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Coronavirus Sections Special Coverage

Pitching In

By George O’Brien

It’s called an ‘intubation box,’ or an ‘InTuBox,’ to be more specific.

As that name suggests, this is a box that helps shield healthcare workers while they are intubating a patient, thus helping reduce the likelihood of spreading infection.

Pia Kumar says the product was conceptualized by an anesthesiologist in Taiwan, and in what would still be considered limited use, it has proven successful in doing what it was designed to do. And now, the company she serves as president, Universal Plastics in Holyoke, will start to produce them for healthcare providers, with the first boxes due to roll out of the plant on Whiting Farms Road in Holyoke early next week.

Production of the boxes is part of the company’s efforts — which mirror those of manufacturers across the region and, indeed, across the country — to adjust and retool for what many are calling a ‘wartime’ economy, while helping a healthcare sector desperate for essential equipment.

Indeed, in addition to the intubation boxes, the company is also producing face shields that can be used by those in healthcare industry and other sectors as well. Even individuals with compromised immune systems can use them at a time when everyone is trying to reduce their exposure to the dangerous virus.

Production of those shields commenced recently, and the company is on pace to produce roughly 1,000 of them per day, said Kumar, adding that these efforts were inspired by need, and the company’s desire to help meet it.

In a way, the story of how Universal has launched these initiatives — and how it is carrying out this specific mission — is a microcosm of the many-tentacled saga of COVID-19, touching almost every aspect of the pandemic, from the economic impact to the plight of the healthcare community as it girds for days that will be even worse than they are now, to the manner in which companies and individuals are going above and beyond.

Let’s start with the economic impact. Universal, like most every company in every sector, has been hard hit by the pandemic. Some of its major customers are in aerospace, one of the hardest-hit sectors, and many of its products — from seat backs to tray tables to arm rests — wind up in commercial airliners.

“It’s been very tough … we have a good company and a great workforce, and we’ll rebound from this, but this is certainly a very difficult time,” she explained. “Our number-one business is aerospace and airline interiors, and I don’t have to tell you how that’s doing these days, so our work has really slowed down.”

So the company was looking for ways to keep people employed and also contribute to what in many ways has become a war effort, said Kumar, adding that the company already produces a number of products for the healthcare industry — from diagnostic testing equipment to containers for sharp instruments — and has been hard-pressed by those customers to keep producing them in this time of great need.

“We were seeing how this situation was getting worse and how there was a shortage of PPE [personal protective equipment], and we thought about what we could make in-house that we could give to hospitals and other healthcare provides locally and across the country,” she told BusinessWest, adding that two items that quickly emerged were face shields and the intubation boxes.

With the former, it’s a relatively simple product and one that it is certainly in demand. “We offered it around, and we’re getting a lot of interest from a lot of hospitals,” said Kumar. “That’s because these are reusable, they’re durable, and they can used by a number of people.”

She listed doctors, nurses, anesthesiologists, and workers in nursing homes, among others in the healthcare profession, and even individuals going to the grocery store — although those in healthcare are the company’s first priority.

As for the intubation boxes … as information about the product, which was conceptualized as the COVID-19 virus started its spread, started to filter into the healthcare community, some doctors approached Universal with inquiries about whether it could produce the item.

“It really started just last week,” she explained. “Baystate Medical Center reached out, as did a hospital in Miami, and we just thought the product was practical and made a good deal of sense.”

The company created a prototype and is slated to begin production on April 6, she went on, adding that some orders have been placed for a few hospitals in other markets, and Baystate is currently testing the product.

But producing these items will pose some challenges, said Kumar, noting that many employees at Universal, fearful of the spread of the virus, have not been coming to work.

But production of the face shields and the intubation boxes proceeds as remaining employees press on, assisted by some front-office workers who have stepped into the breach.

“People have rallied behind this PPE effort with the face shield and the intubation boxes,” she told BusinessWest. “Some of the people in our front office are helping with the assembly of these face shields — everyone is pitching in, rallying behind this, and coming together.

“We’re not looking to turn a profit here — we’re selling these items at cost,” she said in conclusion. “We’re just trying to keep ourselves busy and do a little good if we can.”

From all appearances, she and her staff are succeeding with both missions.

George O’Brien can be reached at [email protected]

Coronavirus Cover Story

A Time to Collaborate

Editor’s Note: This is the second in a series of virtual roundtable discussions with area business leaders concerning the COVID-19 pandemic and its impact on virtually every aspect of life and business. For this installment, we talked with five area bank presidents — Steve Lowell at Monson Savings Bank, Chuck Leach at Lee Bank, Tom Senecal at PeoplesBank, Jeff Sullivan at New Valley Bank & Trust, and Michael Tucker at Greenfield Cooperative Bank — about how this crisis is impacting this important sector and in what ways the region’s banks will be assisting those businesses impacted by the pandemic.

By George O’Brien

Chuck Leach

Steve Lowell

Tom Senecal

Jeff Sullivan

Michael Tucker

Steve Lowell called it a “fireside chat.”

That’s how he chose to describe his efforts to reach out to customers during this time of crisis and communicate a number of key points.

“With my wife holding my phone in front of me and me speaking onto the camera … we put it on our YouTube channel and sent out an e-mail blast with a link to it for our customers to get an update,” said Lowell, president and CEO of Monson Savings Bank, adding that, like the creator of the original fireside chat, Franklin Roosevelt, he used his to talk with people directly and work to calm fears at a time when many are afraid. “We wanted to assure our customers that we’re here, we’re operating, and we intend to remain here and continue operating.”

The need for a fireside chat and the method of delivering it show just how different these times are for banks and their customers, commercial and consumer alike. Most of those in both categories are in some form of distress, and they’re looking to their bank, especially if it’s a smaller community bank, for help.

And the banks are providing it, in the form of everything from deferments on mortgage payments and commercial loans to interest-only payment options if customers prefer that option, to refinancing large numbers of mortgages to enable consumers to take advantage of lower interest rates.

And, for commercial customers, these banks are expected to be key players in the process of funneling federal stimulus money to impacted businesses — just as soon as they figure out what that role is and how it will be carried out.

Right now, for the most part, they just don’t know. What they do know is it will be a different — and, in many ways, more important — role than they play now.

“In many ways, it’s analogous to what some of the manufacturers are doing now: a company that was making clothing for a baseball team a few months ago is now making masks and gowns,” said Jeff Sullivan, president and CEO of Springfield-based New Valley Bank & Trust. “We’re going to go through a version of that and have to retool and pivot and think about the new SBA loans that are part of the relief package as different than how we usually do business.

“There are some opportunities,” he went on. “But there’s a whole ton of risks that we don’t understand yet because we haven’t done it yet and haven’t thought about all the downside risks such as fraud — there’s a lot of work to be done.”

While they read the legislation and try to understand it, the banks themselves are coping with the challenges presented by the COVID-19 pandemic — and there are many. Most have closed their lobbies or reduced hours to a large degree, with business conducted by appointment only. This means more customers are using online banking and automated tellers, technology that is new to many, and that brings its own set of challenges — and opportunities. Meanwhile, employers are working remotely and finding new ways to work as well.

