Alerts & Newsletters

In a move that should significantly ease traveling to the United States, the Biden Administration has announced plans to withdraw COVID-related geographic travel restrictions in early November. 

The purpose of this Dykema Tax Alert is to briefly summarize the House Tax Proposals as they affect businesses and their owners.

Today, the Ninth Circuit upheld California’s new law (AB 51) barring arbitration provisions in employment contracts. The U.S. Chamber of Commerce and other organizations challenged the law in federal court. The district court enjoined the law, ruling that it conflicts with the Federal Arbitration Act.

Employee Retention Credits (“ERC” or “credits”) are available to eligible employers that paid qualified wages after March 12, 2020, and before January 1, 2022. Multiple pieces of legislation and Internal Revenue Service (“IRS”) guidance expanded and modified the ERC rules and determination of eligibility for ERC, and computation of the credits may vary based on each individual calendar quarter in 2020 and 2021. We have previously provided a summary of the IRS guidance for 2020 and a summary of the rules applicable to the first two quarters of 2021. This alert discusses the most recent IRS guidance from August of 2021 and summarizes ERC rules applicable to the third and fourth quarters of 2021 and general clarification provided by the IRS, and also includes a comparison chart that highlights the differences in the ERC rules as applicable to calendar quarters in 2020 and 2021.

The Small Business Administration (SBA) recently issued an interim final rule governing the appeals process for decisions regarding Paycheck Protection Program (PPP) loans. The rule, which took effect July 28, 2021, permits borrowers to defer principal and interest payments until after the SBA rules on a borrower’s timely appeal and thus making an appeal especially attractive to borrowers. To prepare for the appellate process, it is important to know what is appealable and how to properly file an appeal, especially given that the SBA is still evaluating PPP loans and rendering decisions. The SBA “may undertake a loan review at any time in the SBA’s discretion.”

On August 11, 2021, the Federal Financial Institutions Examination Council (the “FFIEC”) issued new guidance on risk management principles for access to and authentication of electronic funds transfers for the first time in over a decade, titled Authentication and Access to Financial Institution Services and Systems (the “New Guidance”). The New Guidance effectively replaces the FFIEC’s prior guidance on this topic, including its original guidance issued in 2005, Authentication in an Internet Banking Environment (the “Original Guidance”), and the supplement issued in 2011 in response to increased fraud in Internet-based financial transactions (the “Supplement,” and together with the Original Guidance, the “Guidance”). The Guidance was intended to set regulatory expectations for financial institutions offering Internet-based financial services to both commercial and consumer customers.

Shortly after the passage of the CARES Act, the SBA announced that it would be auditing every borrower with a PPP loan in excess of $2 million. What is meant by “audit’ remains to be seen. But to assist in their reviews, the SBA implemented a Loan Necessity Questionnaire known as Form 3509 and Form 3510 (“Questionnaire”). While many borrowers have heard from the SBA that their loan is forgiven, the SBA can audit for six years thereafter. So PPP borrowers (including those who have obtained forgiveness) are not out of the woods and should start to prepare for a potential audit now. 

This is the second in a series of videos from Dykema and Stout addressing PPP-related issues.

With SEC Form 10-Qs for the second quarter due in the next few days, and SEC Form 10‑Ks for companies with June 30 year ends due in the next few weeks, publicly traded companies that received PPP loans, even those that have had those loans forgiven, need to review and update their SEC disclosures regarding their PPP loan. That is because, even though from an accounting perspective forgiveness of your PPP loan eliminates the liability, from a legal perspective forgiveness is not necessarily the end of the process. Indeed, especially for publicly traded PPP borrowers with loans of $2 million or more, PPP loan-related disclosures are still likely required, even after the PPP loan has been forgiven.

Although we remained quite busy with deal activity during the second quarter, we had fewer deals close. All told, we had twelve deals close, averaging $26,000,000 each.

This video is the first in a series of videos from Dykema and Stout addressing PPP-related issues.

We are still waiting for the “official” SBA FAQ announcing the withdrawal of the Forms 3509/3510 Loan Necessity Questionnaire (“Questionnaire”) that, according to the SBA, will include additional information about its review process. In the meantime, PPP lenders have been told by the SBA that they no longer are required to request that borrowers who obtained loans of $2 million or more complete the Questionnaire. Seemingly coinciding with the withdrawal of the Questionnaire, however, the SBA has instead been requesting from many of these same borrowers additional information and documentation. As always feared, it appears that the SBA is viewing loan necessity in hindsight, based upon post-application events, rather than the uncertainties present at the time of application. So what should borrowers take into consideration?

In today’s Insights & Updates chat, Robert Boonin, from Dykema’s Labor & Employment Group, and James Brandell, a Government Policy Advisor from Dykema’s Washington, D.C., office, discuss what is on the Biden Administration’s agenda in terms of redirecting wage and hour law.

In a move that allows greater flexibility for travel to the United States, the State Department recently announced National Interest Exceptions (NIEs) issued to foreign nationals in the last 12 months who are covered by COVID-related Presidential Proclamations (PPs) will now be valid for 12 months, rather than the previous 30-days. In addition, these NIEs will allow for the ability to use them for multiple entries during the new validity period.

In this episode of Insights & Updates, Robert Boonin, from Dykema’s Labor & Employment Group, and James Brandell, a Government Policy Advisor in Dykema’s Washington, D.C., office, discuss the evolving legal standards for determining who are “independent contractors” versus “employees” in the eyes of the courts, the Department of Labor (DOL), and the National Labor Relations Board (NLRB). This is critical due to the Biden Administration’s apparent view being that many independent contractors are really misclassified employees, and such misclassifications expose employers to substantial liability.

