Attorney Jim DeJong will be featured on Money Sense presented by Ellenbecker Investment Group on WISN AM 1130. On the show, Jim provides an overview of the implications of the COVID-19 pandemic on the M&A market. He discusses what a business owner planning to sell a business should be doing now to prepare the business to attract qualified buyers and to obtain the best price. Jim also discusses the importance of business succession planning.

Tune in to hear the show in its entirety on Saturday, June 6th at 2:00 pm.

The recording can be accessed here.

Do you want to leave your children with an inheritance, but are worried about creditors taking part of that inheritance? If so, you are not alone. Fortunately, a properly established protective trust can help safeguard the money you leave behind for your children from their creditors, including in a divorce.

Creditors can more easily reach your children’s inheritances if it is given to them directly, outside of a trust. However, creditors would have more hurdles to jump through to reach your children’s inheritance if it is held in a protective trust. Therefore, many parents add extra protections for their children by directing their children’s inheritances to be held in a protective trust.

The trust, acting as its own separate entity, would own the assets on behalf of your children, the beneficiaries of the trust. This way, your children would not technically own the assets which makes it much more difficult for creditors to reach their inheritances. Importantly, your children would still have access to the trust assets and benefit from them. A protective trust would allow your children to be the beneficiaries and receive distributions for their health, support, and maintenance. Also, in some circumstances your children could be the Trustee of their own trust, meaning they could manage the trust assets on their own.

Not only would a protective trust safeguard your children’s inheritances from obvious creditors, it would also safeguard their inheritances if they were to get a divorce. If you were to give your children their inheritances directly, they would need to take extra steps and precautions to ensure their inheritance is not comingled with marital property to prevent the inheritance from transmuting into a marital property asset. However, if the inheritance is protected in a trust, then the trust assets would remain classified as individual property under Wisconsin marital property law.

With a proper estate plan in place, you can have peace of mind knowing the money you leave behind for your children will be protected from the many threats your children may come across. If you would like to learn more about asset protection and discuss your estate planning options, please contact attorney Kelly M. Spott.

Attorney Joseph Gumina, chair of O’Neil Cannon’s labor and employment law group, was recently featured in the Super Lawyers article “Can I Lay Off My Furloughed Employees?”. In the article, Gumina shares advice regarding legal considerations employers need to be aware of when considering laying off furloughed employees during these unprecedented times. Read full article here.

O’Neil Cannon remains open for its clients and we are here to help. We encourage you to reach out with any questions, concerns, or legal issues you may have, including those related to coronavirus.

Newsletter Article Highlights:

• $310 Billion Added to Paycheck Protection Program and $10 Billion Added to Emergency EIDL Grant
• Don’t Waive Goodbye to Your Construction Lien Rights
• What Happens if My Business Can’t Perform Its Contract Due to the Coronavirus?
• Estate and Tax Planning During Market Tumult and Low Interest Rates
• President Signs Families First Coronavirus Response Act Expanding Employees’ FMLA Rights and Mandating Paid Sick Leave

Firm News:

• Attorney Christa Wittenberg Elected Shareholder
• Attorney Joseph Gumina Featured in Merit Shop Contractor
• Attorneys Christa Wittenberg and Grant Killoran Featured in Wisconsin Lawyer
• Attorneys Pete Faust and Jason Scoby Quoted in the Business Journal

Click the image below to read more.

Attorneys Pete Faust and Jason Scoby were recently quoted in the Business Journal in an article about advising their clients on the Economic Injury Disaster Loan (EIDL) program and the Paycheck Protection Program (PPP). The Business Journal article,  addressed how funds should be applied and documented, and the options available to those who did not receive funds in the initial round. O’Neil, Cannon, Hollman, DeJong and Laing remains open and ready to help you. For questions or further information relating to the PPP and EIDL programs, please speak to your regular OCHDL contact.

The full article titled “Top tips for Milwaukee-area businesses that received PPP funds, and businesses that didn’t” was published on April 23, 2020 in the Business Journal.

For the period from March 27, 2020 through December 31, 2020, the CARES Act permits employers to pay directly, or to reimburse employees for, up to $5,250 of qualifying employee student loan payments.

Like many CARES Act provisions, this new opportunity results from an expansion of an existing law or program. In this case, the ability for an employer to assist employees with student loan payments arises from an amendment to Internal Revenue Code Section 127, which governs Educational Assistance Programs (EAPs). Qualifying payments made as a fringe benefit under an EAP are excluded from the employee’s income and are deductible to the employer.

The $5,250 limit is the amount that employers are currently permitted to contribute, tax-free, for tuition assistance under an EAP. Through the end of this calendar year, it is also the combined limit for student loan repayment assistance and any other education-assistance payments that an employee may receive.

Essential business employers seeking ways to reward or retain employees during the pandemic should consider whether tax-free payment of student loan debts would meet payroll and employee-acknowledgment objectives. If your company currently sponsors an EAP, student loan payments may now be made under the current EAP document. Companies wishing to newly implement an EAP in order to take advantage of this tax-favored student loan repayment assistance opportunity can do so by properly adopting a written plan document satisfying IRS content requirements.

