COVID-19 Q&A Archive - Warner Norcross + Judd LLP

As the COVID-19 crisis introduced a wide array of regulations and orders, Warner attorneys provided clarification and guidance to our clients and the business community in the form of eAlerts which announced recent legal updates, and webinars which provided further clarity on specific issues and topics. As questions emerged during the crisis, Warner published a Question of the Day, to offer more timely responses to the pressing issues faced by businesses during COVID-19. The following is a compilation of those questions and accompanying answers, listed by date and practice area. We hope you find this information helpful and urge you to contact your Warner attorney directly or email us at covid@wnj.com if you would like to discuss your specific legal needs.

The information provided below in these Q&As is intended for general information purposes only, is not intended to provide legal advice on any specific facts and circumstances, and does not give rise to an attorney-client relationship. The information is current as of the time the question is posted and subject to change. If you have questions regarding the application of this information to you or your business, contact your Warner attorney directly.

Appellate and Supreme Court Bankruptcy Business and Corporate

Cannabis Commercial Finance Contracts Economic Incentives

Employee Benefits Family Law Financial Services General

Government Contracting Health Care Law Immigration

Intellectual Property Labor and Employment Litigation Real Estate

Supply Chain Supply Chain Litigation Tax Law Trust and Estates

White Collar Criminal Defense and Investigations

What can I do if I cannot file my complaint, counter-complaint or cross claim before the statute of limitations expires?

April 22 2020 Appellate and Supreme Court

In Administrative Order 2020-3, the Michigan Supreme Court delayed “all deadlines applicable to the commencement of all civil and probate case[s]” in Michigan courts, including “any statutory prerequisites” to filing an initial pleading, initial responsive pleading, or motion raising a defense or objection to an initial pleading. The practical effect of this Order is to delay all deadlines (including, ostensibly, all statutes of limitations) for filing a complaint, answer, motion or objection related to an initial pleading in civil and probate matters in Michigan courts until after the state of emergency is over. This extension does not apply to criminal matters. In Executive Order 2020-58, the Governor ratified the Supreme Court's extension of the statutes of limitation and time for fulfilling statutory prerequisites for filing a new action. But, we anticipate that after the pandemic is over, the Michigan Supreme Court and the Governor's authority to extend statutes of limitation will be challenged. So we recommend, if at all possible, to file complaints, counter-complaints and cross claims without regard to the Michigan Supreme Court’s extension. For more information, please contact Matt Nelson or Brandon Cory.

I am a creditor holding a mortgage on a significant and sizeable piece of commercial real estate. Unfortunately, the borrower is in default, and workout and forbearance attempts have failed.

June 10 2020 Bankruptcy

Unlike with consumer mortgages, there are currently no prohibitions on foreclosing a commercial mortgage. To the extent consistent with the default and remedies provisions of your mortgage, you may proceed to foreclose by advertisement or judicially. However, there is another option. Under the newly enacted Uniform Commercial Real Estate Receivership Act, MCL 554.1011, you may be able to have a receiver appointed over the commercial real estate and any related personal property. Once appointed, the receiver may continue to run any related business on the property and collect rents. Ultimately, the receiver may sell the property at either a public or private sale. Such a sale is free and clear of junior liens and, most importantly, free and clear of the borrower’s statutory right of redemption, which is typically six months. As a creditor, you may bid at any public sale and offset against the purchase price part or all of the amount secured by your lien. Therefore, seeking a receivership under this Act may be a more efficient and economical way to realize upon your commercial real estate collateral by avoiding the traditional method of foreclosure and redemption.

For a more detailed look at the new Uniform Commercial Real Estate Receivership Act, please click here and join us for a complimentary webinar on June 15 from 12:00 to 1:00 p.m. as Ralph Colasuonno and Rozanne Giunta discusses this Act and its consequences on the commercial real estate landscape. If you have any questions regarding this topic, please contact Ralph Colasuonno or any member of Warner’s Bankruptcy, Restructuring and Insolvency Practice Group.

I am a party to a contract for the sale of goods and the other party to the contract recently filed for bankruptcy. Can I terminate the contract assuming the other party will no longer perform?

June 05 2020 Bankruptcy

Many contracts include clauses stating that a party can terminate the contract when the other party files for bankruptcy, and so you may think that the answer is a clear “yes.” However, when a company files for bankruptcy, the bankruptcy laws provide that an “automatic stay” immediately takes effect. The automatic stay is very broad and it generally prohibits unilateral termination of contracts even if the applicable contract specifically authorizes termination upon a bankruptcy filing. So the answer to your question is generally “no,” you cannot unilaterally terminate a contract based on the other party filing for bankruptcy. If you do terminate and violate the automatic stay, you could be subject to sanctions by the Bankruptcy Court.

Although unilateral termination of the contract is generally prohibited, it may be possible to obtain Bankruptcy Court approval to obtain “relief from the automatic stay” to allow you to terminate the contract. Whether you can obtain relief from the automatic stay by the Bankruptcy Court will depend upon the facts and circumstances of your case and the statutory requirements. Please contact Jon Lauderbach or Gordon Toering for more information.

What Michigan counties have implemented required screening measures for Michigan businesses that remain open?

March 29 2020 Business and Corporate

The following counties have implemented required screening and social distancing measures for open businesses. Open businesses must post a copy of the order at the entrances to the facilities. Any special provisions for individual counties are noted below:

Allegan County: The Allegan County Health Department has not adopted required procedures, but has published recommendations. Link: Allegan County Recommendations
Benzie and Leelanau Counties: Effective April 28, 2020, at 12:00 a.m. through May 15, 2020, at 11:59 p.m. Link: Benzie and Leelanau Counties Order
Central Michigan Counties (Arenac, Clare, Gladwin, Isabella, Osceola, Roscommon): The Central Michigan Counties Health Department has not adopted required procedures, but has published recommendations. Link: Central Michigan Counties Recommendations
Bay County: Effective April 3, 2020 at 12:00 a.m., no end date listed. Order just has to be visible to all employees. Applies only to critical infrastructure workers, specifically: (a) healthcare workers, (b) first responders, (c) corrections officers, (d) municipal and community water treatment, (e) wastewater, and (f) energy workers. Link: Bay County Order
District 4 (Alpena, Cheboygan, Montmorency, Presque Isle): Effective April 6, 2020 at 12:00 p.m. through April 13, 2020 at 11:59 p.m. (EXPIRED) A copy of the order must be distributed to all critical infrastructure workers. Link: District 4 Counties Order
Ingham County: Effective April 13, 2020 at 12:00 p.m. through April 30, 2020 at 11:59 p.m. Employees who answer in the affirmative to screening questions can be allowed to remain at work if asymptomatic. Link: Ingham County Order
Ionia County: Effective March 23, 2020, until rescinded or the State Emergency Order is lifted. Order only applies to childcare facilities. Link: Ionia County Order
Kent County: Effective March 22, 2020, until rescinded or the State Emergency Order is lifted. Order only applies to childcare facilities. Link: Kent County Order
Lenawee County: Effective April 13, 2020 at 11:59 p.m. through April 30, 2020 at 11:59 p.m.. Link: Lenawee County Order
Mid-Michigan Counties (Clinton, Gratiot, Montcalm): Effective April 6, 2020, no end date listed. Link: Mid-Michigan Counties Order
Northwest Michigan Counties (Antrim, Charlevoix, Emmet and Otsego): Effective April 10, 2020 at midnight through May 15, 2020, at 11:59 p.m. A copy of the order must be distributed to all critical infrastructure workers. Link: Northwest Michigan Counties Order
Oakland County: Effective April 14, 2020, at 12:01 a.m. through the expiration of the Michigan Emergency Order. (Michigan EO 2020-42 was rescinded by EO 2020-59 on April 24, 2020, so the Oakland County Order has technically EXPIRED.) Link: Oakland County Order
Saginaw County: Effective April 3, 2020 at 12:00 a.m. until rescinded. Link: Saginaw County Order
Washtenaw County: Effective April 14, 2020 at 12:00 a.m. through April 30, 2020 at 11:59 p.m. Link: Washtenaw County Order
Wayne County: Effective March 26, 2020 at 7:00 p.m. There is no termination date. The Order does not apply to childcare businesses. Link: Wayne County Order

Are there any required screening or other measures in place for Michigan businesses that remain open?

March 27 2020 Business and Corporate

Yes. The Michigan Executive Order contemplates that any employer who is bringing employees back to work will adopt protocols to ensure employee safety. It would be prudent for employers to provide information detailing in-office safety measures to employees designated as critical infrastructure workers or minimum basic operations employees along with the notice of that designation. For practical advice, review the tips from our Labor and Employment Practice Group. In addition, the Oakland County Health Department has implemented required screening and social distancing measures for open businesses effective as of 12:00PM on March 25, 2020 until April 13, 2020. Open business must post a copy of the order at the entrance of the facility. The complete order can be found here: Emergency Order 2020-5 for Control of Pandemic. Likewise, the Washtenaw County Health Department has implemented required screening and social distancing measures for open businesses effective as of 6:00PM March 26, 2020, through 11:59PM on April 13, 2020. Open businesses must post a copy of the order at all facility entrances. The complete order can be found here: Public Health Emergency Order. Warner recommends that employers adopt written protocols and is ready to assist you. In addition, your Warner team will provide updates in the COVID-19 Resource Center if additional screening measures are implemented in Michigan.

Does an employee need any written authorization to travel to work if he/she is designated as a Critical Infrastructure Worker or is necessary for Minimum Basic Operations?

March 26 2020 Business and Corporate

Under the Executive Order, employers are required to designate and provide written notice to “Critical Infrastructure” and “Basic Minimum Operations” employees by March 31, 2020. The Executive Order does not require that designated employees retain a copy of that notice on their person. In other words, this is an obligation on employers, not employees. However, as a best practice, we have been recommending to clients that their employees have a copy of the notice with them, in case they are asked to produce it.

Are state-legal marijuana operations eligible businesses to qualify for PPP? (Updated on April 14, 2020)

April 06 2020 Cannabis

No. Because federal law prohibits the distribution and sale of marijuana, financial transactions involving a marijuana-related business would generally involve funds derived from illegal activity. Therefore, businesses that derive revenue from marijuana-related activities or that support the end-use of marijuana may be ineligible for SBA financial assistance.

