By Attorney Kelly Jesson
After a lot of delay on both sides of Congress and the President, we have a new COVID-19 stimulus law. The President signed the “Consolidated Appropriations Act, 2021” on December 27, which contains a lot of government funding measures in addition to the COVID relief/stimulus provisions. Below are some highlights – what we think individuals and business owners would like to know:
Foreclosure, Evictions, and Student Loans
There are no provisions in the new law extending foreclosure forbearance or student loan forbearance. However, the President and government agencies have taken matters into their own hands since the first CARES Act was originally passed, frequently extending these deadlines. Currently, student loan deferment is scheduled to expire on January 31, 2021. FHA borrowers through February 28, 2021, can request forbearance of up to 12 months of mortgage payments.
The new law does extend the eviction moratorium (for tenants with less than $99,000 annual income) through January 31, 2021, but again this can be extended by the government at any time. Lots of money was appropriated to the states for rental assistance programs.
Pandemic unemployment assistance will continue for up to an additional eleven weeks if eligible, through March 14, 2021. If eligible as of that date, a worker who has not yet received the maximum amount of benefits may continue to receive benefits through April 5, 2021. Eligibility requirements did not change.
Workers with at least $5,000 in self-employment income may be eligible for an additional $100 per week benefit as part of the Mixed Earner Unemployment Compensation.
Federal Pandemic Unemployment Compensation (the extra payments of $600 per week) will be reduced to $300 per week but will continue for up to an additional eleven weeks if eligible, through March 14, 2021. Eligibility requirements did not change.
Many eligible individuals (eligibility requirements did not change in this new law) will receive another tax rebate in the following amounts:
• $600 ($1,200 in the case of eligible individuals filing a joint return), plus
• $600 for each qualifying child
• But the credit shall be reduced by 5 percent of so much of the taxpayer’s adjusted gross income as exceeds:
• $150,000 in the case of a joint return,
• $112,500 in the case of a head of household, and
• $75,000 in the case of a taxpayer not described above.
This means that a married couple filing jointly with no children will not receive any credit if their income is $174,000.
Paycheck Protection Program (“PPP”)
Lots of exciting news here! Congress has allocated funds to a “second draw PPP loan program.” The available loan amount is the same, and the business must have been in business on February 15, 2020 (like before) to be eligible, but the second draw is only available to businesses with not more than 300 employees (first round was 500). Like before, there are special rules for seasonal businesses and those with more than one location. At least 60% of the loan must be spent on payroll, like before, to be forgiven; however, Congress did broaden the types of permissible expenditures.
Forgivable business expenses now include covered operations expenditures (payment for any business software or cloud computing service that facilitates business operations, product or service delivery, the processing, payment, or tracking of payroll expenses, human resources, sales and billing functions, or accounting or tracking of supplies, inventory, records and expenses), covered property damage costs (related to property damage and vandalism or looting due to public disturbances that occurred during 2020 that was not covered by insurance), covered supplier costs (essential to the operations of the entity and made pursuant to a contract that existed prior to the covered period or perishable items), and covered worker protection expenditures (related to making customers and employees safe from COVID-19). Additionally, the forgivable health insurance expense clause in the CARES Act was amended by the new law to include other type of insurance, such as group life, disability, vision, or dental insurance. If a business has already applied for and received forgiveness for its first PPP loan, it cannot go back and amend the application to include these new expenses. However, if a business has not had its first PPP loan forgiven yet, it can go back and calculate money spent on these new permissible expenditures and include these on its forgiveness application for the first round of PPP loan.
In order to qualify for a second draw PPP loan, the business must have suffered an at least 25% drop in gross receipts for a quarter in 2020 than the same quarter in 2019. If the business wasn’t in business in 2019, then it must have suffered a 25% drop from the first quarter of 2020 as compared to one of the other three quarters of 2020.
Any amounts forgiven under the PPP will no longer be included in the business’s gross income. The new stimulus law also created a simplified certification process for forgiveness of loans no greater than $150,000.
EIDL Emergency Grants
A business no longer has to pay back / deduct from the PPP forgiveness amount money it received as part of the emergency grant of up to $10,000. If you’ll recall, the SBA limited the grants to $1,000 per employee, and the money ran out at some point. The new law provides additional funding for these grants, and there is no language in the law limiting the grant to $1,000 per employee (although the maximum amount is still $10,000). To qualify, the business must: be located in a low-income community; have suffered an economic loss greater than 30%; and employ not more than 300 employees. In addition, the business must qualify as an eligible entity as defined in the CARES Act. If a qualifying business has already received a partial grant, it can apply for the remaining balance of the $10,000.
