CARES Act – Coronavirus Aid Relief & Economic Security

by on Apr 2, 2020 11:06 AM

CARES Act - Coronavirus Aid Relief & Economic Security

On March 31st, Trilogy Partners hosted a town hall call with over 50 business owners to discuss the CARES Act. We thank our guests who addressed the legal and tax implications of CARES Act. Below is their contact information as well as links to their respective COVID19 Resource Centers:

Norris McLaughlin, P.A.

Withum Tax & Audit Advisory

DISCLAIMER: Please check with your trusted professionals prior to acting for your business. This Q & A recap should not replace professional services from legal, financial, payroll, HR, insurance, or consulting professionals. If you need a resource in one of these areas, please reach out to Hal Levenson at or contact Trilogy Partners at 609-688-0428.

Also, as expressed by the professionals on the call, it is critical that you do a personal examination of the many factors of your business to make the best decision for you and your employees.

Coronavirus Aid Relief & Economic Security Act Downloads (CARES Act)

Coronavirus Aid Relief & Economic Security Act Details (CARES Act)

Title I: “Keeping American Workers Paid and Employed Act”
$2Trillion Aid Package $367 Billion to Small Businesses

Key Takeaways for Businesses:

  • Paycheck Protection Program (PPP)
  • Loan Forgiveness
  • Employee Retention Tax Credit (not available to businesses with PPP loan)
  • Payroll Tax “Holiday”

General overview: Please explain the difference between the SBA 7(a) loan vs. the EIDL grant.
SBA 7(a) loan involves:

  • Forgivable loan based on average monthly payroll costs (year prior to loan) – up to $100K for FTE’s
  • Potential loan amount is 2.5x avg. monthly payroll
  • Loan has very specific uses that are different than the EIDL grant (must apply directly with SBA online for grant)
  • Forgiveness based on payroll, rent, mortgage, utilities, for an 8-week period
  • Payroll includes wages, benefits, retirement, tips, commissions
  • Forgiveness is tax free

Q & A regarding SBA 7(a) loan:

1. How do I apply for the loan? 

Apply at an SBA approved lender for a loan (See
There will be an application that needs to be completed along with a calculation to determine if you are eligible for loan forgiveness

2. Is there a deadline to apply? 

June 30, 2020

3. Can I apply now?

Application is available now and SBA will begin accepting applications Friday, 4/3.

4. What determines the amount that can be borrowed?

Potential loan amount is 2.5x avg. monthly payroll for one year prior to loan date

5. What if I already furloughed or terminated employees, can I still apply?

Yes, if you reinstate employees by June 30th, you can still qualify for PPP.

6. Why wouldn’t I reduce my payroll until I apply for the loan?

The intent of the Act is to keep employees employed and paid. The loan amount is based on 8 weeks of average prior payroll ( If you reduce your payroll, your loan will be significantly reduced and may not cover your staff during the 8-week period.

7. How much of the loan will be forgiven and what are the criteria for loan forgiveness?

Borrowers can obtain tax-free loan forgiveness for an amount equal to the sum of the following expenses that are incurred during the 8-week period after the loan is made:
Payroll costs (except compensation over $100,000/year is excluded), Payment of interest on mortgage obligation, Rent payments, and Utility payments.

The amount of the loan forgiven cannot exceed the amount borrowed

8. What kind of documentation should we have prepared?

For the PPP loans, begin gathering (Source: Tarlow & Co, CPA):

  • 2019 Form 941’s
  • 2019 W-3 and W-2s
  • Payroll records for 2020
  • 2019 1099s
  • Listing of any contractors paid in 2020 and amounts paid

9. Who qualifies for relief? (Source: Withum)

Small businesses, nonprofits, Tribal business concerns, 501(c)(19) veteran’s organizations, and 501(c)(3) nonprofits that were in business on 2/15/2020 and:
Have less than the greater of (i) 500 employees or (ii) the applicable size standard for the industry as provided by SBA; or Are sole proprietors, self-employed individuals, or independent contractors.

Additionally: Restaurants, hotels, or businesses that fall within the North American Industry Classification System (NAICS) code 72, “Accommodation and Food Services,” and that have 500 or fewer employees at each of its locations, are eligible.

10. What are the monetary limits?

The lesser of 250% of the average monthly “payroll costs” during the one-year period ending on the date the loan is made (the measurement period); or $10M

11. Does the entity matter? (C or S-Corp, Partnership?)

No, all are included if less than 500 employees

12. How are owners handled? Definition of owner >5%+ or something else?

Owner is also capped at $100,000

13. If owner has a separate related company that the primary entity pays and they get a W-2 salary from the separate related company, does the owner qualify under the separate or primary entity?

Will be looked at on a case-by-case basis; must guard against double-dipping

14. How are Subcontractors handled in relation to the companies that they work for? Does the company they work for receive the payment or does the Subcontractor receive the payment for their own business?

  • Subcontractors/1099’s do not count as part of your payroll
  • Now that it is clear that independent contractors are excluded from Company level “payroll costs” calculation, it is also clear that sole-proprietors/independent contractors can apply for the PPP based on their net income from self-employment.
  • Subcontractors may be eligible for Pandemic Unemployment Compensation

15. Loans – who does the calculation?

The lender reviews the application and approves the loan

16. What are the tax effects if the forgiveness of the loan?

If a taxpayer receives loan forgiveness, it cannot take advantage of the employer retention tax credit or payroll tax holiday

17. What if you keep everyone as an FTE but reduce their salaries?

You may apply for PPP so long as you do not reduce your workforce or salaries by more than 25%
If you reduce compensation greater than 25%, loan forgiveness will be reduced proportionally
Business cannot reduce compensation below state minimum wage requirement

18. Do Part-Time people qualify?

Part time is part of the calculation of FTE’s

19. If your FTE earns more than $100K/yr. and is capped at $8333.33, can you pay them the difference?

Yes, you can if you have sufficient funds. However, to substantiate use to the lender, this is not advised.

20. If you don’t have a loan or LOC, can you still get an SBA loan or grant money?


21. Does your balance sheet or cash in the bank matter in the SBA loan forgiveness?

Does not appear to matter

22. If your insurance covers Business Interruption, can you still apply for PPP?

Yes, as they can each cover different aspects of the business. The PPP is very specific about what is included and is designed to keep employees working and paid.

23. If an employees’ duties change as part of COVID19 and they are still employed, does this qualify?


24. If an employee is out on FMLA, does his/her compensation count as part of PPP?


25. If home and not working but still employed, does compensation qualify towards PPP?


26. If one division is impacted and another is not, can you apply as a division?

No, the application is completed as a single company entity

27. Will businesses be expected to show certification of loss of revenue for loan forgiveness?

There is no indication that you will have to certify loss of revenue, however the SBA may decline the loan if revenue has not been impacted.

28. How long do you have to keep employees past 8 weeks in order to qualify for loan forgiveness?

Currently unclear, only thing certain is that you must retain employees for 8 weeks following receipt of loan.

29. How long does the lender have to deny or grant forgiveness?

The lender has 60 days to deny or grant forgiveness following the 8-week period. There will be recourse against the borrower if not used for approved expenses.


About Hal Levenson

Hal Levenson is the Founder and Chief Visionary Officer at Trilogy Partners. Trilogy Partners is an advisory & implementation firm whose mission is to help companies grow and transform.  We accomplish this by focusing on 3 critical business areas: Financial, Strategy & People.