PPP Loan Forgiveness Clarified: Borrowers May Begin Calculating How Much, If Any, Must be Repaid

The CARES Act was enacted in late March with the goal of saving the economy from collapse or depression.  Central to the CARES Act’s goal is the Payroll Protection Program (PPP) with its design of saving small businesses from bankruptcy or closure.  As enacted, Congress offered complete loan forgiveness so long as borrowers met certain requirements relating to employee retention and spending limitations.  However, even for unforgiven PPP loan amounts, borrower-friendly terms such as a one percent (1%) interest rate and a six (6) month repayment deferral are offered.  Accordingly, the PPP was immediately and overwhelmingly popular.  Indeed, the pool of PPP money ran out in a few weeks, requiring Congress to replenish the funds.  

The Small Business Administration (SBA) recently published its long-awaited loan forgiveness application and offered some clarity on unanswered questions and outstanding concerns.  Specifically, borrowers now have the benefit of designating their loan proceeds and imputing those figures into a worksheet to determine which amounts would likely be forgiven, and which amounts would revert to the original PPP loan terms and be required to be repaid.

As you likely recall, loan forgiveness will focus on a borrower’s expenditures during an eight (8) week, or 56 day, period, commencing on either:

  1. the day on which the borrower received the PPP loan, or

  2. for borrowers with a biweekly (or more frequent) payroll schedule, the first day of the borrower’s first pay period following the PPP loan disbursement date.  

Given the PPP’s namesake, its focus is on preserving payroll and retaining employees.  As such, expenses that fit within the definition of “payroll costs” will eligible for loan forgiveness – such as compensation, employer contributions to group health care coverage and retirement plans, and certain state and local taxes assessed on employee compensation, among other costs.  Eligible compensation is capped at $15,385 per employee during the 8-week period (which is the 8-week equivalent of $100,000 per year).  In addition to such payroll costs, there are non-payroll costs that are likewise eligible for forgiveness.  These non-payroll costs include:

  1. mortgage interest payments on both real and personal property obligations incurred prior to February 15, 2020;

  2. lease payments on real and personal property leases executed prior to February 15, 2020; and

  3. utility payments for electricity, gas, water, transportation, telephone or internet access that was in service prior to February 15, 2020.  

In addition, with regard to eligible payroll costs, such costs that are incurred during the 8-week period, but not paid during the last pay period of such 8-week period, are eligible for forgiveness so long as they are paid on or before the next regular payroll date.

Once all eligible payroll and non-payroll costs have been identified and added together, borrowers must then determine the portion of their maximum loan forgiveness amount that will be reduced, if any.  Specifically, borrowers must reduce their maximum loan forgiveness amount by the following:

  1. Salary/hourly wage reduction.  For employees that were employed by the borrower in 2019, and had an annual salary of $100,000 or less, the borrower must have maintained that employee’s average pay during the 8-week period at a rate of at least 75% of the employee’s average pay from January 1, to March 31, 2020.  A borrower’s loan forgiveness will be reduced by the amount of any reduction in pay.  However, there is a safe harbor whereby borrowers can avoid such reduction if, by June 30, 2020, the borrower restores the employee’s salary to an amount equal to or greater than the employee’s annual salary as of February 15, 2020.

  2. Full-time equivalency (FTE) reduction.  Borrowers are required to maintain the number of employees and the average paid hours of employees during the 8-week period.  If there is a reduction in the average number of weekly full-time FTEs during the 8-week period compared to the period covering either (i) February 15 to June 30, 2020; (ii) January 1 to February 29, 2020; or (iii) for seasonal employers, a consecutive 12-week period between May 1 and September 15, 2019, the loan forgiveness will be reduced unless the borrower qualifies for the safe harbor or one of the exceptions.  Specifically, borrowers will not be penalized for an FTE reduction if (i) the borrower made a good-faith written offer to rehire the employee during the 8-week period, or (ii) the employee was terminated for cause, voluntarily resigned or voluntarily requested a reduction of hours.  For the FTE safe harbor, for borrowers that reduced their FTEs between February 15 and April 26, 2020, there will be no FTE reduction if the FTEs are restored by June 30, 2020.

Additionally, borrowers are subject to the 75% requirement whereby a borrower’s non-payroll costs cannot exceed 25% of all forgivable costs.    The application has a mechanism for determining whether at least 75% of the potential forgiveness amount was used for payroll costs.

The SBA application also requires borrowers whose PPP loans exceed $2 million to disclose that fact by checking a specific box.  It had been previously been announced that all such loans would be automatically subject to audit, and this feature allows the SBA to easily identify such borrowers.

While the application is complicated in places and confusing in others, organized borrowers should be able to navigate it.  In addition, there are already rumors relating to changes to the structure of PPP loans as well as what will be eligible for forgiveness.  Currently, the loan forgiveness application must be filed by October 31, 2020.

A copy of the SBA loan forgiveness application may be found here.

For businesses interested in learning more about the loan forgiveness application or how to navigate their way through it, please contact Chris Young at 301-738-2033.

Chris Young
is an associate in the Business & Tax practice at Miller, Miller & Canby. He focuses his practice on corporate legal agreements, business formation, tax controversy work and helping clients deal with new tax regulations. View more information about Miller, Miller & Canby's Business & Tax practice by clicking here.