Whether a business is eligible is determined by the nature of the business’s specific operations. The following businesses are ineligible:

(a) “Direct Marijuana Business” – a business that grows, produces, processes, distributes or sells marijuana or marijuana products, edibles or derivatives, regardless of the amount of such activity. This applies to recreational use and medical use even if the business is legal under local or state law where the applicant business is or will be located.

(b) “Indirect Marijuana Business” – a business that derived any of its gross revenue for the previous year (or, if a start-up, projects to derive any of its gross revenue for the next year) from sales to Direct Marijuana Businesses of products or services that could reasonably be determined to aid in the use, growth, enhancement or other development of marijuana. Examples of Indirect Marijuana Businesses include businesses that provide testing services, or sell or install grow lights, hydroponic or other specialized equipment, to one or more Direct Marijuana Businesses; and businesses that advise or counsel Direct Marijuana Businesses on the specific legal, financial/accounting, policy, regulatory or other issues associated with establishing, promoting or operating a Direct Marijuana Business. However, for purposes of illustration, SBA does not consider a plumber who fixes a sink for a Direct Marijuana Business or a tech support company that repairs a laptop for such a business to be aiding in the use, growth, enhancement or other development of marijuana.

Indirect Marijuana Businesses also include businesses that sell smoking devices, pipes, bongs, inhalants or other products if the products are primarily intended or designed for marijuana use or if the business markets the products for such use. For more information, contact Matt Johnson.

We’d like to apply for a loan under the Main Street Lending Program. What are the loan terms?

May 23 2020 Commercial Finance

First and foremost, it is important to understand that unlike a PPP loan, loans made under the Main Street Lending Program are not forgivable. Additionally, the Main Street Lending Program is actually made up of three different programs: (1) the Main Street New Loan Facility (“Facility”); (2) the Main Street Expanded Loan Facility (MSELF); and (3) the Main Street Priority Loan Facility (MSPLF). Each program has slightly different loan terms. However, loans under all three programs have the following characteristics: (1) four year maturity; (2) amortization of principal and interest deferred for one year; and (3) adjustable interest rate of LIBOR (one or three month) plus 300 bps. Amortization of principal varies based on which facility the loan is made under, as does minimum loan size ($500,000 for Facility and MSPLF loans, but $10 million for MSELF loans). Loans under all three programs are also subject to origination and transaction fees. For more information about loan terms and eligibility under the Main Street Lending Programs, contact Rob Davies, Malaina Weldy or your Warner attorney.

Our business is looking for other sources of funds to sustain us during the duration of COVID-19 pandemic. What other loans might we qualify for under the Main Street Lending Program? And can we get a loan even if we already received a PPP loan?

May 22 2020 Commercial Finance

Receiving a PPP loan does not disqualify otherwise eligible borrowers from receiving a loan under the Main Street Lending Program. However, the borrower must be able to meet several conditions in order to be eligible, including, among others, that the business: (1) has 15,000 or fewer employees or 2019 annual revenues of $5 billion or less; (2) is created and organized in the United States or under the laws of the United States; and (3) has significant operations in and a majority of its employees based in the United States. A borrower must also make several attestations in order to receive a loan, including that it will: (1) comply with the compensation, stock repurchase and capital distribution requirements of the Coronavirus Aid, Relief and Economic Security Act (CARES Act); (2) that it will not seek to cancel or reduce its outstanding lines of credit with any lender; and (3) that it will make commercially reasonable efforts to maintain its payroll and retain its employees during the period the loan is outstanding. For more details about eligibility requirements under the various Main Street Lending Programs, contact Rob Davies, Malaina Weldy or your Warner attorney.

I received a Paycheck Protection Program loan with a principal amount under $2 million. Does that mean I am in no danger of an audit by the SBA?

May 15 2020 Commercial Finance

No, just receiving a loan under $2 million does not mean that the SBA will not later audit your application. However, the SBA, in consultation with the Department of the Treasury, has created a safe harbor that will apply to the SBA’s review of PPP loans under $2 million. Any borrower that, together with its affiliates, received PPP loans less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith. In other words, the SBA is currently assuming for loans under $2 million that due to the current economic uncertainty, any such loan was necessary to support the ongoing operations of the applicant. This safe harbor only applies to the certification that the “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant” and does not exclude the entire loan from review.

Because of the evolving nature of the Paycheck Protection Program and the potential changes to the above safe harbor, please contact Matthew Crowe, Rob Davies, Matthew Johnson, Timothy Hillegonds, Ford Turrell or your Warner attorney for questions about the interpretation of the Paycheck Protection Program certification requirements or how to demonstrate the basis for your certification to the SBA.

I received a Paycheck Protection Program loan and would like to seek forgiveness of the loan. Could there be a reduction with regards to the amount forgiven? If so, for what reasons?

May 14 2020 Commercial Finance

The SBA Interim Final Rule states that the amount of loan forgiveness can be up to the full principal amount of the loan and any accrued interest. With regards to forgiveness, there are three types of loan forgiveness reductions as follows, all of which are generally measured based on the eight-week period beginning on the date that you receive the PPP loan proceeds: 1) the use of more than 25% of the loan proceeds for non-payroll costs; 2) a reduction in employee headcount; and 3) a reduction in employee pay level. The first is the simplest calculation. Note that we don’t have any guidance on the sequence in which these types of reductions should be calculated. Because of the evolving nature of the Paycheck Protection Program, contact Ford Turrell , Rob Davies, Matthew Crowe, Tim Hillegonds or your Warner attorney if you have questions about the interpretation of the Paycheck Protection Program forgiveness requirements, in particular, requirements related to the amount that may be forgiven and how to calculate the forgiveness reductions.

I received a Paycheck Protection Program loan. How do I know I am compliant with the requirements of the SBA related to the Paycheck Protection Program? Where do I find the latest guidance from the SBA on the Paycheck Protection Program?

May 13 2020 Commercial Finance

The Paycheck Protection Program is a new and evolving program. The SBA is issuing new guidance and changing prior guidance related to the Paycheck Protection Program that can affect a recipient’s use of funds received from the program. The SBA has been issuing and changing this guidance by releasing interim final guidance documents and updates to the SBA’s frequently asked questions several time per week. These guidance documents and revised FAQs are available on the SBA’s Paycheck Protection Program website, available here. The SBA does not give advance notice of when the SBA will be releasing such updates. In addition, each update may give new guidance or modify earlier guidance provided by the SBA. Because of the evolving nature of the Paycheck Protection Program, please contact Ford Turrell, Rob Davies, Matthew Crowe, Tim Hillegonds or your Warner attorney if you have questions about the interpretation of the Paycheck Protection Program requirements, in particular, requirements related to allowable uses of the loan proceeds and reductions to the amount that may be forgiven.

Can a business apply for both a loan under the Paycheck Protection Program (PPP) and an Economic Injury Disaster Loan (EIDL)?

April 04 2020 Commercial Finance

Yes, subject to the following limitations. Businesses may receive a loan under the PPP and an EIDL loan so long as the business applies the loans to different items. For example, a business may receive a loan under the PPP loan for payroll assistance and an EIDL for working capital. An applicant that already received EIDL from January 31, 2020 through April 3, 2020, can apply for a PPP loan. If the EIDL loan was not used for payroll costs, it does not affect eligibility for a PPP loan. If the EIDL loan was used for payroll costs, the PPP loan must be used to refinance your EIDL loan. Proceeds from any advance up to $10,000 on the EIDL loan will be deducted from the loan forgiveness amount on the PPP loan. However, since at least 75% of the PPP loan proceeds shall be used for payroll costs, the amount of any EIDL refinanced will be included in this calculation. For more information, contact Matthew Johnson or Ford Turrell.

Because of the COVID-19 pandemic, I am unable to perform all or some of my contractual obligations. When and how should I notify the other party to the contract?

June 09 2020 Contracts

First, you should carefully review the contract’s notice requirements. Even if the contract’s force majeure clause does not specify the notice required, the contract may contain a separate provision governing notice. Under Michigan law, parties must provide notice of their failure to perform or delay in performance within the time period and manner specified in the contract. Therefore, if the contract requires “prompt” or “written” notice of non-performance or requires that you send notice to a particular address, you should abide by those terms and provide notice accordingly.

If the contract governs the sale of goods and does not contain any notice requirements, courts will use UCC 2-615 to fill the gaps of the contract. Pursuant to UCC 2-615(3), you must notify the other party “seasonably” of your failure to perform or delay in performance. If the contract does involve the sale of goods and is silent concerning notice, you should notify the other party of your failure or delay in performance as soon as reasonably practicable to preclude arguments about delay. Please contact Michael Brady, Homayune Ghaussi or Katelyn Crysler for more information.

I am a party to a contract for the sale of goods and I am hearing rumors that the other party to the contract may soon file for bankruptcy. I want assurance that the party is not insolvent and will continue to perform its obligations under our contract. How can I get this information from the other side?

June 08 2020 Contracts, Supply Chain

You should begin by looking to your contract to determine when you may request assurances. Absent a contractual provision on point, when a contract is for the sale of goods, Uniform Commercial Code (UCC) Section 2-609 provides a way for a party to demand adequate assurance of performance from the other side when the requesting party has “reasonable grounds for insecurity.” The reasonableness of a party’s insecurity is determined by commercial standards—there must be an objective basis for the insecurity, rather than a purely subjective fear that the party will not perform.

Insolvency of the contracting party by itself, may or may not be sufficient grounds for insecurity that would justify demanding adequate assurance of performance from the other party. The requesting party must look broadly at the circumstances surrounding the other side’s performance. If a party properly demands adequate assurance and the other party does not provide adequate assurance of performance on a timely basis, then that could justify termination of the contract. You must be careful, however, because termination when there are inadequate grounds for insecurity could be considered a breach by the requesting party. Please contact Homayune Ghaussi or Katelyn Crysler for more information.

Due to COVID-19, I am unable to perform all or some of my contractual obligations, but my contract does not contain a force majeure clause. Am I still excused from performing?

