OFF THE RECORD
SPECIAL COVID-19 ALERT
A Message From Our Firm

Dear Clients and Friends!

We hope that this newsletter finds you safe and healthy, and that you are managing the circumstances as best as can be expected. If you are like most people, you are tired of all the various news and updates surrounding COVID-19. For this reason, we are trying to limit our updates to only that information which we believe is most critical. We are hopeful after hearing Governor Hogan speak yesterday that we will begin to enter Stage One of the 'Maryland Strong: Roadmap to Recovery' soon. With that said, we continue to stand ready to help you and your business with any issues that may arise and to answer your questions.

And, remember, you can always reference our dedicated COVID-19 section on our website for important updates and links to prior alerts and newsletters. This page can also be easily accessed from our homepage at  www.darslaw.com .

Please continue to stay safe and healthy.

Very truly yours,
Paul G. Skalny
Managing Director
For Businesses, Entrepreneurs & Organizations
PPP CERTIFICATION REQUIREMENT CREATES RISK
AND UNCERTAINTY FOR BORROWERS

New guidance issued by the U.S. Treasury Department has created confusion and dismay among thousands of businesses across America that have received loans under the Paycheck Protection Program (PPP) created by the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The application form for a PPP loan requires the applicant to certify in good faith that “the uncertainty of current economic conditions makes necessary the loan request to support the ongoing operations of the Applicant.” Under tremendous pressure to file a loan application as quickly as possible before funding ran out, and with no guidance from the SBA or Treasury as to what the certification really meant, borrowers were left to interpret this language for themselves. 

Fast forward a month. In what appears to be a reaction to the media backlash from the revelation that large publicly-traded corporations such as Shake Shack, Ruth’s Chris Steakhouse and Potbelly Sandwich Shop received millions of dollars in PPP loans, the U.S. Treasury Department quietly issued revised guidance for PPP loans that has essentially redefined the standard for determining which borrowers are eligible. The new guidance also includes a “safe harbor” for borrowers who discover that they are no longer eligible by allowing them to repay the loans without penalty by May 14.
COVID-19 RELATED EMPLOYEE RETENTION CREDIT

If your business did not receive a Paycheck Protection Program (PPP) loan under the CARES Act, all is not lost. The Employee Retention Credit represents an additional incentive designed to encourage businesses, including tax-exempt organizations, to keep their employees on the payroll. The credit is a fully refundable tax credit against the employer’s share of certain employment taxes equal to 50 percent of the qualified wages an eligible employer pays to employees after March 12, 2020, and before January 1, 2021. Eligible employers can get immediate access to the credit by reducing employment tax deposits they are otherwise required to make. Additionally, if the employer's employment tax deposits are not sufficient to cover the credit, the employer may get an advance payment from the IRS.

To determine the amount of the credit, each employee’s wages in an amount up to $10,000 (including certain health care costs) can be counted. The maximum amount of qualified wages taken into account with respect to each employee for all calendar quarters is $10,000, so that the maximum credit for an eligible employer for qualified wages paid to any employee is $5,000.  Since this credit can apply to wages already paid after March 12, 2020, employers can get access to the credit by reducing upcoming deposits or requesting an advance credit on Form 7200, Advance of Employer Credits Due To COVID-19.

Employers are eligible for the credit if they operate a trade or business during calendar year 2020 and experience either:

  • the full or partial suspension of the operation of their trade or business during any calendar quarter because of governmental orders limiting commerce, travel, or group meetings due to COVID-19, or
  • a significant decline in gross receipts. 

A significant decline in gross receipts begins on the first day of the first calendar quarter of 2020 for which an employer’s gross receipts are less than 50% of its gross receipts for the same calendar quarter in 2019. The significant decline in gross receipts ends on the first day of the first calendar quarter following the calendar quarter in which gross receipts are more than 80% of its gross receipts for the same calendar quarter in 2019.

The credit applies to qualified wages (including certain health plan expenses) paid during this period or any calendar quarter in which operations were suspended. The definition of qualified wages depends upon whether the eligible employer has more or less than 100 full-time employees.

An eligible employer's ability to claim the Employee Retention Credit is impacted by other credit and relief provisions as follows:

  • If an employer receives a Small Business Interruption Loan under the Paycheck Protection Program, authorized under the CARES Act, then the employer is not eligible for the Employee Retention Credit.
  • Wages for this credit do not include wages for which the employer received a tax credit for paid sick and family leave under the Families First Coronavirus Response Act.
  • Wages counted for this credit can't be counted for the credit for paid family and medical leave under section 45S of the Internal Revenue Code.
  • Employees are not counted for this credit if the employer is allowed a Work Opportunity Tax Credit under section 51 of the Internal Revenue Code.

Eligible employers will report their total qualified wages and the related health insurance costs for each quarter on the quarterly Form 941 employment tax return beginning with the second quarter.
LOAN FORGIVENESS FOR BUSINESS OWNERS:
WHAT YOU NEED TO KNOW ABOUT EMPLOYEES RETURNING TO WORK

Many business owners are now becoming the recipient of a loan under the Paycheck Protection Program (PPP) (“Recipient”) and may be eligible for loan forgiveness. The large amount of loan forgiveness is dependent upon payroll costs.  Below are answers to many of the questions business owners have in ensuring loan forgiveness by maintaining or returning employees.

How much of the PPP loan is forgiven?

The amount of forgiveness is equal to the following costs incurred and payments made during the eight (8) week period following the date the recipient receives the PPP loan:

  • Payroll costs,
  • Any payment of interest on any covered mortgage obligation,
  • Any payment on any covered rent obligation, and
  • Any covered utility payment.

