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“The Meaning Of Necessity And PPP Program Update”Friday, May 1, 2020Presented by:Alan Gassman, Brandon Ketron and Bruce Brumerg0:03Hi, this is Alan gassman in my secret quarantine bunker.?I'm here with Brandon Catrin of our law firm and a new friend Bruce brumberg and we're going to talk about the meaning of necessity and the PPP program update Brandon's been reading the latest pronouncement by aicpa the latest questions and answers on the PPP program.?And we've had a lot of questions on the necessity issue, which is a tough issue and that's why we've invited Bruce to join us.0:33Brandon and I are going to lead this discussion for about 20-25 minutes.?It might seem longer and then Bruce is going to chime in Bruce is a well-known author and business owner.?He's also a graduate of the University of Michigan and University of Virginia school of law.?So he knows his stuff and I've been reading his work for a long time.?So I was pleased to see that he's been writing and thinking about this.?So page 3 is our table of contents.1:03Contents we're going to talk about what the Eid Al loans are what the PPP loans are.?We're going to talk about the fact that a loan under PPP has to be necessary and what that means we're going to talk about the history of this issue.?We're going to talk about what the Supreme Court has said about the word necessary what the tax law has said about the word necessary capitalization requirements, then we're going to talk about some other things related.1:33The PPP program and then again Bruce is going to speak almost everybody on this call has seen our summary chart which shows the Eid L program and a lot of people are getting checks from PI DL.?It was supposed to be a fast $10,000 for many people.?It turned into a thousand dollars per employee.1:56But then the PPP program on the right hand side.?I think everyone on this call realizes it is a loan program intended to loan people two-and-a-half times their monthly average payroll costs for the last 12 months.2:12And then if it is spent on payroll and certain rent interest in utilities, it is forgiving and the whole question here is whether the business is able to apply for the loan and receive the loan because as I'm reading here from the top of the right-hand side is the loan necessary to support the ongoing operations of the business and those words necessary to support the ongoing operations of the business are keeping a lot of people awake at night and are going to keep a lot of people from Having jobs because initially it was thought by almost everyone that almost every business had the necessity to have more money on hand in order to survive a rocking rough recession.?So I can't think of any business owner people who have businesses with lots of money and lots of positive cash flow still.3:25Still very concerned that the result of this virus will be a severe recession or a severe shut down and that they will run out of working capital and I think that's what most people thought about the word necessary Brandon.?What do we have here on page 7.?Yeah, so we just have the the PPP language on the top line there.?Just what?3:55Applicant has to certify on the application.?Remember that these are Under penalties of perjury and you're submitting a loan application to a Federal Institution.?So they are going to be penalties if you you know cannot comply with the certification and you could basically are committing fraud if you are not on the other thing we have here as well is what is the standard for Eid L qualification??And that's different for the PPP loans.?We have to have substantial economic injury for the Eid.4:25Owls and they have some guidance on what this actually means.?It generally means a decrease in income from operations or working capital with the result that the business is unable to meet its obligations and pay ordinary and necessary operating expenses in the normal course of business.?So that is your standard for your Eid L qualification, which is different than the PPP qualification.?So we also need to be concerned with this certification as well.4:50If we receive Pi DL money, so the E ideal Language is much more severe.?It's much better defined.?And for most people they only got $10,000 and the $10,000.?They got they end up having to repay it because if you got 10,000 from PI DL it increases decreases the Forgiveness of PPP.?So if you haven't applied for Eid L, and you're not sure you would qualify don't bother especially if you're doing the PPP loan if you get the E ideal money.5:25You may want to send it back and say turns out we didn't need it to the extent that the Eid L program outlines substantial economic injury.5:37So besides the fact that at the very beginning the Trump Administration went on television and said, hey, here's the money take it keep people employed without discussion of hey, it really needs to be necessary to support the Ongoing business suddenly it became very clear that big businesses including the basketball team a Ruth's Chris Steakhouse other big companies.?Apparently a hundred of them are more got two million dollars or more each and this was bad publicity.6:24So in a press conference that I saw with secretary muchin and Donald Trump, they said look, that's not right.?It wasn't for big companies big companies have access to Capital markets.?We're going to get this money back and Donald Trump said I'm going to call these people myself.?I heard him say that in the press conference.?Well about 36 hours after that press conference question 31.?6:53Was published in the SBA website and this constitutes the opinion of the SBA??It is a regulatory blank document.?Although the cares act does not.7:09Enable the SBA