PPP lending rules clarified for owners / operators of fishing vessels; OSHA and CDC Interim Guidance for Seafood Processors | Schwabe, Williamson and Wyatt PC
Below is some recent information on the fishing and seafood industries.
Paycheck Protection Program Loans – Certain Fishing Vessel Owners and Crew Members
For owners and operators of fishing vessels who have obtained (or are considering applying for) a Paycheck Protection Program (“PPP”) loan, the Small Business Administration (the “SBA”) recently issued a final rule. provisional (the “IFR”) (SBA-2020-0040) specifying that payments to certain independent contractors may be included in the calculations of both the maximum loan amount and, in some cases, the cancellation amount. ready. The IFR was issued and comes into effect on June 26, 2020.
The PPP authority has expired; Extension possible. Congressional authority for the Paycheck Protection Program expired on June 30, 2020. Without Congressional action to expand this authority, no further PPP loans will be approved for funding. At 4:00 p.m. PT on July 1, 2020, the Senate and House voted to extend the deadline for PPP loan applications until August 8, 2020. The legislation is now heading to the president for his signature or veto.
For owners or operators of fishing vessels who received a PPP loan before the program expired, the IFR is nonetheless relevant for expenses that may be included in the calculation of the loan forgiveness amount. If extension legislation is enacted, for owners or operators of fishing vessels applying for a PPP loan, the IFR may allow them to apply for a larger maximum loan amount.
Background. In response to the coronavirus pandemic, Congress enacted and on March 27, 2020, the President enacted the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) to provide economic assistance to people affected by the pandemic. The Paycheque Protection Program (“PPP”) is part of the CARES Act, which provides certain eligible small businesses with potentially repayable loans to be used to cover certain expenses in order to maintain their operations and retain their workforce. artwork. Congress then amended the PPP, and on June 5, 2020, the President enacted the Paycheck Protection Program Flexibility Act (“PPPFA”).
In necessarily general terms, under the PPP, an eligible business can borrow up to 2.5 times its average monthly salary costs incurred in the year preceding the loan (not to exceed $ 10 million). There is a detailed formula for calculating wage costs, but usually it includes remuneration (wages, salaries, commissions or similar remuneration); vacation, parental, family, medical or sick leave; severance or severance pay; payments required for the provision of group health care benefits (including health insurance premiums); payment of retirement benefits; and the payment of national or local tax assessed on the employee’s remuneration. Certain costs are excluded, including cash compensation amounts greater than $ 100,000 annually attributable to employees earning more than that amount; social charges; compensation for employees located outside the United States; and, particularly relevant for owners and operators of fishing vessels, payments to independent contractors.
Proceeds from a PPP loan are intended to be used for salary costs, rent, certain utilities, and mortgage interest payments by a business affected by the COVID-19 situation. No less than 60% of the loan proceeds must be used for salary costs.
A PPP borrower is eligible for a loan discount equal to the amount the borrower spent on the following during the 8 week (borrower’s option) period (for loans before June 5, 2020) or 24 weeks (the “discount covered period”) beginning on the loan financing date:
- Labor costs (using the same definition of labor costs used to determine loan eligibility);
- Interest on any commercial mortgage obligation contracted before February 15, 2020;
- Rent on real estate or furniture lease in force before February 15, 2020; and
- Payments on utilities (electricity, gas, water, transport, telephone or Internet) for which the service started before February 15, 2020.
Relief for owners and operators of fishing vessels. With the issuance of the IFR by the SBA, the exclusion of payments to independent contractors has been removed for some boat owners or operators who engage in the capture of fish or other forms of aquatic animals (boat owners fishing) and who have hired one or more crew members who are considered independent contractors or self-employed workers for certain federal tax purposes. Generally, a crew member can be considered an independent contractor or self-employed worker if the fishing vessel they work on has an operating crew which is normally made up of less than 10 people and the crew member crew receives in compensation for its work a share of the catch of the boat or of the proceeds of the sale of the catches of an amount which depends on the amount of the catches. Such a crew member generally cannot receive additional cash remuneration or other compensation for his services in relation to the fishing vessel. The crew member must be a crew member as described in Article 3121 (b) (20) of the Tax Code. The owner of the fishing vessel must declare the compensation paid to this crew member in box 5 of the IRS Form 1099-MISC.
The SBA had issued an earlier interim final rule that provided that since independent contractors have the option of applying for PPP loans on their own, they are usually not taken into account when calculating another applicant’s PPP loan and the amounts paid to them do not fall within the definition of “salary costs”. As some crew members are treated as independent contractors or self-employed for certain federal tax purposes, fishing vessel owners have faced uncertainty as to whether they should report payments to these members. crew as a salary cost on their PPP loan applications. The IFR dispels this confusion by allowing those payments reported in Box 5 of IRS Form 1099-MISC (up to the annual compensation limit of $ 100,000) to be considered “salary costs” in a claim for compensation. loan for the purpose of calculating the maximum loan amount. Such payments paid during the period of forgiveness may also be counted as “payroll costs” for loan forgiveness purposes, subject to a caveat. In order to avoid “double debits”, the compensation paid to a crew member can only be included in the calculation of the loan cancellation if this crew member has not received his own PPP loan and does not seek exemption from the amount of compensation received by the crew member for performing the same services in respect of the owner’s fishing vessel.
OSHA and CDC Interim Guidance for Seafood Processors
Recently, the Occupational Safety and Health Administration (“OSHA”) and the Centers for Disease Control and Prevention (“CDC”), in consultation with the Food and Drug Administration, issued certain interim guidelines – Protecting workers from processing. COVID-19 seafood. For more information, please see the following advice.