June 06 2020 Contracts, Supply Chain

If your contract governs the sale of goods and does not contain a force majeure clause, courts will use UCC 2-615 to fill the gaps of the contract. Under UCC 2-615(a), a supplier’s delay in performance is excused if its performance “has been made impracticable by the occurrence of a contingency the non-occurrence of which was a basic assumption on which the contract was made.” Simply stated, your delay or non-delivery may be excused if an unforeseen event, not within the contemplation of the parties at the time the contract was entered into, has rendered your performance commercially impracticable.

If your contract is not for the sale of goods and does not contain a force majeure clause, the common law applies. Michigan’s common law recognizes a variety of equitable defenses that may excuse your performance, including impossibility, impracticability, and frustration of purpose. Please contact Michael Brady, Homayune Ghaussi or Katelyn Crysler for more information.

As a result of the COVID-19 crisis, I am unable to perform all or some of my contractual obligations. What can I do?

June 03 2020 Contracts, Supply Chain

First, you should carefully review the contract for any provisions excusing your obligation to perform, including a force majeure, an excusable/justifiable delay or an excused non-performance clause. Force majeure contract provisions address circumstances in which performance becomes impossible or impracticable due to events that could not have been foreseen, and are not within a party’s reasonable control. If your contract contains a force majeure clause, look to its terms to see what qualifies as a force majeure event and what notice requirements must be met. If COVID-19 qualifies as a force majeure event under the contract and you adhere to its notice requirements, your obligation to perform for the duration of the event may be suspended or excused.

If your contract does not contain a force majeure provision, you may find recourse through the Uniform Commercial Code (UCC) for contracts governing the sale of goods or through common law equitable defenses—impossibility, impracticability and frustration of purpose—for contracts not involving the sale of goods. Please contact Michael Brady, Homayune Ghaussi or Katelyn Crysler for more information.

When my manufacturing business is permitted by the state of Michigan to get back up and running, I will have limited production to satisfy my customers. How must I allocate my limited capacity?

April 29 2020 Contracts, Supply Chain

First, you should carefully review your customer contract and determine whether the contract addresses allocation of supply. If the contract addresses allocation of supply, you should abide by the terms of the contract and allocate accordingly.

If the contract does not address allocation of supply, the Uniform Commercial Code (UCC) fills in the gaps of a contract for the sale of goods. Under UCC 2-615, when the seller cannot perform at full capacity, the seller must allocate supply among their customers in a “fair and reasonable” manner, and must provide seasonable notice of the allocation decision. The UCC does not define what constitutes “fair and reasonable,” but it does require that the seller allocate among existing customers and the seller’s own needs. However, there is no requirement that supply be divided equally among customers, and past sales figures can be the basis for allocation. Regardless of the method of allocation you choose, you must be sure that there is a logical and credible basis for your decision. Register for our upcoming webinar titled Business Update: Managing Your Supply Chains After COVID-19, on May 1, 2020. Please contact Michael Brady, Homayune Ghaussi or Katelyn Crysler for more information.

Is there any economic relief available in Michigan for businesses and community development projects that previously received grants, loans or other economic assistance from the Michigan Strategic Fund?

April 27 2020 Economic Incentives

Under the Michigan Strategic Fund Awardee Relief Initiative, relief may be granted in the form of payment deferment, milestone extensions, maturity date adjustments or extensions, refinancing authorizations, scope reductions and deadline extensions. Details regarding eligibility are available here. The Awardee Relief Guidance is available here and the application can be accessed here. Please contact Jared Belka for more information.

Has the IRS issued any relief from the notarized/witnessed signature requirement for retirement plan payment elections in connection with the COVID-19 pandemic?

June 11 2020 Employee Benefits

To facilitate the payment of plan distributions and loans during the COVID-19 pandemic, the IRS issued Notice 2020-42 (Notice), which provides relief for any participant election that requires the signature of an individual to be witnessed in the physical presence of a notary or plan representative. This temporary relief covers the period January 1, 2020, through December 31, 2020.

The Notice does not eliminate witnessing entirely, rather it provides alternative electronic options, such as live audio-video technology (e.g., Zoom, WebEx, etc.), so that participants, spouses, notaries and plan representatives can continue to follow social distancing guidelines. Temporary relief from the physical presence requirement is provided for any participant election witnessed by a: (1) notary public of a state that permits remote electronic notarization, or (2) plan representative. Please read here for more details on the Notice.

If you need assistance with implementing the temporary relief provided by the Notice or with implementing the Coronavirus Aid, Relief and Economic Security Act (CARES Act) retirement plan provisions, please contact Lisa Zimmer, Brianna Richardson or any member of Warner’s Employee Benefits and Executive Compensation Practice Group.

Is there any relief for student loans?

April 24 2020 Employee Benefits

Yes. There are two programs, one for employers and one for student loan borrowers.

Section 2206 (Exclusion for Certain Employer Payments of Student Loans)

An Educational Assistance Program is a separate written program that an employer may provide to help employees pay for their own educational expenses Eligible educational expenses include tuition, fees, books, supplies, and equipment and exclude meals, lodging, transportation, or education involving sports, games, or hobbies. An employee may receive a maximum of up to $5,250 in educational assistance each calendar year. Amounts received up to the limit are excluded from the employee’s gross income for that year.

The CARES Act adds student loan payments made before January 1, 2021, as an eligible Educational Assistance Program expense. The employer may either pay the lender directly or reimburse the employee for any qualified educational loan payments incurred for the employee’s own education. This provision does not increase the annual $5,250 limit.

To take advantage of this relief, an employer without an educational assistance program will need to adopt one and an employer with an existing program will need to amend it.

If you have a client that is interested in offering this relief for employees, contact Norbert Kugele for assistance. Norbert can help the client with all the necessary documentation.

Section 3513 (Temporary Relief for Federal Student Loan Borrowers)

Under this provision, all loan payments for a loan held by the Department of Education are suspended from March 13, 2020, through September 30, 2020. During this period, no additional interest will accrue, no reports will be filed with any consumer reporting agency, and all involuntary collections (i.e., wage garnishment or tax refund offset) will be suspended. For more details, visit this website here.

Has the Department of Labor (DOL) extended the deadline for providing the annual funding notice (AFN) for defined benefit plans subject to ERISA?

April 23 2020 Employee Benefits

No. Although the CARES Act allows the DOL to delay the AFN distribution deadline, the DOL has failed to do so. The AFN must be provided no later than 120 days after the end of each plan year. For pension plans with a calendar plan year, the 2020 deadline is April 29, 2020 (due to the leap year). The civil penalty for failure to provide the AFN on time is $110 per day, payable to each participant or beneficiary who did not receive the AFN. Please contact Lisa Zimmer or Kent Sparks for more information.

How do I account for retirement plan contributions when calculating my payroll costs for a PPP loan?

April 19 2020 Employee Benefits

Clearly any per payroll period or per month retirement plan contribution would be counted in the monthly average of a company’s payroll costs. The SBA has not directly addressed how retirement plan contributions that are made on a less frequent basis, such as a quarterly or annual contribution, should be taken into account, but they have said that for purposes of calculating the loan amount they are contemplating a gross number based on aggregating all payroll costs from the 12-month period. The FAQs that the SBA issued on April 6, 2020, do discuss employer contributions to defined-benefit or defined-contribution retirement plans as a payroll cost that is not subject to the $100,000 limit on includible compensation, so it is clear they expect retirement contribution to be included. We believe an applicant would have a good faith argument based on the available SBA guidance that an annual retirement contribution should be included in the 12-month aggregate payroll costs, and thus a portion of it in the monthly average payroll costs. For additional information, contact Justin Stemple.

Our 401(k) plan permits participant loans; are there any new rules for loans from tax-qualified defined contribution plans?

April 03 2020 Employee Benefits

Yes. The CARES Act temporarily increases the maximum loan limit and temporarily extends the repayment period for plan loans made to participants who are qualified individuals (as defined in the CARES Act) from a tax-qualified defined contribution plan subject to ERISA. The maximum permissible loan amount is temporarily increased for six months beginning on the date the CARES Act was enacted (i.e., from March 27, 2020 through September 23, 2020) to the lesser of (a) $100,000 (versus the current $50,000) reduced by the amount of any outstanding loan; or (b) the participant’s account balance (versus the current 50% of the participant’s account balance). Loan repayments that are due between March 27, 2020, and December 31, 2020, are delayed for one year, even if such delay results in a loan repayment after the end of the maximum statutory five-year loan repayment period. The existing loan repayment schedule must be adjusted to reflect the delay and the additional interest accrued. There is not consensus on how and when repayments should resume. Under the most common interpretation, and the one being implemented by most recordkeepers, repayments begin on January 1, 2021, the loan is re-amortized as of thta date, and the term of the loan is extended nine months. Increasing the loan limit appears to be optional, but it is not clear whether the loan payment delay is optional. The statutory language seems to indicate that delay is required and must be made available to participants who are qualified individuals under the CARES Act and want it. Generally, employers have plenty of time to adopt plan amendments reflecting this change, but the plan must operate in accordance with the implemented changes in the meantime. Until the IRS provides further clarity on which provisions are optional and which are required, employers need to coordinate with their recordkeeper and make good faith decisions. Contact Lisa Zimmer for more information.

Can employees withdraw funds from their 401(k) plan accounts without being subject to penalty?

April 01 2020 Employee Benefits

Yes. The CARES Act allows distributions through December 31, 2020, for up to $100,000 for coronavirus related reasons from 401(k) plans, 403(a) plans, 403(b) plans, government sponsored 457(b) plans, and IRAs. These distributions are not subject to the 10% early distribution penalty applicable to in-service distributions made before age 59-1/2, and may be repaid in one or more contributions within three years. In addition, income taxes may be paid ratably over three years. A coronavirus related distribution only may be made to a "Qualified Individual." A Qualified Individual is an individual: (a) who is diagnosed with COVID-19; (b) whose spouse or dependent is diagnosed with COVID 19; (c) who experiences adverse financial consequences as a result of being quarantined, furloughed, laid off, having work hours reduced, being unable to work due to lack of child care, closing or reduced hours of a business owned and operated by the individual; or (d) other factors determined by the Secretary of the Treasury. Coronavirus‑related distributions appear to be an optional plan provision, and it looks like employers may add them to their defined contribution plan without also allowing repayments. Generally, employers have plenty of time to adopt plan amendments reflecting this change, but the plan must be operated in accordance with the implemented changes in the meantime. While we believe coronavirus-related distributions are optional, until the IRS gives clarity on this, employers need to coordinate with their recordkeeper and make good faith decisions. If you have questions, please contact Lisa Zimmer.