“For some who didn’t bank digitally, they’re beginning to be forced to use it, and at our institution, for the most part, we’re getting extremely positive feedback on this,” said Tom Senecal, PeoplesBank president and CEO. “Surprisingly, many people who were afraid to use it are liking it now, and I do think this will change the behavior of people in the future to adapt to it more quickly.”

Chuck Leach, president and CEO of Lee Bank, agreed that both customers and employers are adapting to new ways of doing things.

“We’re getting everybody — customers, clients, and employees — more on board with a different way of working through electronic channels,” he told BusinessWest. “As for employees, we were thinking more about working from home before this; we were having conversations already, and we knew we could do it technology-wise, but this just triggered an acceleration of that, which has been healthy for us.”

Overall, these are different and somewhat complex times for banks in that they and their customers are relying more heavily on technology to do business. And yet, it’s a time when many customers need a close banking relationship perhaps more than they ever have.

“Whether it’s in traditional retail or banking, there’s been this drumbeat of ‘everything’s going digital,’” Leach said. “But what this crisis has also illuminated is the need for human contact, albeit by phone or e-mail. When you’re trying to go back and forth with a bank on deferment or interest-only — when you’re solving problems — you still want to talk with someone. Those are not transactional exercises.”

What banks won’t be focusing on this year, said Senecal and others, is earnings. That’s because the bottom line clearly will not be as attractive as it has been in recent years — not with interest rates down to zero, residential customers refinancing their mortgages to take advantage of these lower rates, and other revenue streams being heavily impacted by the pandemic (more on that later).

A New Norm

As noted earlier, while banks are still conducting business, it is certainly not business as usual. Most all establishments have either closed their lobbies or established ‘by-appointment-only’ policies, in efforts to safeguard both customers and employees.

Drive-through windows are open, as are ATMs, and institutions with ITMs (interactive teller machines) report a dramatic increase in usage — out of necessity. Overall, those we spoke with reported a few bumps and a slowing of the pace of activity as customers began using new technology, but, overall, a relatively smooth transition, if it can be called that.

“It’s been surprisingly smooth,” Lowell said. “And I say surprisingly because I wasn’t sure how customers would respond. But they have been great. We’ve had people getting documents notarized, opening accounts, and more right through the drive-up. And while it was very busy initially, it has slowed down; we extended hours originally because we didn’t know what to expect, but we’re thinking of reducing things and going back to our normal hours to give our staff a break.”

Returning to the subject of digital banking, Senecal, speaking for all the others at the ‘table,’ said his bank has been gently pushing its customers to embrace new technology like ITMs. The pandemic has provided a great assist in these efforts, and most customers are enjoying the ride, if you will.

“Whenever a customer has done it, you get this reaction like, ‘oh, my God, this is unbelievably easy,’” he said of ITM use. “Like all of us, you need to be pushed toward new technology — it can be intimidating — and the more we push or force people, and they understand the environment we’re in, they’re learning that it’s not so bad.”

But the pandemic has also brought some staffing challenges, said many on the panel, noting that, as they try to keep employees safe, they are limiting the number of people working at one time. And there are other constraints as well.

“We have people in some critical positions who are in the National Guard,” Senecal said. “So we’ve had to readjust some of some our staffing. But otherwise, we have not diminished our services at all; we’re doing everything through the drive-up.”

Michael Tucker, president and CEO of Greenfield Cooperative Bank, said one of his branches actually had to be closed for a short period because the spouse of one of his workers, a first responder, had come in contact with someone who had tested positive for the virus.

“We had split our staff into Team A and Team B at each location,” he explained, noting that the employee in question is on Team A. After deep cleaning and sanitizing the office, it reopened with Team B, with Team A on self-quarantine.

Such developments could not have been imagined even three weeks ago, but they are now part of a new norm for banks.

As for the types of business conducted, the bank presidents we spoke with said that, by and large, people understand that their money is safe, and there has been an inflow when it comes to deposits, rather than anything approach a rush to withdraw money. Meanwhile, commercial activity has slowed tremendously, as might be expected. But on the residential-mortgage side, business has been booming.

‘Crazy’ was the word used by most all them.

Meanwhile, another word uttered over and over by those around this virtual roundtable was ‘outreach.’ Indeed, while taking calls from commercial clients with questions and issues, area banks have been making them as well.

“We’ve been doing a ton of customer outreach, particularly in the hospitality area, and there is a large concentration of those types of businesses in Berkshire County,” Leach said. “We’ve done a lot of proactive outreach with that sector, and there has been a significant number of loan modifications, including more than 80 interest-only and three full deferments on the commercial side.”

All methods of communication have been used, from snail mail — although not much of that anymore — to e-mail, to that fireside chat Lowell gave with the assist from his wife.

“We’ve been trying to be creative as to how we get the word out,” Lowell said. “I recently recorded several commercials that are going to be on radio stations, as well as a brief TV spot using my phone; we’re trying to be creative and take advantage of technology.”

Tucker agreed, noting that his bank has used videos on its Facebook page and other vehicles for communicating a simple but direct message: “we’re here, and we’re going to try to help.”

Lending a Hand

BusinessWest talked with these bankers just a few days after the sweeping $2.2 trillion stimulus package was passed, and all of them were still digesting its hundreds of pages and dozens of provisions. The homework is intense and the need is great, and these factors will contribute to a very busy and exceedingly challenging time for banks.

For now, as noted, they’re trying to get both hands around it.

“It’s a vital piece for all of us bankers to understand,” Senecal said, “because we’re going to get bombarded with phone calls; Congress and everyone else says ‘call your local banker,’ but they haven’t really communicated too much to us yet other than, ‘if you go try to find the bill yourself, you’ll understand what it’s saying.’”

Leach said his bank has already received a number of phone calls regarding the relief bill, and he acknowledged that the “onslaught,” as he called it, has only begun.

While the U.S. Small Business Administration (SBA) will ultimately be the conduit for much of the funding to be released from the payroll-protection program and other initiatives within the bill, he noted, area banks will be providing what amount to bridge loans, and this role brings with it a good deal of risk.

“That’s an intense amount of pressure on community banks to participate in this way, and that’s the really the untold story here,” he explained. “A significant portion of these programs that will enable more liquidity, or relief, are enabled by banks, and especially community banks.”

And while they’re still digesting the massive measure, the bankers we spoke with said they have a basic understanding of how the payroll-protection program, one of the key components of the package, will work. Sullivan explained by using the example of a small landscaping company.

“They’re trying to figure out if there’s going to be work and if they should lay off people or keep them on,” he explained. “As I understand these new loans, for employees they’ve kept on the payroll or brought back, they’ll get eight to 10 weeks of payroll covered as a forgivable loan. So this will basically take their payroll and their costs out till the end of June, and the employer isn’t going to have to worry about sinking the ship because they’re not going to have revenue on the other side to offset those costs; these are forgivable loans.

“This basically keeps people from going to the unemployment line, and it allows business owners to keep their staff as a core unit,” he went on, adding — and lamenting, as others did — that it will probably be at least 30 days before any relief trickles down.

This seems like an eternity to the small-business owners devastated by the crisis, many of them forced to close their doors entirely, they said with one voice, but this is the pace the federal government moves at.

All those sitting at the ‘table’ expressed the hope that the process of accessing relief will be relatively simple and user-friendly, but many had their doubts.