President Biden recently issued the Executive Order on Promoting Competition in the American Economy (the “Order”), which affirms that it is the policy of his Administration to enforce the antitrust laws to combat concentration and abuses of economic power in several markets. For employers of any size, two particular sections regarding the labor market are important to note. These sections contemplate a rule curtailing employee non-compete agreements in all industries and a change to the Department of Justice (DOJ) and Federal Trade Commission (FTC) guidance regarding benchmarking exchanges of employee compensation information.

In today’s Five Minute Matters chat, Robert Boonin, from Dykema’s Labor & Employment group, discusses paid leave with James Brandell, who is a Government Policy Advisor in Dykema’s Washington, D.C., office.

On June 17, the Supreme Court rejected another court challenge to the Affordable Care Act (“ACA”), holding that the plaintiffs lacked standing to challenge its minimum essential coverage provisions. For the third time, the Supreme Court upheld the ACA. More than a decade after the ACA was enacted, the long and winding road of ACA challenges may be over and healthcare industry participants may finally be able to rely on the ACA as settled law moving forward.

Litigation between the Associated General Contractors of America (AGC) and the Small Business Administration (SBA) may be nearing an end. AGC seeks to compel SBA to remove and revise the Loan Necessity Questionnaires that have been going to borrowers seeking forgiveness for Payment Protection Program (PPP) loans more than $2 million. On June 23, 2021, AGC reported that it has learned in its settlement negotiations that SBA intends on withdrawing Forms 3509/3510 completely and has already begun the process.

This week, the Ninth Circuit greenlighted a shareholder’s lawsuit challenging SB 826, a relatively new California law establishing quotas for women on corporate boards. The Ninth Circuit issued a ruling reversing a district court’s dismissal of the shareholder’s suit for lack of standing to challenge the law. With the challenge now moving forward, California corporations will want to keep a close eye on this case. This alert covers the Court’s decision and highlights the law’s quotas, effective date and penalties.

On Friday, May 30, 2021, the U.S. Department of Treasury released its “General Explanations of the Administration’s Fiscal Year 2022 Revenue Proposals” (the “Green Book”). The Green Book, a copy of which is located here, provides detailed descriptions of the Biden Administration’s legislative tax proposals, which the White House formally announced on May 28, 2021, when it released its fiscal year 2022 Budget proposals.

Although the State of Michigan announced several weeks ago that employers would be permitted to require employees to return to “in-person” work, the emergency rules issued by MIOSHA prohibiting in-person work remained in place. Those emergency rules were rescinded earlier today and replaced with a new set of emergency rules that will remain in effect until October 14, 2021.

Due to the COVID-19 pandemic, sweeping new laws and regulations having a tremendous impact on California workplaces were enacted in California in 2020 and 2021. There is potential for these laws to delay or undermine the recovery of California businesses. This alert examines the many issues facing California employers surrounding vaccination and reasonable accommodations for employees.

Even before the Biden Administration proposed an increase to the capital gains rate, it has been increasingly common for a seller (“Seller”) of business assets to be approached by consultants promoting a transaction structure whereby Seller can immediately receive nearly all of the cash proceeds of the sale while also deferring the corresponding tax for as long as 30 years. The allure of receiving cash proceeds tax-free for 30 years is a powerful inducement to enter into what is commonly referred to as a “Monetized Installment Sale” (“MIS”) transaction. However, there is reason to proceed cautiously when considering MIS transactions. Furthermore, on May 7, 2021, the IRS Office of Chief Counsel released a memorandum directly, albeit succinctly, addressing MIS transactions (the “2021 IRS Memorandum”).

In a move aimed at speeding the processing of certain non-immigrant petitions, U.S. Citizenship and Immigration Services (USCIS) has announced it will suspend the biometrics requirements for certain I-539 applicants for a two-year period beginning on May 17, 2021. The biometric requirement for I-539 applicants has caused significant backlogs and delays in USCIS’ processing, causing many non-immigrants to lose their ability to work legally in the United States.

On April 28, 2021, President Biden addressed a Joint Session of Congress unveiling his proposals to invest in and restructure the American economy. In his address to Congress, President Biden formally announced his American Families Plan (the “AFP”) which combines $1 trillion in spending with $800 billion in tax cuts and credits for low and middle-class families, and targets high-income earners and corporations to fund all of the costs over a 15-year period. So what are the notable tax provisions of the plan?

Although dropping off from the record deal volume we had during the fourth quarter of 2020, this year has gotten off to a strong start. All told, we closed 17 transactions, including seven in the DSO space alone. The other 10 transactions included deals in the lighting, childcare centers, food and beverage, funeral services, entertainment, automotive, printing and graphics and accounting services industry segments. The average deal size for the first quarter of 2021 was nearly $29 million. Given the number of in-process deals currently in our pipeline, we expect our deal volume to remain high through the second quarter.

On April 19, 2021, the Michigan Department of Treasury issued a notice (the “Notice”) outlining Michigan’s conformity to the federal tax treatment of Paycheck Protection Program (“PPP”) loans under the CARES Act. The Notice also provides guidance for both individual and corporate taxpayers relating to the calculation of sales apportionment, gross receipts for corporate taxpayers, and the calculation of Total Household Resources when taking into consideration the impact of PPP loan forgiveness. This alert contains information about the Notice, as well as the guidance on the corresponding calculations.