Gravel & Shea PC

COVID-19 Updates

The American Rescue Plan Act Makes Significant Changes to COVID-Related Paid Leave and Brings Back COBRA Subsidies

On March 11, 2021, President Biden signed into law the American Rescue Plan Act (“ARPA”).  While ARPA is wide-ranging and covers a host of COVID-related needs, employers should be particularly aware of two important components.

Paid Sick Leave

 As we know, the employer paid sick and family leave obligations under FFCRA ended on December 31, 2020.  At the very end of the year, Congress passed a law that did not extend the paid leave mandates into 2021, but instead gave employers who were covered by the FFCRA the option to extend paid sick leave (“PSL”) and/or extended Family and Medical Leave Act (“EFMLA”) benefits to eligible employees who had not exhausted those benefits in 2020.  If employers continued to provide that leave on a voluntary basis, they could receive the corresponding payroll tax credit until March 31, 2021.

While many commentators believed that Congress would pass some sort of mandatory paid leave provision in the new year, ARPA did not go quite that far. Instead, it chose to continue to encourage employers to provide COVID-related paid sick leave by extending the tax credits until the end of September, 2021 and expanding the qualifying reasons for leave in the following ways:

  1. Obtaining a COVID-19 immunization;
  2. Recovering from an injury, disability, illness or condition related to COVID-19 immunization; or
  3. Seeking or awaiting the results of a COVID-19 test or diagnosis because the employee has been exposed to COVID-19 or the employer has requested the test or diagnosis.

All of the six reasons that an employee could receive PSL under the FFCRA are still qualifying events for the tax credits.  For a refresher on FFCRA-qualifying events, see: Trump Signs Families First Coronavirus Bill – Effective on April 2, 2020.

ARPA permits employers to receive a tax credit for up to 10 days of PSL per employee starting April 1, 2021, even if that employer had already taken a tax credit for those same employees prior to that date.  In other words, if an employee exhausted her ten days of PSL before March 31, 2021, an employer could still get the tax credit for an additional ten days of leave from April 1, 2021 to September 30, 2021.

The PSL tax credit is based on the employee’s regular rate of pay if the need for the leave is related to immunization or testing (as described above) or due to the employee’s own symptoms, quarantine or isolation, up to a cap of $511 per day (or a total of $5110 per employee).

Extended FMLA

Under FFCRA, up to twelve weeks of EFMLA was available if the employee was unable to work or telework due to the COVID-related unavailability of a child’s school or day care provider.  ARPA expands the reasons that tax credits can be obtained for providing EFMLA to include all of the reasons that PSL can be used (when an employee is subject to a quarantine or isolation order, where an employee is told to self-quarantine by a health care provider, where an employee is experiencing symptoms of COVID-19, issues related to immunization or testing, where an employee is caring for an individual who is quarantining, and where an employee’s son or daughter’s school or child care is closed).

Employers can receive a tax credit for providing up to twelve weeks of EFMLA.  The available credit per employee is still limited to two-thirds of the employee’s regular rate of pay, with a cap of $200 per day.  Importantly, the first two weeks of EFMLA no longer need to be unpaid, and therefore, the total cap has been increased from $10,000 to $12,000 per employee.

ARPA includes a non-discrimination requirement.  An employer cannot take a tax credit if it limits PSL or EFMLA benefits to highly-compensated employees, full-time employees or employees on the basis of tenure.  However, the employer can choose to provide only PSL or only EFMLA and still receive the tax credit.

We anticipate that both the Department of Labor and the IRS will issue additional guidance on these provisions in the near future, and we will keep you updated.

COBRA Subsidies

 In addition to extending and expanding the FFCRA tax credits, ARPA also provides that the federal government will pay 100% of COBRA insurance premiums from April 1, 2021 through September 30, 2021 for employees who were terminated from their jobs or had their hours reduced so that they became ineligible for health insurance coverage during the pandemic.  Importantly, the subsidy is available to terminated employees if they became eligible for COBRA at any point during the pandemic.

Employers will be responsible for funding the subsidy and will be reimbursed through a payroll credit against quarterly taxes – similar to the credits taken for FFCRA leave.

Under ARPA, a terminated employee who is eligible for COBRA and who has not elected it by April 1, 2021 (or who elected it and then discontinued it) may elect COBRA coverage during a special enrollment period starting April 1st and ending 60 days after the COBRA notification was delivered.  Those individuals may receive the subsidy on a prospective basis.

