These are unprecedented times, with information changing daily and multiple emergency executive orders taking effect in response to the Coronavirus outbreak. These events are having a devastating effect on all industries, but especially on the Restaurant & Hospitality industry.
Citrin Cooperman is working diligently to stay on top of industry developments that are affecting our clients. We know you have many questions and we are going to do our very best to provide you with the latest information. Below is a link to industry resources and updates on events that have taken place to date.
Families First Coronavirus Response Act
U.S. Treasury Acts to Defer Certain Tax Liabilities
Business Interruption (BI) Insurance
Local News and Tax Updates
FAMILIES FIRST CORONAVIRUS RESPONSE ACT
On March 14, 2020, the House of Representatives passed the Families First Coronavirus Response Act (FFCRA) with a largely bipartisan vote of 363-40. This Bill has not been passed, and is likely to be amended. In its mission to help those affected by the coronavirus, the FFCRA does many things. We will advise you of the specific provisions, as soon as the law is adopted. Below are excerpts of the Bill, in its present form:
EMPLOYMENT ISSUES - (Consult with your attorney regarding your responsibilities as an employer)
Emergency Family and Medical Leave Expansion Act
For employers with fewer than 500 employees, the Act provides up to 12 weeks of job-protected leave for any of the following reasons:
- To adhere to a requirement or recommendation to quarantine due to exposure to or symptoms of COVID-19
- To care for an at-risk family member who is adhering to a requirement or recommendation to quarantine due to exposure to or symptoms of COVID-19
- To care for a child of an employee if the child’s school or place of care has been closed, or the child-care provider is unavailable, due to a COVID-19
Employees will receive a benefit from their employers that will be no less than two-thirds of the employee’s usual pay.
Emergency Unemployment Insurance Stabilization and Access Act of 2020
- The State ensures that applications for unemployment compensation, and assistance with the application process, are accessible in at least two of the following: in-person, by phone or online. The State has demonstrated steps it has taken or will take to ease eligibility requirements and access to unemployment compensation.
Emergency Paid Sick Leave Act
- An employer shall provide to each employee paid sick time for any of the following uses:
- To self-isolate because the employee is diagnosed with COVID-19
- To obtain a medical diagnosis or care if such employee is experience the symptoms of COVID-19
- To comply with a recommendation or order by a public official with jurisdiction or a health care provider on the basis that the physical presence of the employee on the job would jeopardize the health of others.
- To care for a child if the school or place of care has been closed due to the COVID-19.
- The amount of sick time to which an employee is entitled shall be as follows:
- For full-time employees, 80 hours.
- For part-time employees, a number of hours equal to the number of hours that such employee works, on average, over a 2-week period.
- With respect to an employer that provides paid leave on the day before the enactment of the Act:
- The paid sick time under this Act shall be made available to employees in addition to such paid leave; and
- The employer may not change such paid leave on or after such date of enactment.
- An employee may first use the paid sick time under the Act. An employer may not require an employee to use other paid leave provided by the employer before the employee uses the paid sick time under the Act
Tax Credits for Paid Sick and Paid Family and Medical Leave
- Employer tax credits. The Act provides tax credits to employers to cover wages paid to employees while they are taking time off under the bill's sick leave and family leave programs.
- The sick leave credit for each employee would be equal to his wages, limited to $511 per day while the employee is receiving paid sick leave to care for themselves, or $200 if the sick leave is to care for a family member or child whose school is closed. An additional limit applies to the number of days per employee: the excess of 10 days over the aggregate number of days taken into account for all preceding calendar quarters.
- The family leave credit for each employee is limited to $200 per day with a maximum of $10,000.
- The credits are refundable to the extent they exceed the employer's payroll tax.
- Employers don't receive the credit if they're also receiving the credit for paid family and medical leave in Code Sec. 45S.
- These rules apply only to wages paid with respect to the period beginning on a date selected by the Secretary of the Treasury, which is during the 15-day period beginning on the date of the enactment of the Act, and ending on December 31, 2020. (Act Sec. 7001; Act Sec. 7003)
- Comparable credits for the self-employed. The Act also provides for similar refundable credits against the self-employment tax. It covers 100% of a self-employedindividual's sick-leave equivalent amount, or 67%oftheindividual's sick-leave equivalent amount, if they are taking care of a sick family member, or taking care of a child following the child's school closing. The sick-leave equivalent amount is the lesser of average daily self-employment income, or $511/day to care for the self-employed individual, or $200/day to care for a sick family member or child following a school closing. (Act Sec. 7002)
- Self-employed individuals could receive a family leave credit for as many as 50 days, multiplied by the lesser of $200 or their average self-employment income. (Act Sec. 7004)
- These rules apply only to days occurring during the period beginning on a date selected by the Secretary of the Treasury, which is during the 15-day period beginning on the date of the enactment of this Act, and ending on December 31, 2020. (Act Sec. 7002 and Act Sec. 7004)
- Employer FICA exclusion. Under the Act, sick leave and family and medical leave paid under the Act will not be considered wages under Code Sec. 3111(a) (employer tax - old age, survivors and disability insurance portion of FICA; 6.2%). (Act Sec. 7005)
U.S. TREASURY ACTS TO DEFER CERTAIN TAX LIABILITIES
On Tuesday March 17, 2020, Secretary of the Treasury Mnuchin announced that the President has authorized the following actions relating to tax returns for 2019:
- Individuals with taxes due on April 15 can defer on a penalty free and interest free basis balances due up to $1 million for a 90-day period of time. Secretary Mnuchin indicated that no application for such a deferral is necessary. The IRS will automatically waive the appropriate amounts of interest and penalties.
