of economics rests on one simple principle: Changes in incentives influence human behavior in predictable ways. Both monetary and nonmonetary factors influence incentives. If something becomes more costly, people will be less likely to choose it. Correspondingly, when the benefits derived from an option increase, people will be more likely to choose it.
This basic postulate explains how changes in market prices alter incentives in a manner that works to coordinate the actions of buyers and sellers. If buyers want to purchase more of an item than producers are willing (or able) to sell, its price will soon rise. As the price increases, sellers will be more willing to provide the item while buyers purchase less, until the higher price brings the amount demanded and the amount supplied into balance. At that point the price stabilizes.
Element 1.2 There is no such thing as a free lunch:
Because we cannot have as much of everything as we would like, we are forced to choose among alternatives. There is “no free lunch.” Doing one thing makes us sacrifice the opportunity to do something else we value. This is why economists refer to all costs as opportunity costs.
It is often said that some things are so important that we should do them without considering the cost. Making such a statement may sound reasonable at first thought, and may be an effective way to encourage people to spend more money on things that we value and for which we would like them to help pay. But the unreasonableness of ignoring cost becomes obvious once we recognize that costs are the value of forgone alternatives (that is, alternatives given up). Saying that we should do something without considering the cost is really saying that we should do it without considering the value of the alternatives. When we choose between mutually exclusive (but equally attractive) alternatives, the least-cost alternative is the best choice.
In this episode, Charles Musgrove talks with FSU Economics Professor and author, Joe Calhoun about the economic impact the Coronavirus will have on the US economy. We talk about the government's financial assistance and how assistance given to individual citizens versus to businesses will have different effects to the economy. Is this assistance a 'bailout'? We dismiss this negative description for the aid that will be provided to people and businesses that suffer financially from the Coronavirus.
Excerpts from the book that Joe Coauthored entitled Common Sense Economics: What Everyone Should Know About Wealth and Prosperity
Life is about choices, and economics is about how incentives affect those choices and shape our lives. Choices about our education, how we spend and invest, what we do in the workplace, and many other personal decisions will influence our well-being and quality of life. Moreover, the choices we make as voters and citizens affect the laws or “rules of the game,” and these rules exert an enormous impact on our freedom and prosperity. To choose intelligently, both for ourselves and for society generally, we must understand some basic principles about how people choose, what motivates their actions, and how their actions influence their personal welfare and that of others. Thus, economics is about human decision-making, the analysis of the forces under lying choice, and the implications for how societies work.
Element 1.1 Incentives Matter:
All of economics rests on one simple principle: Changes in incentives influence human behavior in predictable ways. Both monetary and nonmonetary factors influence incentives. If something becomes more costly, people will be less likely to choose it. Correspondingly, when the benefits derived from an option increase, people will be more likely to choose it.
This basic postulate explains how changes in market prices alter incentives in a manner that works to coordinate the actions of buyers and sellers. If buyers want to purchase more of an item than producers are willing (or able) to sell, its price will soon rise. As the price increases, sellers will be more willing to provide the item while buyers purchase less, until the higher price brings the amount demanded and the amount supplied into balance. At that point the price stabilizes.
Element 1.2 There is no such thing as a free lunch:
Because we cannot have as much of everything as we would like, we are forced to choose among alternatives. There is “no free lunch.” Doing one thing makes us sacrifice the opportunity to do something else we value. This is why economists refer to all costs as opportunity costs.
It is often said that some things are so important that we should do them without considering the cost. Making such a statement may sound reasonable at first thought, and may be an effective way to encourage people to spend more money on things that we value and for which we would like them to help pay. But the unreasonableness of ignoring cost becomes obvious once we recognize that costs are the value of forgone alternatives (that is, alternatives given up). Saying that we should do something without considering the cost is really saying that we should do it without considering the value of the alternatives. When we choose between mutually exclusive (but equally attractive) alternatives, the least-cost alternative is the best choice.
Join us for the second episode with guest Michelle Rehwinkel Vasilinda. Michelle is a former member of the Florida House of Representatives, representing the 9th District, which includes most of Leon County, from 2008 to 2016. Her insight into State politics, current bills, and how all of this impacts citizens, employees and businesses is unique and interesting. Michelle's perspective on the current legislative session with the backdrop of the Coronavirus are the ingredients of an awesome episode of Business Matters.
At the recording of the show, we are dealing with the fall out from the Coronavirus and the energy war between Russia and OPEC. The price of oil has plummeted and the stock market is now officially in a bear market. Major events are being canceled as schools and businesses evaluate how to change their delivery of products and services. Resiliency and Adaptation is a hallmark of America and is the American Way. Difficult times force people to think outside the box, to adapt to the challenges and create new solutions and a 'better way'.
We discuss a wide range of hot topics that are relevant today, including how schools will function if they don't have classes in the school, how business will operate and survive and in fact create new and better solutions. How will the OPEC/Russia conflict over oil impact the energy industry? We have had conflicts over energy and the price of oil before and it forced us to become energy independent by using our own oil reserves, fracking and natural gas. What is the next energy frontier? America is strong and will overcome the turbulence.
The Florida Legislature is in the final scheduled week, but will it end on time? E-Verify and other bills may cause session to be extended. Of course we talk about the Coronavirus, and the impact in Florida on businesses and the education system. Governor DeSantis signed Executive Order Number 20-52, COVID-19 Public Health Emergency to assist the State of Florida efficiently respond to the challenges presented by the virus.
We also discuss the relationship of E-Verify, Coronavirus and the $15/hour minimum wage. Will E-Verify level the playing field? Should Florida wait to implement E-Verify requirement until after the Coronavirus impact is over? How does the $15/hour help or harm the economy in Florida. Check out this episode for a lively, informative and entertaining discussion.
Oliva: Florida Senate E-Verify Plan Un-American
https://www.wlrn.org/post/oliva-florida-senate-e-verify-plan-un-american
Should lawmakers consider Coronavirus before enacting E-Verify requirements?
https://floridapolitics.com/archives/322295-should-lawmakers-consider-coronavirus-before-enacting-e-verify-requirements
Senate approves E-Verify requirement, sens to House for Approval
https://floridapolitics.com/archives/322479-senate-approves-e-verify-requirement
Join us for this episode with guest Michelle Rehwinkel Vasilinda. Michelle is a former member of the Florida House of Representatives, representing the 9th District, which includes most of Leon County, from 2008 to 2016. Her insight into State politics, current bills, and how all of this impacts citizens, employees and businesses is unique and interesting.
We discuss a wide range of hot topics that are relevant today. The Florida Legislature is in the final scheduled week, but will it end on time? E-Verify and other bills may cause session to be extended. Of course we talk about the Coronavirus, and the impact in Florida on businesses and the education system. Governor DeSantis signed Executive Order Number 20-52, COVID-19 Public Health Emergency to assist the State of Florida efficiently respond to the challenges presented by the virus.
We also discuss the relationship of E-Verify, Coronavirus and the $15/hour minimum wage. Will E-Verify level the playing field? Should Florida wait to implement E-Verify requirement until after the Coronavirus impact is over? How does the $15/hour help or harm the economy in Florida. Check out this episode for a lively, informative and entertaining discussion.