“SBA lending has always been pretty paper-intensive and tedious, and you have to make the T’s are crossed and the I’s are dotted,” Lowell said. “The challenge for us is that we’re going to be be the intermediaries — they want us to be the ones dealing with the customer. And in order for us to do that, they need to make it simple, and they need to make it easy for us to work with our customers.

“My hope is that this is what will happen,” he went on. “The skeptic in me is concerned, but hopefully I’ll be wrong.”

Senecal agreed completely, but said that, based upon his reading of the legislation, there is some reason to be optimistic that relief can be accessed in a simple, effective manner.

“If you pay payroll and you have employees, you are eligible for an SBA loan that does not need to have collateral and is 100% guaranteed by the government and will be administered by the banks,” he told BusinessWest. “And the application process seems pretty simplified. What is not clear on the bank side is what happens to us and how we fund this. What risks are we taking? The government guarantees the loan, the borrower doesn’t have to guarantee the loan, and the borrower doesn’t have to put up collateral; the interest rate cannot exceed 4%, but it’s still unclear who pays that 4%.

“We don’t have all the answers,” he continued. “But it does feel good that there is relief for employers, and they can use those funds for pretty much anything to operate their business.”

Earnings Statements

While the banks will play a large role in helping businesses stay afloat during this crisis, they will have to be mindful of their own bottom lines as well. Those we spoke with are projecting that this will be a very challenging year in that regard for all those reasons mentioned above.

“Margins were shrinking before this,” Tucker said. “And now, with no interest coming in for a while, that’s going to put even more pressure on banks. The good news is that the banks here are well-capitalized and have the ability to weather this, but 2020 will be a very difficult year at the end of the year when you see the numbers.”

The banks we spoke with are all mutual banks, meaning there are no stockholders. And their presidents said their respective boards understand the unusual circumstances as well as the need for these institutions to step up and help the community get to the other side of the pandemic.

“Most of us, if not all of us, are sitting on a good amount of liquidity, so we’re in a position to take these steps, suffer through a few months of losses, and still fund things that need to be funded,” Lowell said. “And on the regulatory front, everything that we’ve heard from the FDIC, federal examiners, and others is that they are encouraging us to keep this economy running and help people — and they won’t hold it against us, as long as we do it within reason and do it within the confines of safety and soundness and don’t take on excessive risk.

“I think we’re going to be prudent, and the last thing we want is to see any of our customers not get through this,” he went on. “We’re going to be looking to our existing customers first, and then, if we can help other people, we’ll try to do that, whether it’s through the SBA or direct lending, or some of the other programs.”

Sullivan agreed, saying this will be a unique opportunity for the banking community to collaborate, as perhaps never before, and work collectively to steer the economy out of extremely dangerous whitewater.

“I don’t see this as competition or anyone trying to be opportunistic about this,” he told BusinessWest. “The size and scope of this problem is huge, and part of what we want to message to the community is that the industry is collaborating to get through it.”

Senecal agreed. “The focus is to get through this year and be there in support of the community,” he said. “As mutual banks, we’re here for the community, and all of us have enough capital to sustain a really bad year. None of us are focused on earning this year; we’re doing everything to make sure our communities get through this and economically come out of this in a great position.”

Lowell might have summed up the situation, and the sentiments of everyone at the ‘table,’ by saying in conclusion: “it will be an interesting year; I don’t anticipate any of us are going to make a lot of money, but we’re all in good shape at the start of this, and I see us all coming through it the end while helping people stay in business.”

George O’Brien can be reached at [email protected]

Coronavirus

Opinion

Everywhere you look, the news on the COVID-19 pandemic is sobering and, in many cases, frightening.

But what we’re reading and hearing about what has gone on at the Soldier’s Home in Holyoke goes beyond that. This news is heartbreaking and, at the same time, disheartening.

We don’t know all the details, but what we do know is that people have died (six was the latest count at press time last week), many others have tested positive for the virus, and protocols were not followed. And it’s clear that the first two developments are a result of the third.

Holyoke Mayor Alex Morse told the media this week that people started dying at the facility very early in March, and no one was told about this — not him, not anyone in state government, and none of the family members of the veterans receiving care at the facility. This at a time when it was clear — or should have been clear to all — that the virus was spreading like wildfire through the facility.

According to various media reports, Morse, frustrated in his efforts to get information and receive assurance that a very dangerous situation was being addressed, resorted to calling Lt. Gov. Karyn Polito. Soon thereafter, a team of health specialists was dispatched to the 68-year-old facility.

As details continue to emerge, the story becomes more distressing and alarming. It appears that, from the start, the virus was not taken seriously, not by Bennett Walsh, the facility’s superintendent, who has since been suspended, and apparently not by Secretary of Veterans’ Services Francisco Urena.

Indeed, there are troubling reports that a Soldiers’ Home staffer who wore protective gear after treating the first veteran who displayed symptoms of the virus was reprimanded for doing so and sent a letter saying his behavior “unnecessarily disrupted and alarmed staff.”

There are other reports that veterans from infected areas were mixed with veterans from other floors, prompting comments that the spread of the virus through the facility could have been halted or slowed.

In comments to the press about the matter, Gov. Charlie Baker called what’s happening at the Soldiers’ Home a “gut-wrenching loss that is nothing short of devastating to all of us.” He went on to say that the first priority is to stabilize the situation and support the health and safety of residents and families, and the second priority is to get to the bottom of what happened.

He’s right, but he can’t forget about the second part of this equation. It seems clear that this situation was mishandled from the beginning and there was a disturbing lack of transparency with regard to how the matter was addressed. People are angry, and they have every right to be.

What’s most disturbing about this travesty is the setting in which it took place. The Soldiers’ Home cares for those who served their country in times of war and then looked to that same country to take care of them when they needed help. To say that the leaders of the Soldiers’ Home failed them — and their families — is a huge understatement.

As one family member of a resident told the media, “there are a lot of heroes in that building.” He’s right, and those heroes certainly deserve better.

Coronavirus Sections Special Coverage

Strong Medicine

As COVID-19 continues to upend nearly every aspect of life in the U.S., Congress has been working to relieve suffering Americans. Having passed the Families First Coronavirus Response Act on March 18 in an effort to limit the spread of the pandemic and support relief efforts, Congress turned to stabilizing the economy. After days of furious negotiations between Republicans and Democrats on Capitol Hill and Trump administration officials, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act. With a $2.2 trillion price tag, the act is the most expensive piece of legislation ever passed.

The act passed in the Senate by a unanimous vote late on March 25 and was passed in the House of Representatives on March 27. The President signed the bill into law later that day.

The CARES Act looks to make a significant impact on the economy by providing loan forgiveness, supporting small businesses, enhancing unemployment insurance, and providing federal loans to industries severely impacted by the pandemic. In addition, it provides tax relief and tax incentives for individuals and businesses alike. The majority of the tax relief is designed to increase liquidity in the economy, largely through the relaxation of limitations on business deductions and the deferral of taxes, but also with the introduction of recovery rebates for individuals.

In this article, Meyers Brothers Kalicka, P.C., in conjunction with its affiliation with CPAmerica, presents some of the key elements of the CARES Act and how they will impact individuals and businesses.

