Hello, and welcome to this afternoon's webinar on Recent Coronavirus Legislation, Taking Advantage of the Benefits and Understanding the Requirements. Our speakers today are Clinton Baker, Mark Johnson, and Beth Swanson from Keiko ISIM. I'm Daniel Fisher. I'm AAD's Vice President of Governor Affairs. I'll also be participating in this webinar. Before I turn it over to AAD's President and CEO, Brian McGuire, I'd like to let those of you who are live with us know that you may submit questions during the webinar via the chat box in the lower left side of your screen. I will ask, though, that you save your questions toward the end. Many questions you're going to have will get answered. This is a very detailed and comprehensive presentation, and I'm willing to bet most of the questions you have right now will be answered by the end. And then if you still have questions, we will have a question and answer period at the end. So, please hold your questions until toward the end. The slide deck for today's presentation is available as a PDF in the handouts tab of the webinar homepage. This webinar will also be recorded so that you may watch or rewatch on demand at your convenience. Before turning it over to Brian McGuire, I just want to make sure everyone's aware, AAD has been engaged every step of the way with Congress and the administration to ensure the maximum number of AAD members can take advantage of these benefits that are provided in both the bills that recently passed Congress, as well as to provide you with the most accurate and best information. So, we remain engaged with Congress and the administration, even though these bills have passed, to make sure the guidance and the regulations come out in a favorable manner for our members and also so that we have, again, the latest and greatest information to share with everyone, and we will continue to do so as we receive updates. So, with that, I'll turn it over to AAD's President and CEO, Brian McGuire. Well, good afternoon or good morning, depending on where you're calling in in the country today. We welcome you to today's webinar on a very timely topic. Once again, AAD is doing our best to get you the information on these bills and these regulations and guidance as quickly as it comes out. I think we can all agree we're in uncharted territory here, but we've assembled what we think is an excellent panel of experts to provide you the information on taking advantage of the benefits, as well as understanding the requirements to do so. AAD will continue to put these webinars together as things come out of the administration and Congress as it relates to the virus. And with that, I would just like to welcome our MAHITA guests in joining us today and, again, encourage you to hold your questions until the end of the webinar and then submit them in the chat box because many of your questions will be answered by the panelists. And with that, I'd like to turn this over to Mark Johnson. Thank you, Mark. Thank you, Brian and Daniel. We appreciate the opportunity to be here. I'm going to start out the slide with something you probably hate to hear from accountants, and that's this disclaimer slide. As you know, there's been a lot of nonstop information coming about corona for the last few weeks, and for the last week specifically, a lot of nonstop information about the economic side of it and specifically the stimulus that the government is offering to combat it. The good news is most everyone on this call has already been deemed essential. Now, before you get the big head, my daughter's pastor in Denver reminded us yesterday that so are liquor stores, marijuana dispensaries, and attorneys. And Beth, our final panelist, is an attorney, so we'll forgive her for that. So the legislation, specifically the three tranches that have passed so far that we'll talk about today, was designed around there being eight weeks of a contagion. So you've heard about the 15 days to heal, the 30 days of quarantine, the open by Easter, all that kind of discussion. That is what this legislation was designed around, that we would be done with it by the time that that eight weeks is over. So if this goes longer or if the reoccurrences happen, then we're definitely going to see more after this. That might mean more extending of deferrals, more of reimbursement periods, et cetera. We don't know what that looks like yet because we're hoping it doesn't happen. Remember, prior to this being a coronavirus year, it was an election year. So there's a lot of this that also, as Congress is getting stuff out to us as quick as they know how. Sometimes that isn't very quickly, but they're getting it out as quickly as they can. So it's fast moving, and your responses also are going to need to be fast. So we're helping AED get this information out to you quickly, even at the risk of ongoing changes making some of this information we're going to go over today subject to change. So you've not waited too long yet, though. The SBA, who, you know, they are bankers, keep bankers hours, they weren't open this weekend. So they released a statement first thing this morning that they will release guidance later today for their banks to administer the programs for them. So a lot of this that you're hearing about already is not in the people's hands that can control it. And speaking of controlling, Beth, I seem to have lost the control for advancing the slide. There we go. All right. So today's takeaways. There's a lot of stuff here. We do a lot of webinars, and we're feeling the pressure, frankly, on getting one like this out because it is so current and so vital for you right now. Lots of info. Daniel, you might have to give us the hook at the end of the hour in case we go long, but we're just going to keep talking until you tell us to shut up. Here's what we'll try to cover today. The bold marks on this slide are the actual phases that have passed so far, and we're going to take them out of order because we thought that was a little bit more important to you guys in the order that we take them. Phase one was actually the second bolded item here, the one called Coronavirus Preparedness and Response Supplemental Appropriations Act of 2020. That passed first and is the smallest of the three, but it did contain some immediate response needs. Phase two is the bottom one, the one called Families First Coronavirus Response Act. That's the Family First Act as you heard it, and that got the attention of many of your HR teams and made you start thinking about how the government might actually be here to help you like you've heard for years. And then phase three is the one on top. That's the big one. That's the one that got all of your attention, and we'll spend most of our time here, hence that's why it's first on our agenda. Yes, this is Clinton. This next slide here, we put in here about tax filing and payment extensions. This wasn't technically part of a stimulus bill. In fact, this came directly from the Department of Treasury and the IRS. They had a joint announcement a little over a week ago. I believe it was March 21st when they announced that they were extending the date for tax returns to be filed from April 15th out to July 15th. Shortly thereafter, they also released an announcement that that was an extension of time to pay. So for those of you who are procrastinators or maybe for those of you who like a little more flexibility in your planning, looking back, you have a little extra time. So just a couple of points on this. One is not every state has conformed to this, and so many states have. Many states have. I think probably 90 percent of the states that have an income tax have conformed to this, but there are still a few outliers that have not. What I would also say is some states may have done this for income tax but for some other tax purposes such as intangible tax returns or some other filings that may happen for businesses that may have not. So you don't