What benefits are available under the CARES Act for employers, or affiliated employers, with greater than 500 employees (“Larger Employers”)?

April 07 2020 Labor and Employment, Commercial Finance, Tax Law, Business and Corporate

There are several benefits to Larger Employers, including:

Employees of Larger Employers are entitled to the unemployment assistance under Sections 2102 and 2104 of the CARES Act.
Larger Employers taxable as corporations may now deduct qualified charitable contributions in an amount up to 25% of their taxable income and carry over excess contributions for future tax years. For charitable deductions of food inventory, the limit has been increased from 15% to 25% of aggregate net income.
Larger Employers are entitled to the Employee Retention Payroll Credit under Section 2301 of the CARES Act.
Larger Employers can delay paying the employer share of FICA imposed under § 3111(a) of the Internal Revenue Code incurred for the period beginning on March 27, 2020 and ending before January 1, 2021.
There are modifications to the rules for net operating losses, the AMT credit and the deductibility of business interest expense that may benefit a Larger Employer taxable as a corporation.
Larger Employers may be eligible for part of the $454,000,000,000 in loans/loan guarantees/investments for programs or facilities established by the Board of Governors of the Federal Reserve System to provide liquidity to the financial system that supports lending to eligible businesses, states or municipalities. We are waiting on more guidance from this program.
Businesses with up to 100,000 employees or up to $2.5 billion in 2019 annual revenue may take advantage of the Federal Reserve's Main Street Lending Program. The program provides for new loans in the minimum amount of $1 million with a four-year maturity with an interest rate of SOFR + 250-400 basis points. We are waiting on more guidance before applications can be made for these loans.

Please contact Matt Johnson for business questions, Rob Davies regarding finance questions, Sean Cook for tax questions or Steve Palazzolo regarding unemployment.

Has the IRS issued any relief from the notarized/witnessed signature requirement for retirement plan payment elections in connection with the COVID-19 pandemic?

June 11 2020 Employee Benefits

If you need assistance with implementing the temporary relief provided by the Notice or with implementing the Coronavirus Aid, Relief and Economic Security Act (CARES Act) retirement plan provisions, please contact Lisa Zimmer, Brianna Richardson or any member of Warner’s Employee Benefits and Executive Compensation Practice Group.

Is there any relief for student loans?

April 24 2020 Employee Benefits

Section 2206 (Exclusion for Certain Employer Payments of Student Loans)

To take advantage of this relief, an employer without an educational assistance program will need to adopt one and an employer with an existing program will need to amend it.

If you have a client that is interested in offering this relief for employees, contact Norbert Kugele for assistance. Norbert can help the client with all the necessary documentation.

Section 3513 (Temporary Relief for Federal Student Loan Borrowers)

Has the Department of Labor (DOL) extended the deadline for providing the annual funding notice (AFN) for defined benefit plans subject to ERISA?

April 23 2020 Employee Benefits

How do I account for retirement plan contributions when calculating my payroll costs for a PPP loan?

April 19 2020 Employee Benefits

Our 401(k) plan permits participant loans; are there any new rules for loans from tax-qualified defined contribution plans?

April 03 2020 Employee Benefits

Yes. The CARES Act temporarily increases the maximum loan limit and temporarily extends the repayment period for plan loans made to participants who are qualified individuals (as defined in the CARES Act) from a tax-qualified defined contribution plan subject to ERISA. The maximum permissible loan amount is temporarily increased for six months beginning on the date the CARES Act was enacted (i.e., from March 27, 2020 through September 23, 2020) to the lesser of (a) $100,000 (versus the current $50,000) reduced by the amount of any outstanding loan; or (b) the participant’s account balance (versus the current 50% of the participant’s account balance). Loan repayments that are due between March 27, 2020, and December 31, 2020, are delayed for one year, even if such delay results in a loan repayment after the end of the maximum statutory five-year loan repayment period. The existing loan repayment schedule must be adjusted to reflect the delay and the additional interest accrued. There is not consensus on how and when repayments should resume. Under the most common interpretation, and the one being implemented by most recordkeepers, repayments begin on January 1, 2021, the loan is re-amortized as of that date, and the term of the loan is extended nine months. Increasing the loan limit appears to be optional, but it is not clear whether the loan payment delay is optional. The statutory language seems to indicate that delay is required and must be made available to participants who are qualified individuals under the CARES Act and want it. Generally, employers have plenty of time to adopt plan amendments reflecting this change, but the plan must operate in accordance with the implemented changes in the meantime. Until the IRS provides further clarity on which provisions are optional and which are required, employers need to coordinate with their recordkeeper and make good faith decisions. Contact Lisa Zimmer for more information.

Can employees withdraw funds from their 401(k) plan accounts without being subject to penalty?

April 01 2020 Employee Benefits

My spouse and I are divorced and we have three children ages 18, 13 and 10. Who gets the stimulus checks attributable to our children?

April 21 2020 Family Law

Since the stimulus payment actually represents a credit and advance refund against an individual's 2020 income tax obligation, the parent who is entitled to claim a child under age 17 on their 2020 tax return should be entitled to the stimulus check attributable to that child. The stimulus checks or tax credits go to the parent who claims the child for tax credit purposes on their income tax returns. Absent a court order (re: which parent claims), the custodial parent is entitled to claim the credit and the stimulus check. However, children 17 or older will not receive a credit or stimulus check. For more information, contact Ric Roane or Nazli Sater.

If I am not able to go to work and get paid, what do I do about my child support obligation?

March 31 2020 Family Law

For support payers who have reduced income who are receiving unemployment benefits, they should nevertheless attempt to comply with the existing support order and pay some amount. A payor of child or spousal support (alimony) must file a motion to modify (reduce) support based upon a change in circumstances. Even though the courts are not immediately available for hearings on support modifications at this time, any modification or reduction would be retroactive to the date of filing the motion. Therefore it is imperative that a payor promptly seek to file a motion to modify support so as to preserve the retroactive date for any modification. Indeed, even though the Courts are physically closed to filings, many courts use electronic filing for motions. The support payor should thus file the motion to modify support by e-filing or by mailing the motion to the courthouse so as to preserve the retroactive application of any modification. NOTE: Child support is always subject to modification upon a showing of a material change in circumstances, while in many Judgments, spousal support may be “modifiable” or “non-modifiable.” Please contact Ric Roane or Nazli Sater for additional information.

If an investment adviser registered under the Investment Advisers Act of 1940 for investment receives a Paycheck Protection Program (PPP) loan, does the adviser need to make a disclosure?

May 03 2020 Financial Services

Maybe. The U.S. Securities and Exchange Commission (SEC) provided guidance in the form on an FAQ in which the SEC reminded advisers of their fiduciary duty under federal law, including the duty to make full and fair disclosure to the adviser’s clients of all material facts relating to the advisory relationship. In determining whether an adviser who receives a PPP loan must make a disclosure, the adviser should consider the circumstances leading to seek a PPP loan. If, for example, the adviser must use the PPP loan in order to pay the salaries of the adviser’s employees who are primarily responsible for performing advisory functions (or, presumably, lose the benefit of those services), it is the staff’s view that the adviser would need to disclose this. While helpful, the SEC staff’s guidance still leaves many unanswered questions. The entire SEC FAQ is available here. For help in determining whether and how you need to make a disclosure and the type of disclosure, contact Shane Hansen or Linda Paullin-Hebden.

Individuals registered with broker-dealers or with investment advisers must register using a securities industry Form U4. If a registered person or a business they control receives a loan under the Paycheck Protection Program (PPP) and that loan or a portion thereof is forgiven because the loan forgiveness terms were satisfied, will the registered person be required to report that forgiveness in response to Question 14K of Form U4 as a “compromise with a creditor”?

April 18 2020 Financial Services

No. FINRA recently provided guidance that if a PPP loan or a portion thereof is forgiven, consistent with the original terms of the loan, no reporting under Form U4 is required. FINRA clarified that a compromise with one or more creditors generally involves a new agreement in which the creditor accepts less than the full amount of the debt owed under the existing debt instrument in full satisfaction of the debt. The PPP loan contemplates forgiveness and thus, will not require a new agreement by the creditor but will be an event consistent with the terms of the loan. In the event the PPP loan or any portion thereof is not forgiven, any later forgiveness of such amount by the creditor would be deemed to be a compromise with the creditor and reportable on Form U4. It should be noted that FINRA guidance is not binding on state regulators. That said, the North American Securities Administrators Association (NASAA) has publicly stated that it concurs with FINRA regarding this guidance. FINRA FAQs can be viewed here. Please contact Shane Hansen or Linda Paullin-Hebden for more information.

Is the SBA still accepting applications for the Paycheck Protection Program (PPP) loan program?

April 16 2020 Financial Services

Yes. After funding for the first round of PPP loans ran out, Congress appropriated $310 billing in additional funding for a second round, which is currently under way. As of Sunday, May 3, 2020, the SBA reported that more than 2.2 million loans had been approved in round two, totaling more than $175 billion. Once the additional funding is exhausted, the SBA will no longer accept applications for the PPP loans unless Congress funds a third round. Please contact Rodney Martin for more information.

Can a commercial bank qualify for a PPP loan?

April 09 2020 Financial Services

No. Banks and other financial businesses, such as finance companies and pawn shops that are primarily engaged in the business of lending, are not eligible to receive PPP loans according to SBA regulations (13 CFR 120.110). The SBA’s Standard Operating Procedures also lists the following businesses as ineligible to receive a guaranteed loan: (i) banks; (ii) life insurance companies (but not independent agents); (iii) finance companies; (iv) factoring companies; (v) investment companies; (vi) bail bond companies; and vii) other businesses whose stock in trade is money. These provisions would appear not to disqualify a trust bank or investment advisory firm, since neither would not be “primarily engaged in the business of lending.” Please contact Rodney Martin or Shane Hansen for additional information.