Employers will need to be prepared to notify employees who might have had a COBRA-qualifying event in the past year and provide them with an opportunity to elect COBRA during the qualifying time period.

By May 30, 2021, employers’ COBRA notices will have to include information about the availability of the subsidy.  The Department of Labor has been directed to publish a model notice within 30 days, which should ease the administrative burden on employers.


Please contact Heather Hammond ( at Gravel & Shea PC if you have questions or would like assistance.




FFRCA Ends, but Payroll Tax Credits Continue Employment-Related Highlights from the Omnibus and COVID-19 Relief Bill

President Trump signed the FY 2021 Omnibus and COVID-19 Relief bill (the “Act”) on Sunday, December 27, 2020.  There are several important employment-related provisions included in the Act.  Here is a summary of those provisions:

  • Payroll Tax Credit for Paid Sick Leave and Family Leave.  As we know, the Families First Coronavirus Relief Act (“FFCRA”) provided a certain amount of paid sick leave and extended family leave to employees who needed leave for certain COVID-related purposes.  Although the FFCRA expires on December 31, 2020 and the leave will no longer be required by law after that date, the Act extends the tax credit through March of 2021 for those employers who choose to provide the paid sick leave and extended family leave to their employees on a voluntary basis (if the employee has leave remaining under the limits set by the FFCRA).
  • Unemployment Insurance.  The Act provides $300 per week in increased federal unemployment benefits through March 14, 2021.  It also extends until April 5, 2021 the Pandemic Unemployment Assistance (“PUA”) program (which provides coverage for the self-employed and others in non-traditional employment circumstances) and the Pandemic Emergency Unemployment Compensation (“PEUC”) program (which provides additional benefits to those workers who have exhausted their regular state benefits).  The Act also increases the maximum number of weeks an individual may claim benefits to 50 weeks.
  • Tax Credit for Paid Family and Medical Leave.  The Act extends the federal tax credit through December 31, 2025 for employers who provide paid family and medical leave to their employees.
  • Health and Dependent Care Flexible Spending Accounts.  The Act allows employees to roll over unused amounts in their health and dependent care flexible spending accounts, from 2020 to 2021, and from 2021 to 2022.  It also allows employees to make a 2021 mid-year prospective change in contribution amounts.
  • Student Loan Repayment.  The CARES Act allowed employers to provide student loan repayment as a benefit to employees through December 31, 2020, and the Act extends this provision until December 31, 2025.  An employer may contribute up to $5,250 annually towards an employee’s student loans, which would be excluded from the employee’s income.
  • Return-To-Work Reporting Requirement.  The Act requires state to implement methods within 30 days to address situations where unemployment insurance claimants refuse to return to work or accept an offer of suitable work.  This method will require a reporting method for employers to notify the state when an individual refuses work.

We will continue to monitor federal and state laws and regulations surrounding these issues.  If you have questions or concerns, please contact your attorney at Gravel & Shea PC or Heather Hammond (

United States Department of Labor Issues Important New FFCRA Regulations

The United States Department of Labor (“DOL”) issued revised regulations on Friday, September 11, 2020 (the “Revised Regulations”).  The Revised Regulations go into effect on September 16, 2020.

The Revised Regulations accomplished the following:

 1. Affirmed that the emergency paid sick leave (“EPSL”) and expanded family and medical leave (“EFMLA”) provisions of the FFRCA (together, the “FFCRA Leave”) may be taken only if the employee is actually employed and working.  Employees who have been “furloughed” or laid off are not eligible for FFCRA Leave;

2. Affirmed that employees who wish to take FFCRA leave on an intermittent basis must obtain their employer’s approval;

3. Limited the definition of “health care provider” who can be excluded from the EPSL or EFMLA provisions of the FFCRA to only those employees who meet the definition of a health care provider under the FMLA, or who are “employed to provide diagnostic services, preventative services, treatment services or other services that are integrated with and necessary to the provision of patient care which if not provided, would adversely affect patient care”; and

4. Clarified that employees must give employers information to support the need for FFCRA Leave as soon as practicable (rather than requiring notice in advance of taking the leave).