need to do anything specific for this one. It just happens. There's nothing you as a business owner, taxpayer has to do to qualify for this, but that's something we want to make sure everybody had heard about. On this next slide, I love this picture. I've got to give kudos to Mark. I don't know where he found this picture, but my understanding is the green things in each one of those pictures are $100 bills. So when we talk about how big is this bill, it's a $2 trillion bill, sorry. And so this is just an illustration of that. So it's a massive bill. To put it into context of this, we've had some other trillion-dollar bills that have happened in the past before. Some of them maybe even long-term have approached a $2 billion total cost such as Tax Reform Act of 2018 or the Affordable Care Act, of course, which was almost a decade – actually, it was a decade ago last week, 10 years ago when that passed. But those were also bills where that cost was over a 10-year period. With this one being $2 billion, a lot of that is actually coming out very quickly. To put in context what a trillion is, Mark and I were talking the other day, and we saw something that said, if a person spends a million dollars a day, every day, they would not have spent $2 trillion yet since 1-1 of zero, since the BZAD conversion. That's just the way math works. Said another way, I saw an illustration that said, if you counted seconds as dollars, it would take over 31,000 years to spend a trillion seconds. And so that's without leap years, of course. But it's massive how big this number is and really, honestly, how quickly Congress and the administration have put this together. On the next slide, this gives a rough breakdown of some of the larger components. What we're going to focus on today is kind of that bottom left fourth, if you will, the PPP, the Paycheck Protection Program. A little slice above that, the EDL program. We'll talk about that in quite a bit of detail. That's where we're going to spend most of our time as it relates to this bill. Some of the other sections people ask, some of it has to do with payments to individuals, refunds. Some of it also has to do with the Economic Stabilization Fund. Some people are using bailout on that. It seems like that's a term that causes some consternation or some disagreement on whether it's a bailout or not. Well, the reality is it's needed for much of the economy. And then there's a portion of it that affects agriculture. Again, we're not going to spend time on that today. Because a lot of agriculture has money that flows through the Department of Agriculture or the Food and Drug Administration and some other avenues. But those are the big components today that we're going to spend most of our time talking about. On the next slide, we wanted to share with you again, like I believe it was Daniel who said at the beginning, these slides are available in PDF format in the webinar. Or as you may come back through and listen to parts of this presentation later, these are some of the bullet points specific to this most recent CARES Act that just passed last week and was signed on Saturday. And there's a lot of things in there. We're not going to have a chance to cover them all. In fact, we're going to focus most of our time where I've already said on the Paycheck Protection Program and the EIDL program. But there's a lot of things in here. So if there's something on this list, I'm not going to read this list to you. But if you look at this list and you think, oh, wow, I wonder what they changed to Retirement Fund Rules, just know something significant changed on that. And that's certainly an area to look into, even though it's not what we're going to cover today. So Mark, why don't we go ahead and jump into it in detail on the Paycheck Protection Program and how that affects the equipment dealers and equipment distributors that are on the call today? MR. BARTLETT Yes. Specifically, why should they care about this program? At first, you hear Paycheck Protection Program. It sounds like a payday loan. That's a bad connotation to many of you. And it's not that much more. It's more like a business grant program. So it does provide significant funding for small business, covers lots of things, including operating expenses, and it may be forgiven. Those are kind of the three highlights as we start looking at the details. There are some, you know, the biggest thing on here for most of the employees here that will be the differentiator, and Beth may speak to this more later, is the 500-employee cutoff. There are some ways around the 500-employee cutoffs, but not very many. There's things to do with your NICS code, et cetera. However, it's not limited by some things that we thought it would be. So for instance, SBA loans have traditionally been limited by some income limitations and things like that, and that is not set in stone here. One thing to determine as I start talking about employees, though, is the term employee is not just full-time equivalents like you might think of normally. That is, it's all employees. So anytime you hear us use the word employees for the next several slides, we're talking about all employees full-time or part-time. Maximum loan amounts. First off, keep in mind that this Paycheck Protection Program loan is based on your payroll only, and so what we're looking at is a maximum loan amount that is the equivalent two and a half times your average monthly payroll. So how do we calculate average monthly payroll? We simply look back to last year, so we look at, for instance, the time period from April 1, 2019 to March 31, 2020, and we find out what our average is, divide that by the weeks, and we get what our average payroll is. We can get the maximum loan amount then is up to two and a half times that average monthly payroll, or $10 million, whichever is less. So if you've got a $20 million payroll a month, sorry, you're only going to get five or whatever that math is, a little less than $5 million a month on that one. So two and a half times or $10 million. All right. So what's the definition of payroll? Not quite as simple as you can see. You can see here we had to cram a lot of words onto one slide and make some of them even smaller. So first off, what does it include? It's essentially net pay plus benefits up to $100,000 per employee. That's how you kind of look at all those words, and that's what it kind of boils down to, with some restrictions. The employees that count for this are only, again, the employees that have a principal residence in the United States. So if you've got employees that their principal residence is outside the United States, their payroll would not count in this number. Any employees over $100,000, they still count, but only up to $100,000. It doesn't necessarily include the taxes that we withhold for the employees, because that's their money, not yours. And it does not include any of the emergency leave wages that Beth will cover later under the Families First program, because they're covered under a different place. So you can see lots of words on here, but that's what it boils down to, and it is payroll. However, you can use the funds that you get through this program for more than payroll. You can use them for most of your operating expenses, as you can see on here. So it covers payroll, as well as all the benefits that come with payroll, you know, the group health care, paid sick medical leave, that counts in there, as long as you're not double dipping somewhere else. Employee salaries and commissions accounts, there's a little bit of discrepancy there, Our understanding to date, and again, this is one of those that might change, but our understanding on that is contract labor, those are self-employed people, and they have a program that's available to them, similar to the program that's available to you. So they would be covered under that, not under yours. So that would not count as the payroll. Payments