to legislate it enables the SBA to interpret the question Do businesses owned by large companies with adequate sources of liquidity to support the businesses ongoing operations qualify for a PPP loan.7:28The answer underlined specifically before submitting a PPP application all borrowers should review carefully the required certification that the current economic uncertainty makes this loan request necessary to support the ongoing operations of the applicant borrows words must make this certification in good faith taking into account their current business activity and their ability to access other sources of liquidity sufficient to support the ongoing operations in a manner that it is not significantly detrimental to the business.8:08So if you have a large company as indicated in question number 31, and you can go to the market the Capital Market to get money, even though you'll have to pay a pound of Flesh and interest or percentage of ownership.?They are telling you hear that.?That's what they want to do.?Now.?Look at the question number 31 talks about large companies.8:38But the answer says borrowers.?It doesn't say borrowers who are large companies.?It says borrowers.?So it was unclear to us and everybody else as to whether this answer applied to everybody or just publicly traded companies and what they call hedge funds now at the bottom of page 9 it says any borrower that applied for a PPP loan prior to the issuance of this guidance.9:08Repays the loan in Fall by May 7 2020 will be deemed by SBA to have made the required certification in good faith.?Meaning you will not be considered to have violated this federal law.9:25An intentional violation of this law is a felony up to 30 years in prison and up to a 1 million dollar fine.?Now, I don't know that the SBA has the authority to say that you will not be criminally prosecuted.9:42If you signed an applications knowingly indicating that this was necessary to support the ongoing operations of the applicant when in reality it wasn't Quite probably you would not be an attractive Target if you gave the money back.9:59but there will still be some exposure also atmospheric Ali please keep in mind that The Whistleblower laws are fully supportive of employees or others who turn in companies that did not have the economic uncertainty that received the loan that had the loan forgiven by making expenses in those eight weeks The Whistleblower will Turn in their employer or someone they know about and then they will receive a healthy percentage of the PPP loan.?That was forgiven and their lawyers will receive a lot of money.?So we're going to have you know that type of environment as a result of these rules now.10:48As I said Brandon, what was the date that question 31 came out you recall??Yeah, I don't recall the day specifically.10:58So then on April 28 number 37 do businesses owned by private companies with adequate sources of liquidity to support the businesses ongoing operations qualify for a PPP loan.?Answer C question 31.?So let's say two restaurants are sitting next to each other one restaurant happens to have five hundred thousand dollars of cash in the bank account because the owner forgot to take it.11:28Out the other restaurant only has 15 thousand dollars worth of cash because the owner was always advised take money out of the company does one company qualify and the other company doesn't one company was always run conservatively and carefully with cash in the bank.?The other company was run on a shoestring.?They never paid their bills on time.?They were irresponsible.11:55The irresponsible company gets the loan and the Constable company doesn't get the loan or if the company only has 15 thousand dollars in it, but the owner has a million dollars in his bank account and it's just a little sandwich shop.?That means the owner who's paid more taxes who's been more conservative gets penalized and his competitor next door gets rewarded.?We don't really know the answers to these questions.?Now, here's another question page 11.12:26I filed or approved Own application based on the PPP rule on April 2nd to I need to take any actions based on updated guidance in this is from SBA.?No borrowers and lenders May rely on the laws rules and guidance available at the time of the relevant application.?So if you made your application before these Revelations came about then it's more likely that you will be seen to have qualified.12:58If I'd as necessary at least in the eyes of the SBA Bruce, do you have any comments up to this point??I think it's right.?There are some of the things you're raising work exactly as I thought about even for my own business because you've just been picking up on I you have money in the bank.?I have Legal Financial publishing business and we're subchapter S corporation.13:23We do have investors and yeah, I've been you know, we don't just rip it all our money every year and so we've been Putting some side in the bank until I have money in the bank.?And so it does that work against the company who has been smartly saving money having a rainy day fund and I think that is a point that it does need some clarification by the SBA.?I mean, it's focused just on liquidity meaning larger companies that have access to other sources of Finance.13:50Right, right.13:52So those who got the loans early may be seen differently than those who got the loans later and how many borrowers are going to really have their arms around the situation by May 7th to decide whether to turn it returned the money or if they realize if the industry reopens and you're not going to need eight months of capital to keep your business open, that's great, but many of us are in businesses that That will Buckle 5 to 8 months from now and we do need the