Oliva: Florida Senate E-Verify Plan Un-American
https://www.wlrn.org/post/oliva-florida-senate-e-verify-plan-un-american
Should lawmakers consider Coronavirus before enacting E-Verify requirements?
https://floridapolitics.com/archives/322295-should-lawmakers-consider-coronavirus-before-enacting-e-verify-requirements
Senate approves E-Verify requirement, sens to House for Approval
https://floridapolitics.com/archives/322479-senate-approves-e-verify-requirement
Governor's Executive Orders - https://www.flgov.com/2020-executive-orders/
Guest Terry Madigan gives practical tips on legal documents that should be in place to prevent heart ache and pain when separation happens with business partners, employees or in a business transition situation. Check out this episode for nuggets of knowledge from long-time Tallahassee attorney, Terry Madigan.
This show does not provide legal advice and Provider is not a law firm.
Top 10 Legal Documents For Small Businesses
LINKILAW JANUARY 22, 2018 LEGAL DOCUMENTS
Top 10 Legal Documents For Small Businesses
So, you’ve got the idea and are all psyched to get going! But one thing holds you back every time you try to get the ball rolling; where do I start? do I have all the right documents to ensure I have a working business?
These are the 10 most important legal documents for small businesses:
- Memorandum Of Understanding
When you are ready to start your own business. The very first thing you need to do is to ensure that you and your business partners are committed to a common course of action. A memorandum of understanding, although not legally binding, is the first stage before a formal contract. It is a way of solidifying a deal and is often used to make sure all parties are on the same page. This document establishes your intentions and will spell-out the essential terms of your agreement.
A memorandum of understanding will also help ensure that expectations are aligned between business partners. It makes clear what you can and cannot expect from one another.
- Memorandum Of Association & Articles Of Association
When your business idea is on track it is time to officially set-up your business. You will need a Memorandum of Association and Articles of Association, both of which are essential founding legal documents for every business in the UK.
The Memorandum of Association sets in stone your intention to form a company, while, the Articles of Association establish the rules about running and owning it. They also define the purpose of your business as well as the basic rights and obligations of directors and shareholders.
Both are standard legal documents and may be easily amended to add any provision that you may wish to include to better reflect your vision. Don’t worry about getting these drafted by a lawyer from the very start, because, when you incorporate a private limited company in the UK, you will automatically be provided with model articles.
- Shareholders’ Agreement
The most important legal document for any business regardless of size; is the Shareholders’ Agreement.
To ensure the smooth running of your business, a well-drafted Shareholders’ Agreement is required to outline the relationship between shareholders and to establish their respective rights and obligations. Among other things, it defines each party’s proportion of shares, profit sharing and the company’s decision-making procedures. Without one, in the event of a dispute or simple doubt you will have to rely on the narrowly-drafted constitutional documents, namely, the Memorandum of Association and Articles of Association (see above).
A Shareholders’ Agreement serves the purpose of safeguarding shareholders’ interests in various circumstances. It allows you to protect your investment in the business by including clauses that force shareholders to sell their shares back to you in certain sets of circumstances.
- Non-Disclosure Agreement
A non-disclosure agreement creates a trusting relationship between the signatories. You may use it to protect any kind of information that you may want to share but wish to remain confidential.
It is always useful if your business involves an innovative idea or know-how. This legal document is also commonly used when presenting a new idea or product to investors, or when dealing with third parties i.e. contractors, distributors.
If you do not have a non-disclosure agreement in place, you may risk losing your intellectual property rights to your product and brand name. The people or businesses you share your business ideas with, may share them with others, or even implement them themselves. You may as a result be exposed to competition and face information leaks that could lead to loss of potential investment opportunities.
- Directors’ Service Agreement
Directors are responsible for running a business and this is why their authority needs to be clearly defined to avoid any complications. Think of a Directors’ Service Agreement as an employment agreement which deals with the directors core duties towards the company.
It outlines the rights and obligations of directors that go beyond the basic duties that are imposed on them by law. The document will typically include a definition of the director’s role in the company, the salary, working hours as well as provisions regarding termination of employment.
It is a legal requirement to have some form of written agreement between your business and its directors within 2 months of a director beginning work.
- Employment Agreement
Needless to say that once your business starts expanding you will need an Employment Agreement for any new recruits. An Employment Agreement will specify the employee’s role but most importantly, it will limit the employer’s liability.
It is necessary to put one in place as in the absence of a written agreement, default legal provisions will apply which tend to favor employees.
Do not forget to consider the types of staff you may want to hire (i.e. intern, consultant, contractor) as a different type of employment agreements will be needed in each case.
- Terms & Conditions For The Supply Of Goods Or Services
It is fundamental to define the terms on which you trade with your clients when supplying goods and/or services. Your business will need to have a comprehensive set of Terms and Conditions both when acting as a supplier and as a buyer during its lifecycle.
This essential legal document includes information on contract formation as well as product and service specifications. It deals with payment process, delivery, cancellations and returns issues. As a business owner it is important to include provisions to limit your liability and to account for the event of insolvency as well as to determine the applicable laws in case of a dispute.
Your Terms and Conditions will be the main point of reference in case of dispute and therefore will have a great impact on your business. You will find that standard Terms and Conditions will usually apply, however, they can be industry specific. So, it is well worth getting tailor-made legal advice.
- Website T&Cs
You might be wondering if anyone actually reads those, but, Terms and Conditions are essential for any website owner. They form an online agreement between the client and the business that outlines each party’s rights and obligations and it also provides basic guidelines on how to use the website.
So, why are Website Terms and Conditions needed? Without them you risk being exposed to liability for your website’s content and any fault that may arise as a results of its use. They also help safeguard your own intellectual property as well as your user’s data.
This legal document will highly vary depending on the type of business in question, it, therefore, is essential to get terms and conditions that reflect your business and do not expose you to any uncertainty.
- Cookie Policy & Privacy Policy
As a website or app owner, you will probably use cookies to provide a customised and user-friendly experience to your online users.
A cookie is a small text filed that is stored onto the user’s computer which gathers information. A Cookie Policy will inform users about the use of cookies. It will explain which types of cookies are used, the kind of information they gather, their purpose, and finally the procedure of deleting the cookies.
Given the widening privacy concerns it is required by law to have an extensive Privacy Policy that explains how your business collects, uses, discloses your customer’s personal data. The policy will have to focus on personal information that directly relates to the customers (i.e. name and address) to prevent them from exposing their identity.
This is particularly important in light of the forthcoming General Data Protection Regulation which will come into force in May 2018 and will impose fines of up to €20 million on businesses for privacy breaches.
- Software Development Agreement
Lastly, you may need a Software Development Agreement if software is being developed as part of your business. This agreement will outline your relationship with your developer and will map out the overall development process. Typically, the developer working for your will develop the specified software and will transfer the IP created back to you.
This technical legal document will set the scope of the project, the payment for the work and will address any confidentiality concerns. One cannot stress enough the importance of having in place a Software Development Agreement as in its absence you may risk getting an unusable or faulty software. Even worse, the developer could run away with valuable information about your business.
Have in mind that you will need to create a new contract for every new software as they may vary considerably due to their nature.
Getting the right legal documents drafted by specialist lawyers is a must for your small business. They are essential for a successful business to kick-off and ensure all you hard work does not go to waste.