of interest on any mortgage obligation, so that, you know, that would be covered under the Payments of Interest Act. mortgage obligation, so that, you know, any scheduled mortgage that you've got in the next few weeks. Not, you know, obviously you can't hurry up and prepay part of your mortgage to get an extra benefit on there, but your scheduled mortgage. Similar rent, including the rent under a lease agreement, but not prepaid rent. Utilities, interest on any other debt obligations that were already in place before this started. So you can use the funds for that. We do have to make some certifications. Obviously, to qualify, you have to promise the government that you do qualify. So you can imagine, a program of this scope, $2 trillion, as Clinton mentioned, there will be some unscrupulous characters applying for these funds, and the government will need a way to get even with them at some point if they shouldn't have applied for this, and government, they'll be slow, but they will figure that out. The first of these certifications being that you do have to certify that you've experienced economic hardships because of the coronavirus. Some of you might not have experienced those hardships yet. Most of you probably think there are some coming during this time period, though, and so by the time this is all said and done, you will have to make those certifications on there. So the big thing everyone wants to talk about then on this program is the loan forgiveness piece of it. So forgiveness is available on the monies that you get under this program. We will have to run some numbers during the period of basically eight weeks, and again, that's what I talked about earlier. If this coronavirus lasts longer than this, then this calculation could go past the eight week period. But for now, it's an eight week period, and you'll have to turn in at the end of this what did you actually spend on payroll, on interest, on mortgage, on the rent, and on the utilities, because those are the only things that are eligible for the forgiveness part. So there is a bookkeeping requirement. In other words, at the end of this, it will have to be shown to the SBA. The good news, though, is that that debt forgiveness, unlike other debt forgiveness that you may have heard of before, is a little bit different. It's excluded from gross income. So you won't get the money from the government and then also have to report that as taxable income only to lose 30 to 40 percent of it because of your taxes. A little bit more on the forgiveness. There could be a decrease in the amount that's actually forgiven if some things happen during that eight week period. So if your full-time equivalent base drops this year from the period February to June as it did last year's February to June, and if that decreases by an amount, then that amount that it decreased by could decrease the amount that your debt is forgiven. Similarly, if your payroll cost goes down by more than 25 percent, not counting any of those employees that were over the 100, as long as they stayed at 100, then the 25 percent reduction or more would cause a decrease in the amount of debt that would be forgiven. So again, after the eight weeks, we'll have to apply for the forgiveness and produce the necessary documentation. The lender at that point will have up to 60 days to approve that forgiveness. So more bookkeeping. And like most tax acts, this is good for accountants. So I apologize for Beth earlier for being an attorney. I guess I'll apologize for being an accountant at this point, because most tax acts do produce more stuff for us. So the gist of that, though, is the loan forgiveness is there. It's a big deal. And you will have to make certifications and bookkeeping adjustments to get it. Additionally, previous SBA loans, because of the timing, the fees, and the credit requirements were made. Oftentimes, for dealerships your size, we never even considered them, because they took a long time, they cost a lot, and they were basically unattractive for our clients. However, on this round of this, the approval process is supposed to be much faster and much more automatic. As you can see here, the fees have been waived, and you don't have to show a letter showing that you have no other credit available elsewhere. There's also no guarantees, no personal guarantees, and no collateral. All that sounds way too good to be true. And maybe that is the case. Maybe it is too good to be true, and we'll find out some details later that we're sorry about. But right now, everything else that's going on in the world is also much worse than we might have imagined a few months ago. So this is an opportunity for you to seek help to keep the economy rolling. Clinton will walk us through the first phase of legislation. Thanks, Mark. Like Mark said, he just covered the payroll protection program, which is a much bigger program, applies to businesses that have 500 or fewer employees, can cover up to two and a half months of wages. I mean, it's a big, robust program. Candidly, our firm is reaching out to every one of our clients to go through that calculation, and we recommend all businesses do, because it is a forgivable loan if they're under 500 employees, with exceptions. The program I'm going to talk about is kind of its smaller, yet older sibling, if you will. The Economic Injury Disaster Loan Program has been around for quite a while. Oftentimes, this is a program that, when you think about rapid government assistance after a natural disaster, such as a hurricane or a tornado, this is the program that's used for that. It has a lot of similarities to the program Mark just talked about, but this has been around. It has infrastructure. And so some people might ask, well, why talk about both? And the reason is businesses can take advantage of both of these programs. And so there are some other incentives out there that you can't overlap with, and these two you can't overlap, but you can use both programs. The key is you can't double dip, and I'll get into that in a minute. But this one extends beyond payroll, it actually gets into what are some of your operating expenses, what is your working capital, and it has potential for a longer term. In fact, on the next – I'll cover that one later too. On the next slide when we talk about the eligible entity, you're going to notice this slide looks very similar to the slide Mark covered with the larger program, with the payroll protection program. There are a couple of caveats, a couple of things that are different. One of the differences here is that you'll notice this one doesn't have an exception for affiliates. So when we're looking at companies that have common ownership, traditionally under the SBA programs, you had to look at them together. And so you couldn't take a company that had 100 employees, another company that's got 100, and add them up and say, hey, all we did was split ownership, but we really have seven companies here and be over the 500. In this case, you can't do that for the EIDL program either. It looks at each affiliate group, which is a traditional definition of it. A couple of other things that are on this slide is that there are some exceptions to that 500 that Mark mentioned for NAICS codes, and that's been rewritten, or the guidance has been reissued. And so for equipment dealers, though, the traditional rule was if you had over $35 million in revenue, you didn't qualify for these SBA programs. That got raised to 500. Unfortunately, I know there are a number of dealers that do have more than 500 employees, and as of right now, they wouldn't be eligible for this loan program either. I've heard some rumors that maybe there's some people out there politicking to get that changed. I'll be real honest. These things are happening so fast. They wouldn't surprise me, but at the same time, it also might be one of those things that just kind of gets rolled over and run past in terms