Don’t Procrastinate: Answer these 4 Questions to Get a Quick Jump-Start on Your Estate Plan

As the coronavirus pandemic continues to disrupt daily life and leave Americans uncertain of the future, you do not have to feel helpless. In fact, now is a great time to be proactive and organize your affairs in the event you or a loved one should fall ill. One of the most important things you can do (and should do) is get your estate plan in place. If you can answer the following questions or at least begin to think them through, you can get a jump-start on the estate planning process today.

1.    Who Do You Want to Handle Your Financial Affairs?
One major issue that must be addressed during the estate planning process is the control of your money and property. This includes what will happen while you are alive and what will happen at your death. The person(s) you choose to put in charge of your money and property should be trustworthy, detail-oriented, financially savvy, and organized. To assist you with your financial affairs, you may decide to appoint someone to serve as your Agent (aka attorney-in-fact) under a financial power of attorney and/or a successor Trustee of your revocable living trust.

The agent is responsible for carrying out the financial transactions listed in the financial power of attorney document on your behalf while you are alive. The document can be tailored to meet your needs, granting your agent as much or as little authority as necessary or desired. You could grant your agent the authority to do everything you could do (known as a general durable power of attorney), or the agent could be instructed to only open a bank account for the purposes of depositing a specific check (known as a limited power of attorney). You also have the ability to specify when your agent’s authority to act on your behalf becomes effective. With a “springing” power of attorney, the agent can act only if you become incapacitated. The method used to determine whether you are incapacitated is stated in the power of attorney (note: in general, “springing” powers of attorney are not recommended). Alternatively, an immediately effective power of attorney allows your agent to act the moment you sign the document, even though you are still able to conduct your own financial affairs. This feature, however, does not limit your ability to carry out your own transactions - it merely provides that another person can carry them out in addition to you.

Another way a trusted individual can assist you is by serving as a successor trustee of your revocable living trust. When the trust is first created and you transfer money and property to the trust, you will likely serve as the initial trustee and will be in full control of the money and property, just as you were before your transferred it to the trust. In addition to being the trustee, you will also be the current beneficiary, allowing you to continue to enjoy the money and property even though they are technically owned by the trust. For the foreseeable future, this situation will work well. However, the true benefit of the trust arises when you are no longer able to fulfill the role of trustee. At that point, the trusted individual you have appointed as your successor trustee will step in and manage the money and property for you, without court involvement. Your successor trustee can also step up at your death without court involvement. But no matter when the successor trustee takes over, i.e., when you are unable to manage your affairs or upon your death, he or she is required to follow the instructions that have been detailed in the trust document. This means that the money and property will continue to be used for your benefit during your lifetime and for the benefit of those you have chosen at your death.

2.    Who Will Communicate Your Medical Decisions to the Appropriate Medical Personnel?
In the event you are unable to communicate your medical wishes, your agent under an advance medical directive or medical power of attorney is the person who can make the life or death decisions on your behalf. Your health care agent should be level headed, able to act under pressure, and most importantly, able communicate your wishes, even if their own wishes or beliefs differ from yours. If you have family members that disagree with your choices, you may want to rethink before giving them the authority to make medical decisions on your behalf. It is also essential that you consider the individual’s availability to act for you. Medical emergencies can happen without warning. It is necessary that the person you choose as your agent is available in the required capacity to make those decisions for you. If the person you would like to choose is across the country, do they have the time and finances to travel? If your first choice has a demanding job or home life, can he or she be reached in a reasonable amount of time in the event a decision can be made over the phone?

Medical decisions are very personal. Even if you have the most capable person appointed as your health care agent, it is helpful if you can provide him or her with your wishes in writing. This can be a valuable tool for your agent. An advance medical directive or ‘living will” allows you to state your wishes regarding your end-of-life care: Do you want medication to help manage any pain? Do you want to be put on a ventilator if needed, etc.? While these decisions may take some soul searching, this information may be crucial in allowing your agent to make the best decisions on your behalf.
3.    Who Will Look After Your Minor Children, Even if it is Just Temporary?
If you have a minor child, you know that they require some level of supervision. In case you are not able to take care of your minor child, and the other custodial parent is not available, you must make sure to appoint someone to step in and take care of your child, even if it is just for a short period of time. This person should have the ability to take on the mental, emotional, and possibly financial day-to-day responsibilities of raising your child. Because it is impossible to know in advance the amount of time your child would need to spend with them, you will also need to consider whether the person is geographically desirable or if your child would be required to move, even temporarily.

4.    How Do You Want Your Money and Property Divided at Your Death?
When considering how to divide your money and property, think about what is in the best interests of each person. You do not have to give the money and property to your loved ones outright: You have options.

If you are concerned about giving a chosen beneficiary access to 100% of the money and property they will inherit, you could choose to stagger distributions over a period of time. For example, the beneficiary could receive 25% at age 25, 50% at age 40, and the remaining 25% at age 60. By staggering the distributions in this fashion, your younger beneficiary may be able to use the last portion as a nest egg for retirement.

In the event you would like to incentivize certain behaviors, you can set aside money or property to be distributed when a beneficiary accomplishes certain milestones (i.e., graduates college, stays sober for 180 days, gets their first full-time job). This can be helpful if you are concerned that the inheritance might derail a beneficiary from a productive path. By making the distributions contingent on certain behaviors, you can help ensure that they are staying on the right track even after you are gone.