INDIVIDUAL TAX RELIEF

Recovery Rebates

The most well-publicized provision is the $1,200 recovery rebates for individual taxpayers. The rebate amounts are advance refunds of credits against 2020 taxes, and equal to $1,200 for individuals, or $2,400 for joint filers, with a $500 credit for each child. The amount of each rebate is phased out by $5 for every $100 in excess of a threshold amount. This threshold amount is based upon 2018 adjusted gross income (unless a 2019 return has already been filed), and the phaseout begins at $75,000 for single filers, $112,500 for heads of households, and $150,000 for joint filers. Thus, the rebates are completely phased out for single filers with 2018 (or 2019, if applicable) adjusted gross income over $99,000, heads of household with $136,500 (or higher, depending upon whether status is established because of children), and joint filers with $198,000.

In order to be eligible for a recovery rebate, the individual must not be: (1) a non-resident alien, (2) able to be claimed as a dependent on another taxpayer’s return, or (3) an estate or trust, and must have included a Social Security number for both the taxpayer, the taxpayer’s spouse, and eligible children (or an adoption taxpayer identification number, where appropriate). The act includes additional rules for the application of the credit.

The Secretary of the Treasury has been directed to provide the rebate as rapidly as possible.

Retirement Plans

The CARES Act also waives the 10% penalty on early withdrawals up to $100,000 from qualified retirement plans for coronavirus-related distributions. For purposes of the penalty waiver, a coronavirus-related distribution is one made during the 2020 calendar year to an individual (or the spouse of an individual) diagnosed with COVID-19 with a CDC-approved test, or to an individual who experiences adverse financial consequences as a result of quarantine, business closure, layoff, or reduced hours due to the virus. Any income attributable to an early withdrawal is subject to tax over a three-year period, and taxpayers may recontribute the withdrawn amounts to a qualified retirement plan without regard to annual caps on contributions if made within three years.

This relief is commonly granted by Congress in the wake of major disaster declarations, such as those made after a major hurricane.

The act also waives all required minimum distributions for 2020, regardless of whether the taxpayer has been impacted by the pandemic.

Charitable Contributions

The CARES Act enhances tax incentives for making charitable contributions for the 2020 tax year. First, it allows an above-the-line deduction of up to $300 for charitable contributions made by individuals. This allows an individual to claim a deduction for a charitable contribution, even if the individual does not itemize deductions.

Additionally, the percent-of-adjusted-gross-income (AGI) limitations are increased for all taxpayers as well as for specific types of contributions. For the 2020 tax year, individuals can claim an unlimited itemized deduction for a charitable contribution, which is normally limited to 50% of AGI. In the case of corporations, the usual 10%-of-AGI limitation is increased to 25% for the 2020 tax year. Finally, the contribution of food inventory, the deduction for which is normally limited to 15% of AGI, is increased to 25% for the 2020 tax year.

Student Loans Paid by Employers

The act provides for an exclusion of up to $5,250 from income for payments of an employee’s education loans. In order for the exclusion to apply, the loan must have been incurred by the employee for the education of the employee (so, for example, the loan must not have been incurred to pay for the education of the employee’s child). The payment can be made to the employee or directly to the lender. The exclusion only applies for payments made by an employer after the date of enactment and before Jan. 1, 2021.

The $5,250 cap applies to both the new student-loan repayment benefit as well as other educational assistance (e.g., tuition, fees, books) provided by the employee.

BUSINESS TAX RELIEF

Employee Retention Credit

The CARES Act grants eligible employers a credit against employment taxes equal to 50% of qualified wages paid to employees who are not working due to the employer’s full or partial cessation of business or a significant decline in gross receipts. The credit is available to be claimed on a quarterly basis, but the amount of wages, including health benefits, for which the credit can be claimed is limited to $10,000 in aggregate per employee for all quarters. The provision contains several requirements defining qualified wages, qualified employees, and qualified employers. The credit applies to wages paid after March 12, 2020 and before Jan. 1, 2021.

This is very similar to the paid leave credits granted to employers under the Families First Coronavirus Response Act signed into law on March 18, with some changes to the requirements. Most significantly, neither the employee nor the employer have to be directly impacted by infection.

This is also similar to the employee retention credits Congress provides after major disasters, but with different requirements and limitations.

Payroll Tax Deferral

In order to free up employers’ cash flow and retain employees during times of quarantine or shutdown, the CARES Act defers the payment of payroll taxes. Payroll taxes due from the period beginning on the date the CARES Act is signed into law and ending on Dec. 31, 2020, are deferred. The 6.2% OASID portion of payroll taxes incurred by employers, and 50% of the equivalent payroll taxes incurred by self-employed persons, qualify for the deferral. Half of the deferred payroll taxes are due on Dec. 31, 2021, with the remainder due on Dec. 31, 2022.

Net Operating Losses

The act allows for a five-year carry-back of net operating losses (NOLs) arising in 2018, 2019, or 2020 by a business. Businesses will be able to amend or modify tax returns for tax years dating back to 2013 in order to take advantage of the carry-back. Under current law, only farming NOLs are allowed to be carried back, and the carry-back is limited to two years.

The Tax Cuts and Jobs Act (TCJA) eliminated the carry-back of NOLs for tax years ending after 2017 and allowed for the indefinite carry-forward for NOLs. Prior to the TCJA, an NOL could be carried back two years, with longer carry-back periods for NOLs arising from a casualty or declared disaster or farming losses.

The CARES Act also eliminates loss-limitation rules applicable to sole proprietors and pass-through entities to allow them to take advantage of the NOL carryback. Additionally, the act allows for NOLs arising before Jan. 1, 2021 to fully offset income. Under current law, NOLs are limited to 80% of taxable income.

Minimum Tax Credits

The TCJA eliminated the alternative minimum tax for corporations for tax years after 2017, but allowed corporations to claim a refundable portion of any unused minimum tax credits through 2021. The amount of the refundable credit is limited to 50% of any excess minimum tax in 2018 through 2020, before being fully refundable in 2021. The act accelerates the year for which a fully refundable credit can be claimed to 2019, and allows corporations to elect to claim the fully refundable minimum tax credits in 2018.

Business Interest Expense Limitation

The TCJA limited the amount of allowable deductions for business interest (regardless of the type of entity) for tax years beginning after 2017. The limitation is generally the amount of business interest income for the year plus 30% of the taxpayer’s adjusted taxable income for the year. The limitation does not apply to taxpayers with average annual gross receipts for the prior three year below an inflation-adjusted amount. For 2020, this amount is $26 million or less.

The act increases the limitation amount to 50% of the taxpayer’s adjusted taxable income for 2019 and 2020 (with a special allocation election required for partnerships for 2019). In calculating the limitation for 2020, the taxpayer may elect to use adjusted taxable income for 2019.

The option to use 2019 adjusted taxable income in calculating the limitation is meant to counteract the likelihood that incomes will not be higher in 2020 because of the economic environment, whereas 2019 was generally a very high revenue year for businesses.

