What is the CARES Act?
On March 27th, the president signed the COVID-19 aid, relief and economic stimulus package known as the CARES Act to provide a $2 trillion stimulus package.
This includes $349 billion allocated to small businesses, unemployment insurance payments, certain tax credits and benefits, student loan relief and direct payments to taxpayers via an immediately available refundable tax credit.
Every property management operation is different, and should individually consider whether SBA disaster loans, CARES loans, or state or local programs are suitable for their needs. We included the list of programs below, and you can read the full summary of the CARES Act here.
What relief is included for small businesses?
Paycheck Protection Program (PPP):
This will provide small businesses, nonprofits, and other entities classified under NAICS code 72 with loans of up to $10 million based on average monthly payroll costs. It is also available to sole proprietorships, independent contractors, and eligible self-employed individuals.
The PPP loans are backed by the SBA but will be provided by lenders. Interest rates cannot be higher than 4% and the maximum loan amount is $10 million. They can be used in coordination with other COVID-financing assistance or any other existing SBA loan program.
It offers up to eight weeks of average payroll, mortgage interest, rent, and utility payments to be forgiven if the business retains its employees and their salary levels.
Principal and interest payments can be deferred for six months, and all SBA borrower fees are waived.
However, Multifamily has been seriously limited by provisions for this program.
Currently, residential property management companies with multiple physical locations, passive owners, apartment buildings and people who contract third-party property managers are ineligible.
According to Forbes, “The National Multifamily Housing Council and National Apartment Association are seeking confirmation from the SBA that all multifamily housing businesses, including off-campus student housing providers, would be able to qualify for the Paycheck Protection Program.”
The industry is currently asking the government to make adjustments for multifamily and student housing providers. You can make your voice heard by reaching out to your elected officials here.
Small Business Administration (SBA) Loans:
The SBA will cover all loan payments for existing SBA borrowers, including principal, interest, and fees, for six months. The loan amount is based on average total monthly payments for payroll for the 12-week period beginning February 15, 2019, or at the election of the eligible recipient, March 1, 2019, and ending June 30, 2019.
Each program has different requirements; go here for more details.
Emergency Economic Injury Grants:
The law also provides an advance of $10,000 to small businesses and nonprofits that apply for an SBA economic injury disaster loan (EIDL). EIDLs are loans of up to $2 million that carry interest rates up to 3.75% for companies, as well as principal and interest deferment for up to 4 years. The loans can be used to pay for expenses that could have been met had the disaster not occurred, like payroll and operating expenses.
This $10,000 economic injury grant does not need to be repaid, even if the grantee is subsequently denied an EIDL, and may be used to provide paid sick leave to employees, maintaining payroll, meet increased production costs.
To apply for this grant, go here.
Refundable Tax Credits:
Refundable tax credits are available for private-sector employers that are required to offer coronavirus-related paid leave to employees.
Go to the IRS website to learn more and get information on how to obtain advance payment of these credits.
The employer-side of certain payroll taxes are deferred through the end of 2020. Deferred taxes will not become due until the end of 2021 and the end of 2022, with 50% of the liability being paid at each date. Any business that does not have a loan forgiven through the new SBA Paycheck Protection Program is eligible for payroll tax deferral.
Employee Retention Tax Credit:
This credit is available for struggling businesses that are not eligible or choose not to participate in the new SBA Paycheck Protection Program. Any business that has been forced to fully or partially suspend operations, or that has seen a significant drop in revenues, is eligible for a 50% credit for wages paid to furloughed or reduced-hour employees. There is an overall limit on wages per employee of $10,000.
Learn more at the IRS website and talk to your payroll service provider.
What are the new paid sick leave and paid emergency family leave requirements for small businesses?
Starting on April 1, 2020, employers with fewer than 500 employees must provide paid sick leave and paid emergency family leave to employees affected by COVID-19.
It’s a good idea to check the NMHC website regularly throughout this process as things are changing rapidly.
Accounting and bookkeeping support
You’ll need to supply a lot of information when applying for any of these programs, so making sure your books are in tip-top shape will make this process easier. If you’re in need of support, please talk to us about our accounting and bookkeeping services. We’re here to help you save money on accounting costs, and help you weather any storm you might be facing.
We know this time is confusing and unpredictable, but you don’t need to face this alone.
For more COVID-19 support, read our articles on Coronavirus Preparedness for Property Managers, and How Property Managers Can Work Remotely During Social Distancing.