For some beneficiaries, it may be more appropriate for any distribution to be solely within the complete discretion of the named successor trustee. Although this may sound harsh, there are many types of beneficiaries that can be safely provided for using this strategy. If your beneficiary has creditor issues, their creditors can only take the money or property that has been given to the beneficiary. So long as the money and property remain in the trust, and the trustee is not required to make distributions to the beneficiary, the money can stay out of the hands of the creditors. Additionally, a properly structured trust can prevent the beneficiary’s former spouse from taking the inheritance due to the limited control your beneficiary has over the money. This does not mean that your beneficiary will never receive any benefit from the trust - it just means that the trustee has the ability to ensure that distributions are truly in the best interest of the beneficiary, at the best time, and in the right amount.

We Are Here to Help
We are here to help you navigate through the estate planning process during these unprecedented times. Let us help you be proactive and get your affairs in order.

David Lucas
is an attorney in the Estates & Trusts and Business & Tax practice groups at Miller, Miller & Canby. He focuses his practice in Estate Planning and Trust and Estate Administration. He provides extensive estate and legacy planning, asset protection planning, and retirement planning.

Contact David at 301.762.5212 or via email. To learn more about Miller, Miller & Canby's Estates & Trusts practice click here.

Jody Kline Joins University of Maryland School of Architecture as Guest Lecturer

On the evening of Thursday, April 30, Jody Kline of the Land Use and Zoning Department at Miller, Miller & Canby was a guest speaker / lecturer at a class offered at the University of Maryland’s School of Architecture, Planning & Preservation.  The class, titled “Planning Policy, Practice and Politics for Developers” is offered within the University’s Master of Real Estate Development program.  Through videoconferencing, Jody spoke to graduate students along with their instructor, Jamey Pratt, a Senior Planner of the Area 3 Team of the Maryland-National Capital Park and Planning Commission in Silver Spring. 

Jody began his presentation by explaining how developers of real estate use the services of attorneys during the land development process to secure entitlements throughout a project, from acquisition to implementation.  Relying on his more than 45 years of experience in the land use field, Jody discussed how real estate development is highly influenced by area master plans, governing regulations and even the personalities of plan reviewers.  He encouraged the students to recognize that the success of their potential future projects would be more determined by how they responded to the challenges of the development review process, rather than what pro forma told them.  Each project is unique with its own issues and attention needed to walk through the process. Finally, based on his experience from years in the field, he provided a cautionary tale of realistic time constraints that can either make or break a real estate development project.
Jody Kline
has been a principal at Miller, Miller & Canby since 1981 and co-chairs the Land Development practice group with attorney Soo Lee-Cho. The practice group has been honored with a national “Tier 1” ranking in US News & World Report Best Law Firms.

Jody Kline concentrates his practice on land use, zoning and subdivision law in Montgomery County and he has represented clients in many of the County’s planning and economic development initiatives. His areas of expertise include zoning, special exception, subdivision, master planning, building permit issuance, and administrative and real estate matters related to land development. He represents private clients, non-profit entities and municipal corporations and agencies. He is a recognized “Super Lawyer,” and U.S. News & World Report “Best Lawyer” in the state of Maryland, as well as a recognized Top Real Estate Lawyer in publications that include Washingtonian and Bethesda Magazine.

To learn more about his practice, contact Jody Kline here; learn more about Miller, Miller & Canby’s Land Development practice by clicking here

Main Street Lending Program: How to Save Your Business Without Relying on Congress or the CARES Act

As most small businesses have likely heard, the CARES Act’s Payroll Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL) program both ran out of money last week. While there is pending federal legislation to replenish both with several billions of dollars, given how the first round of funding went, it is all but certain that any second-round funding will be depleted in a matter of days. As such, there are going to be businesses that lose out on CARES Act funding altogether, especially considering how much money has already been injected into it and the uncertainty surrounding the duration of the pandemic. For those unlucky businesses, there are other CARES Act programs and mechanisms as well as state and local relief programs that they can take advantage of; or they can look to a less-publicized Federal Reserve program. Indeed, the Main Street Lending Program (the “Program”) is Federal Reserve creation and is an alternative to the PPP and EIDL and other CARES Act programs (it is unaffiliated with the Small Business Administration (SBA)).

Main Street Lending Program
The Program is designed to assist banks with loaning money more freely by requiring the Federal Reserve to purchase ninety five percent (95%) of the loans, while the lender assumes the remaining five percent (5%). As such and similar to the PPP, local banks serve as the lender for economically stressed businesses. In addition, businesses that have already received PPP loans may also take advantage of the Program.  

The Program operates in two (2) facilities:

  1. Main Street New Loan Facility (MSNLF)

  2. Main Street Expanded Loan Facility (MSELF).

For both facilities, repayment on these loans are four (4) years, amortization of principal and interest is deferred for one (1) year, and the interest rate is an adjustable rate of secured overnight financing rate (SOFR) plus 250-400 basis points. The minimum loan under both is $1 million, but the maximum under the MSNLF is generally $25 million, and for the MSELF it is generally $150 million. However, a key distinction between the two facilities is that, under the MSNLF, the loans are unsecured.

The Program is aimed to help small and medium-sized businesses. Accordingly, eligible borrowers must have either:

  • 10,000 or less employees; or

  • 2019 revenues of $2.5 billion or less.  

In addition, eligible borrowers must be created or incorporated in the United States, with a significant portion of their operations and employees based here. Borrowers must also make several attestations when submitting a loan application and depending on which particular facility it applies to, including, among other things, that the borrower will not use loan proceeds to pay preexisting loans or lines of credit; it will not cancel or reduce existing lines of credit; that it requires this financing due to COVID-19 pandemic and it will make reasonable efforts to use the loan proceeds to maintain its payroll during the term of the loan; and that it will follow stock repurchase, compensation and capital distribution restrictions set forth in the CARES Act.

