Vital Updates at the Local and National Level

Midweek brings a whole host of updates on the relief front, both at the Federal and State levels. To help sort everything out, here is a consolidated overview. Important links can continue to be found on our COVID19 Resources Page.

Federal  

At the Federal level, we have the following:

Families First Coronavirus Response Act (FFCRA)

This bill, from last week, expanded FMLA and Sick leave coverage to workers impacted by the COVID-19 Public Health Emergency. The IRS has released guidance that employers will be able to deduct any payments made under these new rules directly from their Federal Tax deposits and seek expedited refunds as they go, so they don’t have to wait until the end of the quarter to be reimbursed. Last night the DOL released guidance and Q&A webpages on how to implement the rules. DOL has also ruled that these rules go into effect on April 1, 2020. These are key tools for keeping qualified workers paid during the crisis.  

IRS News Release Re: FFCRA

Department of Labor COVID-19 and FFCRA

Coronavirus Aid, Relief, and Economic Security Act (CARES)

The Senate has finally reached a deal on the CARES Act, which is the 3rd Coronavirus relief bill and the biggest to date. They are working on the drafting of the legislation, so the final verbiage is not out, however we expect the $2 Trillion package includes a number of key provisions, including:

1. Unemployment Benefit Increases - unemployed workers will be eligible for an additional $600 per week in unemployment insurance benefits for 4 months, in addition to amounts they are already eligible for under existing state unemployment plans. Unemployment insurance is extended to the self-employed, independent contractors, and gig workers. I heartily applaud this, as we have been advocating for exactly this support since Day 1.

2. Recovery Rebate Stimulus Checks - $1,200 checks per taxpayer, subject to various rules including income limitations of $75,000 ($150,000 married), plus an additional $500 per child. There will be phaseouts on income above $75,000.

3. Small Business Interruption Loans / Payroll Protection Program Loans- SBA 7(a) Loan Program Expansion with Forgiveness - Government guarantees will increase to 100%, fees will be waived, and amounts used for payroll over the next few months will be forgiven. These loans will go directly through banks, to allow money to quickly move to employers (and their employees), and will have terms of a max of 10 years and max 4% interest. 
   
   There will be loan forgiveness equal to the amount spent during the 8 week period after loan originations for payroll, plus mortgage interest, plus rent, plus utilities.

4. Subtitle C - Business Provisions - Deadlines for tax filings will be delayed. Employer tax deposit due dates will be extended and payments waived. There is a credit for employing staff during a shutdown (50% of wages), and a retroactive adjustment (finally) fixing the Qualified Improvement Property exclusion from the 2017 tax bill (Public Law 115-97), which can be coupled with changes to the NOL carryback rules, allowing NOLS from 2018, 2019, and 2020 to be carried back 5 years and be used to generate losses for refunds. The taxable income limitation for an NOL is now removed, allowing for tax refund based stimulus from the last year.

5. Individual Tax Provisions - Penalty free retirement withdrawals, delayed estimated tax payment provisions, and changes to charitable deductions will all be included.  

There is no text available to the public for this yet, but we are working closely with friends on The Hill to get access to the text as soon as possible and will analyze the final bill when it is released to start strategizing with you.

District of Columbia 

At the local level, DC has opened the application process for the DC Small Business Recovery Microgrants - we have worked closely with RAMW to help the Mayor’s Office correct some issues with the original application and have seen immediate improvement. The DC government has also opened up funding through other agencies and mechanisms, including by awarding grant money that had previously been applied for and allowing it to be used to support operations.

DC Small Business Microgrant Applications

Maryland

Maryland introduced a number of emergency relief measures, including Emergency Relief Loans, Emergency Relief Grants, and Department of Labor Grants to help keep workers employed.

Maryland Small Business COVID-19 Emergency Relief Grant

Maryland Small Business COVID-19 Emergency Relief Loan Fund

COVID-19 Layoff Aversion Fund 

As always, our teams are here to help you through this crisis and we are actively helping clients with grant applications, loan applications, and cash flow management. Please reach out to your Harmony Group team member for anything you need, or call me on my cell at any time.

Matt Hetrick, CPA

President and Owner of CPA Eats

Some Great News - The Families First Coronavirus Relief Act Passes

Day 7 - Coronaworld

Today we have some good news to share. On the health front, some promising treatments seem to be getting fast tracked for COVID-19 (google Chloroquine), which shines a bit of light at the end of a tunnel that was looking rather dark. On the stimulus front, all sorts of useful things are being discussed. The National Restaurant Association is pushing for all of the great things we did in DC to be emulated on a national level, including restaurant grants and enhanced support for our displaced employees. On the Federal level, we have all heard planning discussions for immediate individual stimulus checks, which would help directly offset the economic hit to displaced workers, as well as jump start consumer spending after the crisis.

