PPP Small Business Loan Application Deadline Extended … Again

The deadline for applying for a PPP loan has been extended for another 60 days by the PPP Extension Act of 2021 (“Act”). Previously set to expire on March 31, the deadline is now May 31, 2021. The Act provides the SBA with an additional 30 days –  from June 1 through June 30, 2021 – to  process PPP loan applications submitted  by May 31, 2021.

For additional information on recent changes, click here. Continue reading »

Latest PPP Updates Includes 2-Week Exclusive Access for Employers with Fewer than 20 Employees

President Biden announced changes to the Paycheck Protection Program on February 22, 2021, which  include an exclusive two-week access period for businesses to apply for PPP loans.

Changes Announced on February 22, 2021 Continue reading »

President Trump Signs Paycheck Protection Program Flexibility Act

The Paycheck Protection Program Flexibility Act (Flexibility Act) makes key changes to the Paycheck Protection Program (PPP) that provide borrowers with more flexibility to obtain loan forgiveness, including extending the time period to spend PPP loan proceeds, reducing the payroll expenditure requirement for PPP loans, and extending the time period to restore employment and wage levels. The following is a summary of the modifications the Flexibility Act makes to the PPP.

1. Extension of Time to Spend Loan Proceeds. The Flexibility Act extends the covered period that a borrower must spend its loan funds from eight weeks after the loan origination date to 24 weeks or until December 31, 2020, whichever is earlier. The Flexibility Act allows borrowers that already received a PPP loan prior to enactment of the Flexibility Act to elect an eight week covered period, which may be beneficial for borrowers who have already spent most of their PPP loan proceeds and are near the end of their original eight week covered period.

2. Payroll Expenditure Requirement. The Flexibility Act reduces the payroll expenditure requirement from 75% to 60%. The remaining 40% of loan funds may still only be used for payments of interest on any covered mortgage obligation, rent and utilities.

In an Interim Final Rule issued on April 3, the SBA established the requirement that at least 75% of the PPP loan proceeds be used for payroll costs. If less than 75% of the of loan funds are spent on payroll costs, the SBA Loan Forgiveness Application requires a borrower to reduce the amount eligible for loan forgiveness. In changing the payroll expenditure requirement to 60%, the Flexibility Act added the following language to the CARES Act: “To receive loan forgiveness”, a borrower “shall use at least 60% of the covered loan amount for payroll costs.” Based on this language it is not clear whether a borrower will still be able to obtain partial loan forgiveness if the 60% threshold is not obtained. Continue reading »

PPP Loan Forgiveness Application Now Available

Updated 7/6/2020

The Small Business Administration (SBA) and the Department of Treasury have released the Paycheck Protection Program (PPP) Loan Forgiveness Application.

The application deadline for the Paycheck Protection Program has been extended to August 8, 2020. Updated loan forgiveness instructions and forms are available here:

PPP Loan Forgiveness Application Instructions for Borrowers

PPP Loan Forgiveness Application Form – Revised June 16, 2020

Self-Employed: Continue reading »

Safe Harbor Deadline for Repayment of PPP Loans Extended from May 14 to May 18

On May 13, 2020, the Small Business Administration (SBA), in consultation with the Department of the Treasury, extended the safe harbor deadline to repay Paycheck Protection Program (PPP) loans to May 18, 2020. Previously in its PPP Loans Frequently Asked Questions (FAQs), the SBA reminded borrowers to carefully review the required certification on the PPP loan application that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.”

In further guidance, the SBA provided that any borrower of a PPP loan that repays the loan in full by the specified safe harbor deadline will be deemed by the SBA to have made the required certification concerning the necessity of the loan request in good faith.  According to the newly issued FAQ #47, Continue reading »

Additional SBA Guidance Regarding PPP Loan Business Necessity Certification and New Safe Harbor for PPP Loans of Less than $2 Million

The Small Business Administration (SBA), in consultation with the Department of Treasury,  announced additional guidance regarding the required good faith certification borrowers must make concerning the necessity of the Paycheck Protection Program (PPP) loan request. In PPP loan applications, borrowers must certify in good faith that current economic uncertainty makes the loan request necessary to support their ongoing operations.

In an update to its PPP Loan Frequently Asked Questions (FAQs) on May 13, the SBA provides a new safe harbor for any borrower that, together with its affiliates, received a PPP loan of an original principal amount of less than $2 million. These borrowers will be deemed to have made the required certification concerning the necessity of the loan request in good faith.

As previously announced by the SBA, borrowers with PPP loans in the amount of $2 million or more, and other designated PPP loans, are subject to review by the SBA for compliance with the requirements of the PPP Interim Final Rules and the Borrower Application. According to Question 46 of the updated FAQs, Continue reading »

Safe Harbor Deadline for Ineligible Borrowers to Return Paycheck Protection Program Loans is Extended to May 14

UPDATED 5/6/2020

The Small Business Administration (SBA), in consultation with the U.S. Treasury,  published retroactive guidance regarding the loan necessity certification a borrower must make on its application for a Paycheck Protection Program (“PPP”) loan.

In its update to the list of Frequently Asked Questions (FAQs) about PPP loans issued on April 23, the SBA explained that prior to making an application for a PPP loan “all borrowers should carefully review the required certification that ‘[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.’” In making this good faith certification, the Treasury stated that all borrowers must take “into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operation in a manner that is not significantly detrimental to the business.”

Although the SBA guidance specifically questions loans made to public companies with substantial market value and access to capital markets, the guidance applies to both public and private companies.

