Foster Swift Business & Tax Law E-blast
December 29, 2020
Since its original publication on December 23, 2020, this article has since been updated with current information.
Earlier this week, Michigan enacted a $106 million COVID-19 relief bill. Not to be outdone, the United States Congress then passed a $900 billion relief package, which was signed into law by President Trump over the weekend. Each package includes a number of programs aimed at helping small businesses navigate the pandemic. An overview of each package is provided below.
Michigan Stimulus Package
The supplemental appropriation bill includes economic relief for eligible small businesses, live music and entertainment venues, and individuals.
- Small Business Survival Grants: Eligible small businesses can receive grants if their business has been fully or partially closed by any gatherings or face mask emergency order. The small business must have 100 or fewer employees. The grant is capped at $20,000 for those fully closed and $15,000 for businesses partially closed. The grant funds may be used for payroll, expenses, rent or mortgage payments, utility expenses, and costs related to reopening the business. Funds are administered by the Michigan Strategic Fund through the local and nonprofit economic development organizations that participated in the Michigan Small Business Relief Program.
- Michigan Stages Survival Grants: Eligible live music and entertainment venues can receive grants of up to $40,000 to assist with payroll, expenses, rent or mortgage payments, utility expenses, or costs related to reopening a stage.
- Unemployment: As previously announced, unemployment benefits have been extended from 20 weeks to 26 weeks. Governor Whitmer vetoed a portion of the package that would have transferred $220 million dollars from the General Fund to the Unemployment Insurance Trust Fund. This is not expected to immediately impact unemployment benefits.
Federal Stimulus Package
The federal stimulus package revives many of the CARES Act’s successful aid programs, such as the Paycheck Protection Program (PPP).
- Paycheck Protection Program: The legislation both revises the rules that apply to previously issued PPP loans, and provides new rules intended to cover future PPP payments. First-time borrowers are eligible if they meet the original PPP loan eligibility requirements. Entities eligible for a second PPP loan will include businesses with 300 or fewer employees, some nonprofit organizations (with eligibility expanded to include 501(c)(6) organizations), self-employed workers, and independent contractors. Borrowers who received a PPP loan under the CARES Act are eligible for a second loan if they can demonstrate a 25% reduction in gross receipts in any 2020 quarter as compared to the same quarter in 2019. The SBA is expected to provide additional information about the PPP’s second round by early January, including the following.
- Amount: Borrowers can receive 2.5 times their average monthly payroll costs (3.5 times for borrowers in the accommodation or food services industries). Loans are capped at $2 million.
- Forgiveness: Funds spent on eligible expenses may be forgiven; provided that, at least 60% of the funds are spend on payroll costs. Eligible expenses include those expenses in PPP 1.0 (mortgage, rent, utilities, and payroll) and the following additional expenses: covered operations expenditures (e.g. software, cloud computing, HR and accounting needs), covered property damage (costs related to property damage due to public disturbances that occurred in 2020 but were not covered by insurance), covered supplier costs (expenditures that are essential to the borrower’s operations), and covered worker protections (e.g. personal protective equipment). Forgiveness for loans under $150,000 will be significantly easier to obtain.
- Tax Effects: Forgiven PPP loan amounts are not includable as gross income for borrowers. Additionally, borrowers may take tax deductions for expenses ultimately covered by PPP loan funds.
- Unemployment: Individuals may receive up to 50 weeks of benefits and $300 in Federal Pandemic Unemployment Compensation to supplement state benefits.
- Recovery Rebates: The bill provides a one-time refundable tax credit (more popularly known as a stimulus check) of $600 to all eligible citizens. The credit phases out starting at $75,000 ($150,000 for married filing jointly) and is completely phased out at $100,000 ($200,000).
- Paid Sick Leave: The Families First Coronavirus Response Act’s payroll tax credits for paid sick and family leave are extended through March 2021.
- Shuttered Venue Grants: Grants are available for eligible live venue operators or promoters, theatrical producers, live performing arts organizations, movie theaters, and similar venues. The grants may be used for payroll, rent, utilities, and personal protective equipment and are capped at $10 million.
There are a vast number of grants, loans, tax credits, and other types of relief available for businesses of all sizes. We expect a number of clarifications and rules to be issued over the next couple of weeks, including further guidance from the Small Business Administration.
Please contact your Foster Swift attorney if you have any questions regarding specific program qualifications, or for any help applying for any of the above assistance.
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