Bonadio knows Labor Unions and we’re here to assist you in navigating the CARES Act. As we reviewed various provisions of the Cares Act, we selected those provisions that apply directly to you for your review. This is not to be construed as legal advice, if anything in this memo interests you, you should contact your Bonadio Partner.
There are essentially five programs for your review and consideration:
- The Paycheck Protection Program.
- Expansion of the SBA already existing Economic Injury Disaster Loan Program including Emergency Economic Injury Grant.
- Tax Credits for Paid Sick and Paid Family Medical Leave.
- Employee Retention Credit Program.
- Employer Payroll Tax Deferment Program.
We will focus our attention on whether you qualify for one or more of these programs at a high level to start a discussion with you.
There are some good financial benefits to these packages. It’s worth your while to review your operations and look at the hardship you are expecting to endure in terms of an economic downturn in the next few months. Many of you are expecting a decrease in revenues over the next few months due to work conditions. As a labor leader, you keep people working. That is the point of the federal stimulus package—to keep people working.
Accordingly, this money is set aside for you in the following manner:
- The Paycheck Protection Program- Typically, the only program in your organization’s platform of funds that qualifies for this loan is the Training Fund IF it is a 501(c)(3). You need to maintain a payroll in your 501(c)(3) training fund to qualify. The loan is 2 1/2 times your average monthly payroll for 2019 and could be totally or partially forgiven if your hardship is justified within the qualified timeframe. Otherwise, the repayment terms are lucrative, and the rate of interest is 1.0%. Call your bank or financial institution to determine eligibility and to fill out an application. Your banker will advise you on what financial data they need to process your loan.
- Economic Injury Disaster Program- Local unions are eligible for this program. All entities need to be a 501(c) organization. Typically, labor organizations are 501(c). To qualify you generally need to have fewer than 500 employees (including affiliates as defined by the SBA regulations) and again you need to demonstrate that your organization is unable to meet financial obligations and pay your normal operating expenses due to the pandemic. The maximum loan amount is $2 million, which will be determined by the SBA based on their determination of your needs, and amounts need to be spent by December 31, 2020. The interest rate is 2.75% and repayable over 30 years. It takes 10 minutes to apply online with the SBA, and regardless of the approval of the loan, the SBA has indicated that all eligible applicants will receive a $10,000 Emergency Economic Injury Grant within 72 hours of submission of the application. They don’t ask for much information, but you will need your 2019 financial information available. To reiterate, the grant is yours, whether your application for the loan is approved or not.
- Tax Credits for Paid Sick and Paid Family Medical Leave- Generally, employers who employ between 50 and 500 employees are required to pay emergency family and medical leave. The required paid sick leave is up to 80 hours for full-time employees and expanded medical leave requires payment for 12 weeks, allowing the first 2 weeks to be unpaid. There is the capability to take a credit against payroll taxes being paid for amounts paid under the extended sick leave or family medical leave program. There is also the interaction between this credit and the employee retention credit program below.
- Employee Retention Credit Program- This is a payroll tax credit of up to $5000 per employee through December 31, 2020. This credit applies to eligible labor unions. You need to demonstrate economic hardship in any one quarter in which the credit is taken. If you take this credit, you will not be eligible for the PPP loan forgiveness, if applicable. The credit is taken on your federal payroll tax forms prepared by your payroll processor. This credit really benefits those labor union employers with fewer than 100 employees. The credit diminishes greatly for over 100 employees in the local union.
- Employer Payroll Tax Deferment Program- You are allowed to defer 50% of your employer share FICA payroll tax liability between now and December 31, 2020, the amount owed it’s 50% due by December 31, 2021, and 50% due in 2022. You are eligible to receive the deferment if you take the credits for emergency family and medical leave, as well as the employee retention credit. This is not available for employers involved in the PPP program, but being involved in the EIDL program doesn’t seem to be limiting.
Please don’t hesitate to contact us if you see anything here that you believe you can apply to your organization.
The information and advice we are providing for this matter relates to COVID-19 legislative relief measures. Because legislative efforts are still ongoing, we expect that there may be additional guidance and clarification from regulators that could modify some of the advice and information provided to you, after the conclusion of our engagement. We therefore make no warranties, expressed or implied, on the services provided hereunder.