Qualified Improvement Property

When Congress drafted the TCJA, it allowed for 100% bonus-depreciation rules to apply to all MACRS property with a recovery period of 20 years or less. Before the TCJA, qualified improvement property was depreciated as 39-year residential real property, unless it separately qualified as 15-year qualified leasehold improvement property, 15-year retail improvement property, or 15-year restaurant property. Congress eliminated the three separate categories of 15-year improvement properties with the intention of making all qualified improvement property 15-year property. However, it failed to do so, and as a result, qualified improvement property is depreciated as 39-year property and not qualified for bonus depreciation.

This is known in tax circles as the ‘retail glitch.’ A technical amendment has long been promised and had been included in early drafts of several pieces of legislation since the TCJA became law in December 2017. However, it never made it into the final version of any piece of significant legislation voted on by either chamber of Congress.

The CARES Act corrects this congressional oversight by defining qualified improvement property as 15-year property, thus allowing 100% of improvements to be deducted in the year incurred. The change is made as if included in the TCJA and, thus, is effective for property acquired and placed in service after Sept. 27, 2017.

The closures and quarantines related to the COVID-19 pandemic have been especially hard on small businesses, which include restaurants and local retail stores. This technical correction allows any expenses incurred by owners to make improvements to the physical premises related to these businesses to be accelerated into the 2017 or 2018 tax year on an amended return, or the 2019 tax year on a return due July 15, 2020.

Excise Tax Relief

The act also provides a temporary exception from alcohol excise taxes for alcohol for use in or contained in hand sanitizer produced or directed by the U.S. Food and Drug Administration related to the pandemic. The act also suspends excise taxes on aviation and kerosene used in aviation fuel. The exception and suspensions are applicable to 2020 only.

ADDITIONAL PROVISIONS

The CARES Act is a massive act, the majority of which does not have a tax impact. However, some smaller, but no less significant, provisions impacting federal tax are sprinkled outside of the tax-related division of the act. These provisions include:

• The exclusion from tax of any forgiven small-business loans, mortgage obligations, or other loan obligations forgiven by the lender during the applicable period;

• A safe harbor from the definition of a high-deductible health plan permitting telehealth services to be included, even though such services do not carry a deductible;

• The inclusion of over-the-counter menstrual products as qualified medical expenses for purposes of distributions from health savings accounts and health flexible spending arrangements;

• Pension funding relief for failures to meet contribution requirements to defined benefit plans during 2020; and

• Allowing certain charitable employers whose primary exempt purpose is providing services to mothers and children to use small employer charity pension plan rules.

Coronavirus

Quick Action

Mike Vann says the phone started ringing only a few moments after the e-mail blast went out last Friday to clients and other companies across the region.

It wasn’t a flood of calls, but there were several, and he expects there to be many more in the days and weeks to come. That because his company, the Vann Group, a business consulting firm with a number of specialties, has assembled what it is calling a ‘COVID-19 Crisis Response Team’ to help businesses deal with the fallout from the pandemic.

And a good number of businesses are already in what could be called crisis mode, and the ones that aren’t will likely end up there.

“A lot of companies are going to hit with serious cash-flow issues; if they’re not there now, we probably will be at some point,” he said, adding that a major trust of this new service will be helping companies make sense of the massive, $2 trillion federal stimulus package passed last week, as well as other forms of assistance, and decide which path is best for them.

“There’s a number of different options there — there’s the payroll-protection program within the CARES Act, which will certainly get the most attention, but there’s also the SBA disaster loans and whatever the states are doing,” he explained. “And there’s a variety of options on the federal side; we’ll help people navigate what makes the most sense.”

Vann said creation of the team — comprised of himself, his father and company founder Kevin Vann, and Vann employee Nick Carella — was inspired by incoming calls from clients who had questions that needed answering and a desire to get on top of the situation, to whatever extent that’s possible.

“They’re calling and asking, ‘what does this mean, how do we go about it?’” he noted. “So we thought we would try to get ahead of it a little bit and formalize something so people know they can come to us to help them out.”

The team will provide resources and guidance to support businesses as they navigate those critical strategic, financial, and general business issues that are impacting their organization. More specifically, the team will be assisting organizations with:

• Assistance with the identification and submittal of applications for grants, loans, and other relief programs that a business may qualify for;

• Negotiation support with lenders, landlords, and vendors as well as practical guidance on how to deal with hard business issues; and

• Development of cash-flow models to provide a plan for managing the financial aspects of the business, which will be necessary in determining loan and grant requests.

The team is also launching what it’s calling the “Getting to Next” workshop to help individual companies formulate a strategic action plan for getting through the current period of uncertainty while being ready to capitalize on opportunities once the curve is flattened. The facilitated session is approximately two to three hours and results in a clear and concise plan of attack for the next 30-90 days.

Vann told BusinessWest that how companies respond to the many challenges they’re facing in the coming weeks will be critical to their survival. In such an environment, a proactive response is needed, he added.

Looking for such a response, a number of companies have already called looking for help. And, as might be expected, they cover a wide spectrum of business sectors because virtually all of them are being impacted in some way, shape, or form.

“We’ve heard from financial-services companies, a printing company, a landscaper, and some pretty good-sized service businesses,” he noted. “And, of course, there’s the restaurant scene as well; it runs the gamut.”

Some of these businesses were existing Vann Group clients, but others were not, he went on, adding that this could well become a solid opportunity for the firm.

“A lot of business owners will need help with just stabilizing the business,” he told BusinessWest. “That includes cash-flow projections and looking out from that standpoint, because we’re in completely uncharted territory.”

—George O’Brien

Coronavirus Sections Special Coverage

A New Reality

The massive federal stimulus that took shape last week brought some clarity to how the government would address troubling impact of COVID-19 and the large-scale economic shutdown that has emerged in response to this public-health crisis. Other efforts on the state and local levels aim to help businesses and families struggling with job loss and the suspension of livelihoods. Of course, the true relief will come when this viral threat subsides and businesses ramp back up. But no one knows exactly when that will be.

The news came in quickly — and landed hard.

Last Thursday morning, the Department of Labor issued its first unemployment-claims report since much of the country began implementing, in various ways and at various speeds, some form of economic shutdown to slow the spread of coronavirus and the respiratory illness it causes, known as COVID-19.

The news was not good. The number of Americans filing for unemployment benefits skyrocketed to a record-breaking 3.28 million for the week ended March 21 — nearly doubling expectations of 1.64 million claims. The previous record was 695,000 claims filed during October 1982.

It’s a big problem — and sometimes, big problems require big solutions. Which is why lawmakers in Washington spent much of last week hammering out a $2 trillion stimulus package aimed at helping families facing sudden job loss, small-business owners trying to survive, and entire battered industries ride out what is increasingly looking like a severe disruption to America’s economic way of life.

“Business owners … will be receiving a lifeline from the federal government that is unprecedented in scope, speed, and breadth,” Scott Foster, a partner with Bulkley Richardson, said the morning after details of the stimulus became known.

Among its many provisions, the Keeping American Workers Paid and Employed Act appears to apply to every for-profit business with fewer than 500 employees, including sole proprietors, Foster noted. The act would allow these businesses to obtain a loan — at 4% interest with a 10-year repayment term — to cover payroll costs, including healthcare premiums and paid time off, rent, utilities, mortgage payments (interest, not principal), and interest on other pre-existing loans for any eight-week period falling between Feb. 15 and June 30.