Another informative episode about the expected impact of a $15 per hour minimum wage in the State of Florida. In this episode, Charles Musgrove and guest Drew McLeod, restaurant owner, discuss the unintended consequences of what is likely to happen if this Amendment passes in Florida. Drew has spent over 40 years in the restaurant industry and has owned and managed several successful restaurants in and around the Tallahassee, Florida area. Drew talks about the financial challenges that already exist in the industry and the thin profit margins. The direct impact to his business will be immediate. The long-term impact will likely force the independent, full-service restaurants to change their business model or go out of business. The unintended consequences of this legislation will ripple through each business and the industry. Other pay grades will be impacted, workers' compensation insurance, payroll taxes as well as other employment costs will go up along with the minimum wage increase. Check out this episode to hear it from an owner in the business that will feel the impact.
Small Business and the Fight for $15
A new study shows how a rising minimum wage hurts little companies.
By
The Editorial Board
Dec. 15, 2019 4:17 pm ET
Here’s another volley in the debate over the “Fight for $15”: As the federal minimum wage rose from 1989-2013, small businesses in affected states suffered “lower bank credit, higher loan defaults, lower employment, a lower entry and a higher exit rate.”
That’s according to a study last week from the National Bureau of Economic Research. The analysis by three professors at the Georgia Institute of Technology exploits the fact that many states—now more than half—set their own minimum wages higher than the federal standard. This provides a natural control group. When the nationwide minimum goes up, how do the states where it applies fare in comparison?
Start with data on one million loans, averaging around $100,000, made through the Small Business Administration. For each $1 increase in the minimum wage, the authors estimate that loan amounts dropped 9% more in the affected states. The risk of default was 12% higher. The average credit score for small companies in those states showed “a sharp decline.” Business entries fell 4% in the year the minimum wage went up. A year later, business exits rose 5%.
These results, the authors say, hold throughout various statistical analyses, such as while controlling for local economic conditions. The effects are stronger in businesses like restaurants and retail, which rely on low-skilled labor. Smaller and younger companies are more severely affected as well. In short, the authors conclude: “We find that increases in the federal minimum wage worsen the financial health of small businesses in the affected states.”
By now some readers are probably thinking: Well, duh. It does not take a University of Chicago Ph.D. to suspect that raising the price of labor will make it harder to sustain a small, labor-intensive business. Don’t forget that there’s no cost-of-living adjustment: A $15-an-hour federal minimum wage would apply equally to a French bistro in Manhattan and a pizza joint outside Manhattan, Kan.
Many progressives still insist this is a free lunch, and most of the Democratic presidential candidates support raising the federal minimum wage to $15. That includes the so-called moderates, like Amy Klobuchar and Mike Bloomberg. They ignore the millions of small businesses that are trying to make payroll and grow.
The churn of companies with fewer than 10 employees, this study says, accounts for “more than 70% of job gains and losses in 2018.” No matter what politicians say, inhibiting that dynamism hurts the smallest businesses and the least-skilled workers the most.
This is from a recent article about the subject.
Seattle is experimenting with a $15 minimum wage — here are the results so far Published Tue, Sep 17 20195:34 PM EDTUpdated Thu, Jan 16 20205:33 PM EST ...
Key takeaways, and what all this could mean for you
The city’s economy is still showing continued strength with no signs of slowing down, so it’s hard to say with any certainty that increasing the minimum wage had any measurable negative effects. But on a national scale, the story would likely be different. While millions of people would get a pay increase, millions more might lose their jobs, or at least see their hours cut back.
A $15 minimum wage implemented across the U.S. could lead to a loss of 1.3 million jobs, according to a study published earlier this year by the Congressional Budget Office, but it could also increase wages for 17 million workers and effectively lift over 1.3 million people out of poverty around the country.
Perhaps the key takeaway at this point is that regions with booming economies may be able to increase their pay floors without creating problems — though there may be more unintended side effects that become apparent with time.
Another important takeaway is that Seattle’s minimum wage may actually still be too low to help many workers. A full-time employee in Seattle with a salary of $18 per hour, two dollars more than the current minimum wage, would earn roughly $37,000 a year, for example. That’s significantly less than the average Seattle worker, who makes more than $31 per hour.
And with median rents in the city at $2,700, or more than $32,000 per year, a worker earning $18 per hour could end up spending more than 85% of their income on housing. The average Seattle-area household also spends more than $12,000 per year on transportation and nearly $6,000 per year on food, according to the Labor Department.
What this means for you will likely depend on where you live, and if federal or local leaders decide to push through with any increases to the minimum wage. A significant increase, say to $15 per hour, might lead to more profound effects, such as job losses, in smaller cities and rural areas. But large, bustling cities like Seattle may absorb it with relative ease.
In all, an improvement to the minimum wage may not do much to change the grim reality that living in expensive cities can be challenging even for some people making six figures. As Vigdor puts it, “Good luck living here on an $18-an-hour job.”
In this episode Charles Musgrove and guest Taylor Hodges with Southern Capital discuss important information about disability insurance and life insurance. These policy types provide the beneficiary and owner a method to cover for those events that cannot be paid from available cash.
From Smart About Money
Why You Need Disability Insurance
Disability insurance provides a source of income to people who are unable to work due to an accident or illness. Remember that your earning power is one of your greatest financial assets.
Without disability insurance protection, workers and their dependents are “living on the edge,” at risk of losing their homes and investments. If you need disability insurance, take a look at the details:
- The average disability claim lasts almost 13 months and mortgage foreclosures due to disability occur 16 times as often as they do for death. Yet, more than 40 percent of full-time workers do not have coverage in the event of a short- or long-term disability to protect against a loss of income.
- Research indicates that one-third of employed Americans will become disabled for at least 90 days at some point in their career. Yet, lack of disability insurance is a common financial error.
- Adequate disability policies generally need to be purchased individually from an insurance agent. While some employers provide disability coverage, it is generally short-term and may replace only a small portion of a worker’s salary. In addition, if the employer pays for coverage, benefits are taxable.
- Disability insurance is especially critical for self-employed workers and those who lack the ability to “bank” employer-paid sick leave. Financial experts generally advise purchasing a policy to replace about two-thirds (60 percent to 70 percent) of a worker’s monthly income. Insurance companies usually don’t provide coverage above this or it would discourage people from returning to work.
- Two key features of disability insurance, that greatly influence its cost, are the definition of disability and the elimination period. “Own occupation” policies are more expensive because they kick in when you are unable to perform duties of the job for which you are trained — which means, even if you’re still able to do other types of jobs, but you are not able to do your chosen profession, then you can collect on the disability insurance. On the other hand, “any occupation” coverage defines disability as the inability to do any type of work. Many insurers also offer “split definition” policies that use an “own occupation” definition for several years, followed by an “any occupation” definition later on.
- The elimination (waiting) period is the number of days after a disability begins before benefits are paid. The longer the elimination period (for example, 90 days versus 30 days), the lower the premium for a specified amount (for example, $1,500 a month) of disability insurance.
- Read the fine print. Look for a disability insurance policy that is non-cancelable or guaranteed renewable and pays residual benefits to make up for lost income when a worker is unable to work at full capacity. For example, if an insured person goes back to work three days a week at 60 percent of full pay, the benefit would be prorated to reflect the actual amount of income lost.
- Review the recurrent disability clause that describes what happens if an insured person becomes disabled again from a preexisting disability. For example, if someone becomes disabled again from the same cause, say, within six months of returning to work, they may not have to wait for another elimination period.
- Consider purchasing a cost-of-living rider to protect the purchasing power of monthly benefits. Also check provisions related to disability benefits provided by an employer disability policy or Social Security. Sometimes income from these sources will be considered part of the policy benefit.
- Consider purchasing a policy for the remainder of your working life (until age 65, for example).