The first two areas addressed by the Revised Regulations merely affirm what most employers have already incorporated into their practices.  The DOL first affirmed that an employee is only eligible for FFCRA Leave if the “qualifying reason” he or she needs the leave is the actual reason the employee is unable to work.  In other words, if the employer has no work for the employee to do (and, as a result, the employee is laid off or furloughed), then the employee is not eligible for FFCRA Leave, even if a need for the leave arises.  The DOL was quick to emphasize that this clarification does not mean that an employer can take steps to make work for an employee “unavailable” after he has requested leave, as that type of adverse action would constitute illegal retaliation.

The Revised Regulations then affirmed that an employee seeking to take intermittent FFCRA Leave (where such intermittent leave is permitted by law) must obtain the employer’s approval for such a leave and explain the basis for the request.  This applies to employees who are coming to the worksite as well as employees who are teleworking.  The DOL did point out, importantly, that employees who take FFCRA Leave in full-day increments to care for their children whose schools are operating on some sort of a hybrid model are not taking “intermittent leave.”  If a school is physically closed to students on a particular day and then re-opens on a different day, the DOL considers each closed day a separate qualifying event for FFCRA Leave purposes.

Next, the Revised Regulations made a significant change to the range of employees who can be excluded from FFCRA Leave.  The FFCRA allows employers to exclude employees who are “health care providers” from eligibility for FFCRA Leave.  The purpose of this exclusion is to prevent disruptions to the health care system’s ability to respond to the COVID-19 public health emergency.  In its initial regulations, the DOL had interpreted the term “health care provider” broadly, to cover virtually everyone employed by a health care facility or provider, regardless of whether the particular employee seeking leave provided any health care services.  The Revised Regulations narrow the definition of a “health care provider” to those employees who are providing or capable of providing (and employed to provide) health care services.  The Revised Regulations go on to describe categories of employees who would not be considered “health care providers,” including IT professionals, building maintenance staff, HR professionals, cooks, food service personnel, records managers, consultants and billing clerks.

This narrowing is important to employers in the health care sector, because some of their employees who are not providing health care services may have previously been excluded from paid leave eligibility.  Employers in this sector should review their policies and practices to be sure that, on a going forward basis, employees who are eligible for FFCRA Leave are granted that leave.

Finally, the Revised Regulations clarified that an employee is not obligated to provide his employer with notice of the need for FFCRA leave “prior to” taking that leave, recognizing that this requirement would be impossible in many circumstances.  Instead, an employer is permitted to require notice from its employees “as soon as practicable.”

While the Revised Regulations mostly affirmed what many employers are doing already (with the exception of those in the health care sector), this is a good opportunity to be sure that your policies and practices are compliant with the law, which remains in effect until December 31, 2020.


Please contact Heather Hammond ( at Gravel & Shea PC if you have questions or would like assistance.



Social Security Withholding Relief Initial Guidance Released

On August 8, 2020, the President issued an executive memorandum stating that certain social security tax withholding obligations for September to December 2020 would be deferred due to the COVID-19 emergency, subject to forthcoming guidance from the Secretary of the Treasury.  On August 28, 2020, the Treasury Department released Notice 2020-65, implementing the option to defer withholding, deposit and payment of an employee’s share of social security tax.

Notice 2020-65 delays the due date for employees’ share of social security and railroad retirement tax withholdings that would otherwise be due on paychecks issued between September 1, 2020 and December 31, 2020.  The deferral only applies to paychecks of $4,000 or less in gross wages or compensation per bi-weekly pay period (or the equivalent amount depending upon the pay period used by the employer).

Employers who wish to defer withholdings and deposits may simply defer, without filing any notification or election form.  However, whenever an employer does withhold taxes, the employer must deposit them, as withholding triggers the deposit obligation.  If an employer elects to defer withholding pursuant to the Notice, the deferred tax must be withheld and paid ratably between January 1, 2021, and April 30, 2021.  The tax can either be withheld from earnings during that period or, if necessary, the employer may collect it directly from the employee.

Employers are not required to participate in this deferral option.  While Notice 2020-65 does not explicitly say that the deferral is optional, Treasury Secretary Mnuchin has stated elsewhere that employers are not obligated to take advantage of it.

Although the executive memorandum directed the Treasury Department to consider options for eliminating the deferred tax liability, the Notice does not provide any information about forgiveness of the debt.  In fact, it states that interest, penalties, and additions to tax will begin to accrue on May 1, 2021, if any portion of the deferred tax remains unpaid.