For businesses looking for liquidity to carry them through the health emergency the Program offers a possible alternative on borrower-friendly terms, even though it does not provide for loan forgiveness like the PPP.  Likewise, the automatic $10,000 grant of the EIDL program, or the non-repayable aspect of the Employee Retention Credit, are additional options for businesses looking to obtain much needed-cash while they are under economic distress.

The Federal Reserve is currently working to create and implement the Program’s infrastructure. Final terms and conditions have not yet been released. For businesses interested in learning more about the Program, please contact Chris Young at 301-738-2033.

Chris Young
is an associate in the Business & Tax practice at Miller, Miller & Canby. He focuses his practice on corporate legal agreements, business formation, tax controversy work and helping clients deal with new tax regulations. View more information about Miller, Miller & Canby's Business & Tax practice by clicking here.

The CARES Act: Mechanisms for Avoiding Bankruptcy and Not Requiring a Loan Application

Now that the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) has been around for several weeks, we know what has worked and what has caused confusion and frustration. The most popular aspects of the CARES Act has arguably been the Payroll Protection Program (PPP), which is designed to assist businesses with retaining employees through federally-backed and forgivable loans (provided certain requirements are met), and the Economic Injury Disaster Loans (EIDL) program, which is intended to provide small businesses with similar relief as the PPP. However, on April 16, 2020, the $349 billion that had been allocated to the PPP and the EIDL program ran out, and the Small Business Administration (SBA) immediately stopped accepting applications for both. As such, businesses that did not submit their application prior to the depletion of this CARES Act funding may have missed out on what became a “cash grab.”  While there is talk of another round of federal funding, any details pertaining to such talks amount to mere speculation. However, the CARES Act provides other mechanisms that provide more indirect economic relief as opposed to cash injections through the loan programs.

Employee Retention Credit
Specifically, the Employee Retention Credit is a fully refundable tax credit for employers equal to fifty percent (50%) of qualified wages that “eligible employers” pay their employees. “Eligible employers” are businesses and non-profits that carry on a business or trade during calendar year 2020 and that either (1) fully or partially suspend operations during any quarter of 2020 due to a governmental order, or (2) experience a significant decline in gross receipts during such quarter. This credit is only available to eligible businesses and non-profits, self-employed individuals are not eligible for the credit for self-employment services or earnings. This credit applies to qualified wages paid after March 12, 2020 and before January 2021, and the maximum amount of qualified wages taken into account for each employee for all quarters of calendar year 2020 is $10,000 – so the maximum credit for an eligible employer for qualified wages paid to any employee is $5,000. 

For purposes of the Employee Retention Credit, “qualified wages” include qualified health plan expenses, and is primarily dependent on the average number of full-time employees employed during 2019. Specifically, for eligible employers with more than 100 full time employees in 2019, qualified wages are wages paid to an employee that is not providing services to such employer due to (1) a full or partial suspension of operations by a governmental order due to COVID-19, or (2) a significant decline in gross receipts. For eligible employers with 100 or fewer employees in 2019, qualified wages are wages paid to any employee during either period described above where the employer experiences an economic hardship.

Employers may begin claiming the credit as early as March 13, 2020. The IRS has instructed all eligible employers to begin claiming the credit on Form 941 for the second quarter of tax year 2020. For qualified wages paid between March 13, 2020 and March 31, 2020, the IRS has released guidance that instructs eligible employers claim the credit on those wages on Form 941 for the second quarter of 2020. The credit cannot be claimed on a Form 941 for the first quarter of 2020.

The Employee Retention Credit is allowed against the employer portion of social security taxes and taxes imposed on railroad employers; and it is treated as an overpayment to the extent the credit exceeds the employer portion of employment taxes due. However, employers that received a PPP loan are not eligible to receive the Employee Retention Credit. For small businesses that claim the credit on its Form 941, and also receive a PPP loan, this credit is recaptured and must be repaid to the IRS.

The CARES Act also permits employers to defer the employer portion of the social security tax on wages that are paid from March 27, 2020 through December 31, 2020, with fifty percent (50%) due on December 31, 2021, and the other fifty percent (50%) due on December 31, 2022. However, this deferral is also unavailable to employers that have received a PPP loan.

Net Operating Loss Carryback
In addition, the CARES Act waives the carryback period for net operating losses (NOLs) arising in a taxable year beginning after December 31, 2017 and before January 1, 2021.  Following the Tax Cut and Jobs Act of 2017 (TCJA), NOLs generated in tax years beginning in 2018 and later years were disallowed from being carried back, and could only be carried forward to offset up to eighty percent (80%) of taxable income. Under the CARES Act, NOLs from 2018, 2019 and 2020 can be carried back to the previous five (5) tax years (beginning with the earliest tax year first), and it suspends the aforementioned eighty percent (80%) limitation through the entire 2020 tax year.

As a result of this waiver, taxpayers may take advantage of previously unusable losses to offset taxable income generated in prior tax years. Furthermore, prior to the TCJA, the federal corporate tax rate was as high as 35%. Taxpayers may now carry back losses to offset income generated in higher tax years, rather than carry it forward to tax year 2021, when the federal tax rate is currently set at 21%. Taxpayers desiring to take advantage of this provision will need to consult with their tax advisors, and amend tax returns to potentially generate refunds to assist with their business operating costs. 

Montgomery County Public Health Emergency Grant
From a local perspective, Montgomery County, Maryland has released the online application for the Public Health Emergency Grant (PHEG) program. The application may be found here.

