2020

(Last updated April 1, 2020)

On March 31, 2020, the U.S. Department of the Treasury (Treasury) published the Paycheck Protection Program Application Form together with additional clarifications and guidance on program loans. The application form can be found here and the published Paycheck Protection Program Information Sheet for Borrowers published by Treasury can be found here.

Notably, the referenced information sheet clarifies the following (which, in some cases, is a bit different than the language of the statute and seems to indicate the direction that the SBA’s enabling regulations are headed):

• It is anticipated that no more than 25% of the forgiveness amount may be used for non-payroll purposes.

• Loan payments will be deferred for 6 months (the CARES Act stated that the deferment would be no less than 6 months and up to 12 months – it seems clear that 12-month deferments won’t be an option). Also, while payments are to be deferred for the 6 months, interest will accrue during that deferment period.

• The interest rate will be 0.50% (far more favorable than the 4.00% not to exceed rate referenced in the CARES Act).

• The term of the loan (for any portion not forgiven) will be 2 years (tighter than the “maximum maturity” of 10 years referenced in the CARES Act).

• Small businesses and sole proprietorships can apply by submitting the application to an SBA approved lender beginning Friday, April 3, 2020.

• Independent contractors and self-employed individuals can apply by submitting the application to an SBA approved lender beginning Friday, April 10, 2020.

NOTE: As the loan program is likely to be “first come, first served” and because demand is expected to be extraordinarily high, it is highly recommended that qualifying businesses and individuals apply ASAP.

(Last updated March 31, 2020)

The Dallas Paid Sick Leave Ordinance was set to take full effect on April 1, 2020. On Monday, March 30, 2020—just two days before the enforcement date—a federal judge in Sherman, Texas, issued a preliminary injunction that stops enforcement of the law. At this point, three Texas cities—Austin, Dallas, and San Antonio—have tried to enact mandatory paid sick leave laws. All three cities’ laws have been blocked by state or federal district courts, but only the Austin challenge has made its way to the Supreme Court of Texas. Ultimately, the pending Austin case in the Supreme Court of Texas will decide whether such ordinances are unconstitutional.

If you have any questions regarding the Dallas Paid Sick Leave Ordinance, please contact:

Mike Birrer		Parker Graham
[email protected]		[email protected]
214.855.3113		214.855.3350

(Last updated March 30, 2020)

The fiscal preservation plan offers a lifeline for small businesses in this uncertain time. The IRS has weaponized the tax code to combat the financial pain of the pandemic and to provide immediate relief to small businesses on the brink of disaster.

For most small businesses, cash flow and liquidity are top of mind. The recent tax changes provide important tools for small businesses to accomplish these objectives. The tax relief comes in two forms: (1) additional liquidity in the form of refundable tax credits and (2) interest-free bridge loans in the form of deferred tax payments. The cumulative effect creates immediate relief for small businesses during the shutdown.

Below are key points for small businesses to factor into their cash flow plans:

1.  April 15th Tax Payment Deferral
The IRS has delayed many tax payment obligations for small businesses until July 15th. The effect is a 3-month interest-free bridge loan from the IRS to small businesses. If the recession extends beyond 3 months, the IRS may further extend the deadlines

2.  Employee Retention Payroll Tax Credits
The Employee Retention Credits are a valuable source of tax relief for small businesses. The refundable payroll tax credit is limited to $5,000 per employee and provides important additional liquidity for small businesses. To qualify, the business must be forced to close (in whole or part) or suffer a substantial decline in revenues. Available credits depend on workforce size. Employers with more than 100 employees qualify for the credit for wages paid to employees retained, but not currently working. Employers with 100 or less employees qualify for the credit for all employee wages. Wages paid after March 12, 2020 and before January 1, 2021 qualify for the credit.

3.  Employer Payroll Tax Deferral
Businesses may defer the employer’s share of Social Security payroll taxes (6.2%). The deferred tax must be repaid by in equal installments (50% by December 31, 2021 and the remaining 50% by December 31, 2022). This creates an interest-free bridge loan from the IRS to small businesses.

4.  Paid Sick Leave Payroll Tax Credits
Employers who provide paid sick leave under the Families First Coronavirus Response Act (effective April 1, 2020) are eligible for a refundable payroll tax credit equal to 100% of qualified paid sick leave wages. The employer claims the credit as an offset against its quarterly payroll taxes. There are certain limits on the amount of the credit available depending upon the circumstances. This payroll tax subsidy provides additional liquidity for small businesses.