- Work with an independent insurance agent to shop around among competing carriers.
- If you are unable to qualify for disability insurance at an affordable price consider investing the amount that you would have paid monthly for premiums, to build up your emergency reserves.
- In a divorce decree, require an ex-spouse to purchase and maintain disability insurance if you are dependent on his or her income for support payments.
From Article by Adkins Insurance
You are 7 times more likely to become disabled before age 65 than to die, according to statistics and marketing research organizations. This startling statistic brings to light the importance of owning the correct type of insurance, even if you are young and healthy. Life insurance and disability insurance are very different, so how do you prioritize?
Life Insurance
Simply put, life insurance provides financial protection for your loved ones should something happen to you. You may also gain access to living benefits, such as cash withdrawals from Permanent type plans, or Living benefits that may be available to you in a Term plan should you become ill from a terminal illness.
You’ve probably heard of the different types of life insurance policies, for example term or permanent insurance. Term insurance policies provide protection for a set period of time. If you’re young and healthy, you may be tempted by the short-term security and lower prices of a term contract, but permanent insurance policies can often be the better deal in the long run.
Disability Insurance
To many, disability insurance is viewed as an unnecessary or unaffordable expense, and Social Security Disability will take care of them. Social Security Disability could take several years to receive any benefits and in most cases is not sufficient to a beneficiaries’ current needs.
Should you become disabled, your private disability insurance policy is designed to replace your after-tax income. Typically polices are written to replace 67% of your pre-taxed income. Disability policies generally provide monthly payments to you to cover your needs instead of covering specific expenses.
Types of disability plans are some short-term and long-term. Generally, short term policies are written for benefits from 2-5 years and Long-Term disability policies are to age 65. Your policy will describe the definition of disability and most polices will require you to be disabled for a set amount of time before you begin receiving your benefits, so be sure to take a good look at the specifics of your plan before signing any contracts.
In this episode, Charles Musgrove talks with nonprofit expert and consultant, Alyce Lee Stansbury about effective boards. Board members play a vital role in the success or failure of nonprofits. Alyce Lee talks about the importance of nonprofits in a community and she shares her tips on what should be done to enhance the success rate of a nonprofit board. Learn how to be a better board member and how to improve the board that you serve.
Other topics discussed on this episode:
- Importance and role of nonprofit sector
- Nonprofits are businesses [501c3 is a tax designation, not a business plan]
- Role and purpose of nonprofit Boards
- What to ask/consider before agreeing to serve on a nonprofit Board
- Do you have a passion for the mission and time to serve?
- Need for regular board self-assessment
- Importance of paying competitive salary for chief Executive
- Why Boards fail [i.e. good, bad & the ugly of board service; what can go wrong]
- What high performing Board members need to know/do to be effective & enjoy the experience
Alyce Lee Stansbury, CFRE, Founder & President of Stansbury Consulting, is a nonprofit expert, 25-year fundraising veteran, and seasoned advisor in nonprofit management and board development. She has raised millions of dollars and helped her clients grow fundraising results by over 200%, build high-performing volunteer boards, and exceed campaign goals by 45%.
She is nationally certified by Association of Fundraising Professionals as a Master Trainer in Fundraising, past President of the Big Bend chapter of AFP, and the chapter’s first recipient of the Outstanding Fundraising Professional Award. She has maintained the Certified Fund Raising Executive (CFRE) credential since 2002.
Alyce Lee is a well-respected, trusted advisor and sought-after speaker throughout Florida and the Southeast. She co-writes a weekly column called, “Notes on Nonprofits”, for the Tallahassee Democrat – USA Today Network. She is a founding Board member and Past Chair of the Institute for Nonprofit Innovation and Excellence in Tallahassee and has served on numerous state and local boards.
Top 15 Non-profit Board Governance Mistakes
Posted on October 5, 2009 by Ellis Carter
This list was started as the inaugural post to CharityLawyer Blog. The post struck a nerve, was mentioned by the Chronicle of Philanthropy, the Nonprofit Quarterly, and numerous bloggers and twitter users. San Francisco tax-exempt organizations lawyer and publisher of the Nonprofit Law Blog, Gene Takagi, reviewed the list and added five more governance mistakes from his own experience. The expanded list is instructive and therefore I have posted it in its entirety here.
- Failing to Understand Fiduciary Duties. When you volunteer to serve as a director or officer of a non-profit, you accept the responsibility to act with the duties of good faith, due care and loyalty. You also accept the potential liability for failing to fulfill those duties. Increased scrutiny from the I.R.S., Congress, state attorneys general, the Department of Justice, donors and the media require vigilance at every step. It is no longer sufficient to rubber stamp committee or staff recommendations or to simply “abstain” from dicey decisions. Today, board service comes with real responsibilities and real consequences for those that fail to live up to them.
- Failing to Provide Effective Oversight. Boards are entitled to delegate tasks to committees, officers, staff, or in certain cases, professionals, but only if they perform sufficient oversight. Oversight is commonly exercised through policies and procedures so long as the board ensures that the policies and procedures are actually followed. Common oversight mechanisms include review of financial statements and the annual Form 990 as well as the implementation of various governance policies. Popular governance policies for nonprofits include conflict of interest policies, executive compensation policies, travel and expense reimbursement policies, whistleblower policies, etc. Difficult tasks that require more time and focused attention can be delegated to committees. Common governance committees include those designed to oversee finances, investments, audits, and compensation.
- Deference to the Executive Committee, Board Chair or the Organization’s Founder. No one owns a tax-exempt non-profit. No one committee, director, or individual can control the organization. The executive committee, if one exists, is typically charged with acting on behalf of the board when the board is not in session and cannot be easily convened. It is, however, accountable to the full board and should not be permitted to operate as a “mini-board.” The chair’s primary duty is typically to preside over board meetings and to act as a liaison between the board and the chief executive. The chair does not have the power to override decisions of the board. Similarly, the founder may act as the chief executive and run the day to day affairs of the organization. The founder may also sit on the board, but even founders serve at the pleasure of the board. The board has a duty to review the performance and set compensation for the chief executive and if necessary, censure or even terminate the chief executive.
- Micro-managing Staff. For a non-profit organization with paid staff, once board members demand keys to the organization’s offices and start making direct demands on staff that report to the chief executive, the board has crossed the line. The board’s key duties are to provide oversight and strategic direction, not to meddle in the organization’s day to day affairs. Board members who cross this line are undermining the authority of the chief executive to their own detriment and should be prepared to quit their day jobs. Similarly, staff should not invite micromanagement by asking the board to take on day-to-day tasks that the staff should be handling. The size and budget of smaller organizations necessitates some blurring of these lines, but board members and staff should know their roles and attempt to adhere to them as much as possible.
- Avoiding The Hard Questions. It is can be uncomfortable to ask tough questions or to disagree with one’s fellow board members. However, group think rarely leads to sound decision-making. Often, the most valuable board members are the ones who, calmly and respectfully, speak their mind. It is important to set a tone that encourages a free exchange of ideas, both good and bad. Open, vigorous discussions about key issues should be encouraged. A board that passes every resolution “unanimously” should evaluate whether it needs to do more to encourage a thoughtful and open discussion.