“To summarize, if you are a business and are willing to keep your employees on the payroll, pay your rent or mortgage, and stay in business, the federal government is prepared to pay your rent, your utilities, and your payroll — for employees making under $100,000 annually — for eight weeks, and the payment is tax-free,” Foster said. “It sounds too good to be true, but the public policy is sound — the easiest and best way to get financial support to the most Americans is through their employers.”

Unlike most other loans, this one will be forgiven in an amount equal to the sum of payroll costs, payments of interest on any covered mortgage, payments on any covered rent obligations, and covered utility payments. And to encourage businesses to retain their employees, the amount to be forgiven would be reduced if the business reduces its workforce.

“Business owners … will be receiving a lifeline from the federal government that is unprecedented in scope, speed, and breadth.”

Families will receive a simpler but shorter-term fix — a tax rebate totaling $1,200 for most adults and $500 for each child — which will be distributed as checks in the coming weeks. Meanwhile, states will get help in the form of a $150 billion grant fund, to be distributed proportional to population size, with a minimum of $1.25 billion for states with the smallest populations.

For many of the impacted, it’s a start, at a time of unprecedented anxiety — after all, the country has never voluntarily shut down activity on a massive scale due to a health threat, or for any other reason. This issue of BusinessWest details many of the ways businesses and families are coping, and plenty of advice from local professionals on the best ways to do so. It’s a story that changes by the day, but read on for a snapshot of where we are now.

Targeted Assistance

For many, the COVID-19 threat really hit home the morning — March 23, to be exact — when Gov. Charlie Baker issued an emergency order requiring all businesses and organizations that do not provide “COVID-19 essential services” to close their physical workplaces and facilities to workers, customers, and the public at least until April 7, while continuing to operate remotely when possible.

Those ‘essential’ businesses include healthcare and public health; law enforcement, public safety, and first responders; food and agriculture; critical manufacturing; transportation; energy; water and wastewater; public works; communications and information technology; financial services; defense industry base; chemical manufacturing and hazardous materials; and news media.

Everyone else is being asked to work at home, and most area companies were already moving in that direction before Baker’s mandate. The Springfield Regional Chamber polled its members last week about how the order impacted their operations. Almost two-thirds — 62% — said their employees were already working remotely, 27% said they began remote work after March 23, and 11% said they temporarily closed all operations because they cannot work remotely.

The threat of a longer shutdown looms, and may be foreshadowed by the governor’s order last week to keep all schools and most childcare programs closed at least until May 4, while requesting that educators gear up for the long haul by developing and enhancing online-learning capabilities.

“It sounds too good to be true, but the public policy is sound — the easiest and best way to get financial support to the most Americans is through their employers.”

In the meantime, a number of relief efforts have popped up at the federal, state, and local levels. For example, the U.S. Small Business Administration (SBA) will offer low-interest federal Economic Injury Disaster Loans for working capital to Massachusetts small businesses suffering substantial economic injury as a result of COVID-19. Applicants may apply online at disasterloan.sba.gov/ela.

This week, the Baker-Polito administration also announced economic support for Massachusetts small businesses with the Small Business Recovery Loan Fund, a $10 million fund that will provide emergency capital up to $75,000 to Massachusetts-based businesses impacted by COVID-19 with under 50 full- and part-time employees, including nonprofits. The application is at empoweringsmallbusiness.org.

Meanwhile, Common Capital offers a Fast Track Loan Program to address the needs of local businesses that need quick access to capital. Applicants seeking funding from the program to help mitigate the effects of the COVID-19 pandemic can contact Kim Gaughan, loan fund manager, at (413) 233-1684 or [email protected] for more information.

The Baker-Polito administration also announced steps last week to keep vulnerable families in their homes, preserve the health and safety of low-income renters and homeowners, and prevent homelessness due to reduced or lost income. Specifically, the Department of Housing and Community Development (DHCD) will temporarily suspend terminations of federal and state rental vouchers under its purview, while MassHousing is transferring $5 million to the DHCD for a COVID-19 Rental Assistance for Families in Transition fund to assist families facing rent insecurity.

In addition, the state Division of Banks has issued new guidance to financial institutions and lenders urging them to provide relief for borrowers — several banks have already committed to do so — and will advocate for a 60-day stay on behalf of all homeowners facing imminent foreclosure on their homes. Finally, affordable-housing operators are being urged to suspend non-essential evictions for loss of income or employment circumstances resulting in a tenant’s inability to make rent.

Meanwhile, Massachusetts will delay the collection of sales tax, meals tax, and room-occupancy taxes in the restaurant and hospitality sector for up to three months, while waiving all penalties and interest. And, of course, the IRS has informed all taxpayers that this year’s filing deadline has been moved forward three months to July 15.

Nonprofits are being squeezed by the crisis as well. In response, the Community Foundation of Western Massachusetts (CFWM) established the COVID-19 Response Fund for the Pioneer Valley with a lead gift of $1 million from MassMutual and contributions from a number of area businesses. The fund will provide resources to Pioneer Valley nonprofits serving populations most impacted by the crisis, such as the elderly, those without stable housing, families needing food, and those with health vulnerabilities. To make a gift, visit communityfoundation.org/coronavirus-donations or e-mail [email protected].

Meanwhile, Berkshire United Way and Berkshire Taconic Community Foundation have established the COVID-19 Emergency Response Fund for Berkshire County to rapidly deploy resources to community-based organizations as they respond to the impact of the coronavirus in Berkshire County. Numerous corporate funders have already emerged. To donate, visit berkshireunitedway.org/donate. Nonprofits can request funds at berkshireunitedway.org.

Finally, to help individuals in need, the United Way of Pioneer Valley established the COVID-19 Recovery and Relief Fund to provide aid and resources to those affected by the current public-health emergency. Funds collected will help families and individuals impacted by the pandemic to meet their basic, childcare, housing and financial needs. Visit www.uwpv.org for more information.

Hunkering Down

Resources such as these are critical because there’s really no telling when the region and country can return to some semblance of economic normalcy. Judging by what the medical community knows about how aggressively coronavirus spreads, the health costs of emerging from this collective cocoon too soon are too great — the healthcare system would simply be overrun. That’s why ‘flattening the curve; has become the watchword of the day.

Unfortunately, many businesses feel overrun in a different way. The Springfield Regional Chamber conducted a different poll recently, asking members what level of impact they expect the COVID-19 crisis have on their business.

More than four-fifths have major concerns; 34% say the crisis may put them out of business, while 47% say it will significantly impact their financials. Another 15% say they’ll be impacted financially but expect to weather the storm, while 4% say it’s too early to know.

In many ways, it’s too early to predict many things related to COVID-19 and its impact. Meanwhile, a nation increasingly shelters in place, seeking relief and solutions where they can find them, and hoping for the best.

Joseph Bednar can be reached at [email protected]

Coronavirus Sections Special Coverage

By George O’Brien

By most accounts, this region is still in the beginning stages of the COVID-19 pandemic. Many of the experts are saying it will several months before things will return to something approaching ‘normal.’

But while we have a long way to go, it’s certainly not too early to begin speculating about what ‘normal’ will be, whenever we get there. And it’s fair to say that ‘normal’ won’t look like it does now. In fact, it could look much different because of what we’re all experiencing — and what we’re all learning — during these unprecedented times.