Please contact Chris Young at 301-762-5212 with any questions you may have about the CARES Act, the PPP, the Employee Retention Credit, the NOL carryback waiver, or with Montgomery County, Maryland’s PHEG program.

Chris Young is an associate in the Business & Tax practice at Miller, Miller & Canby. He focuses his practice on corporate legal agreements, business formation, tax controversy work and helping clients deal with new tax regulations. View more information about Miller, Miller & Canby's Business & Tax practice by clicking here.

CARES Act: Corrects a TCJA Drafting Error Providing Relief to Commercial Property Owners and Tenants

The Coronavirus Aid, Relief and Economic Security (CARES) Act was enacted last month, and it is designed to provide economic relief to both businesses and individuals hit with financial stress and disaster due to the COVID-19 pandemic. For businesses, among the most publicized and popularized provisions, the CARES Act offers loans on borrower friendly terms, it provides cash grants, and it makes available certain federal tax benefits and incentives. For individuals, the CARES Act gave eligible taxpayers cash rebates depending on their filing status and adjusted gross income, and it offers deferment on mortgage payments and student loans. In addition, private businesses such as insurance companies, media companies, and internet providers have stepped up with assisting taxpayers in a time of health and economic crisis.

However, the CARES Act also provides relief in less publicized provisions. Specifically, the CARES Act revised (or, perhaps, corrected), an unintended consequence of the Tax Cut and Jobs Act of 2017 (TCJA) as it relates to the deductibility of interior property improvements made by commercial property owners and tenants.  Indeed, while drafting the TCJA, Congress had intended to expand the deductibility of qualified improvement property from fifty percent (50%) to one hundred percent (100%). In other words, commercial property owners and tenants making interior capital improvements could deduct 50% of the cost of such improvements – the TCJA intended to provide for the deductibility of the full cost of such improvements. This deduction had applied to both tenant and owner improvements of commercial properties, including retail shops, office buildings, and restaurants. However, due to drafting error, the precise language relating to such building improvements was left out of the TCJA. 

As a result, not only was the 100% deduction was left out of the TCJA, but it even voided the 50% deduction. In place of the 50% deduction, prior law kicked in, and for the past two (2) years, tenants and commercial property owners were instead stuck with a 39-year depreciation period. As a result, owners and tenants did not have much incentive to perform interior commercial improvements.

The CARES Act, however, corrects this drafting error. Now, commercial property owners and tenants can deduct one hundred percent (100%) of their property improvements immediately (there is no longer a depreciation period). In addition, the law is retroactive, allowing businesses to amend prior year’s tax returns to potentially receive a refund. 

Not only will this CARES Act revision provide certain businesses with potential refunds during these tough economic times, but it will also incentivize businesses to invest in their properties in the future.

Please contact Chris Young at 301-762-5212 for more information regarding this CARES Act provision.

Chris Young
is an associate in the Business & Tax practice at Miller, Miller & Canby. He focuses his practice on corporate legal agreements, business formation, tax controversy work and helping clients deal with new tax regulations. View more information about Miller, Miller & Canby's Business & Tax practice by clicking here.

COVID-19: A Reminder of Why Estate Planning Is Important

The past few weeks have been incredibly difficult for many people in communities around the world. It is crucial for everyone, particularly those who are in good health, to continue to take all the steps necessary to protect those around us who are more vulnerable to becoming seriously ill if exposed. We should all care for our neighbors and communities by staying home, washing our hands frequently, sanitizing frequently-touched surfaces, and implementing any other steps recommended by health experts.

Although most people are not likely to be in serious danger, even if they come down with the coronavirus, it is a wake-up call to those who have been putting off creating or updating an estate plan. None of us knows what tomorrow will bring, so for your own peace of mind and the good of your loved ones, it is important to stop procrastinating.

There are several key documents an estate plan should include to protect you and your family if you should suddenly become very ill or pass away:

Last Will and Testament and/or a Trust
A will enables you to specify the individuals you would like to receive your money and property. In addition, you can name a guardian(s) to care for your children or other dependents if you are unable to do so and a conservator to handle their financial needs. For many, however, a will alone is not the best solution, as it is only effective after you pass away.

In a revocable living trust, you can name yourself as a trustee and continue to exercise control over the money and property you transfer to the trust. However, it also enables you to name a co-trustee or successor trustee who can manage your money and property for your benefit and the benefit of any other beneficiaries of the trust if you become too ill to do it yourself. In addition, your trust can specify when and how the funds should be distributed to your beneficiaries when you pass away. Further, if you have transferred all of your property into the trust, it will not have to go through the probate process—which can be expensive, time consuming, and transparent to any member of the public.

For some, other types of trusts may be appropriate to achieve particular goals, for example, protecting assets from creditors or providing for a child with special needs.

  • Note: If you do not create a will or trust specifying who you would like to receive your money and property when you die, it will pass to the individuals specified in the state intestacy statute, who will receive the shares mandated by the statute. Obviously, this is not optimal, as the people and shares spelled out in the statute may be vastly different from what you would have specified in your estate planning. Moreover, probate is required for the administration of your estate if you die without a will or trust. In addition, a court will have to appoint a guardian and/or conservator to care for your children—and the person appointed may not be the individual you would have chosen.

Powers of Attorney
Using a power of attorney, you can name people you trust to make decisions on your behalf if you become ill and are unable to make them for yourself. Even if you are married, your spouse may not have the authority to make all of these types of decisions for you without the proper documentation.

