May 21, 2020

Amendment Would Add Flexibility to PPP Terms

As FEDA described in Wednesday's mid-week COVID-19 legislative update, there is a push to make amendments to the CARES Act that would give employers added flexibility on how they use Paycheck Protection Program (PPP) loans and how their forgiveness is calculated.

The House version of the bill, H.R. 6886, was introduced by Chip Roy (R-TX) on May 15 and is expected to be considered next week. Roy has provided a thorough summary of the amendment, which can be read here.

The Senate may consider those alterations as early as today, according to the U.S. Chamber of Commerce. FEDA encourages members to reach out to their legislators and ask them to support the amendment. To find your U.S. representative and his or her contact information, visit house.gov/representatives and enter your home zip code in the top right corner. For your U.S. senators, visit senate.gov and click on the “Find Your Senators” by state dropdown menu in the top left corner.
 
May 21, 2020

Legislation Would Allow Deductions for Expenses Paid by PPP Loans

One component that has lessened the value of the Paycheck Protection Program (PPP) is the IRS guidance that prohibits otherwise deductible business expenses when a company pays for that expense using a forgiven PPP loan.

That rule appears to be contrary to the intent of the CARES Act, which established the PPP program. The CARES Act states that any amount forgiven by a PPP loan “shall be excluded from gross income.” Still, the IRS so far has held firm on its guidance regarding deductions.

To reverse this decision, Sen. John Cornyn (R-TX) introduced an amendment to the CARES Act that would allow organizations to take tax deductions for ordinary business expenses if they were paid for by loan forgiveness received in response to COVID-19. The U.S. Chamber of Commerce this week sent a letter to congressional leaders supporting passage of Cornyn’s Small Business Expense Protection Act because it “would allow the customary deduction of business expenses for small business recipients of Paycheck Protection Program loans.”

“The Small Business Expense Protection Act would restore the ability of small businesses that have received PPP loans to deduct business expenses even if the expenses were paid out of PPP proceeds, freeing up much-needed capital on Main Street,” wrote Neil Bradley, executive vice president and chief policy officer for the U.S. Chamber.

To view the full letter from the U.S. Chamber, please click here. Remember to urge your representatives and senators to support this bill as well.
 
April 21, 2020

FEDA Member Action Still Needed

From the U.S. Chamber of Commerce.

As we've previously shared, this week, Congress is expected to reach a final deal on the next round of funding for the CARES Act—which is likely to include restored funding for the Paycheck Protection Program (PPP) and an upgraded Economic Injury Disaster Loan (EIDL) program at the Small Business Administration. This funding is vital in keeping small businesses—the backbone of the American economy—afloat, and more workers on the job. 

There’s still time to urge your delegation members to help support and save small businesses by immediately increasing funding for the Paycheck Protection Program (PPP) and SBA’s Economic Injury Disaster Loan programs.

Note from FEDA: You can also share this tool with your employees and ask them to join in urging Congress to take action.

Click here to urge congress to save small business.

All FEDA Members Urged to Contact Their Senators and Representatives

FEDA urges every member to call and/or email your senator and reps today to let them know how critical it is that they quickly authorize additional funding for the Paycheck Protection Program. Even if you have never reached out to these individuals before, they need to know now how important your company is to employees and your state and local economies. Stress that they must approve enough funding to support businesses through the full impact of this crisis.

To find your U.S. representative and his or her contact information, go to house.gov/representatives and enter your home zip code in the top right corner. For your U.S. senators, go to senate.gov and click on the “Find Your Senators” by state dropdown menu in the top left corner.

If you would like information about your senator or representative’s business voting record or need assistance in reaching out to them, please contact Tracy Mulqueen at 224-293-6501 or tracy@feda.com.

Urgent Message from NAW — Action Needed on Main Street Lending Program

From Jade West, National Association of Wholesaler-Distributors

An issue in the Main Street Lending Program (MSLP) has arisen that we need to call to your immediate attention.
 
There is a provision in MSLP New and Expanded Loan Facility term sheets that requires a borrower to calculate and deduct from its maximum loan the amount of its “committed but undrawn debt.” While the apparent intent of this provision is to require a business to use its available debt/credit before taking advantage of MSLP loans, it may have unintended consequences for many wholesaler-distributors.
 
We understand that the use of committed but undrawn debt to fund inventory needs is wide-spread in wholesale distribution, and have heard from NAW members that the exclusion of that credit from a maximum MSLP loan amount could make them ineligible for a loan because many banks do not allow the companies to draw the entire amount of that committed debt without incurring fees, penalties, restrictions on operations, etc.
 
The Federal Reserve is accepting comments on the MSLP provisions, but that comment period ends at the close of business today (Thursday, Apr. 16). Brief comments may be submitted through a comment form, or a letter may be submitted as an attachment to an email message. Links to both of those options are included below.
 
NAW has submitted a letter to the Federal Reserve on this issue, with suggested modifications to the term sheets which would remedy the situation. Click here to read NAW’s letter and recommended modification to the term sheets.
 
If your company would be impacted by this restriction in the MSLP, please take a few minutes to send a letter or submit a comment to the Fed.
 
You can submit a brief comment directly via this link:
https://www.federalreserve.gov/apps/contactus/feedback.aspx?refurl=%2Fmain%2F
 
"Main Street Lending" comments that need to contain attachments or embedded graphics should be submitted via e-mail to regs.comments@federalreserve.gov
Include "Main Street Lending" in the subject line of your message.
 
For your review or use, the suggested modifications NAW has submitted to the Fed are included below:
 
Option 1:
  • Substitute “available” for “committed” in item five. (Both terms are universally understood terms in asset-based lending, but they mean two very different things.)
  • Add the following clarifying language: “For purposes of determining the eligible loan amount (or, for purposes of this provision), an eligible borrower’s existing outstanding and available but undrawn bank debt does not include any amount that, if drawn, would cause the Borrower to suffer fees, penalties, restrictions, or limitations on its operations.  Lease financing obligations are also excluded.”
Option 2: 
  • No change to the term committed in item five.
  • Add the following clarifying language: “For purposes of determining the eligible loan amount (or, for purposes of this provision), an eligible borrower’s existing outstanding and committed but undrawn bank debt does not include any amount that is not currently available under the terms of the facility, nor does it include any amount that, if drawn, would cause the Borrower to suffer fees, penalties, restrictions, or limitations on its operations. Lease financing obligations are also excluded.”

Sample FEDA Member Letter to Congress Supporting Restaurant Recovery and Relief

(Dear Congressman (or Congresswoman) or Senator _____________:]

As one of the most significant businesses in your district, I urge to support the National Restaurant Association’s (NRA’s) efforts on behalf of over 1 million restaurants directly impacted by the coronavirus. The NRA needs your help to provide relief and recovery for these restaurants and their 15.6 million employees.

Please support the NRA’s full requests for:

  • Direct and targeted financial relief through the creation of a $145 billion Restaurant and Foodservice Industry Recover Fund and $35 billion for disaster relief
  • Loans and insurance protections including 1) $100 billion in federally backed business interruption insurance to sustain businesses and their employees and to establish a new federal loan program to backstop lost revenue to keep workers on the payroll and support sick leave; 2) $45 billion in affordable federal and conventional loans; and 3) $130 million in disaster unemployment assistance
  • Tax programs to fix errors in previous tax bills to help facilities fund improvements and hire local vendors and service providers and more

We truly thank you for anything you can do to support the above requests as soon as you possibly can.

Thank you,

__________________