Due to the temporary nature of the deferral program, the need to pay the deferred taxes in early 2021, and the fact that the Notice is silent on key issues, employers should be cautious about making changes to their standard withholding procedures.

Click here to read COVID-19 News and Updates

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For more information about the Social Security Withholding Guidance, please contact your attorney at Gravel & Shea PC or Heather Hammond (

Nonprofits Now Eligible for Main Street Lending Program Loans

Today, the Federal Reserve announced the expansion of the Main Street Lending Program (the “Program”) to include loans to certain nonprofits.  Nonprofits must meet the following criteria to be eligible for the Program:

  • tax-exempt under Section 501(c)(3) or 501(c)(19) of the Internal Revenue Code;
  • continuously operating since January 1, 2015;
  • created or organized in the U.S. and has a majority of its employees and significant operations in the U.S.;
  • at least 10 employees;
  • 2019 annual revenue of $5 billion or less or 15,000 or fewer employees;
  • endowment of less than $3 billion;
  • non-donation revenue greater than or equal to 60% of its 2017-2019 expenses (less depreciation, depletion and amortization);
  • “non-donation revenue” includes: government grants; revenue from supporting organizations; grants from private foundations that are disbursed over more than one calendar year; and contributions of property besides money, stocks, bonds, and securities
  • at least a 2% ratio of adjusted 2019 earnings before interest, depreciation, and amortization (“EBIDA”) to unrestricted 2019 operating revenue;
  • average of at least 60 days’ liquid assets on hand for the past year;
  • at the time of origination, has greater than a 55% ratio of unrestricted cash and investments to the total of outstanding and undrawn available debt, plus the Program loan, plus any CMS Accelerated and Advance Payments;
  • did not receive funds under any other Program loan facility, the Primary Market Corporate Credit Facility, the Municipal Liquidity Facility or under the industry-specific relief provisions of Title IV of the CARES Act.

Nonprofits that received loan under the PPP or EIDL are still eligible for Program loans, provided they satisfy the criteria above.

Two types of loans are available to eligible nonprofits under the Program:  Nonprofit New Loans and Nonprofit Expanded Loans.  The minimum loan size for Nonprofit New Loans is $250,000, and the minimum for Nonprofit Expanded Loans is $10 million.  The maximum loan size for Nonprofit New Loans is the lesser of $35 million or the borrower’s average 2019 quarterly revenue and for Nonprofit Expanded Loans, the maximum is the lesser of $300 million or the borrower’s average 2019 quarterly revenue.

Like Program loans to businesses, the nonprofit Program loans are not forgivable.  The other terms of the Program applicable to nonprofits parallel those applicable to business, which means that nonprofit loans will have 5-year terms with interest deferred for one year and principal deferred for 2 years and will use a LIBOR +3% interest rate.

More information is available in the Nonprofit New Loan Term Sheet and the Nonprofit Expanded Loan Term Sheet.  Additional details will also continue to be released on the Program webpage.

Program loan applications will be accepted directly by participating lenders.  Interested nonprofits should reach out to their existing lenders or to Program lenders who are accepting new customer applications (listed here) to begin the process of obtaining a Program loan.

Click here to read COVID-19 News and Updates

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For more information about the Main Street Lending Program, please contact your attorney at Gravel & Shea PC or any of the following attorneys at the firm:

Chip Mason (, Cassandra LaRae-Perez (,  Oliver Goodenough (, Keith Roberts (, Pauline Law (, or Catherine Burke (

Main Street Lending Program Now Open and List of Lenders Available

The long-awaited Main Street Lending Program (the “Program”) opened on July 6, and on July 8, the Federal Reserve Board published a list of participating lenders that are accepting new customers seeking Program loans.

The Program provides loans and loan expansions to increase liquidity to U.S. businesses with either 15,000 or fewer employees or $5 billion or less in 2019 revenue, which were in good financial condition before the onset of the COVID-19 pandemic.  Unlike PPP loans, Program loans are not forgivable.  Originating banks will also share in some of the loan risk by retaining a 5% share of each Program loan they generate.

Three different loan types are available under the Program.  The minimum and maximum loan sizes differ by loan type, with minimums start at $250,000.  Principal repayment under all three types of loans is deferred for the first two years and interest repayment is deferred for the first year.  The interest rate across the Program is LIBOR + 3%.