In regards to tangible, actionable news, the Families First Coronavirus Response Act was signed into law, as expected, providing us with a great new tool to make it through the crisis. The law has a number of provisions including the provision of free COVID-19 testing, financial support from the Federal Government to vital safety net programs like SNAP and WIC, as well as backstop funding for state unemployment funds. This was crucial support and should be applauded.

It also included an immediate mandatory expansion of paid sick leave for all employers in the US with less than 500 employees, including self-employed workers. This paid sick leave will be paid for by the Federal Government through payroll tax credits, so bigger employers are excluded as they are expected to provide this leave on their own dime. A comprehensive overview of the provisions can be found here. 

The key points here are as follows:

1. Employees are now allowed 12 weeks of Emergency Family Medical Leave, including 50 days of paid leave due to a need for leave to care for a child under 18 years of age if their school or childcare is closed due to the Public Health Emergency.  

2. Employees are now allowed 10 days of additional paid sick leave for various coronavirus related reasons (including experiencing symptoms of COVID-19 and seeking medical diagnosis).

3. The Federal Government will pay for this leave via refundable payroll tax credits, subject to certain dollar limits per day. 

These tools provide significant employee support tools during the crisis, as well as an important planning tool for employers for employee retention during the crisis. As always, we will be here for you to discuss the potential application of these rules and help you manage through the crisis.

- Matt

The SBA Declares DC an Economic Disaster Area - Hopeful News

Restaurants -

The SBA has declared DC an economic disaster area, as we were waiting for. This encompasses DC, plus the Maryland (Montgomery and Prince Georges) and Virginia (Alexandria City, Arlington, and Fairfax) contiguous counties.  

If you are in one of these areas, you can now apply for a Small Business Administration loan called the “SBA Economic Injury Disaster Loans” which can be used to pay for fixed debts, payroll, accounts payable, and other bills that can’t be paid because of the disaster’s impact, up to $2 million. 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-profits is 2.75%. These loans are offered with long repayments in order to keep them affordable, up to a maximum of 30 years. Terms are determined on a case-by-case basis, based on each borrower’s ability to pay. SBA recommends that small businesses submit disaster loan applications as soon as possible as there is no obligation to accept a loan if approved.

The application process is relatively involved and contains a significant amount of personal information, including signed personal financial statements and Forms 4506-T, so I encourage you to start the process by going to the following link:

SBA Disaster Loan Assistance

If you are not in one of these areas, please monitor the disaster declarations each day at the following link:

Presidential and SBA Agency Declared Disasters
 

Pitter patter, let's get at 'er!

Matt Hetrick, CPA
President and Owner of CPA Eats

COVID-19 Response Emergency Amendment Act of 2020 Passes

The DC Council just finished passing its first emergency legislation to respond to the COVID-19 outbreak and I wanted to share my first analysis.

A draft of the COVID-19 Response Emergency Amendment Act of 2020 can be found here, but a small set of the relevant provisions are as follows:

Section 101 - Unemployment - This expands unemployment compensation coverage to workers unemployed due to COVID-19.  We remain convinced that the current unemployment compensation weekly benefits are inadequate (I had advocated strongly for a temporary doubling of them), but a number of important provisions did make it and we are quite pleased that, as we urged, the eligibility rules have been relaxed and displaced workers will be immediately covered.  Additionally, the council directly included our suggestion not to charge the benefits paid to employees laid off due to this emergency against the experience rating accounts of employers.  This long term protection will make us more viable moving forward.  

Section 201 - Sales Tax - This delays February and March sales tax payment due dates until July 20, 2020.  This allows businesses to retain working capital until we are back open.

Section 202 - Small Business Grant Program - I am exceptionally pleased that this made it into the final bill.  My direct recommendations for support for our industry were for protections for our employees while they were laid off and immediate access to working capital for us to reopen.  The grants will be issued to businesses that can demonstrate financial distress (all of us!) and can be used for Employee wages and benefits (including health insurance), Operating costs, and Repayment of SBA loans.  Of important note, these grants should be applicable to all local businesses and may help gig workers and other self-employed people (think musicians, etc) that aren’t eligible for Unemployment Insurance. The details of the grant program are yet to be released, but the Harmony Group team is preparing all info we need to help apply for grant relief for you.