- Corporations will qualify for the same relief in amounts up to $10 million.
It is critical to note that, as of this writing, there will NOT be any extension of time to file granted automatically. A taxpayer must file a tax return by April 15th or consider filing an extension by April 15th.
- Consider applying for SBA Disaster Assistance Loan
- Start discussions with your landlord to arrange for extended payment terms. Consider the need to renegotiate your lease.
- Discuss payment terms with vendors.
- Due to the directive by a governmental authority that affects access to an insured’s premises, your business interruption insurance might cover the losses.
- Consult with your attorneys (employment and corporate) regarding the treatment of employees, contracts and agreements affected by the reduced business operations.
- Utilize staff for administrative efforts such as updating manuals, facility maintenance and implementing systematic procedures.
- Defer new projects and non-essential purchases or contracts.
- Contact your bankers to discuss covenants that might be affected, deadlines of reporting that might need to be extended and additional financing for cash flow.
- Increase marketing of delivery, when possible, and sale of gift cards.
- Increase marketing for events later in the year such as St. Patrick’s Day.
- File your sales and local tax returns timely; if you have difficulty paying the entire amount contact your state to discuss payment plans. Although not yet determined, the state might provide relief for late payment penalty.
BUSINESS INTERRUPTION (BI) INSURANCE
Although, generally, businesses are not covered by BI insurance, as virus-related losses are specifically excluded from claims, it is expected that the federal government will eventually provide funding. This gap in coverage is also currently being hotly addressed at the state level: COVID-19 - Preparing to File an Insurance Claim for Lost Income
If this is becomes the case, companies need to be thinking about what financial documents to preserve in order to be prepared to file an insurance claim. A complete Examples of information that a business should proactively collect in order to support a BI claim include:
- Historical and current annual financial statements;
- Federal and state annual tax returns;
- Monthly profit and loss statements;
- Budgets, forecasts or projections done prior to and after the event;
- Monthly bank statements;
- Inventory reports;
- Payroll records;
- Invoices and purchase orders;
- General ledger accounts established to account for any expenses related to the loss such as additional payroll, shipping, temporary facilities, etc.; and,
- Documentation to support extra expenses including receipts, invoices, time sheets, advertising costs, etc.
LOCAL NEWS AND TAX UPDATES
- Shuttering businesses: The Governors of New York, New Jersey, and Connecticut have coordinated a response to shutter bars, restaurants, casinos, and other public gathering places, effective at 8:00 PM on Monday, March 16, 2020, throughout the tristate area.
- These businesses will be permitted to provide take-out and delivery food only. No dining or drinking in establishments will be permitted. Clubs and bars with no food will be required to fully close. (See NY SLA guidance and executive orders for New Jersey, New York, Connecticut, Pennsylvania, and Massachusetts.)
- Curfews will also be in effect from 8:00 PM to 5:00 AM in many areas
- Shelter in Place: Among other states, New York and New Jersey are considering “Shelter in Place” orders and decisions should be made within the next 24-48 hours.
- Governor Baker of Massachusetts announced that for businesses that paid less than $150,000 in sales and meals or room occupancy taxes during 2019, their payments due in March, April and May will be postponed to June 20, 2020 and they will "also waive all penalties and interest that would otherwise apply," Baker said.
- NYC Tax Filing Hardship: During a press conference, NYC Mayor de Blasio stated that all businesses should file their taxes on time as normal. If a business has a hardship they should apply for an extension. If the business can prove that it has been disrupted, the City will waive any penalties the business may otherwise incur. The Mayor reiterated, all businesses should file their taxes to the maximum extent possible and indicate, specifically, with proof if there is a hardship.
- NY Governor Cuomo Three way Agreement: for additional Paid Family Leave and Short-Term Disability benefits
- NY Unemployment Assistance – File a Claim
- NJDOL Benefits and the Coronavirus – with printable guidelines
- California special tax relief announced by the FTB
- Connecticut Tax Filing Extensions:
- The filing date for the 2019 Form CT-1120 and CT-1120CU Connecticut corporation business tax return is extended to June 15, 2020 and the payment deadline is extended to June 15, 2020.
- The filing date for the 2019 Form CT-1065/CT-1120 SI Connecticut pass-through entity tax return is extended to April 15, 2020 and the payment deadline is extended to June 15, 2020.
- The filing date for the 2019 Form CT-990T Connecticut unrelated business income tax return is extended to June 15, 2020, while the payment deadline is extended until June 15, 2020.