We continue our efforts to keep you informed of key legal developments relating to COVID-19. Today, we provide a few updates relating to programs under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). For our previous updates, please see HERE.
SBA Paycheck Protection Program
The U. S. Department of the Treasury (the “Treasury”) previously announced that, starting today, April 10th, 1099 independent contractors and self-employed individuals could begin submitting applications for loans under the Paycheck Protection Program (“PPP”) established under the CARES Act. However, there has been no additional guidance regarding the program requirements or application process for either these applicants (i.e. independent contractors or self-employed individuals) or sole proprietorships (who technically could apply last Friday).
As of this writing, it does not appear that the larger SBA authorized lenders have modified or supplemented their online application process to accommodate these three (3) types of applicants. Accordingly, there may be growing frustration among them with this process. Applicants who are not able to access PPP loans through their existing bank relationship are referred to a list of SBA authorized lenders on the SBA site (see HERE); unfortunately, the site does not identify lenders that have opened their application process to sole proprietors, 1099 independent contractors, and self-employed individuals.
Certain online loan facilitators – like kabbage.com and lendio.com – are accepting applications from sole proprietors, 1099 independent contractors, and self-employed individuals, and are apparently submitting these applications to the SBA with their network of SBA authorized lenders that are accepting applications from this group of applicants. As of this writing, we do not have enough information to recommend these facilitators as a suitable way of accessing the program; as always, applicants should proceed with caution before working with any lender or intermediary with which they do not have a pre-existing relationship.
Commercial Real Estate
For businesses with commercial real estate, we highlight Section 2307 of the CARES Act, which amends Section 168 of the Internal Revenue Code. It corrects a drafting error which limited depreciation on qualified improvement property ("QIP"). QIP includes interior improvements to non-residential real property excluding elevators, escalators, internal structural elements and expansions.
QIP is now assigned a 15-year or 20-year recovery period and qualifies for 100% bonus depreciation in the year, beginning in 2018, that it is placed into service. The definition of QIP is modified to include only improvements “made by the taxpayer.”
We recommend eligible businesses consult with their tax advisors about this election and whether to amend a prior year's return to take advantage of it.
We will continue to send periodic updates on topics that may be helpful to your businesses. If you have a particular issue that you’d like us to address or if you’d like to be removed from the distribution list, please let us know.
Feel free to contact us with any questions.
Gery Chico, Jon Leach, and Alpita Shah