Section 302 - Health Insurance - It appears there will be grace periods for health insurance insurance payments, including temporary postponement of cancellations.  I recommend working with your insurance agent to stay abreast of these changes (as well as any insurance modifications that are available).

Section 305-307 - Utility Disconnect Prohibitions - Utilities will not be able to disconnect us.

Section 308 - Eviction Prohibition - Landlords will not be able to evict us. 

I am relieved to see that some of our suggestions made it into the final bill and that this has meaningful relief tools within it, but I want to emphasize that this is simply the first step in our work together to dig out of this crisis. We are watching for the grant application process to be released by the Mayor and my entire staff here at Harmony Group is standing by to work with our clients to secure every available resource. We all know that this whole situation sucks, but, to be honest, it's pretty special to see the entire business community - owners, vendors, banks, landlords, and government - starting to pull together in the same direction to get ourselves through this. I know everyone is dealing with challenges coming at them  at light speed, so let’s keep focused on the task at hand: it is our job to get our businesses through this and have our businesses ready to reopen and get our City back to work. We’ve got this.

Matt Hetrick, CPA

President and Owner of CPA Eats

COVID-19 Update 3/17/20

As we expected last week, the environment has been changing so rapidly that we have been forced to adjust completely on the fly day-after-day. Weekend sales closely tracked the pattern we expected, with Friday and Saturday operations generating enough cash flow to get many restaurants through this week and into our current deep-freeze / shutdown mode.  

As discussed, previously, and on innumerable calls over the last few days, we are expecting major relief legislation to be passed this week:

1. DC coronavirus relief legislation is expected to be passed today. I’ve worked closely with the RAMW to help ensure that meaningful measures to help the industry and our employees were brought to the DC Council for consideration and our industry representatives fought tooth and nail for you. The latest draft includes a number of helpful provisions and can be found here.  

2. Maryland and Virginia are each in the process of passing similar legislation, though I was not directly involved in the processes in either state and don’t know where they will end up.

3. House Bill 6201 goes before the Senate today, from the latest news. This bill provides for an Emergency Medical Leave of 10 Days, paid for by the Federal Government via payroll taxes, and will provide us with significant labor planning tools.

I am constantly monitoring the development of the aforementioned legislation so we can get access to that relief.  Additionally, I worked with amazing staff members from DC and the RAMW to help DC get the information needed to get the SBA to declare DC an eligible economic disaster area.  As soon as this occurs, we will be able to access huge amounts of relief money from the SBA. Tomorrow or Thursday, when we have clarity on what tools will be in our hands, we will begin the long process of rebuilding from this disaster.  

Many of you are not accustomed to sitting on your hands, waiting to get to work, so here are my short term action item suggestions for you:

1. Get your paperwork in order - send us everything we need to get you perfect books.  We need all of your invoices, all of your statements, all of your mail. This information will be crucial in our applications for relief. 

2. Take a full inventory - for loss relief purposes, we need to know the value of everything you threw away (or ate, drank, donated) so it wouldn’t go bad. We highly encourage you to donate your perishables to local food banks, if they can take them, or DC Central Kitchen.

3. Contact your banker - many banks can work with you right now for temporary loan modification. Skipped payments and interest only payments for several months, or better.  Start the discussion.

4. Help your employees - if you have had to abruptly lay off your entire staffs (like most of us), you should encourage them to file unemployment claims and make sure they have the necessary paperwork.  Here is the link for the website they should apply at: https://does.dc.gov/page/ui-benefits-claimants

5. Watch stand up comedy  - seriously. This crisis is going to give us all strokes if we stay at 150% stress levels 24/7. That’s my job for you. You need to recharge to get ready to reopen.  

Even though many of you are exhausted and incredibly stressed, you should be proud of the way you’ve taken care of your businesses and, by extension, your employees. You’ve made swift adjustments to get into this pause as viable business entities, now our jobs are changing for the next few weeks to work to get the financial relief we need to reopen. We are working constantly to get everything ready for the relief application process and I expect to provide an update again as soon as relief information is available.

Another Pandemic Relief Update

Please be aware that there are major economic relief and stimulus packages in progress at both the Federal and Local levels.  We have worked closely with industry leadership at the local level to ensure that the relief will be immediate and meaningful and will provide substantial protections to the employees that are the heart of our industry.

