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Wednesday, April 15, 2020

What Northern Kentucky Business Owners Need to Know about the CARES Act

Dan Tillett is a CPA with Rudler PSC in Fort Thomas.

COVID-19, commonly known as the novel coronavirus, has impacted the American way of life so extremely that has not only changed the way we do business but has also changed the way we shop and socialize. With many states having some form of stay-at-home order, many organizations have temporarily had to close their doors.

But now, there is hope for small business owners nationwide in the form of the Coronavirus Aid, Relief and Economic Security (CARES) Act. Signed into law on Friday, March 27, the CARES Act allows for a number of provisions in the form of financial and tax relief for both businesses and individuals as part of the largest stimulus package ever passed. The centerpiece of the package is the Paycheck Protection Loan Program (PPP), which provides support for qualifying small businesses by allowing them to borrow up to $10 million. These loans are eligible to be forgiven if the loans are used for the criteria set by the CARES Act for specific business expenditures such as employee payroll, health insurance, retirement contributions, building rent/mortgage interest and utilities. But what exactly does it take to qualify?

Consider the following critical information about what your organization needs to know about the CARES Act and the PPP program today.


  • The following organizations could be eligible for a PPP loan:
  • Businesses with 500 or less employees
  • Meet the Small Business Administration's (SBA) size standard (certain industries may have a different employee cap number based on the SBA's Size Standards Chart on
  • Section 501(c)(3) qualifying nonprofit organizations
  • Sole proprietorships
  • Independent contractors
  • Self-employed individuals
  • Tribal business concerns and 501(c)(19) Veterans Organizations that meet the aforementioned SBA size standard

  • Accommodation and food services sector businesses, franchises with codes assigned by the SBA and businesses that receive financial assistance from one or more small business investment companies (SBIC) do not require SBA affiliation to be eligible

The main incentive of the PPP program is to provide incentives to the aforementioned employers above to maintain their employee counts and not send people to the unemployment line. The PPP accomplishes this by providing funds to cover a company's payroll (and other limited expenditures as outlined in the loan) for eight weeks. This enables temporarily closed businesses to be able to resume operations and prevent employees from relying on unemployment, if possible.

This is why companies with 500 or fewer employees should consider applying for this loan immediately. Assuming they use the proceeds for reasons that satisfy the CARES Act standards, it's essentially free money in the form of a loan that can very likely be forgiven. What are the risks or consequences to it? The risk is that you are not able to maintain full time equivalent (FTE) employment levels and use at least 75% of the loan for qualified payroll expenditures. However, with a two-year loan at 1 percent interest, assuming your business continues to operate and loan proceeds are used for payroll or other occupancy related costs, there aren't many consequence to the loan. Even if a portion of it becomes unforgiveable, the remaining loan is under very friendly terms.

Proper preparation for loan applications will help ensure businesses get approved for loans. Rudler has a checklist available on our website that we provide to all of our clients outlining the documentation they need to gather in preparation to go to their bank to apply for these loans. In many cases, we're having them provide us with those documents so we can calculate the amount of loan to request from their bank and help streamline the process. Once loans are secured, organizations will need to accumulate their normal documents -- bi-weekly or monthly payroll records, any invoices for health insurance premiums and retirement contributions, utility bills and mortgage statements (or an up to date copy of your lease) -- to be able to substantiate their claim for loan forgiveness at the end of eight weeks.

While the PPP program is the centerpiece of the CARES Act, it is far from the only program that can have significant impact on small businesses currently suffering as a result of the COVID-19 pandemic. Under the CARES Act, Net Operating Losses (NOLs) incurred in the tax years for 2018-2020 could be carried back for five years. This could be huge for businesses with losses that may be able to be carried back to years prior to the Tax Cuts and Jobs Act (TCJA) of 2017 where their effective tax rates may have been higher than what they experience under the current law.

Likewise, the corrections to Qualified Improvement Property (QIP) for Non-Residential Properties -- which resets an error in the TCJA -- could have a great impact for local restaurants.

This provides organizations that have made improvements to their buildings or leaseholds with the possibility of deducting those expenses right away, rather than depreciating them over 39 years. A drafting error of the final TCJA law in 2017 made improvements take on the same life as the building. Now, companies should consider whether or not to go back and amend a 2018 or 2019 return they already filed to claim additional depreciation on these expenditures, or if they will file for a change in accounting method on a future return to catch this depreciation up.

Rudler has already helped nearly 150 clients in less than 2 weeks with these loans to secure nearly $50 million. Should you have any questions, don't hesitate to call us for help in securing the funds that have been made available to you.

Visit Rudler PSC's website.

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