On June 3rd, the U.S. Senate passed the “Paycheck Protection Program Flexibility Act” (the “Flexibility Act”) which had been previously passed by the House of Representatives on May 28, 2020. It is expected that President Trump will sign the legislation today, June 4th.  The Flexibility Act provides a number of modifications to the Paycheck Protection Program (“PPP”) provisions of the CARES Act, which will significantly increase the forgivable loan amounts of PPP borrowers.  Arguably, the Flexibility Act turns the PPP into more of a small business subsidy/assistance program, rather than a true paycheck protection program.

The Flexibility Act includes the following changes to the PPP:

May 14, 2020

Yesterday the Small Business Administration (SBA) issued updates to its Frequently Asked Questions (FAQs) guidance on the Paycheck Protection Plan (PPP) Loans, and added Questions/Answers (Q&A) 45 and 46, with the latter Q&A being directly related to the certification issues, and to the corresponding May 14th deadline for the return of funds as a “safe harbor” from civil and criminal penalties relating to the certification of need.

As previously reported, the PPP applications required borrowers to certify that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.”  Until its issuance of this Q&A, the SBA’s guidance suggested that it would seek to impose civil and criminal penalties relating to the certification as a first resort, if it determined that the loan was unnecessary.  In doing so, the SBA induced a sense of fear; and then further induced a sense of urgency by offering the safe harbor from such penalties, allowing borrowers to return the funds on or before May 7th to avoid such penalties.  Such deadline was further extended to May 14th.

By Michael Mills and Elaine Yandrisevits

Taxing jurisdictions continue to assess how to respond to the COVID-19 pandemic, with state and local jurisdictions being challenged by budget limitations.  In the forefront of most people’s minds is the tax deadline for personal income tax returns normally due on April 15th.  The following is an updated overview of the tax payment and filing deadlines applicable to our region:

As most of you know, last night the U.S. Senate passed the “Coronavirus Aid, Relief and Economic Security Act”, being referred to as the CARES Act, which is now being sent to the House of Representatives for a final vote.  It is expected that the House will pass the measure without further changes, and that it will be signed into law by the President.  More details will be provided as we move along, but broadly speaking the CARES Act provides the following benefits and stimulus to U.S. small businesses and individuals:

On Friday, March 20, 2020, Treasury Secretary Mnuchin stated, via Twitter, that the federal government is “moving Tax Day from April 15 to July 15,” and that “all taxpayers and businesses will have this additional time to file and make payments without interest or penalties.”  Though the U.S. Treasury and Internal Revenue Service have not yet issued any official written pronouncements, Secretary Mnuchin indicated that he was tweeting at the direction of President Trump.  

On December 22nd, President Trump signed into law the Tax Cuts and Jobs Act, which will take effect on January 1st.  This legislation will have far reaching implications for both individual and corporate taxpayers.  The attached analysis and charts provide an overview of some of the key changes made by the new Act, along with some planning considerations between now and year-end.

Tax Cuts and Jobs Act

Last week Congress passed the “Tax Increase Prevention Act of 2014,” which President Obama signed into law on Friday December 19, 2014.  Referred to as the “extenders package,” it extends certain tax provisions that had expired on December 31, 2013.  The extension of almost all provisions is through December 31, 2014, which is of course a very welcome development for those who will see benefits relating to their 2014 activity.  However, for those who have been waiting to take action until the passage of extender legislation, it leaves very little time to get things done. 

The more universally applicable provisions which have been extended are summarized below.

The U.S. Supreme Court finally rendered its decision in U.S. v. Quality Stores, Inc., 572 U.S. ____ (2014), on March 25, 2014, in a closely watched tax case.  The Supreme Court reversed the Sixth Circuit Court of Appeals, and found that severance pay is to be considered wages, and therefore subject to Federal Insurance Contribution Act (“FICA”) taxes. 

This holding dashed the expectations created by the Sixth Circuit’s holding that severance pay was not subject to FICA taxes.  Many businesses had already filed refund claims based on the Sixth Circuit decision, and many more were in the process.  Those refund claims are now most likely going to be denied.

The taxpayer, Quality Stores, Inc., paid severance to hundreds of employees while undergoing Chapter 11 bankruptcy reorganization.  In its originally filed payroll tax returns, the taxpayer paid roughly $1 million of FICA tax on those severance payments.  It later sought a refund of those payments while in bankruptcy, which then placed jurisdiction with the U.S Bankruptcy Court, rather than the U.S. Tax Court.   That jurisdictional position seemed to work in the taxpayer’s favor, as the Bankruptcy Court found in favor of the taxpayer, as did the Michigan District Court on review of the decision.