There are further conditions placed on the amount forgiven. The purpose of these conditions is to incentivize employers to retain full-time employees at the same level of pay or rehire full-time employees after the COVID-19 pandemic. The amount of forgiveness may be reduced proportionally for a reduction in employee headcount or salaries; however, employers can eliminate the reduction in headcount or salaries by June 30, 2020 and restore the maximum loan forgiveness.
U.S. SUPREME COURT TRADEMARK, COPYRIGHT & PATENT UPDATES

In the recent case of Romag Fasteners, Inc. v Fossil Group, Inc., fka Fossil, Inc., et al. (“Romag”), the U.S. Supreme Court, in a 9-0 decision with the majority opinion written by Justice Gorsuch, held that a plaintiff in a trademark infringement suit is not required to show that a defendant willfully infringed the plaintiff’s trademark as a precondition to a profits award.

Two takeaways from the Romag decision for business owners are:

  1. trademark owners now have the opportunity to recover larger damage awards from any infringer, which enhances the value of your trademarks; and
  2. greater care must be taken to ensure that the trademarks that you adopt are not infringing the trademarks of others to avoid being liable for such awards.

Another important case in the U.S. Supreme Court was Georgia v. Public Resource.Org, Inc. In a 5-4 decision with the majority opinion written by Chief Justice Roberts, the Court held the government edicts doctrine, which is that officials empowered to speak with the force of law cannot be the authors of the works they create in the course of their official duties, applies to annotated works explaining the law created for the government.

This holding attempts to ensure individuals have unfettered access to the law and governmental interpretations of it. However, it does not extend that access to works created by non-governmental entities. As such, business owners must be careful to 1) limit their use of legal works to those created by or for governmental authorities, or 2) get permission from the non-governmental entity to use the work.

Recently, in the case, Thryv, Inc. v. Click-To-Call Technologies, LP the U.S. Supreme Court, in a 7-2 decision with the majority opinion written by Justice Ginsberg, held 35 U. S. C. §314(d) bars appeals from decisions to not implement an Inter Partes Review (IPR) based on timeliness under section 315(b). The America Invents Act introduced the IPR as an attempt to streamline patent validity challenges via an administrative procedure in the USPTO rather than having to litigate validity in federal court. This holding serves as a reminder that business owners must be diligent when faced with the prospect of a patent infringement lawsuit, if they want to employ an IPR in their defense.
EXPANDING TELEMEDICINE DURING COVID-19

Like almost everything, telemedicine practices have been impacted by the COVID-19 pandemic. The need for social distancing has created an urgent need for healthcare providers and patients to use telemedicine for patient care compared to the traditional person-to-person medical visits. Telemedicine visits reduce the exposure to infections that may be more prevalent if the care is provided in a medical facility. In an effort to facilitate the use of telemedicine for patient care, there have been a number of important federal and state statutes and supplements to regulations to facilitate this type of medical care.

On January 31, 2020, a Public Health Emergency was declared by the Secretary of Health and Human Services Alex M. Azar II, effective as of January 27, 2020, to deal with Novel Coronavirus. This was followed by the Executive Order issued by President Trump on March 13, 2020, Prioritizing and Allocating Health and Medical Resources to respond to the Spread of COVID-19. As a result this permitted a number of waivers under Section 1135 and 1115 of the Social Security Act to expand the use of telemedicine. 
For Individuals & Families
ECONOMIC IMPACT PAYMENT GUIDANCE ON CHILD SUPPORT

The guidance and Administrative Orders issued by the courts make clear that court orders regarding child support remain enforceable. With that said, if a parent subject to an order to pay child support has been laid off, whether due to the impacts of COVID-19 or for any other reason, that parent can (and should) file a request to modify child support with the appropriate Maryland court. Even though Maryland courts remain closed through June 5, 2020 (at least), and a hearing on a parent’s request to modify child support might not take place for quite some time, by filing a request, in the interim, that parent may be able to obtain a retroactive modification of child support backdating to the date the request was filed. Also, the parent has then “gotten in line” in terms of having his or her case scheduled, as the courts reopen and work through the backlog of cases.

Due to the March 27, 2020 Coronavirus Aid, Relief, and Economic Security (CARES) Act, many individuals have received or will receive economic impact payments. In general, individual taxpayers receive a payment of $1,200, married couples filing jointly receive a payment of $2,400, and families receive an additional $500 per qualifying child under age 17. These payments begin to phase out for individual taxpayers with adjusted gross income over $75,000, married couples filing jointly with adjusted gross income over $150,000, and heads of household with adjusted gross income over $112,500. The receipt of these payments may give rise to questions with respect to the impact on and intersection with child support payments.

When a parent’s child support payments are overseen by the Maryland Department of Human Services, the federal government will intercept the economic impact payment for people who owe child support arrears. If the amount of child support arrears owed is less than the economic impact payment, that payment will be reduced by the amount of child support owed, and the paying parent will receive the remainder of the payment.

For parents who are separated or divorced but share custody of a child, whichever parent claimed the child as a dependent in the most recently filed tax return is the parent who is likely to receive the economic impact payment. If parents most recently filed their taxes jointly but have since divorced, the economic impact payment may be deposited into an account that was formerly joint, or perhaps to which both parents had access, but which is now only owned by one parent. In this situation, individuals should notify the IRS to provide an update as to the change in their tax filing status.

A family law attorney can help address specific child support and custody issues relating to the economic impact payments and the COVID-19 outbreak in general.