Did Governor Whitmer’s May 1 Executive Order 2020-70 allow for additional resumed outdoor work?

May 05 2020 General

Yes. Under the Governor’s May 1 Executive Order 2020-70, workers “who perform work that is traditionally and primarily performed outdoors, including forestry workers, outdoor power equipment technicians, parking enforcement workers and similar workers” may resume activities at 12:01 a.m. on May 7, 2020. Such activities, however, are subject to stringent precautionary measures. All resumed entities must follow the requirements, including, but not limited to: 1) implementing a COVID-19 Preparedness and Response Plan consistent with OSHA guidance; 2) restricting the number of workers present on premises to no more than is strictly necessary to perform the in-person work; 3) promote remote work to the fullest extent possible; 4) keep workers at least six feet away from one another; 5) increase standards for facility cleaning; and 6) adopt policies for preventing workers who have symptoms of COVID-19 from returning to work. For additional information regarding the Governor’s Order, please review our May 3, 2020 eAlert. For further questions, please contact Troy Cumings, Matt Johnson, Linda Paullin-Hebden or your Warner attorney.

Are any previously prohibited personal activities now permitted under Michigan Executive Order 2020-59?

April 26 2020 General

Individuals may engage in motorized boating and golfing (without a cart). State parks will continue to remain open as they have throughout the pandemic. Individuals may also travel between residences, though doing so is strongly discouraged. The Stay Home, Stay Safe Executive Order has been extended through May 15, 2020, and is available here. Please contact Troy Cumings for more information.

Under Michigan Executive Order 2020-59, are any previously prohibited business activities now permitted?

April 25 2020 General

Yes. Landscapers, lawn-service companies, greenhouses and nurseries are all permitted to re-open, and previously closed sections of large stores dedicated to those activities and any other closed sections can also re-open. Bike repair shops can open for service and retailers that do not sell necessary supplies may open for curbside pick-up and delivery. The Stay Home, Stay Safe Executive Order has been extended through May 15, 2020, and is available here. Please contact Troy Cumings for more information.

Can my company sell PPE to foreign customers?

April 10 2020 Government Contracting

No, depending on the specific PPE. On April 8, 2020, the Trump Administration placed restrictions on exports of PPE. Customs and Border Patrol will be detaining shipments of PPE and consulting with FEMA to determine whether: (1) to return the PPE for use in the U.S.; (2) to purchase the PPE on behalf of the U.S.; or (3) allow the PPE to be exported. Currently, there are restrictions on exports of the following products: (1) N-95 masks and other filtering face-piece respirators (ex: N-99, N-100, R-95, R-99, R-100 or P-95, P-99, P-100), including those that are disposable and offer protection at an N-95 level of filtration efficiency; (2) Elastomeric, air-purifying respirators and particulate filters/cartridges; (3) PPE surgical masks; and (4) PPE gloves, surgical gloves and other gloves intended for the same purposes. We anticipate that this list will be expanded in the near future. A CBP memo was subsequently issued that exempted shipments to Canada/Mexico and also exempted any shipment under $2,500 or less than 10,000 units. For additional information, please contact Adam Bruski.

If I am a health care provider in a small private group practice or in a practice by myself, or a different type of non-hospital provider or supplier participating in Medicare, are there any other options I have under the CARES Act in addition to the small business loans and Paycheck Protection Program?

April 12 2020 Health Care Law

Yes. The CARES Act expanded the Medicare accelerated payment program beyond its traditional availability to hospitals to help increase cash flow to all Part A and Part B providers and suppliers. To be eligible, providers/suppliers must: (1) have billed Medicare for claims within 180 days immediately before the date of signature on the provider’s/supplier’s request form; (2) not be in bankruptcy; (3) not be under active medical review or program integrity investigation; and (4) not have any outstanding delinquent Medicare overpayments. The Medicare Administrative Contractor will review and issue payments within seven days of receiving the request. While the advance and accelerated payments are a loan that providers must pay back, this funding is separate from the $100 billion provided CARES Act appropriation that does not need to be repaid. The Department of Health and Human Services recently opened the CARES Act Provider Relief Fund Payment Attestation Portal to provide payments, not loans, to facilities and providers. The following summarizes some important points relating to the Provider Relief Fund:

All facilities and providers that received Medicare fee-for-service reimbursements in 2019
Payments to practices that are part of larger medical groups will be sent to the group's central billing office
- All relief payments are made to the billing organization according to its Taxpayer Identification Number
As a condition to receiving these funds, providers must agree not to seek collection of out-of-pocket payments from a COVID-19 patient that are greater than what the patient would have otherwise been required to pay if the care had been provided by an in-network provider
This quick dispersal of funds will provide relief to both providers in areas heavily impacted by the COVID-19 pandemic and those providers who are struggling to keep their doors open due to healthy patients delaying care and canceling elective services
If you ceased operation as a result of the COVID-19 pandemic, you are still eligible to receive funds so long as you provided diagnoses, testing or care for individuals with possible or actual cases of COVID-19. Care does not have to be specific to treating COVID-19. HHS broadly views every patient as a possible case of COVID-19.

There are additional terms and conditions that apply to the receipt of funds, and the recipients must provide certain attestations. For additional information, please contact Jeff Segal.

Does the Presidential Proclamation of April 22, 2020, suspending entry of immigrants to the U.S. affect foreign nationals already here?

April 28 2020 Immigration

No. The Proclamation’s restriction on entry only applies to those immigrants who are currently outside the U.S. and do not already have an immigrant visa or other travel document such as a transportation letter or an advance parole document. Moreover, the Proclamation does not restrict the entry into the U.S. of nonimmigrant aliens (e.g., foreign nationals holding temporary visas such as B, E, F-1, H-1B, J-1, L-1, O-1 or TN. Read Warner’s latest eAlert on this topic here. Please contact Michael Wooley for more information.

I have new product and brand name ready to launch when my business reopens and I don’t want to lose any patent and trademark rights. Is the U.S. Patent and Trademark Office closed during the COVID-19 national emergency, or can I still file patent and trademark applications to protect my new product?

May 10 2020 Intellectual Property

The U.S. Patent and Trademark Office’s physical buildings are closed, but the Office remains open for business. While the director announced extensions for certain existing patent and trademark office deadlines, patent and trademark applications are still being accepted and, in fact, should be filed as soon as possible to preserve the earliest filing dates. This is particularly important for patentable inventions that are facing a filing deadline due to public disclosure or sale. For additional questions about patent and trademark filings, please contact Chad Kleinheksel, Mary Bonnema or your Warner attorney.

What are the penalties if a business does not comply with the requirements of Executive Order 2020-97?

June 04 2020 Labor and Employment

If you are not supposed to be open and you are, you could theoretically go to jail. A violation of Executive Order 2020-96, the order that actually allows certain business to reopen, is a misdemeanor. Executive Order 2020-97 is the order that outlines requirements that all businesses must put in place to keep employees safe. It provides that if a business does not follow the requirements, the business is in effect, failing to provide a workplace free from recognized hazards that are causing or are likely to cause death or serious physical harm to an employee under MiOSHA. OSHA announced that it plans to increase the maximum penalty an employer can be issued for: (1) serious and other than serious citations to $13,260; and (2) the highest amount that can be issued for repeat and willful violations to $132,598. For additional information, please contact a member of our Warner Labor Practice Group.

When the state reopens, are employees required to return to the office or can they continue to work remotely at home?

June 02 2020 Labor and Employment

Employees can continue to work remotely. Not only can they continue to work remotely, but they should if they can. Executive Order 2020-97 provides that all employers with in-person operations should “promote remote work to the fullest extent possible.” For additional information, please contact a member of our Warner Labor Practice Group.

Executive Order 2020-97 requires that businesses provide employees with face coverings. Must all employees wear face coverings if they can maintain six feet of social distancing?

June 01 2020 Labor and Employment

The answer depends on the industry. Generally, for businesses with in-person operations, face coverings are to be worn when employees cannot consistently maintain six feet of separation. If you cannot maintain three feet of separation, Executive Order 2020-97 recommends (but does not require) face shields. Moreover, in an office setting, face coverings are required in shared spaces and during in-person meetings. With regards to restaurants and bars, customers must wear them until they get to their table, and hosts, servers and kitchen employees must wear them at all times. Similarly, doctors and dentists must follow CDC and OSHA guidelines. For additional information, please contact a member of our Warner Labor Practice Group.

Does our business need to take temperature readings and document the answers to the questions identified each day?

May 29 2020 Labor and Employment

It depends on the business sector in which you operate. Under Executive Order 2020-97, manufacturers, doctors and dentists must take temperature checks, but other entities are not required. As to keeping records, if you have to take temperatures, you have to keep records. You also must keep records for your screening questions. Section 10 of Executive Order 2020-97 requires employers to maintain records of training, daily screening and any reports of confirmed cases. For additional information, please contact a member of our Warner Labor Practice Group.

Is it still necessary for a business to ask about domestic travel and quarantine employees who travel domestically?

May 29 2020 Labor and Employment

Generally no. Neither the CDC nor the state has required in any of its guidance that employees who travel domestically be quarantined for 14 days. However, MiOSHA, in its recent best practices guidance for manufacturing facilities, issued on May 15, 2020, recommends that employers require a 14-day quarantine after returning from necessary personal travel and the CDC recommends the same for international travel. So while this may not be required, it may still be best practice. In addition, there might be a county order that requires this question in your screening. Thus before you take this question out of your screening or stop requiring quarantine for domestic travel, you should check for any applicable county or local order. For additional information, please contact a member of our Warner Labor Practice Group.

As we bring our employees back to work, can those who are able to work but simply refuse to do so continue to collect unemployment benefits?

May 21 2020 Labor and Employment

No. The U.S. Department of Labor (DOL) issued a letter to all state workforce agencies regarding the “program integrity” requirements for the Unemployment Insurance Program, including the enhanced unemployment benefits provided for in the CARES Act. The letter expressly states that the DOL recognizes employees refusing to return to work has become an issue and that the DOL expects states to stay diligent about determining who is qualified for benefits. It says that “as states begin the process of phased reopening, we expect historically high levels of suitable return to work opportunities. As such, states must work to maintain program integrity by ensuring that claimants are not continuing to claim benefits when they have been offered suitable work.” The DOL “strongly encourage[s]” states to request employers to provide information when workers refuse to return to their jobs for reasons that do not support their continued eligibility for benefits” and to “remind employers and the public about the claimant and employer fraud resources within each state.” States must comply with these program integrity requirements or risk losing the federal funding for these benefits. For additional information, please contact Dean Pacific or your Warner attorney.

