Katie Lejong, member of accounting firm Landmark PLC, leads an internal task force that’s guided clients on multiple aspects to the Coronavirus Aid, Relief and Economic Security (CARES) Act.
Landmark, with offices in Rogers, Fort Smith, Russellville and Little Rock, was formed in 2018 as a result of a merger between Beall Barclay & Co. and the Little Rock office of Thomas & Thomas LLP. The task force has seven employees from three of its offices, all of which can assist those needing help with the CARES Act.
Lejong was designated this year as the firm’s tax director and established an internal group to research the legislation and ensure clients are informed and to provide help in other ways. The task force was established in mid-March before the CARES Act was approved.
“We were starting to dig and read and understand and decided it was going to be a little more than the average legislation and needed to put together a formal team,” Lejong said. “We’ve got a handful of people here that have just been those that are in charge of knowing the legislation inside and out.”
The team comprises employees who specialize in different fields, such as payroll and taxes. A large part of the act regards payroll, and the team needed someone with expertise in this and to understand how it’s reported. Other parts of the act regard net operating losses and the healthcare industry. Lejong noted the importance of having employees on the team who were involved in the industry and are available to help regardless of the office location.
“As clients are asking questions, a lot of those phone calls and email responses have been managed by those individuals that have the higher level of knowledge,” she added.
Also, the team is responsible to ensure the partner group is informed and new information is released to clients as it becomes available. They have emailed clients new information weekly or biweekly amid the pandemic.
The majority of her time on the task force has been spent working with clients on the Paycheck Protection Program (PPP). The team has helped clients better understand the program, to prepare applications to receive the money and to apply for loan forgiveness for it. They have helped clients ensure all the money has been used for forgivable items.
The work might include calculations for clients and developing an application for the client to submit. Or, it could be reviewing the application the client has developed and to ensure accuracy. The firm might handle bookkeeping or payroll for these clients and provide that information to them to prepare an application.
CONNECTING WITH OTHERS
Along with helping clients, Lejong has led virtual presentations for businesses, organizations and chambers of commerce across the state to provide advice on the act for small-business owners.
“We’re not limiting our support to just those that are clients,” she said. “We’re trying to connect with any business that we can help.”
Some of the webinars she’s hosted don’t go into the basics of the PPP as people have been hearing about and reading about it for months, but they provide a high-level overview of it. She also answers questions people have about it.
“I talk about some of the hang-ups, some of the pitfalls that are going to catch people and catch businesses to where they’re going to end up owing some money,” she said. “Then we talk through the process, what to expect through the process. How and what you’re going to submit to the bank. What type of details you need to have and supporting documentation. How the process works on the bank side, and then how long it’s going to take to get through that process.”
The PPP offered businesses 10 weeks of funding that had to be spent in eight weeks, and this required a lot of planning to maximize the benefits, Lejong said. The PPP allowed businesses to borrow 10 weeks of 2019 payroll, but businesses had eight weeks in which to spend the money from the day they received it for the money to be forgiven.
Meanwhile, the Small Business Administration and the U.S. Department of the Treasury have continued to provide updates to information regarding the PPP. The Treasury releases guidance on its website.
“Many of the applications were submitted well before the information and the rules came out on how to calculate it,” Lejong said. “There’s been a lot of adjustments as you go. Even this week, they released rules that will significantly change potentially what will be forgivable.”
BANKS SEEK GUIDANCE
Businesses can submit their forgiveness applications to banks, and the Small Business Administration has a site for banks to submit those applications. But a lot of banks have yet to upload the applications as the banks await more guidance. The Small Business Administration will decide on the applications and determines whether to pay the bank. This payment would be used to pay off the PPP loan issued by the bank.
Lejong is uncertain of the impact on loan forgiveness applications that were submitted before the new guidance was released but include things no longer eligible for loan forgiveness.
“I don’t know how that process is going to work,” she added. “Do they now have to adjust what they submitted to the SBA? Some of the banks are waiting to have all of the guidance before they begin to submit the forgiveness applications.
“Some of the guidance that has come out over the last several months has been in the favor of the borrowers and the businesses. And then some of it has been restricting. It’s kind of hit or miss.”
The businesses applying for forgiveness are those that have received a PPP loan and used the money. Lejong said a lot of businesses have used all the money from the loan.
In Arkansas, small businesses have received more than $3 billion since the PPP started in March. However, not all of the money for the PPP has been accessed, she said. Existing law required the Small Business Administration to stop accepting applications for the PPP on Aug. 8. As of that date, 5.21 million PPP loans had been approved for a total of $525.01 billion. The CARES Act had allotted $659 billion for the PPP, and of that amount, $133.98 billion remains, according to the Treasury.
‘A REMARKABLE YEAR’
Lejong has been a CPA since 1999 and said the past six months have been unlike anything she’s ever experienced.
“This has been the oddest year with the legislation that was passed and the effects of that and the effects on tax season, getting that pushed back to when the deadline was in July,” she said. “It’s been a remarkable year for sure.”
The tax deadline to file a federal income tax return was pushed back to July 15, from April 15, because of the pandemic. Not all states participated in the change; however, Arkansas did for individual tax returns but not for corporations. The second-quarter estimate for Arkansas was still due in June, she noted. And 2019 tax returns needed to be completed to prepare for 2020.
Lejong said recent guidance shows a forgiven PPP loan is not taxable to the business, but for non-taxable items, the IRS requires the expenses used by that money are not deductible. Legislation is in the works to allow those dedications to be included, but it has yet to be approved.
Other proposed legislation would allow businesses with PPP loans to receive a simplified or automatic forgiveness process if the loan was $150,000 or less.
Rent payments are forgivable expenses, but a recent update to the PPP provided shows rent payments to a company that has common ownership and considered a related party cannot receive forgiveness for the full payment. The forgivable amount is limited to the amount of mortgage interest on the rental entity, she said. Another recent update regards an entity in which the owner’s compensation is restricted, and if the owner owns less than 5% of the business, the restrictions wouldn’t apply.
Lejong said she checks the Treasury website nearly every day for PPP updates. Other updates to the PPP could address specific industries that have been more affected by the pandemic and those that can show a revenue decrease as a result of the pandemic.
The PPP is but one aspect of funding that became available because of the CARES Act, she said. A lot of money was set aside for the healthcare industry to provide relief for those businesses, she explained. In early July, dentists became eligible to apply for the money.
Also, CARES Act money was passed on to the states, and they can decide how they want to help businesses with that money. She pointed to the Arkansas Ready for Business Grant Program that was established in May. At least 75% of the $55 million in available grant money will go to business with less than 50 employees and at least 15% of the funding will go to minority and women-owned businesses, according to the Arkansas Department of Commerce.
While Lejong was uncertain of the details regarding the next stimulus package, she expects the proposed ideas to “get beat up pretty good before they come out and become law. There’s no telling what we’ll actually end up with.”