Some questions come to mind even as we’re only about a week into the state’s shutdown of non-essential businesses. In no particular order:

• Will men ever wear ties again?

• Will anyone ever print out a document again?

• Will anyone ever go into a bank branch again?

• Will anyone visit a car dealership again?

• Will companies ever again lease out all the space they’re leasing out now?

• Will we still need college campuses?

• Will we ever need to meet anyone in person again?

The answer to all these questions is ‘yes.’ But the more accurate answer, when we examine things closely, is probably ‘yes, but certainly not as much.’

OK, maybe guys will go back to wearing ties as much as they used to, but … then again, maybe not. Probably not. A good number of them had decided they no longer needed to long before this crisis, and now, this club, if that’s what you want to call it, is certain to get bigger. Maybe much bigger.

As for the rest of those questions, life with COVID-19 has certainly changed how we do things, and maybe for the rest of time, not just until we get that signal that it’s safe to go back in the water, whenever that might be.

Let’s start with paper. Most offices were at least trying to use less paper, but many weren’t exactly fully committed to the task. Now, as offices are relying on other forms of communication, and in many cases, they can’t hit the ‘print’ button, many are learning that it’s OK not to have a print copy of everything. And when the smaller bill comes in from the office-supply company, it’s a good bet that things won’t go back to the way they were.

As for leasing office space, some companies will go back to the same footprint. But it’s safe to say many will find that having employees work at home when they can isn’t just for snowstorms and pandemics. Not everyone wants to work at home, certainly, but if the spouse and the children are not at home at the same time as you are when you’re working — unlike now — it begins to look more doable and more attractive.

Yes, there are limitations, and some people have already found that working at home is like being retired in that you lose track of the day and date. Meanwhile, it can be lonely, and many are finding they need to be around others and just hear the sound of a human voice. But now that some are doing it, they find they can do it.

Bank branches? Some young people can boast that they’ve never been in one. And now, many who are not so young are joining those ranks. People who were intimidated by new banking technology found themselves without a choice — and many have now found themselves saying ‘that wasn’t so bad’ or even ‘that’s pretty cool.’ And, by that way, the same goes for office technology as well.

As for meeting people face to face, this will probably stage some kind of comeback. Skype, Zoom, and all those other platforms are fine, but there’s nothing like sitting across the desk or the coffee-shop table from someone. Although … many people are starting to think those aforementioned options are almost as effective, and they save time, gas, and money. They’ve been around for a while, but now that people have a need to use them, they are.

This doesn’t mean auto dealers, bankers, college presidents, and insurance agents won’t ever meet as a group or an association again. But technology is now showing us that there are other ways to meet collectively.

As noted, we’re still in the beginning stages of this crisis, but we’re already learning things. We’re learning that the technology we were afraid to use for some reason is nothing to be afraid of. We’re also learning new and different ways to do things, and it’s likely we’ll keep doing them that way when this crisis is over.

That’s why things on the other side will certainly look much different.

George O’Brien is the editor of BusinessWest.

Coronavirus Opinion

Opinion

By George O’Brien

Remember that classic scene in Young Frankenstein (even you Millennials have seen it, I’m sure) when Gene Wilder (Dr. Frederick Frankenstein, pronounced Frankensteeen), and Marty Feldman (Igor) are in the graveyard digging up the corpse that will become the monster. Wilder says, “what a filthy job!” Feldman says, “it could be worse.” Wilder asks, “how could it possibly be worse?” Feldman says, “could be raining.”

And then it starts pouring.

Life has felt like that these past few weeks. Someone will say, ‘how could it be worse?’ And it starts raining, in a proverbial sense. People have lost their jobs. Businesses have lost some, most, or all of their revenue streams. People are running out of toilet paper — or they’re really, really afraid that they will. We lost Tom Brady to the Tampa Bay Buccaneers! (The who?) People stuck at home are losing their patience, if not their minds, and we’re just really getting started with this pandemic. And then it snowed on Monday!

There are no sports! How many times can we watch the Patriots beat the Falcons in replays of Super Bowl LII? We know how it ends! The Masters has been postponed if not cancelled. Golf courses are apparently not on the ‘essential’ businesses list put out by the governor’s office. How can golf courses not be on the essential businesses list?

If anyone says ‘it could be worse,’ our immediate temptation is to say, ‘no, it can’t.’

To borrow from Dickens, these really are the worst of times. This is worse than any downturn in the economy, worse than 9/11, worse than the Great Recession. It’s worse because there is so much uncertainty — about today, tomorrow, three months from now, and a year from now.

Not only that, but life is different now. Everything is weird. If we’re actually out on the sidewalk walking and we approach other people, we avoid them like a game of Frogger. If we’re out at the store, we look at everyone as if they might have the virus, and the look isn’t a good one.

Everyone is on edge about their jobs, their life savings, their 401(k), their health, the health of their loved ones. You can see it in their faces, and if you’re talking to them on the phone (which we all are), you can hear in their voices. You can also hear them yawn, because people are not sleeping, by and large. Who could sleep with all this going on?

If we’re actually out on the sidewalk walking and we approach other people, we avoid them like a game of Frogger.

And yet, there is something else, something far more powerful and positive going on, and it’s worth noting.

Yes, there are now security guards and even off-duty police in the toilet-paper aisle in many supermarkets. And yes, sales of guns and ammo are skyrocketing. And yes, we’re already starting to see a rise in reported instances of domestic violence. But despite all this, it’s abundantly clear to me that people are caring more about each other.

And it’s about time.

People don’t just put their initials at the end of an e-mail anymore. They say ‘be well,’ ‘stay well,’ or ‘take care of yourself.’ And they mean it. People are bringing food and coffee to those who are shut in (and that’s most people now). Co-workers are being nicer to each other. When I dropped off the golf cart at a club in Connecticut last Saturday, I walked over to the attendant who was parking it — someone who would likely be unemployed in about 27 hours — and said (from six feet away), “good luck to you — hope you get through this OK.” And I meant it.

You’re seeing a lot more of that these days, and this, more than anything else, will get us to the other side — whenever and whatever that happens to be.

Yes, it could be worse. It could be raining. It seems like it’s already raining — pouring, in fact. But there’s a little sunlight trickling in.

And it might be just enough.

George O’Brien is the editor of BusinessWest.

Coronavirus

Novel Solutions

By John S. Gannon, Esq. and Erica E. Flores, Esq.

It has only been a few weeks since the novel coronavirus made its way to our shores, but life as we know it has changed completely and will, perhaps, never be quite the same again. After a near-record-low unemployment rate in February, nearly 3.3 million Americans filed for unemployment benefits last week, a figure that shattered the previous record of about 700,000 set back in 1982. The report confirms what the plunging securities markets have foreshadowed for the past few weeks — that the coronavirus is killing more than just those who are losing their lives to the disease; it is killing businesses and livelihoods as well.

How long this crisis will continue is impossible to predict. Health experts warn against lifting stay-at-home orders, opening non-essential businesses, and loosening social-distancing recommendations too early; economists worry that the economic consequences will be worse for Americans than the actual disease. But however long this new normal persists, the country has borne witness to another unbelievable sight, a welcome bright spot amid so much uncertainty — a sharply divided Congress coming together to try to mitigate the crisis.