of, hey, we already have this out there to help people. We're moving on to the next thing. On the next slide, then, this covers what the loan proceeds can be used for. And so you're going to notice a very similar list, again, to what Mark mentioned on the other program, could be to pay obligations that can be met due to revenue losses. And so also increased costs for materials. So if you just think about business slowing down and all of a sudden not being able to pay your bills or having to pay more for your products, that can be used. These loan proceeds can be used for that. Loan proceeds can also be used for maintaining payroll, making rent and mortgage payments. Also, like Mark said in the other program, you can't prepay. You can't give advances to employees and then take it away later on. I mean, those are some things that I know you just kind of read some of the chatter out there on social media, people talking about that. That stuff's not allowed, and there will be a certification process where all of this eventually you have to certify what you used it for. I do want to come back to the fact that you can use both, but you can't double dip. So if a business is using the PPP program and using that for payroll, then they could use this program for anything other than payroll. And you might say, well, how designated is that? And that gets to Mark's point of there's record keeping that goes on here that you have to be able to show here are the loan proceeds I took from the PPP program, what I used it for, here are the loan proceeds I took from the EIDL program and what I used it for, and those two things cannot overlap. On the next slide, it outlines the terms and length of this program. Like I said earlier, this is based upon a program that has been around for a long time. It has the infrastructure in place. In fact, the application process, it's called a 7B application, is already on the SBA's website. It has been there for quite some time. It does go through the banks though, and so the banks have the right to — I don't want to say say no, but they have the right to set their terms. And so there's a $2 million maximum on this, and also there's up to a 30-year payout. But the banks may decide that a business doesn't need $2 million. They might say, well, the only real business purpose here is for half that. And they might also say, we don't want to stretch a million dollar note out over 30 years for this type of thing. We'll only approve up to 10 years or 20 years or whatever. So it is subject to normal banking rules. I would say from the people we've talked with, those will probably be pretty relaxed maybe compared to usual. But this is an actual loan. It will have to be paid back. It's not forgiven. You can see the interest rates are defined, very low interest rates, 3.75 for business, 2.75 for not-profit. Also, the personal guarantee on loans less than $200,000 has been waived, and you can read some of the other waivers there. Mark, in addition to this, there's also a number of miscellaneous provisions that we're going to have you cover as well, and not part of these loan programs, but I would say those are the areas we're getting most of the questions from. But what are some of the other provisions? Mark Bevins Sorry, I need to take myself off mute every once in a while. Yes, and the confusing part of that is there's several other slides here I'm going to go through, and there's only so many ways that you can describe payroll and employees in all of this legislation, and that's what it is. It's designed around protecting primarily the employees. So the clients looking at the employee retention tax credit here will need to run an analysis first off to understand if they're better off to take this or the PPP loan, as you can't participate in both at the time. But the employee retention credit is a refundable payroll tax credit for 50% of the wages paid by employers to employees during the crisis. So as far as who's eligible, it had to be existing operations that got shut down because of the related shutdown orders in the States. During that time, the gross receipts would have declined by more than 50% when compared to the same quarter in the prior year. So it's a pretty substantial decrease that you might not have been anticipating yet, but we have seen some of our dealers in running out there modeling work anticipating a 25% to 50% decrease in the next few months. So which wages or what wages? So there's two different caveats on here. One is employers with more than 100 full-time employees, and in that case, if you have more than 100, then the qualified wages are the wages paid to the employees when they're not providing services. So we've closed down, they're not being able to provide services, but we're still paying them. Those are the wages that qualify. If there are employers that are less than 100 employees, then it's any wage. So during that time frame, there's more subject to eligibility in this program. But the credit is only provided for the first $10,000 of compensation. So including health benefits and all that, it's limited to the $10,000. And it's for wages paid between March 13th and December 31st. The next one is payroll tax payment deferrals. So it's not clear whether you can double dip on this, but an eight-week bookkeeping at the end of this will indicate that you would have to have actually had to pay these by then, I would think, but we'll find out. That's, again, one of the limitations of passing so many things and so many big things all at once. But essentially what this is, is it's a deferral of the employer's portion. FICA tax is paid for the period of enactment through January 1st of 2021. So you would take that amount of that deferral, and 50% of that is going to be due by the end of 2021, and the other 50% of that would be due by the end of 2022. If you're self-employed, then it's a similar rule, around 50% of your self-employment taxes. Again, it does not appear that this deferral can be used if a loan is forgiven under the paycheck program. NOL modifications. Hopefully no one on this phone call has any NOLs, but you know, particularly with bonus depreciation and rental fleets and things like that, NOLs happen even when you have a good amount of book income. So NOLs are something that are out there for some of you. So the good news here is that the net operating losses that are currently subject to a taxable income limitation, they can't be carried back, or they couldn't until now. And now we're going to be able to carry them back again. So this provision provides essentially that an NOL arising in the tax year beginning in 18, 19, or 20 can be carried back five years. So if you paid big taxes last year or the year before that, you can start carrying back instead of carrying forward. It also gets rid of the requirement that you couldn't fully use it. So we saw some cases on tax returns this year, for instance, where we might have created an NOL last year of several million because of bonus depreciation, and then we have net income this year of say $100,000, just to make up a number, and we could only get about 80% of that NOL offset. So even though we had millions of dollars in NOL, we could only get $80,000 of use of that NOL this year. That has also been eliminated. So these changes basically allow companies to use those losses, get some money from prior tax returns back, and give you some cash flow to get through this emergency. Business income interest limitations. So this is something you guys have all been dealing with. So now it's a complicated rule to follow, whether you're an ag dealer or a construction dealer, whether you've got what's your taxable income and how that looks. It was subject to 30%. So the interest expense that you had couldn't exceed 30% of your adjusted taxable income. That has now been up to 50%. So that will let many of you take quite a bit more interest expense than you would have been able to