- Insufficient Conflict Management. If a conflict of interest is with an insider, their family member or business, its not enough to simply disclose the conflict and have the disinterested directors approve the transaction. In such cases, the disinterested members of the board need to consider alternate arrangements that do not give rise to a conflict of interest. If after considering alternatives, the board still finds the transaction with the insider is in the best interest of the organization, then the board should carefully document the basis for the decision and the fact that the interested director did not participate in the deliberations or vote. The best practice is to follow the procedures outlined in the intermediate sanctions regulations to properly analyze and document the proposed transaction.
- Lack of Awareness of Laws Governing Tax-Exempts. Directors that hail from the for-profit world often assume nonprofits operate in a less-regulated environment. In reality, the opposite is true. Tax-exempt organizations enjoy an array of tax and other benefits. To ensure those benefits are not exploited, Congress and local governments have imposed additional legal requirements that tax-exempts must follow. It is essential that directors of tax-exempt entities be aware of the various federal, state, and local laws that apply to the organization. Many directors are unaware whether they are governing a private foundation, a public charity, a supporting organization, or another form of tax-exempt entity, all of which are subject to different limits on their activities. Board members should understand, at a minimum, the penalties they face for overpaying key employees or other insiders, for engaging in excessive lobbying or political activities, for accommodating tax shelter transactions, for making egregious bad bargains on behalf of the organization, the impact of failing to pass the public support test, etc. Ongoing board training and orientation for new board members is often the best solution.
- Operating with Outdated, Inconsistent Governing Documents. Over time, many organizations change their mission and purpose without updating their governing documents. Similarly, many organizations develop governance practices that do not comply with their original governing documents. For example, it is not uncommon to see bylaws that call for voting members although no member votes have ever taken place or bylaws with a term that calls for the cessation of the organization on a date that has long since passed. Frequently, these issues stem from copying another institution’s bylaws without regard to the distinctions between the organizations or current law. Encourage compliance by conducting regular reviews of the governing documents and checking the bylaws before electing additional officers or directors, creating additional committees, adopting amendments, etc.
- Airing Disagreements Outside the Boardroom. Every board’s motto should be “what happens in the boardroom stays in the boardroom.” Inherent in the duty of loyalty that all board members must adhere to, is an implied duty of confidentiality. Once an issue is settled by board vote, the board members who voted against the majority must present a united front. If a vote is so disagreeable that a board member cannot carry on in this manner, the board member should consider resigning. In extreme cases, if the board member believes the corporation’s rights are being violated, the board member could join together with other like-minded board members to bring a derivative suit to enforce the organization’s rights.
- Failure to Cultivate Board Diversity. The initial board is typically made up of friends and advisors of the organization’s founder. Over time, the initial board may reach out to their trusted friends and advisors to fill vacancies. This approach to board recruitment can lead to the “usual suspect” syndrome. This is where the same individuals who went to the same schools, belong to the same clubs, and hail from the same neighborhoods and professions are institutionalized onto an organization’s board. If your organization is run by a group of “usual suspects,” consider mixing it up by creating a matrix of skills, experiences, and backgrounds that would add valuable perspectives to the board. Those with law, accounting, and fundraising skills are obvious choices. Substantive mission- related skills are also important. For example, an educational organization may want to recruit a retired teacher or school administrator; whereas, a domestic violence shelter may want to include a policy expert, social worker, or someone who has been a victim of abuse.
Plus, Gene Takagi’s excellent additions:
- Recruiting and Selecting Board Members Without Due Care. We sometimes select friends, relatives, and business associates often because we believe that they will share our vision, support our views, and make meetings pleasant. And sometimes because we can’t find anyone else. We sometimes select influential and wealthy individuals because they will contribute substantial sums to the organization and connect us to their network of other influential and wealthy persons. All of this may be well and good, but only if we make sure that we select directors who are going to attend meetings, provide real oversight, and govern using their independent judgment.
- Failing to Educate and Motivate Board Members. If we’re not in startup mode, we may be stuck, at least temporarily, with a number of directors who regularly fail to meet their legal duties of care and loyalty. Amidst all the media attention on cases involving intentional misconduct, we should recognize that the vast majority of directors simply don’t understand what they are supposed to be doing and believe that they will not be held accountable for their inaction. It’s up to the president, chair, executive director, and really each board member to correct this lack of understanding. While this may be an ongoing (and seemingly Sisyphean) process, we can make some quick fixes. Set up a basic orientation process. Invite a nonprofit-exempt organizations lawyer to present to the board (directors’ ears tend to perk up when they hear the word “liability”). Regularly send out information to the board about the organization’s major issues (it’s okay to be repetitive if the issues remain outstanding) and how board members might help. Have the board conduct a SWOT (strengths, weaknesses, opportunities, threats) analysis on itself (not just the organization) and create an action plan based on the analysis.
- Failing to Document Actions Appropriately. Some of us adopt minutes that are virtual transcripts of board meetings. Others adopt minutes that only document actions without any mention of the process or deliberations. What’s proper? Well, it depends. But often what’s most appropriate lies somewhere between these two extremes. Documenting every discussion could create greater exposure for liability and makes it unlikely that minutes will be reviewed except in cases where we are looking for something specific. On the other hand, documenting only actions can result in a loss of institutional knowledge about why certain decisions were made and provide less evidentiary support of a board’s due care in making decisions. Documenting nothing is not an acceptable alternative, but it’s a common problem. Do we incorporate minutes of board committee meetings into our minute books? Do we even have minute books?
- Failing to Review Program Effectiveness and Efficiency and Take Appropriate Follow-Up Actions. Many of us board members understand that we are fiduciaries and have a responsibility to provide financial oversight. And we “know” that our charities are doing great work because the executive tells us so. But how do we really know this? And if charities exist to provide some sort of public good, and not to maximize profits, isn’t programmatic oversight just as, if not more, important than financial oversight?
- Failing to Hold Executives (and Nonparticipating Directors) Accountable. This one earned a retweet from NY Times philanthropy correspondent Stephanie Strom. How many of us give regular performance reviews to our executives? Do we just give pats on the back (which we should do whenever deserved) or do we also take a hard look at deficiencies and take corrective actions? Many nonprofits are transitioning to younger, less experienced leaders as the boomers start to retire or move to other positions. Mistakes happen and may happen more often with new leaders. How do we respond to this? Do we document errors in judgment, complaints, abuses of authority? Are we prepared to fire an executive even without malfeasance where he or she is just not getting the job done? And what about removing directors who don’t show up at meetings or otherwise fail to fulfill their governance responsibilities? Tricky stuff, but don’t we need to deal with it?
Ellis Carter is a nonprofit lawyer with Caritas Law Group, PC. To contact Ellis, call 602-456-0071 or email us at info@caritaslawgroup.com.
In this episode, host Charles Musgrove discusses employee terminations with attorney Scott Callen. There are many factors that the employer should consider before terminating an employee. Terminations are sensitive for both the employer and employee and it is a critical time in the life of the business and the individual employee. Make sure it is the right course of action and that the right steps are taken. Not doing so, could result in unnecessary pain and suffering to all parties involved. Listen to this episode for more nuggets of knowledge.
Below is an article published on-line by Inc. on this subject.
How to Fire an Employee Without Being Sued
Firing an employee may be a sticky subject, but by creating a plan of action and following procedure, you'll avoid lawsuits associated with terminating an employee illegally.
By Inc. Staff
Firing an employee may be a necessary act but it has the potential to be a legal minefield. Terminations can lead to legal claims based on a variety of potential allegations, including discrimination, retaliation, wrongful discharge, wage and hour liability, defamation, and so on. Mishandle firing an employee, or terminate someone in the heat of an argument without paving the groundwork, and your business and its employees could be paying for it for years to come.
