Gary Ralston, CCIM, SIOR, FINANCIAL IMPLICATIONS CPM, CRE, CRRP, FRICS Owner, SVN Gary.Ralston@svn.com OF COVID-19 & Tyler Davis, CPA, MTA Asset Manager & Advisor, SVN RESOURCES AVAILABLE tyler.davis@svn.com Javier Marin, MBA-IB, CEcD, CGBP Director of Business Development, CFDC Javier@cfdc.org Note: the following should not be construed as and should not be relied upon as legal or tax advice.
OVERVIEW • Federal Relief Assistance • “CARES” Act • SBA Loan Options • State & Federal Disaster Relief Assistance • Florida Bridge Loan • Florida Individual Unemployment Assistance • Economic Impact • Real Estate Industry • Guidance for Landlords & Investors
FEDERAL RELIEF ASSISTANCE • “CARES” Act • $2 trillion response bill • Passed by the Senate on March 26, House on March 27 • Allocations: • $560b to individuals • $500b to large corporations • $377b to small businesses • $340b to State & local governments • $44b to education • $154b to public health
FEDERAL RELIEF ASSISTANCE • “CARES” Act • Checks to Individuals • $ 1,200 to adults, $500 per child • Based on 2018 tax return, or 2019 if filed already • IRS processing these payments • Income phase out based upon Adjusted Gross Income (AGI) • $75,000 single filer/$150,000 married filing jointly • Tax planning opportunity – delay or expedite filing 2019 return depending on 2018/2019 income • Non-taxable under IRC 139 (Disaster Relief Payment)
FEDERAL RELIEF ASSISTANCE • “CARES” Act • Small Business Relief – “Paycheck Protection Program” • Eligible businesses • Fewer than 500 workers in a single location. • Maximum employee number increased for certain industries & businesses (SBA Size standard) • A 501(c)(3) with fewer than 500 employees • Individual Sole Proprietor, Independent contractor, self-employed • Business must have been operational on Feb 15, 2020 and had employees (or paid independent contractors) • Apply for loans through approved commercial banks beginning on April 3 for small businesses and April 10 th for independent contractors & self-employed individuals • SBA Loans • Only one PPP loan allowed per company • Initial rate is 0.5%, Maximum 4% interest rate
FEDERAL RELIEF ASSISTANCE • “CARES” Act • Small Business Relief – “Paycheck Protection Program” • What will be requested? • Must certify the funds will be used for payroll, mortgage interest, rent, or utility payments • Must certify business impacted by COVID-19 • Tax Return for documentation • Payroll Documentation (provided by Payroll Company) • Form 1099 (IC), Income Statement, Schedule C from 1040 if sole proprietor • What is not requested: • Collateral • Personal Guarantee
FEDERAL RELIEF ASSISTANCE • “CARES” Act • Small Business Relief – “Paycheck Protection Program” • How much can be requested? • Companies eligible to borrow 2.5x average monthly payroll • Existing companies – look at 2019 payroll & average it, New Co’s – look at Jan & Feb 2020 • Includes compensation of individual employees – cap employees at $100k in salary • Includes employee benefits for vacation, parental, family, medical, or sick leave. • Includes amounts paid for employee health care benefits including insurance premiums • Maximum loan is 2.5x payroll, or $10m cap • What is forgiven? • Amounts used within an 8 week window for payroll, rent, mortgage interest, and utilities can be forgiven – you can choose the 8 week window (until June 30, 2020) • You will owe money when the loan is due if it is used for anything other than payroll, mortgage interest, rent, and utilities. • Loan forgiveness amount is reduced if the number of employees or payroll decreases by 25% or more • Loan repayment on remainder is deferred for up to one year from date of loan
FEDERAL RELIEF ASSISTANCE • “CARES” Act • Small Business Relief – “Paycheck Protection Program” Application Application Link: https://home.treasury.gov/sys tem/files/136/Paycheck- Protection-Program- Application-3-30-2020-v3.pdf
FEDERAL RELIEF ASSISTANCE • “CARES” Act • Mortgages • Foreclosure & Evictions are delayed 60 days beginning March 18 • Multi-family owners can request three, 30 day forbearance periods on mortgages with bank in exchange for a promise of no evictions • Must be current on payments as of 2/1/2020 • Unemployment • $600/week increase for the first four months • Eligibility expanded to include freelancers, independent contractors, & other non- traditional workers • Also expanded to include furloughed employees & part time employees • Maximum duration of benefits extended to 39 weeks (from 26) • $6.6m unemployment claims last week