A durable financial power of attorney will allow the person you have named as your agent to make financial decisions and conduct business on your behalf if you cannot handle these matters for yourself. It can be as broad or as limited as you choose: For example, you could authorize a trusted individual to run your business for you, or you could simply authorize another person to write checks and pay your bills on your behalf.

An advance medical directive/medical power of attorney/living will can be used to name a trusted person as your agent to make medical decisions on your behalf if you are unconscious or otherwise unable to communicate them to your health care provider. As your agent, the person you have named is required to act in accordance with your wishes to the extent that they are known to that individual, so it is important to communicate important information regarding your preferred providers, medical conditions, treatments you do not want, religious convictions, and other pertinent information. You can also clearly spell out your wishes for the end of your life, for example, whether or not you want to be placed on life support if you are in a vegetative state or have a terminal condition. These important documents allow your family and health care providers to understand your wishes even if you are no longer able to communicate them.

  • Note: If you do not name trusted individuals to act for you in medical and financial powers of attorney, your family members, including your spouse under some circumstances, will have to go to court to be appointed to this role. As in the situation in which you do not have a will or trust, you no longer have any control over who is named to act on your behalf. The person appointed by the court may not be the person you would have wanted to take on these important roles.

Funeral Planning
You can use a memorial and services memorandum to provide information to your family and loved ones about your wishes for your service, people who should be notified when you pass away, instructions regarding your remains, and information you would like to be included in your obituary. If you do not provide this information in advance, your grieving family will be left to guess about what you would have wanted after you pass away. This could lead to unnecessary stress and conflict at a time when they are likely to be feeling emotionally overwrought.

Give Us a Call
Certain situations can bring our own mortality to the forefront of our minds, even if they are unlikely to have a severe or direct effect on us. The pandemic provides an important reminder of just how important it is, not only to us, but also to our family members and loved ones, to have an estate plan in place in case the unexpected happens. Our foremost goal is to help you have confidence that if you become ill, your own care and the needs of your family will be addressed. Call us today at 301-762-5212 to set up a meeting, which can occur virtually or in person at your convenience. Let us help provide you and your family the peace of mind that comes with knowing you have an estate plan that accomplishes your goals and will avoid unnecessary attorneys’ fees, headaches or conflict.

David Lucas is an attorney in the Estates & Trusts and Business & Tax practice groups at Miller, Miller & Canby. He focuses his practice in Estate Planning and Trust and Estate Administration. He provides extensive estate and legacy planning, asset protection planning, and retirement planning.

Contact David at 301.762.5212 or via email. To learn more about Miller, Miller & Canby's Estates & Trusts practice click here

Newly-Released Interim Final Rule and FAQs Provide Clarity for Businesses to Obtain COVID-19 Funding

Independent Contractors and Self-Employed Individuals May Now Apply

This Friday, April 10, independent contractors and self-employed individuals may finally start applying for and receiving loans through the Paycheck Protection Program (PPP), or exactly one (1) week after PPP applications were opened for small businesses and sole proprietorships.  As some may have expected, last week’s PPP loan application opening was a bit chaotic and frustrating to potential borrowers.  Indeed, many applicants have received no loan proceeds yet, and, moreover, most of those applicants have not received a response from the Small Business Administration (SBA) – other than a confirmation email.  Making the loan application process more complicated, the SBA released the Interim Final Rule relating to the PPP on the eve of last week’s loan application opening.  While it was nice to receive clarification on a hastily-passed, and massive spending bill, it sent applicants and banks scurrying to update forms and revise applications. 

While independent contractors and self-employed individuals had a week to digest the developments from the Interim Final Rule, and to use the guidance to get their applications in order and to maximize their potential loan amount, they are also competing with the small businesses and sole proprietorships that have already applied for a finite pot of CARES Act funding.  Indeed, there are currently negotiations on Capitol Hill to inject an additional $250 billion into the already-authorized $349 billion for the PPP.  However, nothing has been passed yet, and there is likely to be opposition to any further federal spending bill – which will lead to delays to its passage and implementation, and which will waste precious days and weeks – all while payrolls, rents, utilities, and other operating costs continue to come due for businesses.

In addition to the Final Interim Rule, the SBA and the Department of the Treasury released a set of Frequently Asked Questions (FAQs) on the PPP on April 6, and have updated them in the subsequent days.  The FAQs have provided further clarity to applicants and banks and have assisted with facilitating the critical funding of small businesses operating expenses through the PPP.

Newly-Released Information

There are several important developments and clarifications from the Interim Final Rule and the FAQs.  Some of such developments and clarifications, as well as important details from the PPP that have not yet been covered in previous posts, include:

  • At least seventy-five percent (75%) of PPP loan proceeds must be used for payroll costs.  Payroll costs have also been clarified to disallow the inclusion of the employer’s share of the Federal Insurance Contributions Act (FICA).  In addition, there is an employee salary limitation of $100,000.00 on an annualized basis – in other words, if an employee’s annual salary exceeds $100,000.00, the maximum allowance that a business may include as part of its payroll cost is capped at $100,000.00.  However, this annual salary limitation only applies to cash compensation and does not include health care, retirement benefits or state and local taxes.

  • The interest rate was raised from 0.5% to 1.0% fixed rate.  Of course, this rate will only applies to any non-forgiven portion of a PPP loan.

  • Prior to the issuance of the FAQs, the CARES Act specified that payroll costs were to be calculated based on the average of the previous twelve (12) months of payroll, but the SBA’s PPP loan application specified that the average was to be based from calendar year 2019.  The FAQs state that either period may be used. 

