Updates on Virginia Tax Payments, Stimulus Package 3.5 and PPP Loan Forgiveness

Federal and State legislation came through this week to provide both individual taxpayers and businesses with further support in the midst of the COVID-19 pandemic. President Trump signed the $484 billion coronavirus relief package, referred to as Stimulus Package 3.5, into law on Friday April 24th. Among other benefits, the law replenishes the Payroll Protection Plan (PPP) funds, which had run dry due to the popularity of the program. On the local level, the Virginia General Assembly approved Gov. Northam’s amendments to the state budget, providing further relief on tax payments through the removal of interest on qualifying payments. Alongside these legislative measures, the Small Business Administration is expected to release definitive, formal guidance on the loan forgiveness feature of the PPP in the coming days. 

Interest on Taxes Waived

The Virginia General Assembly overwhelmingly approved Gov. Northam’s amendments to the state budget to waive interest on income tax payments for which the payment deadline was extended to June 1, 2020, so long as the payment is made on or before June 1, 2020. Additionally, the amendments waive interest on sales tax payments originally due March 20, 2020, so long as the payment was received by April 20, 2020. We expect the Governor to sign the Budget bill with the mentioned amendment. 

Stimulus Package 3.5 

The President signed into law the latest round of stimulus aimed at combatting the economic impact of the COVID-19 crisis. The legislation largely builds on previously enacted programs. Of the $484 billion package, $310 billion is dedicated to the Paycheck Protection Program (PPP). The bill also provides an additional $60 billion in funding to the Small Business Administration for emergency disaster lending and disaster grants.

Payroll Protection Plan Loan Forgiveness

While definitive guidance concerning Payroll Protection Plan loan forgiveness has not yet been released, some aspects are known at this point.

• The full principal amount of the loan and any interest accrued can be forgiven if the borrower maintains staffing levels and payroll amounts and uses all the loan proceeds for covered costs during the 8-week covered period. 
• The 8-week covered period starts on the date the borrower receives the first disbursement of the loan and covers the next 56 days, which should not be interpreted to mean 2 months. 
• At least 75% of the proceeds of the loan funds received must be used for payroll costs and no more than 25% of the funds may be used for other allowed expenditures (rent, utilities and mortgage interest).
• Should the business experience a decline in its average workforce during the 8-week covered period in comparison to the base period, the amount of the loan that may be forgiven will be reduced. This is based on full time equivalents (FTE) and not the number of employees. 
• While there currently is uncertainty in the exact steps of the calculation, determination of the average FTEs for the following periods should be made: February 15, 2019 to June 30, 2019 or January 1, 2020 to February 29, 2020 (whichever is lower) and the 8-week covered period starting with the date the loan is funded.
• If the borrower does not qualify for forgiveness of the full amount of their loan, the remaining loan amount becomes an SBA loan, which bears interest at 1% and is due in 2 years.

Payroll Protection Plan borrowers may submit a request for forgiveness to the lender at the end of the 8-week covered period or as soon as the loan funds have been expended. As the rapid pace of the program implementation leads to many questions, we will continue to provide further updates to this information as official guidance is issued by the Small Business Administration.

Your Hantzmon Wiebel team is here to keep you up to date as new information, guidelines and legislation come out in response to the COVID-19 pandemic. Feel free to contact us with any questions you may have about how the new legislation impacts you and your business or with eligibility inquiries concerning PPP loan forgiveness.

© Copyright 2020 Thomson Reuters. 

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Our firm provides the information in this article for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal or other competent advisors. Before making any decision or taking any action, you should consult a professional advisor who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this blog are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability and fitness for a particular purpose.