5.  Family and Medical Leave Payroll Tax Credits
Employers who provide paid family and medical leave under the Families First Coronavirus Response Act (effective April 1, 2020) are eligible for a refundable payroll tax credit equal to 100% of qualified family leave wages. The employer claims the credit as an offset against its quarterly payroll taxes. There are certain limits on the amount of the credit available depending upon the circumstances. Payroll tax subsidy provides additional liquidity for small businesses.

6.  Tax Refunds for Tax Loss Carryback
The IRS allows net operating losses (“NOLs”) from 2018, 2019 or 2020 to be carried back for five years. The carryback of the tax losses to tax years with higher tax rates is favorable for taxpayers and will create more financial value. This tax loss monetization relief creates additional liquidity for some small businesses.

7.  Tax Refunds for Accelerated Depreciation
Businesses, including retailers, restaurants and bars, are eligible for accelerated depreciation for their costs of interior improvements. This change, sometimes referred to as the “retail glitch,” applies retroactively. The increased tax write-offs should provide more liquidity for some small businesses.

The cumulative financial impact of these tax incentives can be significant. Small businesses should take full advantage of these tax opportunities by incorporating them into their cash flow plans. If the shutdown persists or the recession lingers, businesses may see more tax relief from the IRS. Our firm will continue to monitor all important tax changes and report them to you as they develop.

Bruce Hendrick		Ashley McMillan		Hayden Baker
[email protected]		[email protected]		[email protected]
214.855.3033		214.855.3066		214.855.3140

(Last updated March 27, 2020)

In recent days, culminating with the epic passage of The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) signed into law by President Trump on March 27, 2020, the government of the United States has enacted many programs, to be implemented and managed through the Small Business Administration (SBA), designed to aid small businesses. This client alert provides insight and information into some of the key programs enacted to provide needed cash flow to the hurting members of the small business community.

SBA Express Bridge Loan

If your business is suffering severe economic hardship, and you fear your business needs an immediate cash infusion, you may want to consider an SBA Express Bridge Loan. This loan allows small businesses with existing business relationships with SBA Express Lenders to borrow up to $25,000 in a few days, with much less paperwork than the Economic Injury Disaster Loan discussed below. This bridge-loan may then be paid off, in whole or in part, by an EIDL that should arrive in 2-3 weeks. To see a list of SBA Express Lenders, and to find the application, please visit https://www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources.

Economic Injury Disaster Loan (EIDL)

If your business needs help, but can afford to wait 2-3 weeks to receive funds, you may want to consider an Economic Injury Disaster Loan (EIDL). This loan provides businesses up to $2M, at 3.75% interest with up to a 30 year term, to cover financial and operational expenses that could have been met had the COVID-19 pandemic and its resulting economic impacts not occurred. Permitted uses for these loan proceeds include the following operational expenses: fixed debts, payroll, accounts payable, and other bills not able to be paid. Disbursement of proceeds also includes a certification that the loan is needed to continue operations as a result of the pandemic and that the applicant does not already have a pending EIDL application under this program. For additional information on the EIDL program, please see the link referenced in the paragraph above. It is highly likely that, once the Paycheck Protection Program described below is implemented by the SBA, the demand for the EIDL program loans decreases, however, the EIDL program is up and running now.

Paycheck Protection Program (PPP) under the CARES Act

A key cornerstone of the CARES Act, is the so-called “Paycheck Protection Program” (PPP) aimed at providing assistance to smaller businesses. The PPP is designed to provide certain small businesses with cash-flow assistance in the form of loan: (i) made by lenders certified by the SBA; and (ii) guaranteed and administered by the SBA, to help deal with the unprecedented economic impact of the COVID-19 pandemic. The “covered period” for the PPP is February 15, 2020 through June 30, 2020.

Applicable Businesses – While the services of the United States Small Business Administration (SBA) are typically targeted at those businesses defined by existing regulations as a “small business concern” (being those businesses beneath either (a) a given average annual revenue limit or (b) a designated employee count, as applicable, as determined by the SBA and classified by North American Industry Classification System (NAICS) code linked here), the PPP generously expands its coverage to all business concerns, nonprofit organizations, veterans organization or Tribal business concerns employing not greater than 500 employees (whether employed on a full-time, part-time or other basis) or the number permitted under the traditional small business concern standards linked above for the given industry. For certain accommodation and foodservice businesses, the PPP adds additional coverage so long as each physical location does not employ more than 500 employees. So, in other words, a restaurant business with 6 locations employing 2000 employees in the aggregate could qualify for the PPP preach location that has not more than 500 employees.