otherwise. Now the confusing part about this is that it's clear that that is the case for sole proprietorships and corporations. It's a little less clear about partnerships. Luckily, there aren't near as many partnerships that we see in any way in our dealership base, but it doesn't apply to partnerships just for 2020 anyway, not for 2019. It appears that that language was written around. The IRS made a lot of changes around partnership reporting and basis and things like that, and they didn't want partnerships, I think, to have to go back and amend 2019 returns that they'd already spent so much time doing. So again, that's one of those. We'll see if that gets straightened out any differently, but that's where it sits right now. Okay, is there any fine print or free lunch pitfalls? Is there any of the too-good-to-be-true stuff that we talked about? So there is a couple that we know about so far, and I'm sure more will come out. The first one is a good one though. Social Security – well, good for if you're afraid this is going to dip into Social Security and you're not going to be able to draw on that. The Social Security Trust Fund is supposedly going to be made whole in this. We heard it was going to go broke here, but it's not going to be made whole. We heard it was going to go broke here soon anyway. Clearly, if we start deferring, that makes it go broke faster, but the Treasury is supposed to make some appropriations to fix that. Further, there's some restrictions though on business loan recipients. So in addition to the certifications you had to make earlier, you have to also contractually agree that until one year after that loan is no longer outstanding, you won't pay dividends. You won't buy back any publicly traded stock. You won't increase your compensation to your officers that are already over $425,000, and you will reduce the compensation of officers or employees whose total compensation was already over $3 million. So you can see that most of these are kind of aiming towards the big publicly traded companies, but there are caveats in there that would apply to most of you as well. The biggest thing on the individual provision, that's the one that's hopefully going to spur the economy and make people buy new homes, and housing starts will stabilize and all that kind of stuff to keep your business going. And that's what you've heard about with the $1,200 per person or $2,400 per couple plus $500 per child that is out there. And again, these are advanced refund credits. So a lot of the people that get these might not have $2,400 of tax. The good news is they won't have to pay it. They've already said that that would be considered an IRS correction of an error. If they get paid back more refund credit, then they would get refunded in the future. So that should be true money in their pocket. There's a few other things on here, again, like Clinton said, you can come back to later. So with that, Beth, let's get into the HR side of this with the family first stuff. Thanks, Mark. So on March 18th, which really does at this point seem like really old news, the President signed the Family First Coronavirus Response Act, which provides two new kinds of federally mandated paid leave related to COVID-19 plus tax credits to reimburse employers' cash outlay. So the first revision is public health emergency leave. And what that is, is, could I get the next slide, please? Someone, is it me? Thanks. So public health emergency leave is an expansion of the 12-week FMLE leave that covers employees who cannot work due to child care obligations. With this leave, employees are eligible if they've been employed 30 days as of the date their leave begins. And the first two weeks of the leave are unpaid, and the remaining 10 weeks are paid at two-thirds their regular pay. The law mandates that the mandatory payment is capped at $200 per day. Of course, you can choose to pay your employees the full two-thirds of their regular pay if they're normally paid more than that, up to a total required paid leave amount of $10,000. There are exemptions allowed for employers under 50 employees if the payment of that paid leave is going to create a financial hardship, but you have to apply for that leave. The DOL has not given us any indication of what the application process looks like, although they've promised that it will be simple. Additionally, although this, of course, doesn't impact anybody on this call, but health care workers can be exempted by their employers from the public health emergency leave. Additionally, there's the emergency paid sick leave, which is a new sick leave bank that's in addition to any sick leave that you already offer your employees. Full-time employees get 80 hours, and you can prorate that amount for any of your part-time workers. So, for example, if you've got somebody who works 25 hours a week, they get up to 50 hours of paid leave. There are two tiers of pay, depending on the type of sick leave that your employee takes. If your employee is directly affected by COVID-19, meaning that they are subject to a government quarantine or isolation order, if they are experiencing symptoms and seeking a medical diagnosis, those employees get 100% of their regular pay, up to $511 per day. As of right now, it looks like the Department of Labor probably will indicate that if an employer has to close their work site in order to comply with a government stay-at-home order, that any sort of leave that's paid to employees won't be considered qualified emergency paid sick leave. However, if your business is considered an essential business, but you have employees who have to stay home, for example, if you can only have 10 people at your work site at a given time, we think that, as of right now, that leave would be qualified as emergency paid sick leave. The second tier of employees are employees who are out of work due to childcare unavailability. It's that same category of employees who are eligible for the public health emergency leave that is paid at two-thirds of the employee's regular pay, up to $200 a day. The same exemptions would apply, so employers with fewer than 50 employees could be exempt, but have to apply with the Department of Labor, and also healthcare workers can be excluded for application of those provisions. So, the next slide just walks through what we've talked about a little bit already, which is the triggers for the paid leave provisions. So, for emergency paid sick leave, an employee is unable to come to work or to telework because of a government quarantine or isolation order, medical recommendation to self-quarantine, or experiencing symptoms and seeking diagnosis. And then for both emergency paid sick leave and the family and medical leave expansion at two-thirds of the employee's regular pay is caring for a quarantined individual, which would be not part of the public health emergency leave, but part of their regular SMLA leave, so that would not be required to be paid. But then caring for children whose school or daycare is closed, or substantially similar conditions of a child's daycare or school being closed are subject to that two-thirds pay requirement. One thing that we've heard a lot, especially here in Kansas, is, well, what happens when school's out for the summer, but my kids are still home? The answer to that is that if your kids normally go to daycare during the summer, and that daycare is still closed due to COVID-19 precautions, then the employee would still be eligible for that paid leave. But if the kids are normally home for the summer and on their own, then the employee probably would not qualify for the expanded family medical leave. The next slide, we talk about the length of time. So these provisions cover only the remainder of the calendar year 2020. The Department of Labor has said that employers don't have to comply with the paid leave provisions until April 1st, which is now just a couple days away. It seemed like