A summary of terms of the Program, published by the Federal Reserve, is shown below.  Additional details are also available in our prior posts about the Program (available here, here, and here) and on the Program webpage.

Source:  Federal Reserve Board


Companies interested in receiving loans or loan expansions through the Program should contact a participating lender.  Each lender will use its own loan applications for Program loans, and will apply both the Program standards and the lender’s own underwriting standards.

The Program is not currently open to nonprofits, but the Federal Reserve is evaluating an expansion to nonprofits.  The terms of the Program expansion are still under development, but the Fed’s current proposal would make loans of $250,000 to $1 million available to certain nonprofits with more than 50 and fewer than 15,000 employees.  Additional details are available in this press release and will be released as the Program expansion moves forward.

Click here to read COVID-19 News and Updates

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For more information about the Main Street Lending Program, please contact your attorney at Gravel & Shea PC or any of the following attorneys at the firm:  Chip Mason (, Cassandra LaRae-Perez (,  Oliver Goodenough (, Keith Roberts (, Pauline Law (, or Catherine Burke (

Vermont Economic Recovery Package: Business Grants Now Available

The Vermont Legislature recently completed three pieces of legislation intended to deliver economic relief to Vermont businesses harmed by the economic crisis caused by the COVID-19 pandemic. Each bill focuses on a different sector of the economy, but they are intended to work together to deliver a comprehensive economic relief package funded by CARES Act dollars allocated to the state.  The grant programs opened this morning (July 6).  As they are expected to be oversubscribed, eligible businesses should seek to apply without delay.

Hospitality businesses: $50 million has been set aside for eligible restaurants, bars, hotels, retail (including online retail) stores, entertainment, recreation, and other businesses that pay Meals and Rooms or Sales and Use Tax.  This program will be administered by the Department of Taxes, which started taking applications on July 6. To receive a grant, a business must:

  • be domiciled or have its primary place of business in Vermont;
  • have one or more employees besides the owner(s) (unless it is a woman-owned or minority-owned business);
  • have been open on February 15, 2020;
  • pay Vermont sales and use or meals and rooms tax quarterly or monthly;
  • have experienced a 50% or greater reduction in total revenue or in combined sales and use and meals and rooms revenue for any month from March 1, 2020 to August 31, 2020 relative to the same month in 2019;
  • be open now or have a good-faith plan for reopening following a COVID-19 closure; and
  • be in good standing on its Vermont tax obligations and in good standing with the Vermont Secretary of State

Click here for more information on these grants. In most cases, businesses seeking grants under this program must also must have filed their Vermont sales and use and meals and rooms taxes through May 31, 2020 to be eligible; however, a business may still be eligible for this program even if it hasn’t yet paid taxes owed for February through May 2020.  In addition, businesses that still owe taxes from other periods may nonetheless be eligible if they are in a payment plan for those taxes.

Multi-purpose businesses have a choice between portals to the program. If a business earns some revenue for which they file Meals and Rooms taxes, but they earn more revenue from other streams of business, they may choose to file through the ACCD instead, as described below.

Other businesses and nonprofits. $20 million was set aside to help businesses and nonprofits in other sectors.  The Agency of Commerce and Community Development (“ACCD”) will administer these grants.  To receive a grant under this program, a business must:

  • be domiciled or have its primary place of business in Vermont;
  • have one or more employees besides the owner(s), with the exception that for women or minority-owned businesses, those with zero employees are eligible for grants;
  • have been open on February 15, 2020;
  • must not have, or be the subsidiary of a business that had more than $20 million in total revenue;
  • have experienced a 50% or more reduction in total revenue or in revenue for any month from March 1, 2020 to August 31, 2020 when compared to the same month in 2019;
  • not be in Chapter 7 bankruptcy;
  • be open now or have a good-faith plan for reopening following a COVID-19 closure; and
  • be in good standing on its Vermont tax obligations and Vermont Secretary of State filings.

Small, women-owned or minority-owned businesses. Approximately $5 million was set aside specifically for small, women-owned or minority-owned businesses. Guidelines are expected to be developed by the Vermont Commission on Women and to be administered by the ACCD.