capital Bill Gates was on CNN last night.?He said he did not think that we can expect to have inoculations for this virus for as much as five years.?He said that one year is very very optimistic.?So again this question of how much Capital do you need now lenders?14:50Are insulated page 12 from the SBA can lenders rely on the borrower documentation for loan forgiveness.?And otherwise, yes, the lender does not need to conduct any verification if the borrower submits documentation supporting its request for loan forgiveness and a test that it has accurately verified the payments for eligible costs.?So, you know, a lot of clients are saying well my Bank loaned it to me they told me it was great.15:19Well the bank Receiving five percent of the first three hundred and fifty thousand dollars and then smaller percentages as the loans go up the banking industry did not receive a direct bailout.?This is their bailout for the banks that are able to do SBA Loans.?This is going to bolster their balance sheet.15:40So the banker doesn't have the issue here unless they really really get active but the bankers are have much more financial expertise than the borrower's do and they probably do there probably will be tremendous lawsuits by borrowers against Bankers testing the immunity provisions of these federal laws.?Now, here's a letter from truest formerly known as BB&T and SunTrust and Brandon.?What does this letter have to say??This was sent to PPP borrowers.?I know.?Yeah, so they wanted just to make their borrowers that already received the loan.16:20On the just again point out this certification that was made on the application that you have to have current economics than certainty the makes alone necessary to support the ongoing operations.?They mention some of the press conferences here.?One of the things that secretary venusian is said is that if you have a loan over two million dollars, you're going to be audited that's just going to be an automatic audit for those large borrowers.?So they have to really be concerned with this necessary certification.16:48The other thing that was pointed out on On the letter from truest was here in the Middle where I have highlighted and underlined it is that the lenders are expressly authorized to rely upon the certification by the loan borrower without review or confirmation.?So they wanted to point out that again that they're relying upon you making the certification that they're not actually taking a look at this and authorizing your eligibility for the loan.?If you say you're eligible, they're going to give you the loan so you can't fall back on them for life.17:20All the insulation if it later comes up that you weren't eligible for this loan and they say we don't wish any of our clients to suffer criminal liability or other severe consequences for certifying the current economic uncertainty makes this loan request necessary to support their ongoing operations of your business.17:36We urge you to reconsider whether you remain comfortable with that certification so that puts the burden back on the borrower to go to a lawyer to go to accountant to try to get impartial input as to whether you meet this standard and there's no guidance.?Like I said on whether that means you need the money this week or you will need the money next month or you will need the money in five months.?We spoke yesterday to a business that's going to need the money in 10 months.?If they don't get an improvement in the industry.?They're going to run out of money and have to close down in 10 months.?They could have immediately laid off 30 percent of their staff.?But instead they told their staff we're getting this thing called a PPP.18:20Alone, we're going to keep you on for at least until we get the loan and then at least another eight weeks now they get the loan, but the question is since they have ten months of capital.?Is that enough??Are they supposed to lay these employees off now and return the PPP money or is it enough that they're going to be annihilated in 10 months if the economy doesn't pick up and those that to me seems to be a defendable position to take the PPP loan.18:50But when you read the language and you see the spirit of what's Happening Here including Marco Rubio's tweets, which we'll get into in a minute.?You can't do this type of thing without risk.?So page 15 more about the what the false statement would be the imprisonment lots of scary things.19:16Now beginning on page 17 is an article that we On the 27th for the line Berg system.?If you want a copy of this article other than in the slides, please let us know in the article we go through what the PPP loan Arrangement is and then we talked about the vagueness document.?I mean the vague do vagueness Doctrine which may come into play here for people who get prosecuted.19:47This is in the criminal law when you You have a law that is so vague that you don't know what it really means.?Then the government is not able to prosecute it.?Now.?I am not a criminal lawyer or a white-collar lawyer and I have seen governmental prosecution of things that I just would not have imagined that the government would prosecute so don't think that the language of page 25 means that you can't be prosecuted but this will be something that I think will cause a lot of defenses.20:21I personally don't expect criminal prosecutors to show up on doorsteps and prosecute a business that would have run out of capital in five to eight months if they had not taken on the beep the PPP you out but if that same business does another cute thing or two, maybe falsifies financials falsifies the repayment records tries to write off rent and interest under agreements that weren't in place, February 15 2020.20:50Or there's a whistleblower