The generality of the SBA guidance left many borrowers confused. There were news articles published about small businesses that were concerned about expending PPP loan funds despite perceived operational needs.  In a likely response to this confusion, the SBA updated its FAQs about PPP loans on May 5, indicating that it was going to provide additional guidance regarding how it would review the business certainty certification.  Additionally, the FAQ update provides that a borrower will be deemed to have made the business necessity certification in good faith if the borrower applied for the PPP loan prior to the issuance of the FAQ and repays the loan in full by May 14, 2020. The original safe harbor repayment deadline way May 7. Continue reading »

Non-deductibility of Expenses Paid with Forgiven Paycheck Protection Program Loans

According to new guidance issued by the IRS in Notice 2020-32, no deduction is allowed for otherwise deductible expenses if they are paid with PPP loan funds that are forgiven and the income associated with the forgiveness is excluded from the taxpayer’s income. The basis for the IRS’ disallowance of the tax deduction for such expenses is Internal Revenue Code (IRC) Section 265(a).

IRC Section 265(a) provides that a deduction is not allowed for any amount otherwise deductible that is allocated to one more classes of income which are wholly exempt from income taxes. The IRS ruled that the CARES Act’s exclusion from income of forgiven PPP loan amounts results in a “class of exempt income” under Section 1.265-1(b)(1) of the Treasury Regulation. Therefore, the payment of such expenses is non-deductible from income because such payment is allocable to tax exempt income. Continue reading »

Separate Spousal Tax Liability for Missouri Income Taxes

If a married couple files a joint federal income tax return, both spouses are jointly and severally liable for the full amount of federal income tax liability for that tax year. Joint and several liability means the Internal Revenue Service can collect the full amount of income tax from either or both spouses, regardless of whether the income tax liability is attributable to the separate income of only one spouse.  A divorce does not prevent the IRS from collecting the entire unpaid income tax liability from either of the spouses.  Under certain circumstances, a spouse may obtain relief from joint and several tax liability by timely filing Form 8857 and proving a claim for innocent spouse relief, separate liability or equitable relief.

By contrast, a married taxpayer who files a combined Missouri income tax return is liable only for the amount of Missouri income tax liability attributable to his or her own income. A taxpayer’s  separate income includes his or her earned income such as wages, income from his or her own separately owned property, and his or her portion of income from jointly owned property, such as interest from a jointly owned financial account.

Missouri law requires a married couple who files a joint federal income tax return to file a combined Missouri income return.  The income of each spouse is reported separately on the combined return. The Missouri tax due on each spouse’s income is separately determined and then added together and reported on the return.

However, in assessing unpaid income tax liability, the Missouri Department of Revenue does not track which spouse’s income gave rise to the liability. Instead, in practice the Missouri Department of Revenue assesses the entire income tax liability against each spouse, even if the tax liability is only attributable to the income of one spouse. Continue reading »

Protecting Against the Overseas Theft of Trade Secrets

Part of a series on issues related to Manufacturers, Distributors and International Trade

The overseas theft of trade secrets is a major concern of companies with business operations outside of the United States. A recent decision by the Court of Appeals for the Federal Circuit provides U.S. companies with a new weapon to protect against trade secret misappropriation that occurs completely outside the United States. While welcome news for U.S. businesses, it is important that they remain vigilant in developing and implementing preventive measures for the international protection of their trade secrets.

In TianRui Group Co., et al. v. ITC et al., 661 F.3d 1322 (Fed Cir. Oct 11, 2011), the U.S. Court of Appeals for the Federal Circuit held that the U.S. International Trade Commission (ITC) has the authority to exclude imports of products into the United States that are manufactured outside the United States using a misappropriated trade secret process, even when the misappropriation occurs outside the United States and there are no goods being manufactured in the U.S. using the protected process.

The Court held that in determining whether a trade secret has been misappropriated, the ITC should apply U.S. federal common law of trade secret misappropriation rather than the law of any particular U.S. state or of the country where the misappropriation occurred. The application of federal common law in actions brought before the ITC involving the overseas theft of trade secrets will make it easier in many cases for U.S. companies to prove the theft of their trade secrets, because proving trade secret misappropriation is generally more difficult under the laws of many other countries.

The holding in TianRui has no bearing on the sale or importation of goods outside the United States that were manufactured using misappropriated trade secrets of a U.S. manufacturer. Consequently, U.S. companies will still need to think globally when adopting trade secret protection measures.

The definition of what constitutes a trade secret and the elements for proving trade secret misappropriation vary from country to country. Additionally, there are regional competition laws that affect trade secret protection. Taking into account these laws when drafting confidentiality and non-compete provision is necessary to ensure trade secret protection and the enforceability of the provisions or agreements. Post-employment restrictive covenants need to be drafted to take into account the relevant statutory and judicial law, because if they are drafted too broadly they will be unenforceable.

In many countries a post-employment non-compete clause is not valid unless there is separate compensation for the restrictive covenant (e.g., China and Germany). In other countries, non-compete agreements are prima facie void on public policy grounds, and therefore, particular care is required when drafting a non-competition agreement in order to ensure that it will be considered reasonable under the applicable country’s laws.

To prove access to confidential information, it is advisable for a company to require written acknowledgement of the receipt of company information from employees, consultants, subcontractors and any other third parties at the time of disclosure, as well as having these individuals sign confidentiality agreements. In some countries, having a signed confidentiality agreement is not sufficient to prove access to a trade secret.

As a result of the decision of the U.S. Court of Appeals for the Federal Circuit in TianRui, U.S. companies have a powerful enforcement mechanism to protect against the imports of competitor products into the United States if the foreign manufacturer engaged in conduct that constitutes an unfair trade practice under U.S. law.

However, when drafting confidentiality agreements, trade secret preventive measures and post-employment restrictive covenants, U.S. companies still need to consider carefully the statutory and judicial laws of the relevant foreign country and region.

Posted by Attorney Marcia S. Orgill. Orgill concentrates her practice in the area of business and personal taxation—especially complex domestic and international tax strategies.