The grants administered by the ACCD and the Department of Taxes are subject to certain terms common between them: grant amounts are calculated by multiplying gross annual revenue (or annual combined total sales if a Meals & Rooms or Sales & Use Tax filing entity) by 10%, up to a maximum grant amount of $50,000 for any one business. Businesses are eligible for one grant through one agency only. A business that received a PPP or EIDL loan may also be eligible for one of these grants, but the proceeds must not be used for the same losses or expenses for which PPP or EIDL proceeds are or were used.

To apply you will need:

  • Your federal EIN
  • The NAICS code for your company
  • Information about any PPP or EIDL loans (and advances) received
  • Your standing with the Vermont Department of Taxes
  • Your W-9
  • Your 2019 income statement broken down by month
  • Your 2020 (YTD) income statement broken down by month
  • Your 2019 federal tax return or the most recent filed (or if a nonprofit, your Federal Form 990 or 990-EZ)
  • Your 2019 Vermont state tax return

Recordings of the Vermont ACCD webinars on these grant programs can be viewed here.

Dairy farms & producers, agricultural businesses, food markets and agricultural fairs.  Under another law signed by the Governor on July 2, approximately $30 million was allocated for agricultural producers and processors. Of this, $25 million will be awarded to milk producers and dairy processers, $5 million to non-dairy agricultural producers and food markets, $500,000 was set aside for agricultural fairs and $192,000 was allocated to the Vermont Housing and Conservation Board to provide business, financial and mental health assistance to farm and food businesses. Through another bill, approximately $2 million was allocated to assist agricultural organizations through the Working Lands Enterprise Board. These programs will be administered by the Department of Agriculture, Food and Markets, in part together with the Vermont Economic Development Authority.  More information can be found here.

Forest Economy Stabilization and Outdoor Recreation. $5.5 million was set aside specifically for businesses that specialize in forest products, like paper making, and of that, $1.5 million was set aside for grants to outdoor recreation businesses for costs or expenses necessary to comply with COVID-19 public health precautions. Guidelines have yet to be developed, but you can follow the Vermont Agency of Natural Resources for developments here.

Residential tenants and landlords.  $5 million was allocated to provide financial and technical assistance to help prevent home foreclosures and $25 million was set aside to assist landlords who can apply for relief on behalf of tenants who are unable to pay their rent. $750,000 was granted to Vermont Legal Aid and other organizations to provide legal and counseling services to tenants and landlords. The Agency of Human Services is expected to administer this program. Guidelines have not yet been set, but information when released should be found here.

Click here to read COVID-19 News and Updates

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For more information about the Vermont Economic Recovery and Relief Package, please contact your attorney at Gravel & Shea PC or Heather Hammond (, Cassandra LaRae-Perez (, or Catherine Burke (

SBA Released New PPP Loan Forgiveness Applications

Last Wednesday, the Small Business Administration and the U.S. Treasury released an updated version of the Paycheck Protection Act Forgiveness Application and, with it, a new “EZ” Application in response to calls for a less burdensome process for smaller borrowers.

The new EZ Form, which is only three pages long, is available only to self-employed borrowers with no employees and to businesses that did not reduce employee numbers between January 1, 2020 and the end of the Covered Period or reduce wages by more than 25% for any employee during that period.  Instructions for the form include the circumstances that qualify a borrower for use of the EZ Form.

The EZ Form FTE-reduction formula differs slightly from the formula used in the longer form.  To qualify for use of the EZ Form, a borrower must not have reduced FTE numbers between January 1, 2020 and the end of the Covered Period.  This differs from the forgiveness reduction calculation that allows the borrower to choose between two reference periods (either February 15-June 30, 2019 or January 1, 2020-Feb 29, 2020) to determine whether employee numbers were reduced.  If any FTE reductions were made since January 1, 2020, even if the 2019 comparison period would reach a different result, the borrower must use the longer forgiveness application form.  The safe harbors introduced by the PPP Flexibility Act still apply, however.

The Agencies also updated the long form, which new version can be found here: PPP Loan Forgiveness Application and its instructions here:  PPP Loan Forgiveness Application Instructions.   The long form has also been shortened, but that is partly due to the Instructions having been stripped from the application and made accessible as a separate document.  The Loan Forgiveness Application form was updated to incorporate the amendments of the Paycheck Protection Program Flexibility Act.