And, yet, firing an underperforming or troubled employee may be the best move for your business. It may improve morale among better performers. It may rid the business of a cancer.
'Firing an employee is both the worst day of your life and the best day,' says Jerry Osteryoung, director of outreach at the Jim Moran Institute at Florida State University's College of Business. 'That's because when you let someone go it affects their family and their livelihood, and it's tough. But it's also the best day of your life because, normally, if you have to fire someone, that person has been a pain in the butt for a while, and it's time for them to go.'
In business, however, it's important to make sure that you prepare well before firing an employee and that you follow the law and your own company procedures. The following pages outline steps to lay the groundwork for firing an employee, holding a termination meeting, and following up after termination.
How to Fire an Employee: Prepare to Fire an Employee
The groundwork for an effective termination of employment should be laid long before the termination decision. 'The biggest mistake people make is they don't prepare for it. They don't work with the employee ahead of time to help the employee succeed so that firing is a last resort. People tend to put up with behavior until they say, 'I'm through,'' says Nancy M. Cooper, chair of the labor and employment group of Garvey Schubert Barer, a law firm based in Portland, Oregon.
A firing should never be a surprise. If you have worked with an employee to identify problems, goals, and performance metrics, that employee is going to know whether they measure up or not. 'Once you go through everything and see that the employee is still not meeting expectations, nobody is going to be shocked,' Cooper says.
The first step is to make sure you have documented your efforts with the following:
- The company's employment application
- An employee handbook describing unacceptable employee behaviors
- Policies describing the company's right to discipline and terminate employees
- Job descriptions or other documentations that specify performance expectations
- Performance appraisals
- Records of disciplinary counseling and formal disciplinary action
- Written documentation of the findings of any internal investigation related to the termination
Since these documents will be legally discoverable in the event a former employee sues the company, it is critical they be clearly written, accurate, and do not contain 'inflammatory' statements about the individual.
It may be best to consult with a human resources attorney before taking steps to fire an employee to make sure you are covering the bases. 'The number one thing you have to make sure of is that you don't violate any laws,' Osteryoung says. 'There are a lot of plaintiff's lawyers who love to sue businesses because they failed or did not follow the correct procedures in firing an employee.'
How to Fire an Employee: Think Through, and Review, the Decision to Terminate
An employee should never be fired on the spur of the moment, and especially not in the heat of anger, Cooper says. 'You want to take some time to reflect,' she adds. A decision to terminate employment should be reached only after careful review of all relevant facts and documents.
An important, but often neglected, step in the termination process is obtaining a thorough and independent review of the decision. Sometimes that involves calling in another set of eyes and ears – maybe the direct supervisor, a member of the human resources department, or in-house or outside legal counsel. 'If it's an incident, talk to people and make sure the employee you're focusing on is really the one to blame,' Cooper says.
The purpose of the independent review is to make sure that:
- The firing is justified by the facts
- The firing is legal under all applicable laws
- The decision to fire follows company policies and procedures, such as those in the employee handbook
- The decision to terminate is consistent with the company's handling of similar situations in the past, regardless of race, gender, age, etc. of the employee being discharged.
'You want an audit trail. You want to document everything,' Osteryoung says. 'You can't just say, ‘I've tried to talk to you 16 times already.' There are a litany of things you need to do.'
How to Fire an Employee: Hold a Termination Meeting
Even under the best circumstances, an employee discharge can be a difficult and stressful situation for the employee and the managers involved. 'More often than not the problem is that entrepreneurs wait too long to fire an employee,' Osteryoung says. 'If you have a problem employee, they don't get better. They can affect the morale of your whole workforce because others are thinking, ‘Why aren't you doing something about this problem employee?' It's like a cancer. The sooner you surgically remove it, the better.'
By following the steps below, managers can reduce their anxiety about conducting an employee termination and can help the employee deal with the termination in a healthy way.
Prepare for a termination meeting. A termination meeting should be carefully planned in order to minimize potential legal liability, protect employees and company property, and reduce emotional distress to the employee being discharged, experts say. Issues to consider include:
- Why hold a meeting?A termination meeting should be held face-to-face. Firing an employee via e-mail or text or over the phone is likely to anger the employee and contribute to feelings that they are being treated unfairly, Cooper says. By meeting in person, you are showing the employee respect and treating them the way you would want to be treated.
- Who should attend?Generally, at least two company representatives should be present. The employee should not be permitted to bring a lawyer, co-worker, or family member to a termination meeting. 'Always have a witness, preferably other management or someone at a higher level than the employee,' Cooper says.
- Where will the meeting be held? It is best to conduct the meeting in a private, neutral location, such as a conference room. If the office is a big, open area, then try to schedule the meeting after hours to provide the employee some privacy, Cooper says. The company representatives should be seated by the door so that, if the employee becomes hostile, he or she cannot block the exit, experts advise.
- What will be said during the meeting? A script should be prepared before the meeting so that the meeting can be kept short, not more than 5 to 10 minutes. 'Keep it factual,' Cooper recommends. 'The one who will be emotional is the employee.' The message should be simple: the employee is being terminated because they have failed to meet performance expectations or address other problems that you had already outlined with them.
- Are special security measures needed? In extreme situations, it may be appropriate to have security personnel standing by, depending upon how the employee is likely to react. At a minimum, have the employee's passwords, accounts, access to buildings, computers or other company assets disabled before the meeting to prevent the employee from doing damage to the business after they are fired.
- How will logistical matters be handled?Make sure to address how the employee's final paycheck will be delivered, how company property should be returned, and how long benefits will be continued.
- Will severance pay be offered in exchange for a release of claims? A company that does not have a severance plan subject to the Employee Retirement Security Income Act (ERISA) may want to consider offering the employee severance pay. Generally, severance should only be awarded if the employee agrees to sign a separation agreement that releases the employee from any claims against the company, Cooper says. 'If you're just paying severance out of the blue and you don't get a signed release of claims, you have no protection,' she says. She advises against issuing severance unless it is a risky termination because that sets a precedent for other employees to expect severance if they are fired.
How to Fire an Employee: Follow Up After the Firing
The terminating managers should attempt to keep the meeting professional, brief yet complete, under control, and humane. You may want the employee to be escorted back to their office after the meeting to collect personal belongings and then be escorted out of the building.
One of the most important things to do in the termination meeting is to treat the employee with dignity and respect. This can be demonstrated by showing sensitivity to the employee's reactions, wishing the employee success in future endeavors, and being willing to speak with the employee after the meeting to answer questions about his or her transition out of the company. The terminating managers should also write down what was said at the meeting, in the event of a lawsuit.
Employee discharges don't end with the termination meeting. Several tasks have to be effectively managed after the termination, including:
- Informing remaining employees on a need-to-know basis about the termination
- Handling reference requests appropriately, consistently, and in a way that will reduce the potential for lawsuits
- Dealing with claims for unemployment insurance benefits or other benefits so as not to trigger further problems for the organization
These post-termination activities should be handled with the same degree of planning and care as the actions before and during the termination meeting. 'Once you let an employee go, you immediately have to have a staff meeting with those who need to know,' Osteryoung says. 'Tell the staff briefly what happened and why. You need to stop the rumor mill very quickly. But you don't want to provide too many specifics.'
