Read "CARES Act Offers 14 Areas of Potential Tax Relief for Taxpayers"
While the Paycheck Protection Program included in the CARES Act is geared toward loan forgiveness for small businesses, there are also alternative standards that may allow companies with more than 500 eligible employees to qualify.
The standards could apply even if a company doesn’t meet the revenue or payroll size standard based on a company’s NAICS code. However, a business must be a “small business concern” as defined below and must meet the alternative standards tests. This option does not apply to not-for-profits or veterans organizations.
Outside of the less-than-500-employee requirement, to be eligible for assistance from the SBA as a small business, an entity must be organized:
Small agricultural cooperatives are the exception. A small agricultural cooperative is an association, corporate or otherwise, that adheres to the Agricultural Marketing Act and whose size does not exceed the size standard established by the SBA for other similar agricultural small business concerns.
A business concern may be formed as a(n):
In addition to the “business concern” rules above, an entity must meet the following two tests:
Affiliated businesses must aggregate tangible net worth and net income of the affiliated group.
*Although the SBA FAQ states the date of the net worth test is as of March 27, 2020, under the Code of Federal Regulations, the size status of an applicant for SBA financial assistance is determined as of the date the application for financial assistance is accepted for processing by the SBA. So there is a conflict between the Regulations and the FAQs, which should allow businesses to use their net worth as of the date of the application.
While tangible net worth is not defined in the code of federal regulations, it makes sense to use the total of partners’ capital accounts for partnerships, and the total of shareholders’ equity for corporations.
In determining your net income after taxes, follow the steps below:
It’s important to note that the method of accounting is also not defined in the code of federal regulations, so as a best practice calculate the numbers using both GAAP and Tax methods and then discuss your results with your tax advisor before finalizing.
Contact Dave Sobochan, Adam Hill or a member of your service team to discuss this topic further.
Cohen & Co is not rendering legal, accounting or other professional advice. Information contained in this post is considered accurate as of the date of publishing. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts, circumstances and current law with your professional advisers.