The revamped instructions have not changed the description of the amended Covered Period, leading us to confirm that the choice is binary:  either the borrower has a 24-week Covered Period or an 8-week Covered Period upon the borrower’s election if they took the loan prior to June 5, 2020.  Loans disbursed after June 5, 2020 have a 24-week Covered Period or a Covered Period ending on December 31, 2020, if that comes first.  While the PPP Flexibility Act arguably allows for a Covered Period to end at any point between 8 and 24 weeks and discussions with at least one Congressional delegate confirms that such flexibility was intended, the forgiveness documents demonstrate that the SBA is not implementing it in this way.  You must choose.  Note that no Covered Period extends beyond December 31, 2020.

Also important is the treatment of “paid and incurred” payroll costs calculation.  It appears that payroll paid the day after disbursement of a PPP loan for employee work that preceding the loan (in that first pay period) and payroll costs earned by your employees but paid after the end of the Covered Period (provided it is paid in the immediately following pay period) may both be included in your payroll costs calculation.  This should apply equally to non-payroll costs.  Mortgage interest and rent and utilities costs qualify as expenses during the Covered Period if they are paid or incurred during the Covered Period as long as the costs are, indeed, paid by the very next due date after the Period.  Be sure to discuss this with your accountant or counsel as you prepare your forgiveness application.  And be certain to submit your application no sooner than ten (10) months after the end of your Covered Period or it may be disallowed entirely.

We recommend reading the Loan Forgiveness Application Instructions carefully now as they comprehensively explain not only the calculations you and your lender will need to make and the data you will need to make them, but they also lay out the documentation you will need to create and retain to support the application.  Forewarned is forearmed, as they say.

Click here to read COVID-19 News and Updates

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For more information about the Paycheck Protection Program or SBA emergency economic injury disaster loans, please contact your attorney at Gravel & Shea PC or any of the following attorneys at the firm:  Chip Mason (, Cassandra LaRae-Perez (, Oliver Goodenough (, Keith Roberts (, Pauline Law (, or Catherine Burke (

Main Street Lending Program Expanded Again, Now Permitting Smaller Loans, 5-Year Terms, and Principal Deferral for Two Years

This week, the Federal Reserve Board announced another expansion to the Main Street Lending Program (the “Program”), which is intended to allow more small and medium-sized businesses to receive Program loans.  The Program launch date has not yet been announced, but is expected soon.  When the Program does launch, it will be open to U.S. businesses with either 15,000 or fewer employees or $5 billion or less in 2019 revenue, which were in good financial condition before the onset of the COVID-19 pandemic.  Program applications will be accepted directly by participating lenders.

The most recent changes to the Program are:

  • reducing the minimum loan amount to $250,000 for New and Priority Loan Facilities (the minimum for Expanded Loan Facilities remains $10 million);
  • increasing the maximum loan limit (see details below);
  • extending loan terms from four years to five years;
  • deferring repayment of principal for an additional year, making principal repayable beginning in the third year (see details below); and
  • using the Main Street Special Purpose Vehicle to purchase 95% of each Program loan, reducing the risk to participating lenders.

The maximum loan size now differs for each of the three Program options:  New Loans, Priority Loans, and Expanded Loans.  The maximum loan size for a New Loan is the lesser of $35 million or the amount that, in combination with the borrower’s outstanding and undrawn available debt, does not exceed 4x the borrower’s adjusted 2019 EBITDA.  The maximum loan size for a Priority Loan is the lesser of $50 million or the amount that, in combination with the borrower’s outstanding and undrawn available debt, does not exceed 6x the borrower’s adjusted 2019 EBITDA.  The maximum Expanded Loan size is the lesser of $300 million or the amount that, in combination with the borrower’s outstanding and undrawn available debt, does not exceed 6x the borrower’s adjusted 2019 EBITDA.

The Program revisions not only defer principal repayment, but they also stack most of the principal repayment obligations towards the end of loan terms.  Principal repayment under all three types of loans will now be deferred for the first two years, and then 15% of the principal will be repaid at the end of year 3, 15% at the end of year 4, and 70% at the loan’s maturity date at the end of year 5.

Other portions of the Program—such as a one-year interest deferral, the use of a LIBOR + 3% interest rate, and the absence of loan forgiveness—remain unchanged.

Updated term sheets are available for each of the three Program loan types on the Federal Reserve website.  The following chart published by the Federal Reserve also provides a helpful summary of Program terms.