forever away 12 days ago. And it ends on December 31st, 2020. So the government is really banking on this hopefully resolving itself by the end of the calendar year. Again, as we talked about for the expanded SMLA leave, the first 10 days are not required to be paid, but an employee can choose to take any of their sick leave that is otherwise available to them. The SMLA rehire provisions are loosened for employers with less than 25 employees. So if you have had to eliminate an employee's position in the 12 weeks that that employee is out, and you've tried to get that employee to a similar position, but one simply isn't available, you wouldn't have to rehire that employee as long as you are in contact with them within the 12 months following the first day of their leave. So in some circumstances, the rehire provisions of SMLA are loosened. And again, the max 12-week total provision of leave as of right now, the SMLA leave and the expanded paid leave don't stack. But we're waiting for more guidance from the Department of Labor on that. A couple of things to note. The expanded paid leave does not mandate that your regular SMLA leave is paid leave. So there's no new requirement for an employee's regular SMLA leave to be paid. You can still have that leave be unpaid if the employee doesn't have paid time off available to offset that protected leave. This provision isn't retroactive. So any leave that you have offered to employees who are impacted by COVID-19 before April 1st don't count toward your mandated paid leave requirement. It's also in addition to your state leave requirements. So I know that California requires that you provide three days of paid sick leave. These requirements are on top of that. You also, of course, can't discharge, discipline, or otherwise discriminate against an employee taking the family leave. And there are penalties for failing to comply. Last week, the Department of Labor said that we will not enforce the law for 30 days from the date of enactment, so through April 17th, if you show good faith that you are remedying your violations as soon as possible, paying back wages as necessary, and providing to them a written commitment to future compliance with the Act. In addition to the burdens of the Families First Act, there are some benefits. The effects of the Act is to provide, essentially, that the government is paying you to continue to pay your employees. For each of the provisions, for public health emergency leave and emergency paid sick leave, you are eligible for a 100% credit on the wages that you pay to your employees. So it's a credit against your FICA taxes for the public health emergency leave and the sick leave. So the two weeks of sick leave, plus the additional 10 paid weeks of FMLA leave, are subject to this credit. The maximum credit for emergency paid sick leave is going to be $511 per employee per day for those benefits, the sick leave benefits that are paid to employees who themselves are subject to isolation or quarantine orders or are sick with COVID-19. For the Tier 2 emergency paid sick leave benefits, it's $200 per day per employee, so for those employees, again, who are out of work caring for their minor children. For the public health emergency leave, that expanded FMLA leave, the maximum credit is $200 a day up to $10,000 per employee for the lifetime of the credit. These credits are going to be taken on quarterly payroll tax returns, but the IRS has promised a faster process to get refunds processed and paid quicker than quarterly. What they're saying is that our understanding as of right now is that they'll have forms available and essentially every time you run a payroll, you'll be able to fill out a form and request a refund of any amount of credit that you're eligible for that exceeds your payroll tax deposit that would have been required. There's also a similar credit for self-employed individuals against SE tax, and the way that that works is essentially if you need to be out of work in order to care for a child or are sick yourself, you'll get a credit against your self-employment tax in the amounts that if you were a W-2 employee of your business, you would have received as eligible paid benefits. A lot of employers are worried about having to potentially lay off or furlough employees, and these slides provide a quick summary of the difference between a furlough and a layoff. So a furlough, you continue employment, but you schedule an employee for reduced hours or provide a period of maybe a couple of weeks of unpaid leave. If you are in a situation where you want to continue to provide health coverage for your employees, you'd want to check with your provider to make sure that you're in compliance with your eligibility requirements under the insurance laws. A layoff can be either temporary or permanent, and your employees officially go off of your payroll and are terminated, and it's really critical when you're making those decisions about whether it's a furlough or a layoff to be intentional with your reasons for decisions, and make sure that your criteria are really clear and objective so that you can protect yourself from any allegations of discrimination. Any employee who experiences a reduction in hours can apply for unemployment. The CARES Act also expanded the eligibility and the payment requirements for state unemployment law so that it's not quite as much of a burden on employees who are experiencing that. We have on our website a number of really great tools in our HR toolkit. We have a number of documents that are available for use, some sample policies and communications to employees. One thing that we found really essential for some of our clients is a letter that employees can take with them that just says that their employer is an essential business and that they are out and about, potentially in violation or apparently in violation of a stay-home order when in actuality they're providing legitimate services for an essential business. With that, I think that we are ready for questions. All right. Well, excellent. Mark, Clinton, Beth, thank you so much. This was great. Very informative. Lots of information and under time, so we have plenty of time for some questions here. So I'm going to also like to bring in a special guest we have, Michael Brennan, President and CEO of Brandeis Machinery Company in Louisville, Kentucky, a former AED chairman who has been studying this legislation endlessly over the last week and has, I think, a lot of great insights possibly on particularly the $2 trillion stimulus and the SBA programs as well as the tax benefits. So Michael, I don't know if you just had any quick thoughts before we dive into the questions to give our presenters just a slight break. No, I think they did a great job explaining the Paycheck Protection Program and the Loan Forgiveness, which are very powerful for most dealers and quite a few of our customers. So I think we can probably go to questions. All right. Excellent. Feel free to chime in here. We're going to start off. There's a lot of questions on the paid sick leave and medical leave. So we're going to give Beth a slight break here by going back to the early parts of the presentation. We'll try to stump Clinton and Mark here. So what about your 615 second quarter payments? I believe this applies to or was back in the filing deadline extension conversation. Right. So, Daniel, I've not heard that that has been extended, which actually winds up and creates a little bit of a hassle for some taxpayers in terms of if they don't have their tax return filed by until after June 15th but they still meet the July 15th deadline, probably means they had to take a pretty good guess at their June 15th deadline. That's the type of thing I don't think has been addressed legislatively yet. It wouldn't surprise me if it gets pushed back to match the same thing where they say, you know, either we're going to give you an extra month and say match