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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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PPP Update – PPP Flexibility Act, New Interim Rules and PPP Loan Forgiveness Application

Posted June 21, 2020 in Mitchell F. Green, Robert M. Kramer, Asset Protection, Corporate and Taxation, Estate Planning and Probate, News
As addressed in previous Legal Beats, the Payroll Protection Program (PPP) Flexibility Act included a number of revisions to intended to increase the likelihood that borrowers will receive full loan forgiveness. More recently, new interim rules, together with a new PPP loan forgiveness application, both issued by the SBA, provide additional guidance, further increasing the likelihood of loan forgiveness! The highlights of these pronouncements include the following: Extension of the 8-week covered period applicable to loan forgiveness to 24 weeks (borrowers that received loans prior to June 5th, 2020, the date of enactment of the PPP Flexibility Act, can elect to use the original 8-week period covered period). The maximum allowable cash compensation (including salary, wages, and tips) eligible for forgiveness is $100,000 annualized per employee (equivalent to $15,385 per employee if the 8-week covered period is selected or $46,154 per employee if the 24-week covered period is selected). 

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I DON’T CARE IF MY COMPANY GETS SUED…I WILL JUST FORM ANOTHER ONE-BANKRUPTCY- PART 5

Posted June 15, 2020 in Robert M. Kramer, Asset Protection, Corporate and Taxation, Estate Planning and Probate, News

This Part 5 of our bankruptcy series.  So far, we have covered what you need to know if the event of bankruptcythe premise of bankruptcy in the era of COVID-19, protecting your LLC and/or Limited Partnership, and what to do with a lease.

Many people are under the impression that they are free to form a new company at any time to cut off legal problems with an old company.

This gets into an area in the law known as “successor liability.” When a business is sold, it depends upon what was sold and whether or not the successor expressly or by implication, accepted the old company’s liability.  If just the assets were sold, ordinarily the purchaser has not assumed the liabilities.

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Treasury/SBA Clarification on PPP Flexibility Act

Posted June 12, 2020 in Mitchell F. Green, Robert M. Kramer, Asset Protection, Corporate and Taxation, Estate Planning and Probate, News
U.S. Treasury Secretary Steven T. Mnuchin and Small Business Administration (SBA) Administrator Jovita Carranza issued a joint statement addressing and clarifying various aspects of the Paycheck Protection Program (PPP) Flexibility Act. SBA, in consultation with Treasury, will promptly issue rules and guidance, a modified borrower application form, and a modified loan forgiveness application implementing these legislative amendments to the PPP.  These modifications will implement the following important changes:

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Paycheck Protection Program Flexibility Act – A Deep Dive

Posted June 8, 2020 in Mitchell F. Green, Robert M. Kramer, Asset Protection, Corporate and Taxation, Estate Planning and Probate, News

The Senate has approved a bipartisan measure that would give more time and flexibility to employers who receive forgivable loans from the Small Business Administration's Paycheck Protection Program (PPP), sending the House-passed bill to President Donald Trump, who is expected to sign it. The PPP Flexibility Act (Act) passed the Senate by unanimous consent, meaning no senator objected or demanded a vote. The House previously approved the measure with a 417-1 vote, but it stalled as several Republican senators raised concerns about a variety of unintended consequences for the $660 billion program meant to sustain small businesses and nonprofits and their employees while the pandemic locked down much of the U.S. economy. The Act gives employers 24 weeks to spend the money and have the loans forgiven, tripling the current covered period of 8 weeks. While an earlier version of the bill would have eliminated any requirement about how much companies must spend on payroll, the final version instead lowers the threshold from 75% to 60%. The following are the highlights of the Act:

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BREAKING NEWS! – Payroll Protection Program Flexibility Act Passes House and Senate

Posted June 4, 2020 in Mitchell F. Green, Robert M. Kramer, Asset Protection, Corporate and Taxation, Estate Planning and Probate, News
As reported in a recent Legal Beat, the U.S. House, last week, overwhelmingly passed the Paycheck Protection Program (PPP) Flexibility Act, by a vote of 417-1. Yesterday, the Senate passed the House bill. This bill provides new flexibility to PPP borrowers in several key aspects.  Borrowers can apply for a PPP loan through to December 31, 2020. However, Senator Ron Johnson convinced the Senate leadership to sign a "letter of intent" that the PPP program not be automatically reauthorized through the end of the year. "Put that letter in the Congressional Record so that we are certain that we're not reauthorizing this or authorizing it through Dec. 31, that the authorization does end June 30," Johnson said. --Instead of an 8-week period to spend PPP funds, borrowers have a 24-week period after the PPP loan is approved or until the end of 2020 (whichever comes first) to spend PPP funds and qualify for loan forgiveness. --The requirement to spend 75% of a PPP loan on payroll costs for maximum loan forgiveness has been reduced to 60%. --For new PPP loans approved after the law is passed, the loan term is 5 years. (Existing PPP loans would still have a loan term of 2 years.)  --Borrowers can defer payroll taxes on PPP loan proceeds used for payroll. I will provide more details on the PPP Flexibility Act in a future Legal Beat.   

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