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Category: Corporate and Taxation

PPP Update - Summary of August 24th Interim Final Rules (“IFRs”)

Posted September 7, 2020 in Mitchell F. Green, Robert M. Kramer, Asset Protection, Corporate and Taxation, Estate Planning and Probate, News
After more than a month of silence, on the part of the SBA, they issued new FAQs on August 4, which provided some additional guidance and clarification, most of which was not borrower friendly! More recently, on August 24, the SBA issued new IFR’s, which provided additional guidance and clarification, as both borrowers and lenders prepare for the loan forgiveness process. While the IFR’s provided additional needed clarification, new guidance, as same pertains to certain related party transactions, are patently unreasonable and make little sense, whatsoever. Below are the highlights from the new IFRs. Following the highlights is a deeper dive into specific issues addressed, relative to owner compensation, limitations on forgiveness for related-party rental payments and attributable to shared and sublease rental arrangements. The highlights of the IFRs are as follows: Limits on the amount of owner-employee compensation that can count towards forgiveness only apply to shareholders who own 5% or more of an S or C Corporation. No clarity was provided for partners in a partnership. Thus, arguably, a partner owning any percentage may be subject to the owner-employee compensation limitations! As a reminder, these owner-employee compensation limits are as follows: For the 8 weeks period, the lesser of: (1) $15,385 or (2) 15.385% of 2019 compensation; and for the 24 week period, the lesser of: (1) $20,833 or (2) 20.833% of 2019 compensation. For non-owner employees, the limits are, for the 8 week period, $15,385 and, for the 24 week period, $46,154. Additionally, for owner-employees, forgiveness for retirement plan contributions for such owners are now limited to 20.833% of the 2019 retirement plan contribution amount, for those contributions made during the applicable covered period.

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HOW TO TOGGLE LARGE RETIREMENT BENEFITS TO YOUR HEIRS

Posted September 4, 2020 in Mitchell F. Green, Robert M. Kramer, Asset Protection, Corporate and Taxation, Estate Planning and Probate, News
Here is the scenario.  Herbert, age 80, has $3,000,000 in his retirement plan. He has around $7,000,000 in other assets.  His wife, Wilma, died recently. Herbert and Wilma have two sons, one a high-risk doctor; the other a real estate developer who has personally guaranteed several projects. Herbert has four grandchildren, two from each son. Herbert is aware that under current law, there is no Estate Tax issue for him because of the approximate $11,600,000 Exemption plus the unused Exemption from his wife. He knows that on January 1, 2026, the Estate Tax Exemption will be cut in half.  He is also aware that if the Democrats get back in control in 2021, this reduction is likely to be accelerated to 2021 or lowered even more. The flat 40 percent Estate Tax rate could increase. Herbert also knows that IRA distributions, etc. are subject to Income Tax as well. To make things even more complicated, beneficiaries of qualified retirement plans, IRAs, etc., with few exceptions, must receive their monies by December 31 of the tenth year after the death of the participant or IRA owner.

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PPP Update – New SBA FAQs

Posted August 16, 2020 in Mitchell F. Green, Robert M. Kramer, Asset Protection, Corporate and Taxation, Estate Planning and Probate, News

After more than a month of silence, on the part of the SBA, they issued new FAQs on August 4, which provided some additional guidance and clarification, most of which was not borrower friendly! Below are the highlights from the new FAQs. Following the highlights is a deeper dive into specific issues addressed, relative to forgiveness for health insurance and retirement benefits and owner compensation, whether owners of a C Corporation, S Corporation, Partnership, as well as for those self-employed. The highlights are as follows:1.  Scanned Copies, E-Signatures and E-Consents allowed to be used. This is intended to simplify the documentation requirement part of the forgiveness application, especially in light of the ongoing pandemic. 2.  Interest is only owed on portion of loan that is not forgiven, and payments are not required to be made until SBA remits the forgiveness amount to the lender. It is expected that banks will have 90 days to review forgiveness application and, thereafter, the SBA will have 120 days to determine forgiveness and submit the proceeds subject to forgiveness to the bank. 3.  Forgiveness not permitted for healthcare and retirement benefits accelerated from periods outside of the Covered Period. 4.  Owner compensation limitation ($20,833, based on a 24-week forgiveness period) applies cumulatively across all businesses. This is a significant limitation as, previously, borrowers who were owners of various businesses were of the belief that the owner compensation limitation applied on a per business/entity basis!

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PPP Funding Extended to August 8! What’s Next?

Posted July 6, 2020 in Mitchell F. Green, Robert M. Kramer, Asset Protection, Corporate and Taxation, Estate Planning and Probate, News

Late Wednesday, Congress voted to extend funding for the Paycheck Protection Program (PPP), which was scheduled to end on June 30, until August 8. It was signed into law on the 4th of July. To date, the PPP has distributed over $500 billion in forgivable loans to more than 4.7 million American businesses. This extension will give many small businesses, which did not initially file for the PPP, additional time to evaluate their needs. With PPP money already running low for many borrowers which availed themselves of the funding and the ongoing  spread of the coronavirus continuing threatening their business, there appears to be some consensus in Washington, as to what to do with the $125 billion that remains in the program. In recent weeks, lawmakers have been increasingly voicing support for the Prioritized Paycheck Protection Program Act (P4), which, among other things, would further extend the application deadline for PPP loans to Dec. 30, or longer. The final deadline as well as administration of P4 would be left up to the SBA. P4 would be open only to companies that have already exhausted or are about to exhaust their PPP loans. It calls for stricter eligibility requirements and creates additional carve-outs for companies hardest hit by the pandemic. Publicly traded companies would be barred from participating.

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New PPP Rules Answer 8/24 Week Question; Others Still Remain!

Posted June 29, 2020 in Mitchell F. Green, Robert M. Kramer, Asset Protection, Corporate and Taxation, Estate Planning and Probate, News

On June 22, the SBA released new Interim Final Rules (IFR) relating to Loan Forgiveness. The IFR updates prior IFRs to conform to the PPP Flexibility Act (PPPFA), specifically relating to the maturity of PPP loans, the deferral of PPP loan payments, and the PPP loan forgiveness process.

The highlights of the IFR are as follows:

1.  Borrowers can file for forgiveness during the 24-week period immediately after they have spent their PPP loan proceeds on “eligible expenses.” They do not have to wait until the end of their 24-week period, which is what was originally thought under the PPPFA. As addressed in a prior Legal Beat, under the PPPFA, borrowers who received their loans on or after June 5, 2020 have a 24-week forgiveness period, while those who received the loan prior to such date, could elect, instead, an 8-week forgiveness period.

The IFR specifically provides that a borrower may submit a loan forgiveness application any time on or before the maturity date of the loan – including before the end of the covered period – if the borrower has used all of the loan proceeds for which the borrower is requesting forgiveness. So long as a borrower has spent all of their loan proceeds, they will be able to apply for forgiveness at any point.

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