On this episode, Charles Musgrove and guest Taylor Hodges from Southern Capital discuss a variety of topics including:
- The 529 College Savings Plan and how the 2019 SECURE Act has expanded the use of the plan assets
- The Safe Harbor provision
- Non-ERISA plans or the Golden Handcuff and practical examples
- Distributions from inherited retirement plans
-
Balance of tax deferred vs after tax savings
-
2019 SECURE Act:
- Small business owners will receive a tax credit for establishing a retirement plan
- Additional tax credit for adopting auto enrollment
- New provisions to allow part-time employees with less than $1,000-hours to join 401K
- Elimination of stretch provisions for beneficiaries
- With a few exceptions, most non-spouse beneficiaries will have 10 years to withdrawal 100% from the inherited IRA – No RMDs during 10-year window
- Will count as income to beneficiary – Shift assets to tax-free?
- RMD age pushed back to age 72
- Only for people who turn 70 ½ after January 1, 2020
- Everyone should check to make sure their beneficiaries are updated
- If beneficiary is a Trust, understand how it may effect beneficiary amounts and taxes on distributions
- With a few exceptions, most non-spouse beneficiaries will have 10 years to withdrawal 100% from the inherited IRA – No RMDs during 10-year window
- Small business owners will receive a tax credit for establishing a retirement plan
-
Executive Benefits
- Goal for business owners is to attract, retain and reward good employees
- ERISA – 401K, SEP, ESOP
- Non-ERISA – NQDC, Phantom Stock, Golden Handcuff
- Different for 8(a) companies due to program restrictions on income and net worth
- Specialize in 8(a) – Unique planning process
- Goal for business owners is to attract, retain and reward good employees
-
Articles
- The Hierarchy Of Tax-Preferenced Savings Vehicles For High-Income Earners:
- https://www.kitces.com/blog/hierarchy-tax-preference-savings-vehicle-roth-high-income/
- Tax Brackets Resource:
- https://www.nerdwallet.com/blog/taxes/federal-income-tax-brackets/
- 2019 SECURE Act:
- https://www.kitces.com/blog/secure-act-2019-stretch-ira-rmd-effective-date-mep-auto-enrollment/
- Don't Die Yet: New U.S. Law Will Muddle Estate Plans:
- The Hierarchy Of Tax-Preferenced Savings Vehicles For High-Income Earners:
https://www.kitces.com/blog/tax-rate-equilibrium-for-retirement-taxable-income-liquidations-rothconversions/
In this episode, Charles Musgrove and guest Taylor Hodges with Southern Capital discuss the different types of retirement plans. From the simple to the complex, the plans offer a variety of options relating to participation, amount of contributions, access to the cash prior to retirement and many more. The 2019 SECURE Act is also discussed about how it impacts the Retirement Plans.
Highlights of the types of Retirement Plans:
- Solo 401K - $19,500 / $6,500 catchup + up to 25% of business income for matching
- Max is $57,000 total contribution + $6,500 for employee catchup
- Can be used for spouse in business to double contribution amounts
- Roth option available, solo 401K usually more expensive to setup and maintain
- SEP IRA – 25% of income up to $57,000/yr.
- Matching contribution for all employees – very important
- LLC is based on net income / S-Corp is based on salary
- Usually inexpensive to setup and contributions are made by the employer only
- SIMPLE IRA (Saving Incentive Match Plan for Employees) - $13,500 / $3,000
- Usually requires employer contribution or match
- Usually two-year hold on the account for rollover and higher penalty for early withdrawal (25% instead of 10%)
- Less expensive to setup and maintain than 401K
-
401K - $19,500 / $6,500 for 2020
- Multiple features and contribution structures
- Must understand plan testing – cannot discriminate
- Owners and key employees cannot own 60% of plan assets
- Owns 5%/ owns 1% and makes $150k +/ officer making $175k +
- Must be fixed in calendar year
- Safe Harbor Provision – employer matching for employees and allows employer to avoid plan testing
- 3 matching options:
- Non-elective – 3% flat
- Basic Match – 100% of first 3% / 50% of next 2%
- Enhanced Match – 100% of first 4%
- 2020 IRA and Roth IRA contribution limits: $6k / $1K catchup
- Income phase out for IRA deduction: single $65k-$75k / $196k-$206k MFJ
- Income phase out for Roth IRA: single $124k-$139k / $196k-$206k MFJ
- 3 matching options:
- Owners and key employees cannot own 60% of plan assets
-
Articles
- The Hierarchy Of Tax-Preferenced Savings Vehicles For High-Income Earners:
- https://www.kitces.com/blog/hierarchy-tax-preference-savings-vehicle-roth-high-income/
- Tax Brackets Resource:
- https://www.nerdwallet.com/blog/taxes/federal-income-tax-brackets/
- 2019 SECURE Act:
- https://www.kitces.com/blog/secure-act-2019-stretch-ira-rmd-effective-date-mep-auto-enrollment/
- Don't Die Yet: New U.S. Law Will Muddle Estate Plans:
- https://www.kitces.com/blog/tax-rate-equilibrium-for-retirement-taxable-income-liquidations-rothconversions/
- The Hierarchy Of Tax-Preferenced Savings Vehicles For High-Income Earners:
In this episode, host Charles Musgrove discusses the $15 minimum wage ballot initiative with the Samantha Padgett, General Council with the Florida Restaurant and Lodging Association. We talk about the status of this option being included on the November 2020 ballot, the potential impact to the hospitality industry in Florida if it passes and many more factors around this topic that will surely become more hotly debated as the November election date approaches.
To provide some context to the subject, below is a recent article published by the Wall Street Journal.
Small Business and the Fight for $15
A new study shows how a rising minimum wage hurts little companies.
By
The Editorial Board
Dec. 15, 2019 4:17 pm ET
Here’s another volley in the debate over the “Fight for $15”: As the federal minimum wage rose from 1989-2013, small businesses in affected states suffered “lower bank credit, higher loan defaults, lower employment, a lower entry and a higher exit rate.”
That’s according to a study last week from the National Bureau of Economic Research. The analysis by three professors at the Georgia Institute of Technology exploits the fact that many states—now more than half—set their own minimum wages higher than the federal standard. This provides a natural control group. When the nationwide minimum goes up, how do the states where it applies fare in comparison?
Start with data on one million loans, averaging around $100,000, made through the Small Business Administration. For each $1 increase in the minimum wage, the authors estimate that loan amounts dropped 9% more in the affected states. The risk of default was 12% higher. The average credit score for small companies in those states showed “a sharp decline.” Business entries fell 4% in the year the minimum wage went up. A year later, business exits rose 5%.
These results, the authors say, hold throughout various statistical analyses, such as while controlling for local economic conditions. The effects are stronger in businesses like restaurants and retail, which rely on low-skilled labor. Smaller and younger companies are more severely affected as well. In short, the authors conclude: “We find that increases in the federal minimum wage worsen the financial health of small businesses in the affected states.”
By now some readers are probably thinking: Well, duh. It does not take a University of Chicago Ph.D. to suspect that raising the price of labor will make it harder to sustain a small, labor-intensive business. Don’t forget that there’s no cost-of-living adjustment: A $15-an-hour federal minimum wage would apply equally to a French bistro in Manhattan and a pizza joint outside Manhattan, Kan.
Many progressives still insist this is a free lunch, and most of the Democratic presidential candidates support raising the federal minimum wage to $15. That includes the so-called moderates, like Amy Klobuchar and Mike Bloomberg. They ignore the millions of small businesses that are trying to make payroll and grow.
