Further Clarification on Paycheck Protection Program and Tax Relief

The speed at which tax relief and financial support legislation has been enacted and implemented has resulted in some confusion and “tweaks” when it comes to final execution. We have been monitoring the various programs and are happy to pass along some clarification regarding the federal Paycheck Protection Program (PPP) and Massachusetts tax relief efforts. PPP Definitions The Department of the Treasury issued additional guidance on April 6, with more specific definitions that answer key questions.

• How is the exclusion of annual compensation in excess of $100k being treated? The exclusion applies only to cash compensation. Non-cash benefits will not be counted, including employer contributions to defined benefit or defined contribution retirement plans, payment for the provision of employee benefits consisting of group health care, including insurance premiums and payment of state and local taxes assessed on compensation of employees.
• What if I have already submitted my application before the new guidance came out?  If your loan application has not yet been processed you may revise your application based on clarifications issued by the Treasury.
• What time period should I use to determine payroll and number of employees? Is it a calendar year count? Or a 12-month period? Treasury has defined the time period to use in determining the number of employees and payroll cost can be either the 2019 calendar year or the trailing 12-months.
• Do payroll taxes count toward overall payroll costs? To determine the payroll cost for your application you should use gross payroll, with no reduction for employee FICA or withholding, but also no “add-back” for employer FICA.

Gray, Gray & Gray has developed a proprietary PPP loan calculator to assist our clients with estimating the potential amount of the loan for which their business may be eligible. Clients are reminded to please contact your engagement partner to access the calculator and your bank to tailor the calculator to their requirements. Massachusetts Tax Dates Adjusted The state’s Department of Revenue issued new guidance and adjusted deadlines for corporate excise and personal income tax relief in response to the coronavirus, or COVID-19, pandemic. It is extending the April 15, 2020 due date to July 15, 2020 for:

• Personal income tax returns and payments;
• Fiduciary income tax returns and payments; and
• Partnership composite income tax returns and payments

The new July 15, 2020 due date also applies to installments of:

• Tax on IRC Sec. 965 repatriated income due on April 15, 2020; and
• Estimated personal income tax due on April 15 and June 15, 2020

The extension relief does not apply to corporate excise tax returns and payments due on April 15, 2020. The state is not waiving interest on payments paid after April 15, 2020, but will waive late filing and payment penalties if taxpayers file their return and pay tax by July 15, 2020. This penalty waiver applies to:

• Financial institution excise returns and payments;
• Insurance premiums excise returns and payments due on April 15, 2020; and
• Fiscal year returns and payments due on April 15, 2020 from S corporations and exempt organizations with unrelated business income

Corporate excise taxpayers with an April 15, 2020 return due date that seek an automatic extension must still pay any outstanding tax liability by that date. Waiting until July 15, 2020 to pay will result in the extension being invalid. Massachusetts will still waive penalties for the period between April 15 and July 15, 2020. For more details on these changes and answers to other tax questions, please contact Gray, Gray & Gray at (781) 407-0300.