MPL General Counsel Corner – ….and now on the first tee
Just like the States are going through stages of reopening, its citizens are doing the same thing. However, I would liken it more to the 7 stages of grief (shock, denial, anger, bargaining, depression, testing and acceptance).
In Pennsylvania, many business owners are in the anger phase. The Auditor General announced yesterday that he would be looking into the Governor’s waiver process. Meanwhile, in response to a Supreme Court petition to halt enforcement of the stay-at-home order, Justice Alito has ordered PA to respond.
These are just a few examples of many citizen-driven actions that are popping up all over the Country. It will be an interesting next couple of weeks/months as the reopening phases roll forward.
With many States allowing more activities today, I hope that you can get out an enjoy what looks to be a nice weekend (at least in the Northeast). Here in PA, marinas and golf courses are finally open for business……and now on the first tee, hopefully, you.
Here are some other things that may be important or relevant for you:
- IRS Notice 2020-32, the battle lines are drawn: I read through this release a few times and it definitely cured my insomnia. However, it is important to understand that the language in this release seems to run counter to what is in the CARES Act. Chad Bumbaugh, from Stambaugh Ness, provided a good rundown:
- This notice disallows the tax deductions for wages, rents, utilities, and other expenses funded with forgiven PPP loans. While the CARES Act stated that forgiveness would not be includable in gross income the IRS, by denying these deductions, has made the forgiveness taxable, albeit indirectly. The forgiven PPP proceeds are not included in gross income but, because of the foregone deductions, end up in taxable income which is the most important of those two metrics.
- As it stands this seems to be “a case of two governmental agencies working against each other” as a colleague put it. Perhaps the parties will find a way to come together to revise the Code in a manner that more closely aligns with the spirt of the PPP loan detailed in the CARES Act.
- New PPP Interim Final Rule – Corporate Groups and Non-Bank and Non-Insured Depositary Institution Lenders –
- Can a single Corporate group receive unlimited PPP Loans? – Businesses that are part of a single corporate group cannot in the aggregate receive more than $20M in PPP loans. This rule applies to any loan that has not been fully disbursed as of 4/30/2020. If a Corporate Group has received funds that have exceeded this amount, they must notify their lender or they may forfeit loan forgiveness eligibility.
- Non-Bank and Non-Insured Depositary Institutions are eligible to be a lender in the PPP with certain conditions being met.
- Main Street Lending Program Update and Expansion: The Federal Reserve updated and expanded the Main Street Lending Program yesterday through revised term sheets and FAQ. This could be a good alternative to the PPP loan or EIDL program, albeit the terms are not as favorable. The basic additions are as follows:
- The program is now open to companies with up to 15,000 employees or $5B in revenue, versus the prior 10,000 employee and $2.5B in revenue threshold.
- A third lending option , the Main Street Priority Loan Facility(MSPLF), is available for lenders willing to share more of the burden with the Fed.
- For the Main Street New Loan Facility (MSNLF), the minimum size has been reduced to $500,000 from $1,000,000.
- For the Main Street Expanded Loan Facility (MSELF), the minimum loan size increased to $10M from $1M and the max loan size was raised to $200M from $150M.
- Upcoming Webinars and Helpful Resources
Please see all of our prior updates at the this link.