that files a whistleblower complaint using a law firm that is reputable.?Then you could have issues in these situations.?So we talked about needs and then we go to the US Supreme Court through Black's Law Dictionary.?They direct you to 1819 judge Marshall of the US Supreme Court who I think is the most famous Supreme Court Justice.?He was a very bright guy.21:21In the question was did Congress have the ability to enact legislation unless it was absolutely needed.21:29What does the word necessary mean in the US Constitution and the court said the word necessary in 1813 means convenient or useful or maybe essential to something else, but it doesn't mean a what they called a Physical necessity it was a much looser standard.?So then in 1933 the Internal Revenue code said that you get a tax deduction for ordinary and necessary business expenses.?And what is an ordinary and necessary business expense and Justice Cardozo.?22:11Also a very famous judge, very bright guy said no these expenses are deductible if they're appropriate and helpful, so would it be Appropriate and helpful for your PPP loan to make sure your business can stay in existence for six months instead of four months or for 10 months instead of eight months given that if we have a major recession banks are going to stop lending and you're going to desperately need that Capital.?Does that seem to be an ordinary necessary business expense to procure that type of alone under Internal Revenue code section 162, which is where most tax lawyers were raised in my opinion.?The answer is yes.22:50but does that the same word necessary as appears in the cares act the answer is who the heck knows so then we go to Internal Revenue code section 537 the accumulated earnings tax, which says that if your AC Corporation and you pack your earnings into your company and you don't send them out as dividends and pay taxes on them and you don't reasonably need these monies or Investments as For your business, then you pay the accumulated earnings tax and Brandon tell us a little bit about the accumulated earnings tax because I could certainly see this being used by analogy.?Do I need the PPP loan while if I wouldn't have been taxed under the accumulated earnings tax because it was reasonably needed in my business then it seems to me I should be able to get the PPP one.23:41Yeah, so there's regulations under the accumulated earning tax that Define this reasonable needs of the business, which is certainly guiding as far as What we can set aside now that would be reasonable to accumulate giving the the circumstances and the definition they use is what a prudent business man would consider appropriate for the present business purposes.?And for the reasonably anticipated future needs of the business.?So that gives us some guiding language and they have some regulations issued as well here.?You see on slide 34 they talk about whether The Prudent businessman standard that I mentioned here.24:20And also it says that there must be an indication that the future needs of the business require.?The accumulation of Corporation has specific definite and visible plans for the use of such accumulation.?So one thing you might consider doing here is just writing out a budget and writing out a plan.?What am I saving this money for??Why am I doing it??Why is it in my business??And why is this loan necessary to add to that accumulation?24:44Because I have future concerns about this virus and the current economic conditions that I were in there's other guidance as well here has to win we're applying the standard.?So we're looking at the basis of the facts that exist at the close of the taxable year.?So if you analogize that to the PPP loan, they would look at the basis of the facts that exist on the date of the application.?So as of right now we have no idea when this virus is going to end.25:12We have no idea how long it's going to last if it turns out that in two weeks everything's back to normal unlikely, but you know, Maybe that does happen.?They're not going to hold that against us because at the time we submitted the application we're basing it on the facts that we know at the time.?So things are changing.25:30So as things change we have to reconsider this almost daily as to whether or not our application is is appropriate or not the other item here that's notable to point out is that the courts have specifically recognized the right to accumulate funds and the face of unsettled conditions whether that's in Torah specific industry threats of strike risk of a peculiar industry.?That's all there's all court cases and guidance on that that it's reasonable to accumulate funds giving unsettled conditions, which we certainly have at this point in time.?They also provide guidance that you can accumulate funds for potential product liability losses.?So looking at that towards this virus, you know, we have the potential of a pretty significant downturn and a point of time where we might have to have reserves for potential.26:20Losses so we can use this guidance to guide us as far as maybe what the treasury or the SBA would use to interpret this necessary standard.?If it ever came to the question of whether or not it was necessary for your business and sitting down with advisors and deciding how you would have to renovate your entire building if this virus is still with us is every single employee going to be in a separate compartment with separate ventilation.26:49How are You going to meet with your clients and customers and if you're a professional practice and you become disabled because you have a high chance of getting the virus and you're out flat on your back for 8 to 12 weeks your business Interruption insurance is no longer available how much business