Source:  Federal Reserve Board

The Federal Reserve of Boston (the “Boston Fed”), which will administer the Program, released updated Frequently Asked Questions about the Program.  Standard lender and borrower forms are also available, but the versions currently posted here are in the process of being updated, so borrowers and lenders should wait and confirm that changes are complete before relying on the forms.  Borrowers are also reminded that lenders will prepare the final loan applications, which will incorporate the standard terms released by the Boston Fed.

Please refer to our original post and our last update on the Program for additional details, visit the Program webpage, or contact us for more information.

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For more information about the Main Street Lending Program, please contact your attorney at Gravel & Shea PC or any of the following attorneys at the firm:

Chip Mason (, Cassandra LaRae-Perez (,  Oliver Goodenough (, Keith Roberts (, Pauline Law (, or Catherine Burke (

Congress Extends the Time Period During Which PPP Proceeds Must Be Spent and Relaxes Other Restrictions

Congress agreed late Wednesday night to relax the restrictions on certain Paycheck Protection Program requirements in its Paycheck Protection Program Flexibility Act of 2020.  (“Flexibility Act”).  The Act was signed into law by the President on Friday, June 5.

The Flexibility Act introduces the following changes to the PPP:

Repayment period extended.  PPP loans that are not forgiven are to be given a repayment period of at least five years after the deferment period, instead of the two year period earlier set by the SBA. Importantly, this provision applies only to loans made and disbursed after the date of this amendment, but it allows lenders to amend the loans they have already made, if they and the borrower mutually agree to do so.

Covered Period extended.  The “Covered Period,” that is, the period during which proceeds must be spent to be eligible for forgiveness, is extended.  The deadline by which a borrower must expend the proceeds and hire back workers or true up salaries is now either 24 weeks after the loan was disbursed, or December 31, 2020, whichever is earlier. The end of the period was June 30 under the original version of the Act.

Borrowers who received their loans before the passage of the Flexibility Act can still elect to have the covered period end after 8 weeks so that they can proceed with the forgiveness process.

Relief when employees elect not to return.  The amendment also provides relief for employers whose employees elect not to return before the end of the employee rehire period. If the employer was unable to rehire workers who were furloughed or laid off after February 15, 2020, either because the employee refused to return or for another reason, and if the employer was unable find similarly qualified employees to take their place before December 31, 2020, then those employee reductions will not reduce their forgiveness amounts. The circumstances must be thoroughly documented, however, to support this claim for relief.

Relief if safety requirements prohibit a full workforce.  Employers also get a break from forgiveness loss due to workforce reductions if they can document the inability to return to work to the same level of business activity because of social distancing, sanitation or other worker safety requirements, as long as those requirements are in keeping with guidance issued by the CDC, OSHA or the U.S. Department of Health and Human Services.

Only 60% of loan proceeds must be spent on payroll costs.  Borrowers can use more of the loan proceeds for expenditures other than payroll costs. Where the SBA required that 75% of the loan expenditures be for payroll costs, the Flexibility Act allows that 40% may be spent on other eligible costs and only 60% of the proceeds have to be used for payroll costs if a borrower wishes to seek forgiveness. See our March 26 Bulletin for a description of the costs that qualify as payroll costs; remember that they are greater than just wages, salaries and other cash compensation.

Payment period has changed for loans not forgiven.  The deferral of the payment period has changed as well. Where payment of loan proceeds remaining after forgiveness amounts were calculated were deferred for at least six months to a year, now payments are deferred until after the forgiveness calculation is determined and communicated to the lender, which would suggest that this period would be longer than 6 to 12 months. To qualify for this deferment however, a borrower must apply for forgiveness within 10 months of the last day of the Covered Period.  If they fail to do so, their payments must commence immediately following that 10 month period.

Payroll tax payment deferral restored to borrowers whose loans are forgiven.  Finally, where the Act originally denied the deferral of payroll taxes for any borrower who had their PPP loan forgiven, this restriction has been removed. PPP loan recipients whose loans are forgiven can benefit from the employer payroll tax delay provisions.

Click here to read COVID-19 News and Updates

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For more information about the Paycheck Protection Program, please contact your attorney at Gravel & Shea PC or any of the following attorneys at the firm:

Chip Mason (, Cassandra LaRae-Perez (,  Oliver Goodenough (, Keith Roberts (, Pauline Law (, or Catherine Burke (