An employer knows of employees who have medical conditions as identified by the CDC that might place the employees at “higher risk of severe illness” if they get COVID-19 and is concerned that their health will be jeopardized upon returning to the workplace, but the employees have not requested an accommodation. How does the Americans with Disabilities Act apply here?

May 18 2020 Labor and Employment

In this instance, and according to the EEOC’s updated guidance, several issues arise under the ADA. First, and most simply, if the employees do not request a reasonable accommodation, the ADA does not mandate that the employer take action.

The ADA in general, however, does not allow the employer to exclude certain employees – or take any other adverse action – solely because the employees have a disability that the CDC identifies as potentially placing them at “higher risk for severe illness” if they get COVID-19. While there is an exception under the ADA if employees’ disabilities poses a “direct threat” to their health that cannot be eliminated or reduced by reasonable accommodation, the ADA’s direct threat requirement is a high standard. And even if an employer determines that the employees’ disability poses a direct threat to their own health, the employer still cannot exclude the employees from the workplace – or take any other adverse action – unless there is no way to provide a reasonable accommodation (absent undue hardship). Accordingly, the employer must still engage in the interactive process with the employees under these circumstances. For additional information, contact Ed Bardelli, Jon Kok, Steve Palazzolo, or your Warner labor and employment attorney.

Under the new Executive Order 2020-59, any individual able to medically tolerate a face covering must wear a covering over their nose and mouth—such as a homemade mask, scarf, bandana or handkerchief—when in any enclosed public space. As a retailer, am I required to enforce this in my store?

May 09 2020 Labor and Employment

You may, but are not required to, mandate masks for all persons medically able to tolerate them. Executive Order 2020-59 provides specific restrictions applicable to stores permitted to remain open for in-store sales (i.e., “retail stores that sell groceries, medical supplies, and products necessary to maintain the safety, sanitation, and basic operation of residencies or motor vehicles”). All such stores with less than 50,000 square feet of customer floor space must limit the number of people (including employees) in the store to 25% of the total occupancy limits established by the state or local Fire Marshal; may continue to sell goods (no longer limited to necessary supplies) if such sales are in the ordinary course of business; and must consider establishing curbside pick-up to reduce in-store traffic and mitigate outdoor lines. All such stores with more than 50,000 square feet must limit the number of customers in the store at one time (excluding employees) to four people per 1,000 square feet of customer floor; create at least two hours per week of dedicated shopping time for vulnerable populations; may continue to sell goods (no longer limited to necessary supplies) if such sales are made in the ordinary course of business; and must consider establishing curbside pick-up to reduce in-store traffic and mitigate outdoor lines. Note that none of these restrictions or requirements include enforcement of customers wearing masks. Please contact Steve Palazzolo, Andrea Bernard, Dean Pacific or your Warner attorney for additional information.

If an employee tests positive for COVID-19, are we required to notify other employees?

May 06 2020 Labor and Employment

Yes. The CDC guidelines state that if an employee tests positive, the employer should compose a list of all other employees who had close contact with the ill employee during the time the ill employee showed symptoms and in the two days before symptoms appeared. The CDC considers all employees having close contact during this time to be “exposed.” The employer must inform all “exposed” employees about their possible exposure to COVID-19. In making this notification, you may not disclose the identity of the ill employee, but must keep it confidential as required by the ADA. For additional information, please contact Jon Kok, Steve Palazzolo or your Warner attorney.

What happens when the employee’s FMLA runs out and child care is still not open or available?

May 04 2020 Labor and Employment

The extended FMLA under the FFCRA does not provide the employee with additional FMLA. The employee is still entitled to no more than 12 weeks of leave under the statute. If an employee uses all of the 12 weeks, and the employee does not have PTO or other leave available under company policies, the employer may choose to provide the employee with additional leave, but the employee is not entitled to it. For additional information, please contact Jon Kok, Steve Palazzolo or your Warner attorney.

The Governor’s Guidelines indicate that masks should be worn at the workplace. Who is responsible for providing them?

April 30 2020 Labor and Employment

The employer. According to the Executive Order 2020-59, “All businesses and operations whose workers perform in-person work must, at a minimum, provide non-medical grade face coverings to their workers.” Note, however, that the Executive Order applies to all “workers,” and not simply “employees.” Accordingly, the employer must also provide masks to temporary workers in its facility and should require any onsite contractor to supply its workers with masks. For additional questions regarding PPE, please contact Steve Palazzolo, Karen VanderWerff, DeAndre’ Harris or your Warner attorney.

A company would like to avoid laying off employees, but needs to reduce the number of hours that certain employees work because of COVID-19. Can the employer do so? Are employees whose hours are reduced eligible for unemployment benefits?

April 17 2020 Labor and Employment

An employer can reduce employees’ hours, provided it continues to comply with applicable minimum wage or salary requirements. In Michigan, employees whose hours are reduced may be eligible for unemployment benefits, provided their gross earnings are less than 1.5 times the weekly benefits they would otherwise be entitled to if they were fully unemployed. Alternatively, an employer can consider applying for Michigan’s work share program. Under a state-approved work share plan, eligible employees can work a reduced number of hours and also receive a portion of their weekly unemployment benefits commensurate with their hours reduction. For example, an eligible employee whose hours and wages are reduced by 25% should receive 25% of their weekly benefits. If employees with reduced hours qualify for state unemployment benefits, they should also receive $600 in weekly federal supplemental benefits available through July 2020. For more information, see Michigan’s Fact Sheets on underemployment benefits and the work share program or contact a member of Warner’s Labor and Employment Practice Group.

What benefits are available under the CARES Act for employers, or affiliated employers, with greater than 500 employees (“Larger Employers”)?

April 07 2020 Labor and Employment, Commercial Finance, Tax Law, Business and Corporate

There are several benefits to Larger Employers, including:

Employees of Larger Employers are entitled to the unemployment assistance under Sections 2102 and 2104 of the CARES Act.
Larger Employers taxable as corporations may now deduct qualified charitable contributions in an amount up to 25% of their taxable income and carry over excess contributions for future tax years. For charitable deductions of food inventory, the limit has been increased from 15% to 25% of aggregate net income.
Larger Employers are entitled to the Employee Retention Payroll Credit under Section 2301 of the CARES Act.
Larger Employers can delay paying the employer share of FICA imposed under § 3111(a) of the Internal Revenue Code incurred for the period beginning on March 27, 2020 and ending before January 1, 2021.
There are modifications to the rules for net operating losses, the AMT credit and the deductibility of business interest expense that may benefit a Larger Employer taxable as a corporation.
Larger Employers may be eligible for part of the $454,000,000,000 in loans/loan guarantees/investments for programs or facilities established by the Board of Governors of the Federal Reserve System to provide liquidity to the financial system that supports lending to eligible businesses, states or municipalities. We are waiting on more guidance from this program.
Businesses with up to 100,000 employees or up to $2.5 billion in 2019 annual revenue may take advantage of the Federal Reserve's Main Street Lending Program. The program provides for new loans in the minimum amount of $1 million with a four-year maturity with an interest rate of SOFR + 250-400 basis points. We are waiting on more guidance before applications can be made for these loans.

Please contact Matt Johnson for business questions, Rob Davies regarding finance questions, Sean Cook for tax questions or Steve Palazzolo regarding unemployment.

What protections do employees having symptoms of or exposed to COVID-19 have under the Executive Orders issued in Michigan?

April 05 2020 Labor and Employment

On April 3, 2020, Governor Whitmer signed Executive Order 2020-36 which prevents employers from discharging, disciplining or otherwise retaliating against two categories of employees. First, those employees who test positive for COVID-19 or display one or more of the principal symptoms of COVID-19 until three days have passed since the symptoms have resolved or seven days since the symptoms first appeared or the employee was swabbed for a test yielding a positive result. This portion of the Executive Order ceases to apply to anyone who receives a negative COVID-19 test. Second, those employees who have close contact with an individual who tests positive for COVID-19 or displays one or more of the principal symptoms of COVID-19 until fourteen days have passed since the last close contact with the sick or symptomatic individual or the symptomatic individual receives a negative COVID-19 test. Certain conditions and exclusions apply. To read the entire order, click here. For more information, contact Karen VanderWerff.

Does Governor Whitmer’s Stay Home, Stay Safe Executive Order qualify as a “federal, state or local quarantine or isolation order” for purposes of the paid sick leave under the Families First Coronavirus Response Act (FFCRA)?

March 28 2020 Labor and Employment

As of March 27, the Department of Labor is taking a narrow interpretation of what constitutes “a federal, state or local quarantine or isolation order” under the FFCRA. According to DOL guidance, employers who have closed or sent employees home (with or without pay) because of a shelter-in-place or “stay home/stay safe” directive or order should not count any paid time for the laid-off or furloughed employees as paid sick leave or expanded FMLA, and should not count on being eligible for payroll tax credits for any pay they may provide to those individuals while they are off work due to the order or directive. For more information, read here.

Executive Order 2020-97 requires that all businesses provide employee training. What satisfies the Executive Order’s COVID-19 training requirements?

May 30 0202 Labor and Employment

All businesses have an obligation to train employees at a minimum on infection control practices, use of personal protective equipment, steps to notify if symptoms are identified and how to report unsafe working conditions. In addition, manufacturers also must train employees on how the virus is transmitted and the distances the virus can travel. You may satisfy this training requirement in any way you want, as long as you do the training and document it. This can include live, online or video training. Warner has created a video training program that meets these requirements and is available for a small fee. If you are interested in purchasing the training, please contact your Warner attorney.

What does the Wisconsin Supreme Court’s rejection of Wisconsin’s stay-home order tell us about challenges to the Michigan stay-home order?