  • For purposes of calculating a business’ number of employees, businesses may use either of the periods used to calculate payroll costs; or, in the alternative, businesses may opt for the SBA’s usual calculation.  In addition, the FAQs make clear that small businesses do not necessarily need to have 500 or fewer employees to be eligible for a PPP loan.  Indeed, small business may have more than 500 employees so long as they satisfy the existing statutory and regulatory definition of a “small business concern” under section 3 of the Small Business Act (although it is not required to meet such definition to be eligible).  A business can also qualify for a PPP loan if it meets both tests of the SBA’s “alternative size standard” as of March 27, 2019, which is: (1) the maximum tangible net worth of the business is not more than $15 million; and (2) the average net income after Federal income taxes (excluding carry-over losses) for the two full fiscal years before the application date is not more than $5 million.

  • For purposes of the amount of loan forgiveness, the measuring amount is the payroll costs over an eight-week period, beginning on the date the lender makes the first disbursement of the PPP loan to the borrower.

  • For businesses and lenders that submitted a loan application based on the Interim Final Rule, they will not need to take any actions to update such applications based on the newly released FAQs.  However, if such loan applications have not yet been processed, they may be revised in accordance with the FAQs.

Information Specific to Montgomery County Businesses

On the local level, Montgomery County, Maryland released guidance of its Public Health Emergency Grants (PHEG) program.  The PHEG program offers grants up to $75,000.00 to businesses of 100 or less employees, independent contractors, non-profits, and sole proprietors; and it requires such businesses to be physically located in the county.  In addition, the business or non-profit must be in good standing with the State of Maryland, and it must have incurred financial losses resulting directly or indirectly from the COVID-19 public health crisis. 

The PHEG program guidance also specifies the information and documents required to apply for the grant.  Among such information and documents are evidence of applications submitted to Federal and State COVID-19 assistance programs, including award or denial letters – the guidance requires applicants to apply for any applicable Federal or State programs to qualify for the PHEG program.  Applicants must also provide a statement of the intended use of county funds, financial documents demonstrating loss of revenue, and a brief explanation of how the public health emergency has affected business operations.

In addition, eligible businesses for the PHEG program must enter into a grant agreement with the county that stipulates that: (1) the county’s right to audit financial records; (2) reporting requirements; (3) the applicant’s obligations to return any unused or improperly used funds to the county; and (4) the grant recipient’s certification, under penalties of perjury, that the grant application and all documentation and statements are true and accurate, and that they may be prosecuted for any false statements. 

Currently, the county has not yet released a copy of the application for the PHEG program, but it has specified that it will be an online application.

The SBA’s Interim Final Rule may be found here and the FAQs here.  Information relating to the PHEG programs may be found here

Please contact Chris Young at 301-762-5212 with any questions you may have about the PPP, or with Montgomery County, Maryland’s PHEG program.

Chris Young
is an associate in the Business & Tax practice at Miller, Miller & Canby. He focuses his practice on corporate legal agreements, business formation, tax controversy work and helping clients deal with new tax regulations. View more information about Miller, Miller & Canby's Business & Tax practice by clicking here.


Additional CARES Act SBA Loan Programs and Montgomery County Relief to Help Your Business

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed by Congress and signed into law late last week.  As a result, small businesses have spent this past week scrambling and reaching out to their banks and advisors to submit loan and grant applications with the hope of saving their business and avoiding bankruptcy.  On April 3, 2020, the Small Business Administration (SBA) will begin accepting applications for the CARES Act’s Paycheck Protection Program (PPP) (as detailed in a post earlier this week), despite prevailing uncertainty and unanswered questions over the specifics of the law and how they apply to unique and distinct circumstances.

While the PPP offers small businesses a lifeline for surviving the COVID-19 pandemic as well as the subsequent economic fallout, it is not the only option that the CARES Act offers businesses to protect them from this sudden and unexpected disruption. 

How the CARES Act Works

Under the CARES Act, the Economic Injury Disaster Loans (EIDL) program offers loans of up to $2 million to small businesses severely impacted by COVID-19.  Similar to PPP loans, EIDL funds may be used to cover payroll, rent, utilities, health care benefits and other operating expenses.  However, EIDL funds may also be used to pay fixed debts and other bills and accounts payable that cannot be paid as a result of the pandemic.  The APR on EIDLs is 3.75% for small businesses (2.75% for nonprofits), and principal and interest is deferred at the Administrator’s discretion, based on the borrower’s ability to repay. 

The highlight of the EIDL is the immediate advance of $10,000 in emergency relief that is funded within 3 days of submitting an application.  The $10,000 is fully forgiven and not required to be repaid, irrespective of whether the EIDL is approved or not. 

Eligibility is similar to the PPP loans.  Businesses must have less than 500 employees, and they include certain nonprofits, sole proprietorships (whether with or without employees), independent contractors, cooperatives, employee owned businesses, and tribal small businesses. 

How to Apply for Assistance

The SBA is accepting applications now.  Businesses may apply via the SBA’s website, and by clicking “Apply for Assistance.”

Businesses that apply for and receive an EIDL may also apply for a PPP loan.  However, if a business ultimately receives a PPP loan, they will need to roll their EIDL into the PPP, and the $10,000 advance they received would be subtracted from the amount forgiven in the PPP (the details of loan forgiveness under the PPP are detailed in our previous post).  For businesses that have loans from both EIDL and PPP, that business may not use EIDL funds for the same purpose as its PPP loan, and vice versa.