Its first emergency measure? Legislation called the Families First Coronavirus Relief Act (FFCRA). It imposes significant new obligations on all private employers with fewer than 500 employees. Below is a summary of this unprecedented new law.

What new rights does the FFCRA provide to employees? The FFCRA requires covered employers to provide the following to all employees:

• Two weeks (up to 80 hours) of paid sick leave at the employee’s regular rate of pay if the employee is unable to work or telework because the employee (1) has been quarantined (either by government order or on the advice of a healthcare provider) and/or (2) is experiencing COVID-19 symptoms and seeking a medical diagnosis. Employees will be paid their full wages, up to a maximum of $511 per day ($5,110 total) for these sick-leave reasons; and

• Two weeks (up to 80 hours) of paid sick leave at two-thirds the employee’s regular rate of pay if the employee is unable to work or telework because the employee (1) must care for someone who has been quarantined (again, either by government order or on the advice of a healthcare provider), (2) must care for a minor child whose school or childcare provider is closed or unavailable due to the virus, and/or (3) is experiencing a “substantially similar condition,” which has yet to be defined but will be the subject of regulations to be issued by the Department of Health and Human Services. Employees will be paid two-thirds of their wages up to a maximum of $200 per day ($2,000 total) for these sick-leave reasons.

• Employees who have been employed by a covered employer for at least 30 days may also take an additional 10 weeks of paid leave at two-thirds their wages to continue to provide care for a minor child whose school or childcare provider remains closed or unavailable due to the virus. This also caps out at $200 per day.

How are we going to pay for this? Important question! Qualified employers that pay sick leave will receive a dollar-for-dollar reimbursement through tax credits for all qualifying wages paid under the FFCRA, up to the appropriate daily and aggregate payment caps. Here’s how the IRS explained it will work:

• If an eligible employer paid $5,000 in sick leave and is otherwise required to deposit $8,000 in payroll taxes, including taxes withheld from all its employees, the employer could use up to $5,000 of the $8,000 in taxes it was going to deposit for making qualified leave payments. The employer would only be required under the law to deposit the remaining $3,000 on its next regular deposit date.

• If an eligible employer paid $10,000 in sick leave and was required to deposit $8,000 in taxes, the employer could use the entire $8,000 of taxes in order to make qualified leave payments and file a request for an accelerated credit for the remaining $2,000.

In its guidance, the IRS also stated that “reimbursement will be quick and easy to obtain. An immediate, dollar-for-dollar tax offset against payroll taxes will be provided. Where a refund is owed, the IRS will send the refund as quickly as possible.” Let’s hope this rings true.

Which employers are covered by the FFCRA? The FFCRA covers certain public employers and all private employers with fewer than 500 employees. For purposes of this count, employers must include all full-time and part-time employees in the U.S. (or any U.S. territory or possession), including any employees who are on leave, as well as temporary employees and day laborers supplied by an agency (with limited exceptions). Independent contractors need not be counted, but employers who may be a joint employer with another business or are owned even in part by another entity should consider consulting an employment attorney for additional guidance.

Are any employers exempt from the FFCRA? Small businesses with fewer than 50 employees may qualify for exemption from the requirement to provide sick time or FMLA leave due to school closings or the unavailability of childcare if doing so would “jeopardize the viability of the business as a going concern.” Regulations outlining this exemption are expected to be published by the Department of Labor in April.

When does this go into effect, will this leave be available forever, and do we need to notify employees? The law is effective April 1, 2020, and expires on December 31, 2020. And, yes, employers are required to post a notice in the workplace on the FFCRA requirements in a conspicuous place.

We are facing an extraordinary crisis. While this law will certainly be a challenge for employers to grapple with, it is important legislation that helps keep workplaces safe by encouraging sick employees to stay home. It also provides much-needed job and financial protection to employees who are home with their children because schools and daycares are closed. One piece of advice: don’t wait until the sick-leave requests start coming to get your questions answered. Our firm has been working around-the-clock with businesses and organizations that understand they need to plan now for the impact of this historic legislation. Be as prepared as possible, and stay safe.

John S. Gannon and Erica E. Flores are attorneys at the law firm Skoler, Abbott & Presser, P.C. in Springfield; (413) 737-4753; [email protected]; [email protected]

Coronavirus

Bold Response to a Crisis

By Scott Foster

The CoronaCrisis has been a roller coaster for business owners. Starting almost a month ago, the rumblings of disruption began and have now erupted into complete and utter chaos. Business owners have been forced to make stark decisions — restaurant owners laying off their entire workforce; ‘non-essential’ businesses shutting down on 36 hours notice; whether and how to support employees facing three, then six weeks of cancelled school; supply-chain disruptions; canceled orders; canceled events; and more. Business owners have openly wondered, ‘how will my business survive?’

Fortunately, once the legislation pending in the U.S. Senate becomes law, which is widely expected, business owners — including sole proprietors and gig-economy workers — will be receiving a lifeline from the federal government that is unprecedented in scope, speed, and breadth.

Coined the Keeping American Workers Paid and Employed Act, the proposed provisions would appear to apply to every for-profit business with fewer than 500 employees (again, including sole proprietors). The act would allow these businesses (whether a corporation, LLC, partnership, or some other form of entity) to obtain a loan to cover payroll costs, including healthcare premiums and paid time off, rent, utilities, mortgage payments (interest, not principal), and interest on other pre-existing loans for an eight-week period falling between Feb. 15 and June 30, with a maximum loan amount of $10 million. The loan would be non-recourse, require no security or personal guarantees, and bear interest of only 4% with a repayment period of 10 years.

But this is not like any other loan ever offered. This loan would be forgiven in an amount equal to the sum of payroll costs, payments of interest on any covered mortgage, payments on any covered rent obligations, and covered utility payments. The amount to be forgiven would be reduced if the business reduced its workforce, and the forgiveness would not apply to payroll costs of any employees who were paid more than $100,000 in 2019. And the best part, unlike other debt that is forgiven by the lender, any amount forgiven under this program will be excluded from gross income.

To summarize, if you are a business and are willing to keep your employees on the payroll, pay your rent or mortgage, and stay in business, the federal government is prepared to pay your rent, your utilities, and your payroll (for employees making under $100,000 annually) for eight weeks, and the payment is tax-free. It sounds too good to be true, but the public policy is sound — the easiest and best way to get financial support to the most Americans is through their employers (especially in this time of historically low unemployment). 

We would expect loans under this program to start being processed by late April or early May, with funding happening as soon as the loans can be closed. The program is relying on banks and commercial lenders to aggressively participate as the primary lenders under the program, so you should be able to continue working with your current bank. 

Given the tight timeframe and the unprecedented scope of this program, Bulkley Richardson is preparing for an unusually high level of lending in the local market and will be prepared to help our clients navigate this new program, get the necessary loans, and submit the backup needed to qualify for the forgiveness.

Scott Foster is a partner at Bulkley Richardson.

In these times, many people will be working remotely. In addition to accessing BusinessWest online, readers may wish to add their home address. To do this, e-mail [email protected], visit  https://businesswest.com/contact-us/subscribe/, or call 413.781.8600.