it up with the June 15th deadline or maybe give a little bit of break and push it to August 15th. So we'll see where it goes. But as of right now, it's not been delayed off of June 15th. All right. I believe this goes back to the payroll protection discussion as well as some of the SBA loans, I believe. Are the benefits for the U.S. mainland only excluding U.S. territories? Yeah. The payroll, again, remember, is subject to the employee having a primary residence in the U.S. So, Beth, you might have a better answer for me on this one. But as far as the business probably has to be resided in the United States as well. I think that's what your question is revolving around, Daniel. But, yeah, I think it would have to be a United States residing business and on United States residing employees. I have forwarded that question to our expert as well. So we haven't gotten an answer back. But we will circle back with an answer when she gets back to us. All right. Great. We may have an answer in real time then here soon. Can you talk more about the good faith certification? I believe that was, again, in the SBA loan discussion. Yeah. I think that's part of the requirement under the Paycheck Protection Program. I would say this. The good faith explanation is, is your business affected by this? I would say from what we've read, the threshold for saying that is not very high. It isn't like there's any calculation out there that says you have to be able to show that, you know, you lost 10% of your revenue or you have to show that, you know, you weren't able to meet with customers or take care of customers' needs. And the reality is almost every state at this point, I believe, has issued an executive order of some kind of a stay-at-home or a stay-in-place order. So I think it's pretty easy for businesses to say, hey, we've been affected by this. Even if they're an essential business, very few even essential businesses have 100% of their workforce in place. So what we've heard is it's a pretty low threshold and it is not a specific number that you have to for the Paycheck Protection Program. Did I say that correctly, Mark? You look like you were going to jump in. Yeah, I think the only other thing I would add to that is that you are certifying, in addition to just the uncertainty, which Clinton just talked about, that you're going to use those funds to retain your workers and maintain your payroll and make your mortgage payments, you know, keep the economy going, that you're going to do that. You're not going to use those funds for going out and buying new businesses or acquiring things that don't already exist for you today. Also, the two that are for sure certain on that you're certifying is saying that you don't have another loan application pending under this program, so you're not trying to get two loans instead of one, and that you haven't already started this process under some similar program with the SBA that's in process right now. So those are really the only two things that are clearly defined. The rest of it is on uncertainty and or, yeah, I promised to use it correctly. Yeah. All right. How will the restrictions be implemented on owners, employees who report on the company income as an LLC or S Corp? So my understanding is, in calculating the payroll, that owners are included as an employee, even if they're not technically an employee. So we're partners here in the firm, so we're technically not employees of our partnership, but yet as a business can calculate, calculates its payroll for the specified period of time, owner compensation, even partner compensation, is allowed to be included in that, up to the same restriction as with employees. So, you know, there's $100,000 limitation. I don't remember, I don't know if we're probably not changing slides here, but it was in that blue box on the right-hand side of the slide where it mentioned you can only include up to $100,000 of an employee's compensation. That would be the same for an owner or partner, even if they're receiving that through their ownership interest. Same for a self-employed individual also. All right. Now I think, Beth, this is going to be your time to shine here. Does the first two weeks unpaid countdown start April 1st or prior to that? We have had people out prior to this act going into effect on a medical leave. So the Department of Labor has said that essentially any leave that you have prior to April 1st doesn't count toward your obligations under the Families First Act, which would mean that they would have to start over as of April 1st. I think that we need more guidance from the Department of Labor on how all of that works, but that's the current interpretation that they're going with right now. All right. Does the FFCRA also have a 500-employee limit? I didn't know the answer to that one, but I'll let Beth reaffirm so I don't make a fool of myself. Yes, it does. The paid leave provisions apply only to employers with 500 or fewer employees. Is a government quarantine order the same as a stay-at-home order? That is another thing, and I hate that I have to say we're not sure yet, or it depends. Especially it depends. Nobody likes that lawyer speak. But we really need more guidance from the Department of Labor on whether they believe, as we do, that a government stay-at-home order is the same thing as a quarantine order. I think that based on what the DOL has provided so far, they're interpreting a stay-at-home order as being a government isolation order only if your business isn't required to close as a result. So, again, it's really unclear, and the Department of Labor is going to have to give us some guidance on it. I think one of the things that might be leading to that confusion, too, is several employers, including our own, including, I guess, me, I guess I am the employer, when an employee has been traveling and is coming back, we're doing some self-induced two-week quarantine kind of things to tell them, hey, you can't come back into the office. That's when our offices were open. They're closed now, but that's a different quarantine, I think, than probably what this question is asking about. This would be a much bigger deal, like when they were talking this weekend about is there a quarantine of New York and New Jersey and things like that. I think in terminology, there's only so many ways you can describe some of these things, and there's only so many words to go around, but quarantine's got more than one definition at this point as well. All right. As an essential business, can you stagger time off for your employees so you can be under a recommended headcount at your site days off? Our interpretation as of right now is that, yes, you can, but I would expect that the IRS or, excuse me, the Department of Labor is going to give us some guidance on that specifically coming soon, I would hope. We've seen a lot of our dealers already doing that, obviously, to get down to the 10. What it's doing is creating some strange compensation issues around that. I'm going to have these 10 people work now, I'm going to have these 10 people work later, and so on and so forth, almost creating shift work, so to speak, and now we've got to figure out are there shift differentials or premiums for coming into work when others aren't and those kind of things. It's currently, whether the interpretation stays that way or not, currently dealerships are doing it and trying to figure out compensation accordingly. How do the employee limit apply to corporations which have subsidiaries that each have separate payrolls? Is each separate company with payroll tested, or is the 500-employee limit tested at the top at the aggregate consolidated level? My understanding of that is while the affiliate rules went away, meaning, let's say we have two separate businesses but we have common ownership among them, while we look through the affiliate level, if we're talking about a subsidiary relationship where you have one