Loan Limits and Details – PPP loans: (i) can be as large as 250% of a qualifying business’s average monthly payroll costs (the average taken over the last 12 months), not to exceed $10 million (and excluding any portion of such payroll costs paid to a given employee(s) over the prorated $100,000 amount discussed in the following section); (ii) have a maximum interest rate of 4%; (iii) to the extent not forgiven (as discussed below), the remaining principal balance will start to mature following the date on which the applicable business applies for loan forgiveness and shall mature not later than 10 years after such date. The PPP waives the standard fees charged by the SBA, and the requirement for a personal guarantee. Furthermore, PPP loans are nonrecourse against individual shareholders, members, or partners except to the extent that such individual used PPP loan proceeds for an unauthorized purpose. Eligible recipients will be required to make a good faith certification that (a) the uncertainty of current economic conditions makes the loan request necessary to support ongoing operations; (b) the funds will be used to retain workers and maintain payroll or make mortgage, lease or utility payments; (c) that the eligible recipient does not have an application pending for a loan under the PPP for the same purpose and duplicative of applied for amounts; and (d) beginning February 15, 2020 through December 31, 2020, the eligible recipient has not received amounts under the PPP for the same purpose and duplicative of applied for amounts. PPP lenders will be required to provide complete payment deferment relief under a PPP loan for a period of not less than 6 months, including payment of principal, interest and fees, and not more than 1 year.

Approved Uses of Loan Funds – Small businesses that receive PPP loans must use loan proceeds for (i) payroll costs, (ii) costs related to group healthcare benefits, (iii) employee commissions and tips, (iv) interest on mortgage obligations, (v) rent, (vi) utilities or (vii) interest on other debt incurred prior to obtaining the PPP loan. There is a salary cap in that the definition of “payroll costs” under the PPP (which plays into how large a PPP loan can be as well as defining approved uses of the funds) expressly excludes the salary of an individual employee to the extent that such salary exceeds $100,000 (as prorated for the covered period).

Loan Forgiveness – An eligible recipient shall be eligible for forgiveness of indebtedness on a covered loan in an amount equal to the sum of the following costs incurred and payments made during the first 8 week period from when the PPP loan is made: (i) covered payroll costs; (ii) payments of interest on any covered mortgage obligation; (iii) payments on any covered rent obligation; and (iv) covered utility payments. Forgiven amounts will be considered to be canceled indebtedness by a lender. Only business who have kept their employees on the payroll or, for those who have laid off employees, who re-hired back to pre-crisis levels by June 30, 2020, will be eligible for payment forgiveness.

Timing for Implementation – It is expected that it may take a few weeks for the PPP to be fully implemented as the SBA has 15 days from the enactment of the CARES Act to prepare the corresponding regulations. Furthermore, the SBA has 30 days after enactment of the CARES Act to provide guidance to program lenders on deferment processes to be implemented under the PPP. One final note on timing, the Senate, in its version of the bill, has requested that the SBA “issue guidance to lenders and agents to ensure that the processing and disbursement of covered loans prioritizes small business concerns and entities in underserved and rural markets, including veterans and members of the military community, small business concerns owned and controlled by socially and economically disadvantaged individuals . . . , women, and businesses in operation for less than 2 years.”

This client alert is not intended to be an exhaustive list of all potential benefits of the recent legislation, but rather is intended to highlight some of the key programs designed to stabilize the cash flow of impacted small businesses.

We will continue to review and publish further client alerts on additional programs as information becomes available. For more questions about the CARES Act, please contact:

(Last updated March 26, 2020)

As the steady stream of DFW Metroplex Counties continue to implement their respective versions of “stay at home” or “shelter in place” orders, we are noticing that later adopting counties are – understandably – relying heavily on the form and substance of orders issued by earlier adopting North Texas counties.

The Amended Proclamation Declaring a Local State of Disaster ordered by the Ellis County Commissioner’s Court on March 24, 2020 at 7:25 p.m. (the “Ellis County Order”) is a solid example of this practice (a full copy of the Ellis County Order can be found here). The Ellis County Order relies on the basic format of the first adopting Dallas County Order, while utilizing – and in some cases enhancing – the substance of the Tarrant County Order which included various useful additional clarifications over the Dallas County Order. The Ellis County Order additionally incorporates an easy-to-read table giving specific guidance on which businesses can remain open (and under which examples) and which are prohibited from opening.

