https://ramlcpa.link/3d56d | Journal of Accountancy
While not law just yet, it is expected to be signed by the president as soon as today.
While we know many key details, there are some key details we don't know, especially regarding the PPP Loan Program. The most pressing in my mind are bank participation and when applications will be accepted as some time will be needed to restart the program.
Additional details will be forthcoming and the below summary will probably be updated over the coming days for additional details and clarifications.
Below, I summarize the key provisions in the bill:
PPP Round 2 & EIDL
$325 billion in aid for small businesses struggling after nine months of pandemic-induced economic hardships.
$166 billion for economic impact payments of
$120 billion to provide workers receiving unemployment benefits a
$25 billion in emergency rental aid and an extension of the national eviction moratorium through Jan. 31, 2021.
$45 billion in transportation funding, including
$82 billion in funding for colleges and schools, including support for HVAC repair and replacement to mitigate virus transmission, and
$10 billion in child care assistance.
$22 billion for health-related expenses incurred by state, local, Tribal, and territorial governments.
$13 billion for emergency food assistance, including a 15% increase for six months in Supplemental Nutrition Assistance Program benefits.
$7 billion for broadband expansion.
The bill also extends the
and temporarily allows a
Business Meals 100% Deductible
PPP Round two (2) Who is eligible to apply
PPP Round one (1) recipients (PPP1) may apply for another loan of up to $2 million, provided they:
PPP loan terms
As with PPP Round 1 (PPP1), the costs eligible for loan forgiveness in PPP Round 2 (PPP2) include payroll, rent, covered mortgage interest, and utilities.
PPP2 also makes (adds) the following potentially forgivable:
To be eligible for full loan forgiveness, PPP borrowers will have to spend no less than 60% of the funds on payroll over a covered period of either eight (8) or twenty-four (24) weeks — the same parameters PPP1 had when it stopped accepting applications in August.
PPP borrowers may receive a loan amount of up to 2.5 times their average monthly payroll costs in the year prior to the loan or the calendar year, the same as with PPP1, but the maximum loan amount has been cut from $10 million in the first round to the previously mentioned $2 million maximum. PPP borrowers with NAICS codes starting with 72 (hotels and restaurants) can get up to 3.5 times their average monthly payroll costs, again subject to a $2 million maximum.
Simplified application and other terms of note
The new COVID-19 relief bill also:
Tax deductibility for PPP expenses
The bill also specifies that business expenses paid with forgiven PPP loans are tax-deductible. This supersedes IRS guidance that such expenses could not be deducted and brings the policy in line with what the AICPA and hundreds of other business associations have argued was Congress’s intent when it created the original PPP as part of the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136 (see the Dec. 3 letter from the AICPA and state societies to congressional leaders).
The COVID-19 relief bill clarifies that “no deduction shall be denied, no tax attribute shall be reduced, and no basis e shall be denied, by reason of the exclusion from gross income provided” by Section 1106 of the CARES Act (which has been redesignated as Section 7A of the Small Business Act). This provision applies to loans under both the original PPP and subsequent PPP loans.
As many employers look to closeout and forget 2020, Maryland employers face yet another challenge as a sizeable hike in unemployment tax rates is coming in 2021.
It's important to note that Governor Hogan signed an executive order (copy below, FAQs) that excludes 2020 employer data from the formula used to determine the 2021 unemployment rate. If the Governor had not done this, all employers would have had an even higher tax rate for 2021.
For employers with zero claims over the prior three (3) years (the measurement period will remain 2017, 2018, and 2019, for 2021) the per annual amount due per employee will increase from $25.50 to $187 per employee for 2021, which is almost 7.5 times the 2020 experience rate.
While obviously not good news, at first glace it might not sound all that punitive at first glance. However, imagine you have 50 employees, all of which require an unemployment contribution. That comes out to an extra $8,075 that employers will have to pay in for 2021. In higher turnover businesses such as retail and hospitality, it's very possible to have on average 10 to 15 employees per year, but because of attrition this equals 50 or more total employees per year, all of which require their own unemployment contribution.
While unemployment rates will reduce over time as we saw a similar situation occur during and after the financial crisis (great recession). Unfortunately, in the short term, this is one more hit businesses are going to have to contend with.