Interruption insurance coverage.?Did you have can you set that amount aside so that your self insured for business Interruption??All of these things are problematic.27:17So the other thing we came by by analogy and thanks to Tim bronze I who's a CPA who does valuations and also has involvement with opinion letters is Bruce.?Do you want to Bruce??You probably know more about fairness opinions than I do.?You want to just mention a fairness opinion and what would typically happen and in your industry for this?27:40If you thought there was something you needed to justify how you fit into that certification.?That is something you could get.?I mean I have I have other observations and other suggestions, but I figured you would continue with your part of the presentation which you're delivering with great Passion.?So I'm enjoying it.27:58Okay, so typically companies that raise capital or are engaging in the raising of capital and securities markets look for a fairness opinion to assure that the capital is being put in the right place and is reasonably needed.28:14So there are there is a whole set of CPAs and lawyers who issue fairness opinions and they'll probably be pretty busy issuing PPP opinions if there is an ability to do so now how do you convince a prosecutor in four or five years that have the time you signed the application??You did not intend to defraud the government and you and your heart of hearts and then your analytic analysis felt that the loan was necessary to support the ongoing operations of the business.28:51Do you consult with a financial advisor your CPA firm a Salting firm a business law firm and do you get a letter from them saying, you know, I've looked at the law.?I've looked at the situation.?I've looked at your burn rate.?You're going to be outside of the covenants of your loan in by July 27th.?The rate things are going your building is 70% financed and if they reappraise you're building the mortgage allows the bank to call the loan.29:26And if they feel insecure, it seems to me as your financial advisor that you do need this extra cushion.?That will be enabled from the PPP program.?I could be wrong other people may disagree with me.?Please don't sue me for malpractice if the government interprets it another way, but I believe that your loan is Justified.?So if you can get a letter like that and it's not self-serving and it's legitimate.29:56It's based on spreadsheet in and Analysis.?Then I would feel better having that letter the not having that letter.?Although there's an old saying if you need an opinion letter, then you know, it's risky.?Why do you do it?30:09So people have to evaluate what the reward is for getting the PPP loan what the reward is for having it forgiven and what the risk is if you think you need an opinion letter, is it really a pool that you want to jump into now page 41 if you like the Owing Stones.?They did a great job with social distancing recently.?There's a great YouTube video.?They did you can't always get what you want from four different locations really good to watch and you know, you can't get what you want that has to do with necessity.?So I thought I would move it in there.?Okay Brandon before we move it before we let Bruce give us his input what's going on in the PPP rules.30:53Other than the society that I should know about yeah, just a couple of updates to what the they call these frequently asked questions and they're updating these almost daily now, so we have we can send you a link to this website so you can get the updates as long with us as well.?They added that a housing stipend sore allowance would be considered as a payroll cost.?It's going to be included in that cash compensation subject to the hundred thousand dollar limit.?They gave us some guidance on determining whether or not an employee resides in the United States or not.31:25We know only wage ages that are paid to employees that reside in the US are counted as payroll cost.?So if you have that issue, there's a sort of Regulation out that provides some guidance on whether they are in the u.s.?They specifically included agricultural producers Farmers cooperatives etceteras eligible for the PPP loans.31:46There are some questions as to whether or not they were eligible but this clarifies that for purposes of determining our employees numbers we look at The for the 500 employee limit which is a limit to actually be eligible for the loan.?We have to count every employee whether that's a full-time or a part-time or other basis.?Those employees are all counted now for purposes of loan forgiveness.?We know we have to measure our employees during the eight week period as compared compared to a prior period And if we terminate employees or less employees go or employees quit we could have our loan forgiveness reduced if that ratio is off basis.32:26So they use the standard of a full-time equivalent employees, but they don't tell us what a full-time equivalent employees is now under other provisions of the cares act.?They use 30 hours under the Affordable Care Act.?It's a 30 hour is a full-time equivalent employees.?So that's probably going to be what applies but we're not a hundred percent sure on that issue.?They gave us some more guidance on whether or not businesses that maybe you've had a change in ownership that were in operation prior to February 15th.32:56The ownership occurred after February 15th.?They said those eligibles those businesses are eligible.?We just use the prior business information to compute our loan so that gave us a nice clarification there because it was unsure of how new businesses that were acquired would really be treated.?And then again the SBA are going to audit these files and see if you complied with the certifications review