The churn of companies with fewer than 10 employees, this study says, accounts for “more than 70% of job gains and losses in 2018.” No matter what politicians say, inhibiting that dynamism hurts the smallest businesses and the least-skilled workers the most.
In this episode of Business Matters, host Charles Musgrove discusses the Top 10 List for Starting Your New Business with Jon Jopling, entrepreneur and business operator. From selection of your business name to setting up your accounting system, this episode is full of valuable information that is helpful to many business managers and owners. Here is the list of topics in this episode:
The Top 10 List for Starting and Running a Business
- Business Name
- Select Entity Type
- Register with SunBiz
- Register with IRS
- Register with DOR for unemployment and sales tax
- Purchase domain
- Set up bank account
- Order checks that will work for accounting system
- Obtain credit card to use exclusively for business
- Set up accounting system and processes
- Set up payroll
- Purchase insurance
- Monitor and reconcile cash and credit card activity
This is Part 2 of our podcast with insurance industry expert Craig Mugglin. In this episode, we talk about workers compensation coverage, exemptions for owners, the different requirements for coverage for construction businesses and other types of businesses. Find out if owners should exempt themselves from coverage, the minimum number of employees that require workers comp coverage and many other important factoids about workers comp insurance.
Also, we take a closer look at business interruption coverage and tips on how to maximize coverage and minimize the cost of insurance coverage. This coverage could be the difference in business continuation or total closure. With the hurricanes and storms that are prevalent in the State of Florida, this is coverage that is a must for many businesses.
In this episode, Charles Musgrove talks with insurance industry expert Craig Mugglin about coverage that often gets overlooked or risk that is under-insured. One of the newer insurance 'types' is Cyber Insurance. The number and magnitude of cyber attacks are ever increasing along with the cost to recover from the hacks. Costs suffered by the company to replace, recover and rebuild can be very high and the costs to restore the company's clients and other victims of the attack can be even greater. We talk about what is covered and what is not along with the cost for cyber coverage. Should the Cyber coverage be included with another common policy issued or should you have a separate policy? Check it out.
In this episode we also discuss business interruption coverage, including cost of coverage, exclusions and whether this insurance is included in the 'package' policy or a separate, stand-alone policy.
Check out this episode for important information about protecting and insuring your business assets.
In this episode Charles Musgrove talks with attorney Kris Dunn about the lessons to learn from the Jeff and MacKenzie Bezos divorce. Yes, most people don't have the net worth of Bezos' $180 billion to settle in a divorce, but there are still many tips that we can apply in our situation. Check out this episode for a lively and entertaining discussion with many nuggets of knowledge.
In this episode host Charles Musgrove talks with attorney Kris Dunn about how to best prepare for the effects of a divorce on business continuation or valuation in determining marital assets. How can a prenuptial and a post-nuptial be used to protect the business ownership and plan for a possible divorce by husband and wife that own and work in the business? How can divorce impact business continuation? Is your business ready for a divorce of an owner? Find out tips to help you avoid a bad situation.
In this episode we talk with David Balmer from Dale Carnegie Training. Old School to New School ... tried and proven techniques that have been around a long time are still the key to success. We talk about management training and how to improve success through improved communications. Find out tips on how to improve culture, morale and productivity and reduce employee turnover. Does your business have the right leadership approach? Find out valuable tips in this episode.
In the follow-up episode with Bill Wilson about how to improve business outcomes, we look closely at the 'why not' of making changes to achieve improved business outcomes. There are reasons why changes are not made, some valid, some not. We also talk about 'Who' needs to be the focus of making the changes to realize improvements. The 'Who' can be inside or outside the organization. Check out this episode featuring Bill Wilson the author of 'The Magic of What, Who, How & Why Not, the Four Keys to Improved Business Outcomes'. Bill will also talk about the starting point for the Farmers Insurance University and his involvement. Check out this episode for valuable business knowledge and an entertaining presentation, including a magic trick.
In this episode, we talk with Bill Wilson about how to improve business outcomes through training, hiring and changing processes within an organization. Bill has great experience with both large, well known companies to the small mom and pop company. Bill talks about how his team worked with Farmers Insurance to reshape their training program, compensation plan and hiring process and how these changes dramatically improved net profits and company morale. The changes they made lead to the creation of the Farmers Insurance University. Bill is also the author of "The Magic of What, Who, How & Why Not, the Four Keys to improved Business Outcomes" which is the result of his years of practical implementation of the program. Check out this episode for useful information and an entertaining discussion.
In this entertaining and informative episode, host Charles Musgrove discusses with attorney Nicholas Fugate the options available for how to own assets. Find out which option is only available for married couples and why this selection will maximize asset protection. Asset protection is the primary objective of making the right choice on how to own assets. Listen for tips on how to get the best protection.
In this episode, we also discuss the highlights for succession planning for the small business and the challenges of determining 'value' of the business.
A frequently asked question from owners of new and old businesses is about the type of entity that should be selected. Should it be an LLC ... single member or multi-member, or and S-Corp ... or a C-Corp? Consideration should be given to legal factors and tax factors before making the final decision about entity selection. In this episode, we talk with attorney Nicholas Fugate about the entity selection process and we even discuss whether your entity should be set up in Delaware, since it does have 'business friendly' rules.
In this episode we talk with Luke Wolkers from the Rogers Benefit Group about the new health insurance plan types available for the small business. Recent legislative changes in the State of Florida greatly improve the ability for the small business to receive refunds based on claims experience. We also discuss the popular teladoc plans and how they save time and money.
Back for another episode on sales tax, attorney Steve Hogan with the Ausley McMullen law firm discusses the audit process, how the business should communicate with DOR and likely sales tax items that the auditor will look for. When you get the notice of audit, you are on the clock. Listen and and learn for another informative and entertaining episode on sales tax.
Also, we discuss commercial rental tax issues and the fact that Florida is the only state with a commercial rental tax.
Steven Hogan of the Ausley McMullen law firm discusses sales tax issues for multi-state businesses. Sales tax as you once knew it in the pre-Amazon days was changed forever in this landmark decision. It dramatically expands the states' power to collect sales tax for sales from out of state businesses. See how the 'Amazon' business model had a date with destiny in this ruling.
Learn more about how to protect your electronic data, how to keep the Trojan Horse out in this Episode II on Cyber Security. Charles Musgrove continues the discussion with Ben Graybar, banker and cyber security expert about how to best guard your computer, network and accounts from the dark web attacks.
Learn how to prevent and protect against cyber security breaches as host Charles Musgrove discusses the latest news and tips with Ben Graybar, VP Hancock Whitney. The content for this subject is discussed on 2 episodes of Business Matters. Listen for an entertaining and informative discussion.
Host Charles Musgrove and attorney Scott Callen discuss the consequences and available responses to negative reviews or posts on social media. False claims, real claims and opinions can all have a significant impact on a business. In this session we discuss key points to help the business navigate a real-time issue on the business playing field.
Charles Musgrove and guest Nicholas Fugate discuss the need for wills, trusts, power of attorney and much more. Check out this episode to learn how it all works and the relationship of wills, trusts and corporate documents like operating agreements and stockholders agreements.
Host Charles Musgrove and guest Scott Callen discuss the impact that legalized marijuana has on the work place. Federal laws and State laws conflict, employee and employer perspectives potentially diverge and present a land mine for the employer to navigate. Listen for an entertaining and informative discussion and learn tips on the issue and what the employer should do to prepare and protect for what could happen.