Guidance has been issued on various employee benefit plan relief provisions found in the CARES Act in Notice 2020-50.[1]

Coronavirus-Related Distributions from Retirement Plans

CARES Act §2202(a) provides specific relief to beneficiaries of retirement plans for a coronavirus-related distribution. Specifically, the Notice describes this relief in Section 1 of the Notice for such distributions as follows:

The section provides an exception to the 10% additional tax under § 72(t) of the Code (including the 25% additional tax under § 72(t)(6) for certain distributions from SIMPLE IRAs), allows the distribution to be included in income ratably over 3 years, and provides that the distribution will be treated as though it were paid in a direct rollover to an eligible retirement plan if the distribution is eligible for tax-free rollover treatment and is recontributed to an eligible retirement plan within the 3-year period beginning on the day after the date on which the distribution was received.[2]

Small details can be crucial in certain portions of tax practice, and in the case of Organic Cannabis Foundation, LLC, et al, v. Commissioner[1] the problem involved the use of a particular delivery option available from FedEx that was not on the list of IRS approved delivery services. That fact, combined with the inability of FedEx to make delivery on its initial attempt, combined to deny the taxpayers the ability to contest their issue in the United States Tax Court, their petition being found to have been filed a day late.

The SBA has both revised the PPP loan forgiveness application form to take into account the changes made in the Paycheck Protection Program Flexibility Act (PPPFA) and added a new “Loan Forgiveness Application Form EZ” for qualified borrowers.[1]

The revised forms take into account changes made in the interim final rules released on June 16, 2020.[2] The forms also clarify that a new limit on income replacement for sole proprietors discussed in the IFR will apply to partners and owner-employees.

A new bit of guidance has emerged from the Small Business Administration, with another interim final rule (IFR) appearing on the Federal Register website in pre-publication form.[1] This IFR contains a number of changes to the third and sixth interim final rule on PPP loans, mainly conforming language to agree with changes made in the Paycheck Protection Program Flexibility Act (PPPFA).

However, the IFR does contain some guidance related to the maximums that can be used for payroll costs for a single employee and income replacement for an owner-employee in obtaining forgiveness for borrowers that opt to take advantage of the 24 week covered period added by the PPPFA.

More late Friday guidance on the Paycheck Protection Program loans was issued by the SBA on June 12, with a second set of Paycheck Protection Program Flexibility Act (PPPFA) interim final rules (IFRs).[1] As with the first set, this guidance makes changes to the original April 2, 2020 IFR released shortly after the CARES Act.

The IRS has released guidance for employers who have established programs that allow employees to donate the value of their vacation, sick, or personal leave to be paid by the employer to a §170(c) organization providing COVID-19 relief in Notice 2020-46.[1]

The SBA released the first PPP loan guidance to modify prior guidance due to the passage of the Paycheck Protection Program Flexibility Act (PPPFA) in a new interim final rule (IFR).[1] The new rule modifies the interim final rule originally published on April 2, 2020 to deal with certain provisions changed by the PPPFA.

Treasury Secretary Steven Mnuchin and SBA Administrator Jovita Carranza have issued a joint statement that provides certain details about the SBA’s planned implementation of changes found in the Paycheck Protection Program Flexibility Act signed into law on June 5, 2020.[1]

The release describes the following guidance the SBA expects to release on the changes made by this law.

The Small Business Administration issued a second interim final regulation late in the evening of May 22, 2020, this one entitled “Business Loan Program Temporary Changes; Paycheck Protection Program – SBA Loan Review Procedures and Related Borrower and Lender Responsibilities.”[1]

The SBA’s potential review of loans has been a topic of discussion since the SBA released Q&A 31 in the “Paycheck Protection Program Loans Frequently Asked Questions (FAQs),” where the agency indicated concern over loans taken by various public companies, followed up by Q&A 39 where the agency announced:

To further ensure PPP loans are limited to eligible borrowers in need, the SBA has decided, in consultation with the Department of the Treasury, that it will review all loans in excess of $2 million, in addition to other loans as appropriate, following the lender’s submission of the borrower’s loan forgiveness application.[2]

This particular IFR was issued to describe the review process and related responsibilities for the borrower and the lender.

The SBA continued with the release of guidance late in the evening, with a release around 10:00 pm EDT on May 23.

A week after issuing the application form for PPP loan forgiveness, the Small Business Administration released an interim final rule covering the forgiveness process.[1] The IFR provides the formal guidance to go with the application package.