Existing Educational Assistance Program Requirements

The existing tax code EAP rules remain in effect. To qualify for tax (and payroll tax) exclusion under Internal Revenue Code Section 127, an EAP must:

• provide benefits exclusively to employees of the employer;
• provide only qualified educational assistance benefits (and only up to $5,250 per employee);
• be documented as a separate written program established by the employer and disclosed to employees;
• be funded solely by the employer;
• not allow employees a choice between educational assistance benefits and cash (or other taxable remuneration); and
• not discriminate in favor of highly compensated employees ($130,000 in 2020) or provide more than 5% of total benefits in any year to 5%-or-more owners.

Additional Detail

The student loan payments made under an EAP must relate to education of the employee, not of their child or spouse. Employer payments may made be for principal or interest, but employees are not permitted to deduct any interest payment made by employers. Where appropriate, employers making student loan payments under an EAP may, therefore, wish for such payments to be allocated only to principal so as to maximize the tax benefit to employees.

Employers interested in providing tax-free student loan payment assistance to employees should consider doing so, either by amending the operation of an existing, or by adopting a new, EAP. Employers who may already be providing post-tax student loan payment assistance to employees can now temporarily convert this form of compensation into a pre-tax benefit, which will permissibly reduce both employee income taxes and employer payroll tax expenses.

O’Neil Cannon remains open during this time and is here to help. We encourage you to reach out with any questions, concerns, or legal issues you may have, including those related to employee benefits and fringe benefits as impacted by COVID-19-related business changes or legislation.

An article by Attorneys Christa Wittenberg and Grant Killoran on constitutional law issues relating to the current COVID-19 pandemic is featured as the cover story in the April edition of the State Bar of Wisconsin publication Wisconsin Lawyer. In their article, they take an informative and deep dive look into regulations and due process concerns relating to the current public health emergency.

Read the full article here.

We are incredibly proud to financially support local Port Washington hero, 16-year-old William “Billy” Schowalter, as he works diligently to create plastic face shields for medical professionals, local police, and other service providers that work with the public. Billy, a son of an OCHDL employee, is using his 3D printer to make personal protective equipment and headpieces to help those on the front lines in the fight against COVID-19. Click here to read more about Billy’s story and to be reminded that we are all in this together.

Under a flurry of recent legislation, Congress has created several tax credits to reimburse employers for paying certain types of wages during the COVID-19 outbreak in 2020. Until now, the precise mechanism for claiming these tax credits has been unclear. With the March 30 IRS issuance of guidance and a draft version of Form 7200, however, the process by which employers may realize the tax relief is coming into view.

With respect to tax credits for the cost of: (1) emergency paid sick leave; (2) expanded family medical leave; and (3) employee retention payments, we now know that eligible employers can reduce the amount of employer payroll taxes otherwise required to be deposited with the IRS. Specified payroll taxes can be reduced dollar-for-dollar by the amount of credit-eligible wages paid. The reduction in employer payroll taxes will be reflected on the employer’s quarterly payroll tax returns, using the appropriate form from the 941 series. To the extent that the amount of the available tax credit exceeds the total amount of payroll tax deposits, however, an employer may use Form 7200, entitled “Advance Payment of Employer Credits Due to COVID-19,” to request expedited payment of the excess credit amount.

Emergency Paid Sick Leave and Expanded FMLA Leave

We have previously described the emergency paid sick leave and expanded family medical leave required to be provided to qualifying employees between April 1, 2020 and December 31, 2020. These expanded types of leave were implemented by the Families First Coronavirus Response Act (FFCRA), which also provided for employer tax credits to reimburse employers for 100% of the cost of corresponding wages paid.

Employee Retention Credit

The newer employee retention credit (described in more detail here) is available to eligible employers under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and is designed to encourage businesses to keep employees on their payrolls.

The amount of the refundable employee retention tax credit is 50% of up to $10,000 in wages paid, per employee, between March 12, 2020 and December 31, 2020 by an eligible employer whose business has been financially impacted by COVID-19. Some limits based upon employer size apply to the number of employees for whom the credit may be claimed. The class of employers eligible for the credit excludes state and local government employers, as well as employers who take small business loans under the Paycheck Protection Program.

For purposes of the employee retention credit, an eligible employer of any size (including a tax-exempt organization) will be deemed to have been financially impacted by COVID-19 if:

1. the employer’s business has been fully or partially suspended by government order due to COVID-19 during a 2020 calendar quarter; and
2. the employer’s gross receipts are below 50% of the comparable quarter in 2019. Once the employer’s gross receipts exceed 80% of a comparable quarter in 2019, then eligibility for the credit is extinguished as of the immediately following quarter.

Note that while an employer is permitted to receive tax credits for emergency paid sick leave and expanded family medical leave under the FFCRA, as well as for the CARES Act employee retention payments, these tax credits cannot be applied to the same wages.