As indicated, the Ellis County Order is substantially the same in substance as the Tarrant County Order (our Client Alert for the Tarrant County Order can be found here) and so I won’t reiterate the common provisions shared by the Ellis County Order and the Tarrant County Order in this alert. The Ellis County Order did, however, include the following distinctive or additional provisions: (i) chiropractors were added to the definition of Essential Healthcare Operations within the definition of Essential Businesses (subject to the same overriding provision that elective treatments or care should be suspended for the duration of the Ellis County Order); (ii) a helpful clarification was added to the definition of Essential Government Functions within the definition of Essential Businesses which outlined that educational services are Essential Government Functions to the extent necessary to implement and maintain distance learning with no students present on campus; and (iii) real estate transactions were removed from the listing of Essential Businesses.

The Ellis County Order is effective as of 11:59 p.m. on March 25, 2020 and continues in effect until 11:59 p.m. on April 3, 2020.

We will continue to monitor developments in the DFW Metroplex and will provide updated alerts as applicable.

(Last updated March 30, 2020)

• Ellis County, Texas Issues Its Shelter-in-Place Order. (Last updated March 25, 2020)
• North Texas Cities Take Action Following Collin County’s Less Stringent Stay at Home Order. (Last updated March 25, 2020)
• Denton County Issues It’s Shelter-In-Place Order. (Last updated March 25, 2020)
• Collin County Shelter-In-Place Order. Is It Business as Usual? (Last updated March 24, 2020)
• Tarrant County Issues Its Version of a Shelter-In-Place Order. What You Need to Know. (Last updated March 24, 2020)
• Dallas County Issues a Shelter-In-Place Order. Now What? (Last updated March 23, 2020)

For questions regarding North Texas Shelter-in-Place Orders, please contact:

David Heidenreich

[email protected]

214.855.3031

(Last updated March 25, 2020)

Many questions and concerns have been raised by Collin County’s stay at home order which went into effect on March 24, 2020 (see our Client Alert on the Collin County Order here). Most of the concerns raised relate to the fact that Collin County Judge Chris Hill stated that all businesses are essential instead of defining a narrower listing of businesses that would be allowed to remain open as Dallas, Tarrant, and Denton Counties have done (along with many other urban/suburban Texas counties – including Harris, Bexar and Travis Counties). In response to this more permissive stance by Collin County, two cities partially located within Collin County have adopted tighter regulations and/or policies with a third poised to do so imminently.

The City of Dallas is located in parts of five Texas counties (Collin, Dallas, Denton, Kaufman, and Rockwall).  To avoid the confusion that a county patchwork of orders would create within the City of Dallas, Dallas Mayor Eric Johnson and Dallas City Manager T. J. Broadnax adopted Emergency Regulations on March 24, 2020 which, in effect, adopted the stricter stay at home order issued by Dallas County Judge Clay Jenkins for application throughout the entirety of the City of Dallas, regardless of the county in which a given portion of the City of Dallas may be located (a copy of the City of Dallas Emergency Regulations can be found here). This means that any business located anywhere within the boundaries of the City of Dallas may only be open if it is an “Essential Business” as defined by the Dallas County Order (found here), and then only to the extent that the applicable social distancing requirements are followed to the extent possible. In addition to adopting the Dallas County Order, the Dallas Emergency Regulations also mandate that all laboratories located within the City of Dallas which are conducting COVID-19 testing report the results of that testing (detailing total number of tests given and the total positive tests for the prior 24 hour period) to the City of Dallas every day by 5 p.m.  The referenced Emergency Regulations of the City of Dallas were immediately effective upon issuance and will continue in effect until rescinded, superseded or amended.

The City of Frisco straddles the Collin and Denton County lines.  To alleviate different treatment of businesses within Frisco city boundaries, the Mayor of Frisco has determined that the definition of “Essential Businesses” adopted by the Denton County stay at home order (found here) will be applied to businesses throughout the entirety of the City of Frisco.  A reference to such policy is set forth on the website for the City of Frisco, however, it does not appear that a formal order or regulations to that effect have yet been released publicly.

McKinney Mayor George Fuller has given indications that he intends to issue regulations for the City of McKinney which would apply the stricter Dallas County “Essential Business” standards to businesses within the City of McKinney.  At the time of this Client Alert, such regulations have not yet been made public.  While no such formal tightening actions yet appear to be forthcoming by other large Collin County cities (including, without limitation, Plano and Allen), the Mayor of Plano, Harry LaRosiliere, issued a press release on March 25, 2020 outlining his position on the stay at home order (found here) and his agreement with Dallas Mayor Eric Johnson that we in North Texas need to have a uniform approach to combatting COVID-19.

We will continue to monitor developments in the DFW Metroplex and will provide updated alerts as applicable.