Recipients will enjoy an additional three months of payments paid by the SBA, and some qualifying businesses may receive eight months. The maximum amount of payments is still $9,000 per borrower per month.
The refundable payroll tax credits for paid sick and family leave, enacted in the Families First Coronavirus Response Act, have been extended through the end of March 2021. The CARES Act rules dealing with retirement distributions have been extended through April 30, 2021.
By Associate Attorney Danielle Nodar
With the holiday season upon us, many people are considering how they can give back to their communities, particularly after a year where many have been adversely impacted due to the longstanding impact of COVID-19. Like many industries and people, the pandemic has also taken a toll on nonprofit organizations. Revenue streams have been reduced due to limits on regular fundraising activities and economic hardships befalling individual or corporate donors. This strain on nonprofits is coupled with an increase in demand for many services provided by nonprofits, particularly those combating difficulties caused by the pandemic, such as food insecurity, homelessness, and elder and medical care.
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provides several provisions that increase tax incentives for charitable contributions by both individuals and corporations, which may be an added incentive for people to make gifts at a time when they may be most needed. The CARES Act provides that individual taxpayers who do not itemize their deductions can now deduct up to $300 for cash gifts made to public charities in 2020. Another bonus to this new change is that it will not expire this year unless the legislation changes; however, to take advantage of it this tax year, all cash or check gifts must be received or postmarked by December 31, 2020. Individuals who itemize their deductions may now deduct cash contributions to public charities up to 100% of their Adjusted Gross Income (AGI), an
increase from the 60% Adjusted Gross Income limit that used to apply before the CARES Act.
For both groups of people, these gifts must be made to a public and not private non-operating foundations, donor advised funds, supporting organizations or split-interest trusts such as charitable remainder trusts. Also, keep in mind, you must provide a receipt to show proof of cash gifts of $250 or more.
Finally, this spirit of giving is not limited to individuals as the AGI limit for cash charitable contributions was also increased for corporate donors with the changes made by the CARES Act. Corporate donors can now deduct up to 25% of their taxable income, an increase from the 10% in previous years.
In order to ensure that your charitable contribution is maximized, you should consult with your tax professional and attorney. For questions about how you can incorporate charitable giving in your estate plan, please contact Jesson & Rains!
By Attorney Edward Jesson
Most people in the construction industry are at least partially familiar with the Mechanic’s Lien statutes in North Carolina. For those that are not familiar with them, you can always get a refresher from our previous article, “Construction Liens 101”. While most people understand that a general contractor, or sub-contractor, or a sub sub-contractor (and so on) may generally be entitled to at least some sort of lien on property if they are not paid, most people are surprised to learn that contractors aren’t the only ones entitled to a lien.
The applicable North Carolina statute states that:
Any person who performs or furnishes labor or professional design or surveying services or furnishes material or furnishes rental equipment pursuant to a contract, either express or implied, with the owner or real property for the making of an improvement thereon shall, upon complying with the processions of this Article, have a right to file a claim of lien on real property . . . .
As you can see, the definition of persons who can claim a mechanic’s lien is broad and is not just limited to those actually performing construction work. Those who provide materials (e.g. concrete suppliers, lumber suppliers) are entitled to mechanic’s liens if they do not receive payment. Likewise, those who provide rental equipment can file mechanic’s liens if they do not receive payment. This can be especially troubling for a general contractor, as often, the material suppliers and rental equipment businesses are several rungs down the contractual ladder from the general contractor or owner.
Similarly, those who provide professional design or surveying services are entitled to a mechanic’s lien if they don’t receive payment. North Carolina law provides that design services encompasses both architects and engineers.
Of course, not everyone involved in a construction project is entitled to a direct lien on the real property: only those who have a contract with the owner of the real property are entitled to a direct lien (subject to limited exceptions). Those further down the contractual chain are generally only going to be entitled to a subrogated lien (again, subject to certain exceptions).
It is incredibly important when involved in any construction project, whether you’re on the owner’s side or the construction/design side, to make sure that everyone down the chain is getting paid for the work that they are performing. Even if a supplier of a sub-sub-contractor doesn’t get paid, that can cause costly legal issues should they seek to file a lien at a later date. The attorneys at Jesson & Rains can assist if liens are filed and protect against liens being filed in the first place. Please give us a call if you need assistance!
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Kelly Rains Jesson