your submissions as well.?So make sure that we are submitting this accurately.33:26We and that we are looking at this certifications and question 31 as to whether or not we can apply or not.?Now the aicpa also issued some comments on the patient Protection Program.?They go through the application and point out how how to do the calculations and give you know, the CPAs and accountant some guidance on on how those are calculated.?They made some suggestions though, which is what I wanted to get to.33:56As far as recommendations to the SBA, which hopefully the SBA will take into account.?One of the things they should jested.?Is that the eight-week period where you're measuring your expenses should start at the beginning of a pay period because a lot of what a lot of borrowers are running into is they might have got their loan funded the day after they just issued a payroll not going to get a full four of four weeks of payroll of full for pay periods in that eight weeks if they're on a two-week pay period and therefore they might have not be able to pay off.34:26Out all the loan amount.?So they're recommending that we can start that on the date of the payroll.?So we would get a full eight weeks of payroll covered in this they also recommended that we could begin that eight-week period when restrictions are lifted, that would be very nice so we could essentially defer start date of the loan a back into the point in time where we're back in operation here.?Another number three recommendation is we need a definition of full time equivalents as I pointed out.34:53They don't Define it there's definitions and other areas of the There's act as well as the Affordable Care Act uses 30 hours.35:00So we need clarification on that and then one thing that we have pointed out in some articles is that when you're measuring compensation reduction because we if we reduce employee compensation making less than $100,000 by more than 25% We have a reduction in our loan forgiveness, but the direct language of the statute Compares eight weeks of pay to pee in a prior quarter, which is 12 13 weeks so that That doesn't match up.?So we need guidance on how we're doing this calculation whether we're annualizing pay calculated on a per week basis or how we're doing this.?So that's just pointing out what the aicpa is recommended as far as guidance to the SBA and treasury to issue some more interpretive regulations.?Okay, Brandon.?Thanks very much.?Before we go to Bruce.?Can you show the language and Marco Rubio's tweet??Yeah.?I think that I think everybody needs to see that In fairness to see where this could come in.?35:56So by the way, for those of you who aren't lawyers, the law is based on statutes regulations and court cases.?Those are all called precedential a tweet is not something that is precedential.36:15But Senator Rubio who chairs the committee that issued this bill says that Businesses must certify that they've been harmed by the crisis and need the PPP loan to operate number three any company with Revenue to cover operations isn't eligible.36:38Well that's going to cause a lot of fear that's going to cause a lot of drama, but that is not precedential unless they pass laws going forward that Define it that way and those laws cannot be Throw active at least not from the criminal sense.?So Bruce we're looking forward to your comments now.37:05Well Brandon and I thank you for your thoughts and your in your Clarity on them that you you approach it from a little bit different angle that I had.?I hadn't focused as much on the word necessary as much as the ongoing operations of the business you had to justify that as I was saying earlier.?I do have a I do have a lot of great.?I have a legal and financial Publishing Company my stock .?I've been doing that but we 20 years is June and we had a we have a conference that was scheduled in San Francisco, June 15th.37:3416 so we had to cancel it was on financial planning for public company Executives and directors so I you know I very much look into this in terms of whether would apply to my business but much more interesting lie I grew up in the Philadelphia area and there's a family business the bowling business started by my grandfather and my almost 80 year old mother owns still one of the bowling alleys the bowling centers have to call him bowling centers in my family and there's a bar and obviously that's been shut down for a while and also my first cousin owns part ownership of to bowling centers also in the Philadelphia area so they're directly affected by the force government shutdown and it was required in Pennsylvania and they have all applied for these loans so I'm very much up on what's going on and so when I started looking into this for my own business you know right away one soon as I heard about the tears act and I heard about this supposed free money And it's really not a loan interest people.?It's really it's a government grant and if you need two conditions, you get to keep 75% of it.?I don't know how many people on this call are really in it for the one percent and still a good terms, but it's really the the forgivable part of it the government grant you have to sort of meet those conditions.?And so I've been started writing on it.?I've been writing for Forbes going to much more narrow topic and if you want to see what I've been writing on the paycheck protection loan.39:04Graham just Google paycheck Protection Program and legal list and I've you know done a whole series of Articles including one that has insights from federal prosecutors.?It's been it's been nice to you know, see that, you know, I expanded my little narrow niche of you know, executive stock compensation to write on something much more broadly and I've been hearing