May 20 2020 Litigation

Nothing at all. On May 13, 2020, the Wisconsin Supreme Court rejected the State of Wisconsin’s stay-home order because it exceeded the scope of the Wisconsin Department of Health Services Secretary’s authority under Wisconsin law and violated the separation of powers guaranteed in the Wisconsin Constitution. Like in Michigan, however, the Wisconsin lawsuit was initiated against a Democrat governor’s administration by a Republican-controlled legislature. The issues presented in each lawsuit are distinct and governed by different state laws. In Michigan, the primary question presented by the legislature’s lawsuit is whether Governor Whitmer had the authority to announce a “new” state of emergency and disaster after the legislature declined to concur to her request to extend the earlier state of emergency. Although both cases raise questions about the scope of the executive branch’s ability to create laws during a pandemic (typically the role of the legislative branch), the result in each case is controlled by the different laws of each state. A decision from the Michigan Supreme Court in the Michigan legislature’s case is at least a month away (most likely). For additional information, contact Matt Nelson or your Warner attorney.

Should I have my customers sign a COVID-19-specific waiver of liability before allowing them to enter my facility?

May 19 2020 Litigation

In most instances, getting a liability waiver from your customer – if practical – makes good sense. It is one step a facility can take as part of its broader COVID-19 protocols to potentially limit its risk of a future COVID-19 exposure claim. A waiver typically includes the customer acknowledging that, when on-site and even with the COVID-19 precautions your facility has taken, a risk of COVID-19 exposure still exists. Whether a liability waiver is appropriate and the complexity and breadth of such a waiver will vary depending on the facility, event and jurisdiction. For more information, register for our May 21, 2020, webinar titled, “Protect Yourself Against Consumer or Visitor Claims During COVID-19” or contact Lance Zoerhof or Tom Amon.

What options are available for documents that need to be notarized or witnessed if the notary or witness(es) cannot physically be “present”?

June 26 2020 Real Estate, Trusts and Estates

Remote notarization and witnessing is temporarily allowed. Additional information can be found in our May 7, 2020, FAQ. Please contact Chris Meyer or Mark Harder for more details. The full text of the Executive Order is available here.

I am an owner of commercial real estate and I believe the taxes for my property may have been over-assessed for 2020. I understand that the statutory deadline for appealing my 2020 assessment to the Michigan Tax Tribunal (“Tax Tribunal”) for commercial and industrial properties is May 31, 2020. Should I still appeal by this date or has this deadline been extended due to COVID-19?

May 16 2020 Real Estate

Normally, the deadline to appeal 2020 assessments for commercial and industrial real property is May 31, 2020 (however, this year it will be June 1, 2020, because May 31, 2020, falls on a Sunday), and the deadline to appeal 2020 assessments for residential and agricultural properties (as long as you appealed to the local March Board of Review) is July 31, 2020. Depending on your property type, failure to appeal by the relevant date will deprive the Tax Tribunal of jurisdiction and result in forfeiture of your appeal. However, the Governor recently signed Executive Order 2020-87 on May 14, 2020, which temporarily suspends certain deadlines for filing appeals before the Tax Tribunal due to the Covid-19 pandemic. Under this Executive Order, the deadline for filing an assessment appeal as to commercial and industrial property has been extended to July 31, 2020. The deadline for filing an assessment appeal as to residential and agricultural properties does not change and remains at July 31, 2020. In the meantime, there is no reason why you cannot file such an appeal by the traditional deadline of May 31, 2020 (June 1, 2020, this year), and to be completely safe we recommend that you consider doing so.

Please contact Ralph Colasuonno, Thomas Amon, Tamara Reeves, Lyndsay Ott or Christian Meyer with any questions regarding these deadlines or for a complimentary consultation on whether you may have a valid assessment appeal.

My tenant already missed its April rent payment because of COVID-19 shutdowns, and is now refusing to pay May’s rent. What can I do?

May 02 2020 Real Estate

Access to speedy remedies in courts is somewhat limited during the COVID‑19 shutdown. In the short term, you should review your leases and legal risk with counsel and discuss whether a collaborative approach makes sense. Rent deferral, modification of lease terms and other interim agreements have been utilized by landlords and tenants to weather this storm. You also need to protect your legal position by serving appropriate, well-crafted notices and properly building your file during the default. Doing so will enhance your negotiating leverage and enable you to take appropriate measures to protect your position in the event that litigation occurs. Whether you are a tenant, landlord or lender, the one thing you should not do is ignore the problem. Tom Amon, Bob Nolan and Brandon Cory discussed strategies for navigating COVID‑19-related lease defaults in their April 27 webinar titled “What’s Next? How Landlords, Tenants and Lenders are Navigating the COVID-19 Pandemic.” For additional questions regarding lease defaults, please contact Tom Amon, Bob Nolan, Brandon Cory or your Warner attorney.

One of our suppliers has fallen short in its deliveries. We have been told that they are having financial problems due to COVID-19-related issues. We are concerned about the supplier’s ability to meet our needs for inventory. What can we do? What should we do?

May 27 2020 Supply Chain Litigation

You may be able to re-source a supplier to a replacement supplier. However, you should first review any applicable supply agreements or purchase orders. The agreements may contain minimum purchase commitments to the existing supplier. Re-sourcing may require approvals from third parties, such as your customer. The existing supplier may have your tooling or equipment in its facility. There are steps you can take to mitigate these risks, but it is important to begin analyzing these issues at the first signs of trouble. For additional information or questions, please contact attorneys Gord Toering or Jon Lauderbach.

I am concerned about the financial condition of our company’s supply base, especially due to the impact of COVID-19. I don’t have the resources available to review the financial condition of all our suppliers. How do I determine which suppliers are of the highest priority?

May 26 2020 Supply Chain Litigation

A company’s biggest suppliers are its most important, but sometimes that isn’t the case. In determining the suppliers that are the highest priority, a key consideration is the ability of a customer to quickly transition supply (i.e., re-source) to another supplier without interruption in supply. Determining which suppliers are most critical in meeting your company’s ability to meet its own customer commitments is often the highest priority. Your biggest supplier may sell you higher volumes of products that are easily replaced. But, a smaller supplier may supply you with key parts that are unique and extremely difficult to obtain elsewhere.

It is important to be proactive to deal with supply base financial issues and not wait until a problem arises. Once a crisis occurs with a particular supplier, in many instances there are limited ways a customer can address the issues. However, taking proactive measures may limit or avoid any problems and as a result, they may reduce or eliminate the cost of dealing with a supplier insolvency or disruption in supply. For additional information or questions, please contact attorneys Gord Toering or Jon Lauderbach.

I am concerned about one of my suppliers. They supply important raw materials to our company, but lately I have been hearing rumors that they are really struggling financially and their financial condition may have gotten worse due to COVID-19. The easiest way for me to find out about their financial status is to run a credit report, but can I rely upon that to accurately assess the financial condition of the supplier?

May 25 2020 Supply Chain Litigation

Credit reports can be helpful as one factor in determining the financial condition of a supplier (or a customer), but those reports are based on limited information. For example, credit reports can be based on payment history from only a few creditors involving a low extension of credit. On the other hand, credit reports can provide some valuable non-payment information, such as information regarding affiliated companies, ownership, etc.

Although not as easy as running a credit report, there are other strategies that can be utilized to determine whether a supplier is financially distressed. For example, if your contract or purchase order requires your supplier to provide periodic financial statements, then you should require the supplier to provide them. There are other ways to obtain this information as well, including a legal demand for adequate assurance of performance. All of the business and legal options should be evaluated and pursued, where appropriate, because of the seriousness of a supplier potentially being unable to supply due to financial distress. For additional information or questions, please contact attorneys Gord Toering or Jon Lauderbach.

What relief is available for larger businesses that due to their size, don’t qualify for PPP loans?

April 15 2020 Tax Law

Apart from various tax and payroll tax relief provisions, larger businesses may also be eligible for loans under the Main Street Lending Program through the Federal Reserve. Eligible borrowers are those: (1) with up to 10,000 employees or up to $2.5 billion in 2019 annual revenues; (2) created or organized in the U.S.; and (3) with significant operations in and a majority of employees based in the U.S. Eligible borrowers that participate in this program may not participate in the Main Street Expanded Loan Facility (MSELF) program or in the Primary Market Corporate Credit Facility offered by the Federal Reserve. Loans under the Main Street Lending Program have a four-year maturity, an adjustable rate of SOFR + 250-400 basis points and amortization of principal and interest deferred for one year. The minimum size of a loan is $1 million. Additional details about the loans, including fees and required attestations by the borrower can be found here. We expect additional guidance on this program to be released in the near future. Please contact Rob Davies for more information.

Are there any changes to the tax treatment of charitable contributions made by corporations under the CARES Act?

April 13 2020 Tax Law

Yes. Under the CARES Act, employers with more than 500 employees that are taxable as corporations may now deduct “qualified charitable contributions” in an amount up to 25% of their taxable income and carry over excess contributions for future tax years. Qualified charitable contributions must be cash and given to organizations historically meeting the definition of charities, but excluding certain supporting organizations or donor advised funds. Any type of property contribution would be treated under the current existing rules. For charitable deductions of food inventory, the limit has been increased from 15% to 25% of aggregate net income to encourage contributions to food banks. For additional information, please contact Sean Cook, Bill Lentine or Jeff Segal.

If I have not filed my 2019 Federal individual tax return and will not have it prepared, how will I make sure that I am making the correct estimated tax payments for 2020? (Updated on April 20, 2020).