Consider these tips to help offset these costs:
1) Have a plan for 2021, as no plan almost always means no success, and those who are successful are just incredibly lucky.
2) Investigate ways to streamline operations & improve efficiency in the short and medium term. No is not the time for long term decision making if possible, as there is still much uncertainty.
3) Review and make cash savings measures (both for the business, and personally), and do the easiest ones immediately. This doesn't mean slash essential services, but it means giving up the luxuries.
Contact us if you need help with these or similar small business savings strategies.
Time sensitive advice regardless of what and how you sell, and why sales enablement plays a key part in your business success.
Forrester Blog Post: ramlcpa.link/z9yn
The timing of the Forrester blog post is almost just as good as the message. While the events of 2020 impacted the entire world, winners and losers have emerged which happens almost always with any kind of major event. A significant issue with COVID is the list is heavily skewed to few (bigger and better capitalized businesses) winners, and far too many losers.
That's a bit of what drew my attention to this post as while we continue to deal with new waves of the pandemic, we're also entering a critical business phase with many businesses intently focused on the upcoming holiday shopping season and making the most of Q4 2020. However, if that is to the detriment of 2021, it could be disastrous.
All too often businesses (especially small businesses) expect Q4 to be the quarter that you make up for the rest of the year, but it often comes as a detriment to sales in the first part of the following year. Why, well everything else is secondary, and plans and strategies are often developed to late in the process with the new year just a couple weeks away or already here. Additionally, because the plans come together in a hasty manner, lessons learned, new insights, and data analysis are glossed over, thus causing more problems in the new year.
To this point, since the events of this year destroyed most business plans in early 2020, almost all businesses have been stuck in a cycle of reacting to each problem without solving them. While that's not going to change much for the rest of the year, to get any kind of control over the situation in 2021, the process needs to start now and include plenty of planning and analysis.
A few of the key areas Stephanie highlighted that can be adopted by almost any business are:
Personally, I believe these points can be applied to any business by adding or dropping a few words or terms.
One of my own that I will add and important to keep in mind:
#sales #strategy #pandemic #covid19 #salesenablement #businessplan #smallbusiness #business #budget
12 Crucial Actions to Protect Your Business
How to Move On After Losing a Big Client. The list below comes from Young Entrepreneur Council (YEC) and provides a good reference point in establishing an action plan.
1. Get a Guarantor for the Contracts
2. Ask for Payment Upfront
3. Get a Lawyer
4. Begin Negotiating ASAP
5. Ensure Constant Communication
6. Get a Realistic Projection
7. Offer a Reduced Payment
8. Auto-Charge Credit Cards
9. Restructure Your Payment Terms
10. Get Trade Credit Insurance
11. Move On and Find New Clients
12. Diversify Your Client Base
#business #businessowner #smallbusiness #clients #COVID-19 #Coronavirus #negotiations #riskmanagement #lossprevention #creditinsurance #tradecredit #insurance #negotiations #restructure #restructuring
REI's Decision to Not Occupy its New Campus is an example of value opportunities only available during a downturn
Additionally, I see more situations like this (big and small) on the horizon as some of the best opportunities of our lifetimes are going to be available at deep discounts! | https://ramlcpa.link/d2yh
REI's decision not occupy it's brand new work campus, and instead sell it is a great example of the type of value business and their advisors should be preparing for.
How The Shaw Festival used some well planned Risk Management and saved 500 performing arts jobs during the Pandemic
The stomach bug and understanding of communicable disease helped save the Shaw Festival during the Pandemic | https://ramlcpa.link/cmzz
How the Shaw Festival kept 500 people employed during COVID — by taking out #pandemic #insurance three years ago.
About three-and-a-half years ago, #CEO of the #ShawFestival in Niagara-on-the-Lake, decided to undertake some risk analysis alongside his #CFO. He looked at potential problem areas .... and came to a shrewd conclusion: .... The festival should take out an #insurancepolicy against the threat of a #pandemic.
The policy covered the interruption of planned performances by communicable disease. As a consequence of that remarkable #foresight, the Shaw Festival has been able to do the basically impossible ....... thanks to the coverage, Shaw’s are among the only #actors, #musicians, and #theatre workers in the #world who still have #jobs.