In addition, for businesses located in Montgomery County, Maryland, the County Executive and the County Council have approved the Montgomery County Public Health Emergency Grant (PHEG) program.  The PHEG program sets aside $20 million in funding to support businesses and nonprofits that have suffered an adverse economic impact from COVID-19.  The County Executive is currently developing a system and regulations for the implementation of the PHEG program, but there is no other information available at this time.  When information relating to this program is released, we will provide updates accordingly.

Please contact Chris Young with any questions you may have about the CARES Act, or with assistance in obtaining Emergency Injury Disaster Loan for your business.

Chris Young
is an associate in the Business & Tax practice at Miller, Miller & Canby. He focuses his practice on corporate legal agreements, business formation, tax controversy work and helping clients deal with new tax regulations. View more information about Miller, Miller & Canby's Business & Tax practice by clicking here.

CARES Act: Your Business Should Not Go Bankrupt Due to COVID-19

Last Friday, President Trump signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act into law.  The CARES Act is aimed at mitigating the economic fallout resulting from the COVID-19 pandemic.  Congress authorized the infusion of $2 trillion into the United States economy.  Of that $2 trillion, $500 billion has been allocated to businesses to help to alleviate the calamity caused by quarantines and social distancing.  With both essential and non-essential businesses facing severe restrictions, as well as with the uncertainty surrounding the duration of the pandemic, anxiety over business survival is at the forefront.  To stymie the potential influx of business closings and bankruptcies, the CARES Act seeks to make cash immediately available to businesses with loans on borrower-friendly terms and conditions as they seek to wade through the pandemic and the economic aftermath.

Paycheck Protection Program
While the CARES Act provides several attractive tax highlights, including the availability of an employer tax credit and the deferral of the Social Security tax portion of the employer’s share of payroll tax, a key component of the aforementioned $500 billion is the Paycheck Protection Program (PPP).  The PPP offers businesses with immediate cash to fund payroll, health care benefits, rent, utilities, and interest on mortgage obligations, among other business operating costs.  The PPP loans are 100% federally guaranteed and, generally, businesses with no more than 500 employees that were in operation during February 15, 2020 and June 30, 2020 are eligible to apply.  

A highlight of the PPP is loan forgiveness.  Specifically, as long as a business maintains its payroll and thereby retains its employees, the amount spent by the business during the eight (8) week period after the loan’s origination will be forgiven.  It is the intent of the CARES Act that employers maintain employees on their payrolls during this crisis period.

The size of the loan that businesses are eligible to receive is equal to 2.5x the business’ average monthly payroll costs for 2019.  Seasonal businesses may use the period between February 15, 2019 and June 30, 2019 as their average monthly payroll.  If the business was nonoperational during that period, then the size of the loan is 2.5x the average monthly payroll costs between January 1 and February 29, 2020.  In addition, the maximum term for PPP loans, if they must be repaid, is ten (10) years, with a maximum interest rate of 4%, and there are no SBA loan fees or prepayment fees.

SBA Loans
In addition to the PPP loans, the CARES Act provides that small businesses may apply for certain SBA loans such as 7(a), 504 and microloans under friendly terms and conditions.  Under the CARES Act, the SBA will cover all loan payments, including principal, interest and fees, for such SBA loans made six (6) months before the Act’s enactment, and for loans made within six (6) months of the enactment.  To be eligible, businesses must meet SBA “small business” criteria.

To apply for a PPP loan, or any of the other loans available under the CARES businesses may reach out to current SBA 7(a) lenders for assistance. Businesses have until June 30, 2020 to apply. Click here to find an SBA Lender.

Maryland Business Relief Grants
In addition to the CARES Act, the State of Maryland is offering relief to small businesses through loans and grants.  Specifically, the Maryland Small Business COVID-19 Emergency Relief Loan Fund offers businesses with fewer than 50 employees with up to $50,000 of cash.  Much like PPP loans, Maryland is offering borrower-friendly terms to assist businesses with navigating this crisis.  Indeed, under this loan program, interest on the loans run at 0% for the first 12 months, and 2% for the remaining 35 months; and there is a deferral of all payments for the first 12 months, and straight amortization beginning in the 13th month through the end of the loan period.  To be eligible, businesses must have been established prior to March 9, 2020 and be in good standing.  Also similar to PPP loans, loaned fund may be used for operating expenses such rent, mortgage payments, and utilities.  To qualify, businesses must establish the lost revenue resulting from the COVID-19 pandemic.

The Maryland Small Business COVID-19 Emergency Relief Grant Fund offers grants of up to $10,000 not to exceed 3 months of cash operating expenses to businesses of 50 or fewer employees.  Like the state’s loan program, businesses must be established prior to March 9, 2020, and be in good standing.  To qualify, businesses must produce financial documentation that reflects that its annual revenues do not exceed $5 million.  Similarly, businesses may use the grant for ordinary business operating costs such as working capital to support payroll expenses, rent, mortgage payments, and utilities.

Applications for Maryland’s Emergency Relief Loan Fund are found online HERE. Applications for Maryland’s Emergency Relief Grant Fund are also found online, and can be accessed HERE.

Please contact Chris Young at 301.762.5212 with any questions you may have about the CARES Act, with assistance in obtaining a Paycheck Protection Program loan for your business, or with the State of Maryland’s grant or loan programs.

Chris Young
is an associate in the Business & Tax practice at Miller, Miller & Canby. He focuses his practice on corporate legal agreements, business formation, tax controversy work and helping clients deal with new tax regulations. View more information about Miller, Miller & Canby's Business & Tax practice by clicking here.


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