taxpayer and that taxpayer has divisions under it, even if they're separate legal entities, if they're all rolling up, at that point they're not affiliates, they're subsidiaries, which is different. So I think you still have the 500 limitation with all of them rolling together. Beth, you may have read some of those details deeper than me. Is that your understanding? I haven't seen anything on the paid leave side that takes away the single employer rules that we look at for 401K purposes and that sort of thing. So I think that for the paid leave provisions that the related employer rules would still apply to determine how large your employer is and whether you're required to offer the paid leave. But that's something that I'm not 100% sure of, so I need to look into it and circle back. You want to be a bigger employer, right, Beth? We want to get to the 500 level. Right. Michael, you had a question? It almost sounds like two different answers. One of them is just how it works for the leave purposes, and the other one is how it works for the paycheck prevention program where they don't necessarily get rules rolled out. Daniel, we forgot to ask Michael a question. Sorry to interrupt you there. No, no, we can barely – actually, I couldn't tell. You're coming in and out of your phone. Yeah, Daniel, I'll just add on the Payroll Protection Act on this issue of the 500 employees, the SBA, Small Business Administration, has some attribution rules that are very complicated in terms of if you have different ownership and entities and how that rolls up for the attribution calculation of the 500. So that's something we may want to get at, or you really need to refer it in your specific circumstance in terms of the ownership of multiple entities and how that comes together under the SBA attribution rules. All right, thank you. We've got a couple more questions here, if that's okay with you guys, Mark and Beth and Clint. Absolutely. If a PEO is paying payroll taxes, would the business receive its refund through the PEO or directly with the IRS? That's a good question. The IRS will probably issue some guidance about PEOs. I have not looked particularly into the PEO issues, but that's something I can take a look at and circle back. Okay. Then we have several questions on if someone tests positive for COVID-19, what do you recommend, what has to happen at the workplace after that? What are the responsibilities? Can you be a little more specific? Let's see here. Let's get into this one then. If an employee has COVID-19-related issue symptoms as a result of a personal choice trip, should they take personal time to be paid, or could you put them under the Family First Act provisions? The Family First Act is a no-fault act. So it doesn't matter how or why an employee is experiencing those COVID-19 symptoms. If an employee is experiencing symptoms and seeking a diagnosis, their leave is required to be paid under those provisions, and you're also eligible for the credit if you're under 500 employees. Okay. And let me go back to another question that was up here. Why don't I ask this one now while I think it may have already been answered, but I do want to get back up to this other one. How would a holding company be viewed with regards to FFCRA and CARES where the aggregate employees is 500 but subsidiaries are – sorry, I've got a moving screen here. But the subsidiaries are – Liz, help me out maybe. Oh, but the subsidiaries have under 500 employees. Is it possible for the holding company to be exempt from FFCRA but eligible for PPP for the payroll protection program? So Beth is scrolling here. So I think what your question is, make sure, is similar to the attribution question. So if you've got companies A, B, and C all roll up into a holding company, and the attribution probably is better asked, Beth, and maybe more easily answered. Specifically, companies A, B, and C are filing separate payrolls now. You know, does that mean – how does that – how does the attribution work on that one for the family medical leave stuff versus how do those then come back into the holding company being eligible for PPP? Right. And I sort of take this question as covered under this umbrella about whether the affiliate rules or the attribution rules apply to determine if you're under 500 employees and subject to the FFCRA requirements. So that's something that I'll circle back on to get some certainty on. Let's do one or – just one or two more questions. This one was asked, we have heard that the SBA franchise directory requirement may preclude equipment distributors from getting the PPP loan. Some manufacturers don't want to be listed as franchises in this directory. Is this true, and is there any way around it? Well, from my understanding of most OEM agreements, dealerships are not franchises. Now, whether or not the government then tries to come in and say that you are is a different question possibly in there that we wouldn't know the answer to that right now. Hopefully never get into it. But I know that we've been specifically chastised any time we inadvertently use a word like franchises in front of OEMs. So I'm guessing that that might not apply here. I think one of the things that Clinton kind of touched on early on and said we wouldn't get into it today too much was there are some questions more around the ag dealership side of this. Because the ag dealers might wind up, ag or business in general, there's a little bit of question whether or not they wind up being subject to these programs since this is a SBA issue and not a Department of Ag or an FDA issue. And so there's been a little bit of question about that that we're waiting on some guidance about. But our understanding right now is an ag dealership would be eligible for this, just like a construction dealership. But your franchise question, I don't think there's a right answer to that unless somebody pierces that franchise language for us. Okay. We'll only do one more here. Under CARES, does workers' conversation expense qualify as a medically related insurance expense? Beth, I heard an HR question there, so I didn't quite hear it all, so hopefully you got that one. So the question was whether workers' comp qualifies as a health expense under the PPP. So I will defer to you on that. Oh, yes, I'm sorry. That's part of employee benefits. So, yeah, that would be part of that whole employer payroll cost. All right. Well, we are about out of time here, so I do want to wrap this up. If you do want your questions answered, I don't know, Mark, Clinton, Beth, if your e-mails are on that last slide there, I'm assuming you'd be happy to take some outreach from people who may have further questions. Absolutely. Okay. We're a member of AED just like they are, and we appreciate everything AED has done for us as well. So, yeah, we're more than happy to answer those. Well, great. Well, thank you for that. We certainly appreciate your long-time involvement with AED. So Mark, Clinton, and Beth's contact information is up on this final slide we're looking at. My contact information is there as well. I know there are a lot more questions, but hopefully we answered a lot of them throughout this presentation. And I would say stay tuned to AED for further information, and Mahita as well for further information, as a lot of this guidance comes out from the federal government. This is very fast-moving. There are a lot of unanswered questions that will be answered in the coming days as the federal agencies, the Small Business Administration, the Department of Treasury, as well as the Department of Labor put out further guidance. So with that, thanks for joining, and I hope everyone has a great day. Thanks, Peter.

coronavirus legislation

Paycheck Protection Program

Economic Injury Disaster Loan Program

small businesses

loan forgiveness

average monthly payroll

EIDL program

operating expenses

Employee Retention Tax Credit

CARES Act

government guidance