(Last updated March 25, 2020)

As a follow-up to the Denton County Disaster Declaration dated March 17, 2020 (Court Order 20-020) (as amended on March 18, 2020 and March 22, 2020), on March 24, 2020, Denton County Judge Andy Eads issued an amended Disaster Declaration and an amendment to the corresponding executive order establishing a “stay at home” order for Denton County (the “Denton Order”). Judge Eads was publicly joined in the announcement of this action by Denton Mayor Chris Watts.

The Denton Order is effective as of 11:59 p.m. on March 25, 2020 and continues for 7 days thereafter unless extended or rescinded. A full copy of the Denton Order can be found here.

Similar to all of the major counties in the DFW Metroplex, the Denton Order requires Denton County residents to stay at home except for certain identified exceptions. Following the lead of Dallas and Tarrant Counties (and departing a bit from the more general, permissive approach of Collin County), the Denton Order is fairly specific in defining the exceptions to the stay at home order.

The exceptions to the Denton Order’s stay at home mandate include the performance of Essential Activities, travel to businesses outside of Denton County (which is a departure from the more strict Dallas County position), providing or performing Essential Government Functions, and the operation of Essential Businesses.

Before detailing the Denton Order’s definitions, I wish to note that the same overarching social distancing requirements of 6-foot separation and other distancing recommendations of the CDC generally apply to all Essential Activities, all Essential Government Functions, and all Essential Businesses to the extent possible (recognizing that some medical, police and other activities may render the 6-foot separation requirement impossible).

The following are general descriptions of the Denton Order’s key definitions:

Essential Activities – The Denton Order’s definition of Essential Activities is essentially identical to the language in the Dallas and Tarrant County Orders and includes activities necessary for health and safety of family or household members (including seeking medical care, medication, medical supplies or supplies needed to work from home), obtaining necessary services or supplies such as food, pet and livestock supplies, and other household consumer products, engaging in outdoor exercise activity in compliance with social distancing standards, performing work providing essential products and services at an Essential Business and to care for a family member or pet in another household.

Essential Businesses – The Denton Order, with a few exceptions, is almost verbatim the same language and categories for Essential Businesses as contained in the Dallas Order (see our Client Alert for the Dallas Order here). Notably, the Denton Order adds a category for Education which permits the Superintendent, Headmaster, or CEO of a school district, charter school, or private school to designate school personnel who are essential to the operation and support of distance-learning for students, preparation and distribution of meals to students, and maintenance/cleaning of facilities. Additionally, the Denton Order – not surprisingly – adds hunting, pawnshops, retail firearm sales and safety and security related services to the definition of Essential Businesses. Notwithstanding a designation as an “Essential Business,” employers should ensure that all employees and contractors who can work from home do so. Additionally, all Essential Businesses must still ensure employee adherence to the practice of social distancing consistent with CDC Guidelines and establish screening precautions for employees to ensure that sick employees do not report for work.

A few additional items set forth in the Denton Order include: (i) a requirement that retail suppliers use commonsense rationing of household products and groceries that are in limited supply; (ii) if someone in a residence has tested positive for coronavirus, the entire household must isolate at home and residents of that household may not go to work, school, or any other community function; (iii) religious services are to be via video or teleconference only; (iv) restaurants, microbreweries, micro-distilleries and wineries may only provide take out, delivery or drive-through services, and (v) except as otherwise expressly permitted by the Amended Order, all public or private gatherings of any number of people other than within a single household or living unit by members of such household or unit are prohibited. Like the Tarrant Order (and unlike the Dallas Order), the Denton Order did not establish a moratorium on eviction proceedings.

We will continue to monitor developments in the DFW Metroplex and will provide updated alerts as applicable.

(Last updated March 25, 2020)

On March 24, 2020, the IRS published further guidance relating to Notice 2020-18.  Filing and Payment Deadlines Questions and Answers, linked here.

The update provides answers to 24 frequently asked questions.  The new information is primarily taxpayer-friendly, but some guidance was unexpected.  Specifically, individual taxpayers should be aware of the following two limitations:

• If a taxpayer files a timely extension, then the extension is only valid for 3 months (not the usual 6 months).  Q&A #12.
• Second quarter estimated tax payments are not postponed (i.e., they are still due on June 15^th).  Q&A #16.

The IRS intends to update the FAQ list periodically.  Our firm will continue to monitor and provide you with important tax updates.

Ashley McMillan		Bob Botts		Bruce Hendrick
[email protected]		[email protected]		[email protected]
214.855.3066		214.855.3105		21.855.3033
Catherine Bright Haws
[email protected]
214.855.3002