FEDERAL RELIEF ASSISTANCE • “CARES” Act • Tax Benefits • $221b directed for business tax benefits • Most of these provisions are temporary & taxpayers must act within a small window • Defer payroll taxes (Medicare & SS) for remainder of 2020 • 50% of this amount paid on 12/31/2021 & 50% on 12/31/2022 • Employee Retention Credit (2020 only) • Companies are ineligible if they are receiving a PPP loan • Most will find the PPP more valuable than the credit • Refundable tax credit • 2 ways to qualify: • Government orders forced the business to shutdown or partially shutdown OR • Business remained open, but gross receipts for a quarter were 50% less than the PY • Business gets tax credit for payroll paid during this period (of forced shutdown or quarters with 50% or less revenue compared to prior year quarter) – subject to limits • $10k max credit per employee
FEDERAL RELIEF ASSISTANCE • “CARES” Act • Tax Benefits • Enhanced ability to carry losses back to prior years • 2018-2020 losses can be carried back 5 years to recoup taxes paid • Tax Cuts & Jobs Act of 2017 previously eliminated any carryback for most businesses • Losses carried forward can eliminate 100% of future income rather than the previously allowed 80% • Waived 10% penalty on qualified retirement plan distribution prior to age 59 ½. • Max penalty free distribution of $100k • Certain requirements to qualify • Still must pay the normal tax (unless ROTH) • Increased retirement plan borrow amount • From $50k to $100k for 180 days
FEDERAL RELIEF ASSISTANCE • “CARES” Act • Tax Benefits • Non-residential property owners – can expense certain interior property improvements (ex: tenant improvements) immediately rather than depreciating over 39 years • Changed asset class from 39-year property to 15 years, which makes them eligible for Section 179 bonus depreciation • Will often result in a large Passive Activity Loss which is subject to limitations • Drafting error in Tax Cuts & Jobs Act of 2017 (Tax Reform) • Retrospective adjustment to Jan. 1, 2018 • File amended returns & receive back a portion of prior year taxes paid • Estimated $30 billion in overpaid taxes in prior years because of this drafting error • Ground up development not included • Only interior improvements to existing structures
FEDERAL RELIEF ASSISTANCE • “CARES” Act • Agriculture Industry: • Office of the Secretary of Dept. of Agriculture received $9.5 billion • Provide support for producers of specialty crops & those that supply local food systems • Commodity Credit Corporation Fund also received $14 billion • Market Facilitation Program (MFP) Payments - falling commodity prices • In Jan. 2020, Sec. of Agriculture Sonny Perdue previously warned that there wouldn’t be any 2020 MFP payments. However, that is subject to change now. • Hotel Industry: • Bill includes language that treats each hotel as a separate business • Qualifying for small business aid • Increase in unemployment benefits will help laid off or furloughed
FLORIDA PROGRAMS • Florida Emergency Bridge Loan • Activated by Governor DeSantis on Monday, March 16th • Processed by the Department of Economic Opportunity • Managed by the Small Business Development Centers (SBDC)
FLORIDA PROGRAMS • Florida Emergency Bridge Loan • Loan terms • Eligibility- demonstrated economic loss • Approval & closing
FLORIDA PROGRAMS • Florida Emergency Bridge Loan • Get Started Now • Visit https://floridadisasterloan.org/ • Review eligibility requirements and loan process. • Gather required support documentation. • Upload completed application and support documentation • Department of Economic Opportunity phone: 1-833-832-4494
FLORIDA PROGRAMS • Individual Employment Assistance • Visit the Florida Reemployment Assistance website: http://www.floridajobs.org/Reemployment-Assistance-Service- Center/reemployment-assistance/claimants/apply-for-benefits • Review eligibility requirements and application process • Gather required support documentation. • Apply online • Call 1-800-681-8102 for additional assistance
FEDERAL RELIEF ASSISTANCE • “CARES” Act • Small Business Relief – “Economic Injury Disaster Loans” • Existing loan program – CARES Act tweaked the rules • Same business eligibility rules as the PPP under the CARES Act • Can be approved solely based on credit scores. • Advance of $10,000 within three days of application is available • $10k is forgivable & deemed a grant if used on “Qualifying Expenditures” • CARES act waives requirement of personal guarantees up to $200k and waives the requirement that the company must have been in business for one year.
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