Jennings says, reflecting on this extraordinary stroke of luck. “It wasn’t actually genius. It wasn’t about this pandemic at all — it was about #communicable #disease.” ..... Shaw employs a rotating repertory ensemble; if one of his actors got the #flu, ten of them could, and that might stall a show. “We took it out for the whole season, thinking that if six actors got ill and we had to shut down for two weeks, we might lose two million bucks,”
#ramlcpa #riskmanagement #businessplanning
While some carriers are beginning to offer pandemic insurance, questions and risk remain.
Welcome to the Growth, Profits, and Wealth Blog where we'll be featuring this new and yet to named series where we’ll look at the accounting, tax, advisory and business angle of topics such as Risk Management, Restructuring, Distressed Assets, Automation, Best Practices, and Growth Initiatives. This is our introductory post and cast which is about was delayed close to a month because of the never-ending tax season.
The idea is to touch on a range of matters affected by the Pandemic for just about a minute or two, to get you informed, help you be better prepared as a practitioner or business owner, give you some reference material, and get you back to work.
First topic is Pandemic Insurance of course, and we'll be coming back to this topic in the weeks and months ahead.
The insurance Industry is moving pretty quickly to provide some measure of Pandemic Insurance, now that we're several months into the pandemic, and also because this is what Fintechs, InsurTechs, and specialty insurers are really designed for. What's interesting is seeing the formation of these insurers and the ownership mix of their backers. May are tied to large insurance companies, private equity, and wealthy individual investors. While these are newer insurers or startups a number of those research have very experienced insurance professionals at every level.
These setups makes a lot of sense as the close ties to large existing insurers gives them access to ReInsurance so the risk can be diversified by other insurers who want to take on some of the risk for a portion of the premiums. On the operations and startup cost side, the ties so private equity and wealthy investors gives them access to capital to create, operate, and administer these policies.
The problems, well where to begin:
First, while this sounds all well and good, these initial insurers and policies are here to make money not do the world or economy a favor. Thus, these policies are going to be some of the most expensive insurance available. Not only is it a hot topic with limited data, but the spike and second closure in some areas makes this about the worst possible time to buy and likely the policy would not even pay out immediately.
In the U.S. News Article "Pandemic-Proofing..." it mentioned policies that offer up to $1MM in coverage, however that coverage comes with eye popping premiums of $80,000 - $100,000 annually. Part of the problem here is with very limited data to model (if even possible) most policies at the moment are using all worst case scenarios to make sure if they do find a buyer they're likely to come out break even or better in the short and medium term.
Perhaps this is why back in May Warren Buffet said he would interested in offering in offering Pandemic coverage, but only at the right price, which is a great leading to something that is overlooked with insurance coverage, which is as one's risk protection is another’s investment.
In the July 23rd Insurance Journal article the insurer One80 was able to write polices up to $100MM , I don't see this as a realistic offering by traditional insurance companies or a solution for small businesses. It's much more likely that these policies fill a niche that needs can actually afford them, perhaps Hollywood, perhaps live entertainment, but will almost certainly have lo effect on the economy. Instead insurers and businesses appear much more likely to wait to see if the Federal Government provides a backstop for insurers or something similar.
Another major issue I see is, if the language and terms are not broad enough these policies could very easily still leaving gaps in coverage, setting things up for this same type of problem in just some other form.
Lastly, and most importantly in my opinion, while these policies might be associated or have some backing by major insurance brokers and carriers, it's very important for the businesses, advisors, & agents to know who is actually underwriting and backing the policy.
Insurers and policies have ratings for a reason but the fragmented structure of these new insurance makes them susceptible for abuse. A little bit of clever or confusing marketing slight of hand is to and the ability to use a large carriers name and ratings to:
I'm not accusing anyone, but the opportunity for abuse and risk is real, and insurance that is at high risk for nonpayment might very well be worthless in the end.
We'll call that a wrap for now and let you all get back to work!
That's enough for now, thanks for listening and I'll be back with one or two more casts by this weekend, and then back next week as we'll being our normal schedule.
#ramlcpa #riskmanagement #insurance #restructuring #pandemic #covid19 #covid_19 #business #smallbusinesses #businessinterruptioninsurance #coronavirus
Travis Raml, CPA