from friends.?I haven't heard from in years.39:26You know, I have a friend from college at Michigan who has a oncology practice in Chicago and I have a childhood friend who's a veterinarian and Long Island, and I've From all people of somehow say hey, you know, I've seen that picture attached to the block.?You don't look that young anymore.?You should update it.?But you know, they still tell me that I try to stay away from the questions about the forgivable loan calculations and how much is forgivable and what's included that's very very complex.?So I just sort of stick to certain areas, but I give people three General observations about this certification about economic uncertainty that's necessary to support the ongoing operations business.40:05The first thing is that the the federal prosecutors they're going to bring a case.?It's clear abuse and fraud.?So if you talk to your legal counsel your accountants in good faith think that you can meet the terms whether it's focusing on the word necessary or focusing on economic uncertainty ongoing operations and business.40:25If you in good faith can say that and documented in good face, you know, you had a board meeting or if it's your own business just document your thinking on it, you know the federal prosecutor Not going to go after you the same time as one of the articles I wrote for blog for the forest walk to make clear.?There are random audit the you know, they just just like they're random tax on it.?And so, you know, you don't want to be caught in that net and no dishes too small.?So you got to remember that.?The second thing is it's called, you know, the paycheck protection Loan program for reason that's its name.?There's very little legislative history on it and I can in one of our one of the articles I do link to a podcast.41:04It has an interview with Marco Rubio, which I think is worth listening to because it's probably the closest you're going to find to the intent of the statute.?But again, it's called the paycheck protection Loan program.?So if you can really show that that's what you're taking out this forgivable loan.?This government grant for I think that'll be fine the other in the third part.?I keep I keep raising and you may have done webinars about this or talk to that.?There's another part of the kids act which is the employee retention credit.41:30That scares act section 2 301 and that's when you get 50% of your payroll tax back up to ten thousand dollars per employee that provision is very very specific on who qualifies.?It says right in there that if your business is fully or partially suspended because of government action you qualify for this credit.?It also gives a very objective criteria.?It's as if your Revenue has declined by more than 50 percent from the prior Year's quarter you qualify.42:02I do not know why this This other provision in the paycheck protection Loan program a different part of the statute did not use similar objective criteria.?It's always been a mystery to me.?But I think if you can fit into the criteria that is for this other part of the ACT, they you know, you're forced to close by the government in directly directly where you have a revenue decline again, I think that could be considered a sort of safe Hollow best practice.42:27So those are the three things to think about the first case is probably going to be fraud or abuse but be aware they'll be random audits the And you know the statutes name is the paycheck protection Loan program.?So if you're using it for that, I think you'll be fine.?And the third is the subjective standard which I've been talking about right from the beginning was required to Quick predictions, you know, Brandon brought up one of them that I was going to mention just very good.?You should take a look at the aicpa suggestions that they sent to the treasury Department yesterday.42:56You can just Google that and it would be great if this eight-week period could correspond with when you want to use it because you know A lot of hear from you know, again friends businesses are in the family business that sometimes you're having to like bring back people.?Now, you don't want to bring them back and it's you know, it's not when you're going to be reopening and so I think that's a very good suggestion and I hope that the treasury Department takes it on the other is I think this whole program is going to be extended again.43:22It's just a prediction beyond the end of June because it was really meant to be the period they thought when business would come back since I was you know, everything would reopen up by the end of June and that's not going to case that kind of Case you know, you see the different stages that are out there and you know, many many different businesses are you know far off and you know stage 3 and that's going to be way beyond June.?So I like to think that I'm you know, Congress will extend this be on that day.43:49So those are some of my thoughts Bruce very good Brandon anything to close with I think I'm good.?Okay.?We thank everyone for attending this.?Obviously.?We are not the exit the be-all-end-all experts in this area.?We've simply shared our thoughts and what we've heard and what we've seen.?Thanks very much to Bruce.?Please don't rely on anything.?You just heard call your lawyer call your accountant.?Call your psychic.?Call your hairdresser, but don't let your hairdresser.?Do your hair.?This is Alan gassman, please.44:21Please email us any questions you have will do an update program sometime next week when we find out.?What's hot and what's not May the rest of your day be very productive and do nice things for others.?Thank you.RE-GENERATE TRANSCRIPTSAVE EDITS ................
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