April 11 2020 Tax Law

We previously posted a response to this question on April 11, 2020, and it was drafted on an earlier date. Now that the June 15, 2020, estimated tax payment is deferred until July 15, 2020, the question may not be as relevant; however given these unusual circumstances, many more taxpayers may be required to file an extension beyond July 15, 2020, and thus for these individuals the question is very relevant. The federal estimated tax payment for 2020 scheduled to be paid on April 15, 2020, and June 15, 2020, are deferred to July 15, 2020. The next estimated tax payments after July 15, 2020, for the 2020 tax year are scheduled for September 15, 2020, and the deadline for filing tax returns for 2019 could be extended by each taxpayer until October 15, 2020. See Warner’s eAlerts dated March 23, 2020 and March 31, 2020. It is certainly a concern paying estimated tax to avoid underpayment interest and penalties on estimated taxes without having the prior year tax return prepared and filed. There are several safe harbor methods to avoid penalties and interest including, but not limited to, paying in an amount equal to: (i) 100% of the prior year’s tax obligation (available to most taxpayers but not all); (ii) 110% of prior year’s tax obligation for taxpayers with adjusted gross income (total income less certain adjustments called “above the line” deductions – again available to most but not all taxpayers) exceeding $150,000 ($75,000 for married filing separate taxpayers); and (iii) 90% of the current year’s tax obligation. Methods to compute tax based on year-to-date earnings are available. We recommend that taxpayers make the attempt to estimate their 2019 tax obligation and projected 2020 tax obligation to determine the best safe harbor method to follow. Note that the state of Michigan has deferred the April 15, 2020, estimated until July 15, 2020, but no order has been issued for the June 15, 2020, payment by the state of Michigan For additional assistance, please contact Sean Cook, Bill Lentine or Jeff Segal.

Can employers who increase pay to employees working during the pandemic beyond the employees’ normal wages include the increased amount in calculating the available credit under the Employee Retention Tax Credit?

April 08 2020 Tax Law

The CARES Act included an anti-stuffing rule, which designates the prior 30-day pay period of an employee as the base for determining the wages that qualify for the credit. In light of this anti-stuffing rule and without further guidance on this provision, employers should not take the benefits for the additional pay beyond an employee’s prior base pay. At this time, the IRS has not addressed whether nominal increases in pay can qualify for the credit. If such guidance is published, the employer could at that time take the benefit if the hazard pay increase was nominal. Please contact Sean Cook, Bill Lentine or Cam DeLong for additional information.

What is the Employee Retention Credit under the Cares Act? Can employers claim the Employee Retention Credit under the Cares Act if the employer also obtains a loan under the Paycheck Protection Program?

April 02 2020 Tax Law

The Employee Retention Credit is a fully refundable tax credit for employers equal to 50 percent of qualified wages (including allocable qualified health plan expenses) that eligible employers pay to their employees. This credit applies to qualified wages paid after March 12, 2020, and before January 1, 2021. 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 that an eligible employer can receive is $5,000 per employee. Employers with more than 100 employees in the prior year may only receive the credit for employees that are not providing services. Employers must be under a governmental order restricting commerce, travel and group meetings or have experienced a 50% or more decline in year to year quarterly gross receipts. The employer will qualify for the beginning of a quarter in which there is a 50% decline and end on the last day in which the year to year quarterly percentage is 80%. Other limitations and restrictions apply.

An employer who receives a loan under CARES Act Paycheck Protection Program cannot claim Employee Retention Credits. Employers with more than 500 employees are not eligible for a loan under the Paycheck Protection Program so should determine if they are eligible to receive the Employee Retention Credit. Employers with less than 500 employees should determine whether the Employee Retention Credit or the Paycheck Protection Program is of greater benefit. For more information on the Employee Retention Credit go to https://www.irs.gov/newsroom/irs-employee-retention-credit-available-for-many-businesses-financially-impacted-by-covid-19.

If you need assistance in analyzing the program that is right for your company, contact Sean Cook, Bill Lentine or Cam DeLong.

When must I file my Michigan individual income taxes for 2019?

March 30 2020 Tax Law

On March 27, 2020, Governor Whitmer issued Executive Order 2020-26, extending Michigan income tax filing deadlines for tax year 2019 returns. The extension is automatic, and you do not need to file anything or contact the Michigan Department of Treasury to qualify. Accordingly, an annual state income tax return and payment otherwise due on April 15, 2020 will instead be due on July 15, 2020. Likewise, an annual city income tax return otherwise due on April 15, 2020, and any accompanying city income tax payment due with the applicable city return, as of now, will instead be due on July 15, 2020. Individual cities also have the authority to extend their filing requirements past July 15. A complete copy of the Executive Order can be found here. The extension also applies to first quarter estimated tax payments due April 15, 2020 for the 2020 tax year. Please contact Sean Cook, Bill Lentine or Jeff Segal for additional information.

I plan to make extra donations this year to charities in my community who are providing support for those affected by the coronavirus. Are there any tax rules or benefits in the new CARES Act related to philanthropy that I should be aware of as I plan my donations?

May 12 2020 Trusts and Estates

The CARES Act has provisions that encourage increased charitable donations whether you will claim the standard deduction or itemize deductions.

If you will claim the standard deduction for 2020, the CARES Act offers an above-the-line deduction for up to $300 per taxpayer ($600 per married couple) in cash donations made to a charity other than a private foundation, supporting organization or donor-advised fund. Since this is an above-the-line deduction, it will reduce your adjusted gross income (AGI), and thereby reduce your taxable income, by the amount you donate up to $300 (or $600).

If you will itemize deductions for 2020, the CARES Act increases the deduction limits for certain donations. Individuals and married couples can, for 2020 only, deduct qualifying charitable contributions of up to 100% of Adjusted Gross Income (AGI), which is up from the previous 60% of AGI maximum. Qualifying contributions are cash donations to charitable organizations other than private foundations, supporting organizations and donor-advised funds. The 100% of AGI limit takes into account gifts of property to qualifying charitable organizations that are deductible under the rules in effect prior to the CARES Act. For example, if an individual contributes property equal to 25% of AGI to a qualifying public charity and cash equal to 75% of AGI to a qualifying public charity, then the individual may deduct the full 100% of AGI. Our in-depth discussion of this and other opportunities available under the CARES Act for those contemplating significant charitable contributions in 2020 is available here.

If you have questions about making your charitable contributions for 2020, please contact Jay Kennedy, Jennifer Remondino or your Warner attorney.

I received a stimulus check or direct deposit payment for a family member who is deceased. What should I do with it?

May 11 2020 Trusts and Estates

The Coronavirus Aid, Recovery and Economic Security Act (CARES Act) authorized a payment to eligible individuals in the amount of $1,200 for each individual ($2,400 for married couples filing joint returns) and an additional $500 for each qualifying child. The payments are based on the individual’s most recent tax return filed, either 2018 or 2019, and are either directly deposited in the individual’s bank account, if known by the IRS, and otherwise by check. Because the payment is based on past tax returns, individuals who died in 2018 or 2019 may have received the rebate by direct deposit or a check mailed to the decedent.

The payment actually represents a credit and advance refund against an individual’s 2020 income tax obligation. The CARES Act specifically excludes estates and trusts from its definition of individuals eligible for the credit. Therefore, individuals who died in 2018 and 2019 are not eligible to receive the payment because they have no 2020 tax liability. Individuals who died in 2020 appear to be eligible for the payment if they had sufficient taxable income in 2020 before death.

Treasury Secretary Steven Mnuchin has indicated that any stimulus money distributed to a decedent who was not entitled to the payment should be returned.

For rebates sent by mail, instructions on the front of the envelope direct the recipient to check a box and place the envelope in the mailbox if the addressee is deceased. If you receive a check for someone who died before 2020, you should return the check as directed on the envelope. If you receive a check for someone who died in 2020, you can deposit the check, but you should wait to spend or distribute the money until you are certain the decedent was eligible for the credit or the IRS provides other guidance.

The IRS has not provided guidance regarding specific action by the IRS or by taxpayer representatives for rebates paid to accounts of deceased individuals through direct deposit. Any stimulus payment paid by direct deposit to an account belonging to a deceased individual should remain there and should not be spent or distributed pending further direction from the Service or in the event the IRS attempts to reverse the deposit.

For additional information or questions, please contact Mark Harder or your Warner attorney.

My patient advocate designation and durable power of attorney are several years old, and I am worried that they won’t be accepted if I should become ill during the pandemic. I know that my signature on these documents need to be witnessed by someone other than my family or medical providers, and possibly by a notary. How do I update these documents under the Stay Home, Stay Safe Executive Order?

May 01 2020 Trusts and Estates

Our trusts and estates attorneys are working remotely and are able to discuss estate planning matters with you via telephone call or video meeting. We are able to prepare these documents, as well as wills and trusts, during the Stay Home, Stay Safe Order.

As to signing estate plan documents, Executive Order 2020-41, permits estate plan documents to be signed, witnessed and acknowledged by a notary public and by witnesses via audio-video technologies, such as video conferences, in which the witnesses, notary and signer can simultaneously and concurrently see and hear one another. The Executive Order requires some coordination, as you must transmit or mail signed documents requiring notarization to the notary on the same day as the video conference, and transmit or mail signed documents requiring a witness to the witness within 24 hours. Further, very particular requirements exist before the form of witnessed documents will comply with the Order. Care must be taken to ensure all requirements of the Order are met.

Warner has the necessary technology and the qualified persons to facilitate remote witnessing of documents and remote notarization (only certain notaries are qualified to undertake remote notarization). The Executive Order will be in effect and apply to documents signed through May 6, 2020, at 11:59 p.m. Whether this Executive Order will be extended remains to be seen. Contact your Warner attorney or Jennifer Remondino if you need assistance updating your estate planning documents.

Under the Governor’s Revised Executive Order, am I permitted to hold a funeral in Michigan during the Stay Home, Stay Safe period?

April 20 2020 Trusts and Estates

Yes. The Revised Executive Order grants an exception from the Stay Home, Stay Safe Executive Order that permits individuals to leave their home or place of residence, and travel as necessary, to attend a funeral, “provided that no more than 10 people are in attendance at the funeral.” Thus, no more than 10 people can attend the funeral, gather at the church or funeral home or gather at the gravesite. In addition, both the church and funeral home will need to comply with all social distancing requirements of the Stay Home, Stay Safe Executive Order. For more information, please contact Laura Jeltema or your Warner Trusts and Estates Practice Group attorney.

I’m being asked to accept service of a subpoena electronically. Is that required?

May 08 2020 White Collar Criminal Defense and Investigations

Multiple jurisdictions across the country are introducing measures to limit the person-to-person contact that is typically necessary for service of process. Check your jurisdiction’s rules and recently issued orders to be sure, but event if service is not provided for by rule in your jurisdiction, consider allowing it in exchange for extending the time to respond to the subpoena or reducing its scope. Please contact Scott Carvo for additional information.