SBA to Provide Disaster Assistance Loans for Small Businesses Impacted by the Coronavirus

As part of the Trump administration’s efforts to combat the coronavirus outbreak and minimize economic disruption to the nation’s 30,000,000 small businesses, the U.S. Small Business Administration (SBA) is offering designated states and territories low-interest federal disaster loans for working capital to small businesses suffering substantial economic injury as a result of the coronavirus. Upon a request received from a state’s or territory’s governor, the SBA may issue, as provided by the Coronavirus Preparedness and Response Supplemental Appropriations Act that was recently signed by the President, an Economic Injury Disaster Loan declaration.

On March 17, 2020, the SBA issued revised criteria for states and territories seeking an Economic Injury Disaster Loan declaration related to the coronavirus. The relaxed criteria will have two immediate impacts:

• Faster, Easier Qualification Process for States and Territories Seeking SBA Disaster Assistance. Historically, the SBA has required that any state or territory affected by disaster provide documentation certifying that at least five small businesses have suffered substantial economic injury as a result of a disaster, with at least one business located in each declared county or parish. Under the just-released, revised criteria, states or territories are only required to certify that at least five small businesses within the state or territory have suffered substantial economic injury, regardless of where those businesses are located.
• Expanded, Statewide Access to SBA Disaster Assistance Loans for Small Businesses. SBA disaster assistance loans are typically available only to small businesses within counties identified as disaster areas by a governor. Under the revised criteria issued today, disaster assistance loans will be available statewide after an economic injury declaration. This will apply to current and future disaster assistance declarations related to the coronavirus.

Any Economic Injury Disaster Loan declaration issued by the SBA makes loans available statewide to small businesses and private, non-profit organizations to help alleviate economic injury caused by the coronavirus. Once a declaration is made, the information on the application process for Economic Injury Disaster Loans will be made available to affected small businesses within the state. These loans must be used to pay fixed debts, payroll, accounts payable and other bills that can’t otherwise be paid because of the disaster’s impact. The interest rate is 3.75% for small businesses without credit available elsewhere; businesses with credit available elsewhere are not eligible. The interest rate for non-profit organizations is 2.75%. The SBA offers loans with long-term repayment periods in order to keep payments affordable, up to a maximum term of 30 years. Terms are determined on a case-by-case basis, based upon each borrower’s ability to repay.

Governor Evers Seeks an Economic Injury Disaster Loan Declaration from the SBA for Small Businesses Affected by the Coronavirus

On March 18, 2020, Governor Evers submitted a request to the SBA to declare the coronavirus a disaster for the State of Wisconsin. If the SBA declares Wisconsin a disaster area, the SBA will allow Wisconsin small businesses across the state to apply for SBA Economic Injury Disaster Loans, which would offer up to $2,000,000 in assistance for each affected small business. Governor Evers’s request to the SBA can be found here.

As of the date of this article, the SBA has declared the following disaster areas: Arizona, California, Colorado, Connecticut, Delaware, District of Columbia, Idaho, Maine, Maryland, Massachusetts, Montana, Nevada, New Hampshire, New Mexico, New York, North Dakota, Oregon, Rhode Island, Texas, Utah, Virginia, Washington, and Wyoming. The list continues to grow and the areas eligible for SBA Economic Injury Disaster Loans are continuously updated here.

If Wisconsin is declared a coronavirus disaster area or if your small business is located in one of the declared disaster areas, you can apply for an Economic Injury Disaster Loan through the SBA here.

Wisconsin’s Small Business 20/20 Program

On March 17, 2020, the Wisconsin Economic Development Corporation arranged for the deployment of $5,000,000 in emergency funds to create the Small Business 20/20 Program in order to help mitigate the impact of the coronavirus pandemic on small businesses in Wisconsin. The purpose of the program is to ease the’ short-term cash flow challenges of these small businesses, and to protect jobs and public health in Wisconsin. The Small Business 20/20 Program provides funds to eligible Wisconsin-based Community Development Financial Institutions (CDFIs) that can make grants available to existing loan clients in order to mitigate the effects of the coronavirus pandemic. Eligible applicants for the Small Business 20/20 Program funds are Wisconsin CDFIs that have a minimum organizational loan portfolio of at least $4,000,000, or a collaborative of CDFIs with a combined organizational loan portfolio of at least $4,000,000. A list of Wisconsin’s 24 CDFIs can be found here.

Approved CDFIs and collaboratives will make program grants available to for-profit businesses that are loan recipients in good standing as of March 1, 2020 with the approved CDFI or its collaborating CDFIs. These businesses must have 20 or fewer full-time or part-time employees and greater than $0 but less than $2,000,000 in annual revenues. Preference for these program grants will be given to service and retail businesses.

Businesses may be granted two months of payroll and rent expenses, up to a maximum of $20,000. These funds must be used for rent and payroll expenses, including covering paid leave (e.g., sick, family, and other leave related to the coronavirus) during the duration of the funding period.

If you have questions relating to the SBA’s Economic Injury Disaster Loans or the Wisconsin Small Business 20/20 Program, please contact O’Neil Cannon