Bulletin Board Magazine 2020, Volume 2

Payroll Protection Program

o Currently the SBA has not issued guidance on how they will select loans for review. Treasury Secretary Steven Mnuchin has restated his “audit” position to that of a “review” will be conducted for all loans over $2,000,000. What that may entail is speculation today. However, we do know that the Treasury has issued a simplified loan forgiveness application “Form 3508-EZ “for borrowers whose loans are $50,000 or less. If you have not already submitted your loan forgiveness application, you may not receive a determination in time for issuing your company’s year-end financial statements. If that occurs, you cannot anticipate acceptance and therefore must reflect the PPP loan proceeds as a term note, with both short- and long-term portions classified and disclosed in your annual financial statements. Once loan forgiveness is achieved and acknowledged, you will reclassify the debt component of your loan to forgiveness income reported on your statement

o A tax planning point is raised here as well. When do you want to record debt forgiveness? Do you want to reflect it in 2020 operations? Maybe, maybe not. 2020 tax rates for corporations are capped at 21%. In which year will your company have higher taxable income? What will the tax rates be for 2021? Who will be President? I don’t know. The prudent approach is to be flexible and prepared. Calculate your loan forgiveness, speak with your lender and review the options with your trusted financial advisor. Stay prepared and stay informed.

of operations below the line of income from operations in the reporting period when the loan forgiveness is approved. o Review the Financial Accounting Standards Board ASC-470 for technical guidance on presentation and disclosure. • As we go to publication, the tax bite for the program is still a certainty. While the proceeds of the loan program are 100% tax free, the salaries and other qualified expenses used in calculating forgiveness are no longer deductible. The IRS notice number 2020-32 clearly requires the reduction of current period expenses for any amounts used to obtain debt forgiveness. The override for this will require an exemption approved by both the House of Representatives and the Senate. Post-election day drama to follow.

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We were in the process of building three multi-family townhouse projects when Covid-19 struck. Through my SBACNJ membership, I was able to access a free Covid-19 safety program which incorporated the CDC guidelines. Our company created project- specific Covid-19 safety plans and required each of our subcontractors do the same. By acting quickly and utilizing the information provided by the Association, we have not had one reported case of Covid-19! This is important to ensure the residential building industry does not lose the “essential status” should there be reported industry specific spike in infections.

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Jim Franklin, Builder Member

Bulletin Board | 18 | www.shorebuilders.org