We are aware that many of our restaurant groups are actively implementing swift changes to their labor scheduling and operational planning, in response to current declines in business, and we urge you to take a long view of the crisis, where possible.  This does not mean you should not adjust your shifts for the next week to match current business levels, but we believe that in non-hotel restaurants you should wait until mid week, when all of the new tools are available, to make longer term plans.  

We are constantly monitoring the situation and will provide you with further guidance over the coming days as we collate aggregate sales trend data and the new laws go into effect.  As always, clients can reach out to me by phone at any time to talk through things.

Regards - 

Matt Hetrick, CPA

President and Owner of CPA Eats

A Message From Matt on Weathering the Covid-19 Pandemic

One of the (few) good things about being a war veteran as is that it grounds everything else in life with a certain perspective: things could always be worse. Whether election riots, government budget shutdowns, or coronavirus, DC has a habit of throwing seemingly insurmountable challenges at its restaurants. And we have a habit of rising to those challenges, time and time again, and moving forward successfully.  

None of us know, today, exactly how extensive the damage from this pandemic and related panic will be. We’ve read all of the news, listened to all of the politicians and the experts, and we still feel hardly better off for it, as the situation is extremely fluid. That’s OK.  

Deep breath. Steady hands. We’ve got this.

Over the next few weeks our work together will be incredibly important. We expect volume to drop materially this weekend and next week, as it did in Seattle, which was the first US community to enter into the panic. We will be communicating regularly and working hand in hand with you to ensure that your restaurant remains financially viable. We will also be preparing to help you get as much assistance as possible when government financial relief packages are finalized. 

Here are our current thoughts re: best practices to address this situation:

1. Accept that you really, truly, honestly don’t have as much control in this situation as you want to have. It’s not just you, there just isn’t a magical plan for how to run a full sized restaurant with a full sized staff and full sized obligations for an unknown length of time with an unknown sales drop and unknown health danger. Once you accept this, you can start looking at reasonable measures instead of end-of-days adjustments. It is important to balance capital preservation efforts against the potential of gutting your team long term, especially if this is only a four-to-eight week event.
    

2. Monitor your Year-Over-Year (YOY) same-day-sales. Don’t look at last week, don’t look at last month. Tonight, compare Thursday, March 12, 2020 against Thursday, March 14, 2020. How are you doing? What is the % trend up or down this week?  This is the measure of how you’re actually performing. It is important to have your finger on the anecdotal pulse of your operation and observe everything that is happening, but it is also important to measure the actual variances.
   
   Many of our clients experienced sales increases this week through Wednesday, however we believe yesterday was a turning point in short term public perception and we should expect 30-40%% reductions in sales this weekend, based on trends experienced in Seattle over the last few weeks and current cancellation trends. We expect substantial weekday reductions at the beginning of next week, as well, but we believe that the situation is too fluid to predict as far as next weekend.
   

3. Plan for labor and menu change scenarios around the staffing levels you need to have at various sales levels. You should carefully analyze your current schedule and then identify the cuts you would make if sales drop 30%. What about 40%? What staff can you afford to employ, how much can they prep and execute if you’re down a station or two and how does this affect your menu? There’s only so much you can do, but be ready for it. We are optimistic that there will be imminent legal changes to help provide economic support and security for displaced workers, and you need to keep your eye on the overarching goal of long term job preservation for your team - you help no one if you go out of business because you are unable to make cuts.
    

4. Be mindful of health. Wash your hands. Be sensible about guest dining space and the layout of your restaurant - if there are less guests, you can likely spread them out. Do whatever you can to make it an amazing experience and ameliorate any health concerns. Keep guests informed online and in person about the extra health and sanitation measures you’re taking.
    

5. Deliver. Now’s the time to get in the delivery game, if you haven’t already joined it. We thoroughly recommend full scale adoption of all delivery services, ourselves, for any restaurant that can offer appropriate menu items. This project is time intensive, so if you intend to offer delivery, you should commence that work immediately.
    

6. Preserve capital. Austerity measures are called for in uncertain times. Purchase wisely, schedule judiciously, and take this as an opportunity to get lean on inventory and staffing. You should be making your adjustments now, not several weeks from now, as many of the adjustments (short of closing) take weeks to have a financial impact. We will be working closely with you to maintain working capital, while managing vendor relationships.
    

7. 40% is the magic number. If sales drop less than 40% YOY, you can make difficult choices and adjust your organization to come to a sustainable loss-level during this crisis. If sales remain at 60% of expected sales or above, you will lose as much money (in utilities, rent, and owner salaries) if you are shut down as if you stay open. If sales decline more than 40% for an entire week, this paradigm starts to change and we will shift planning discussions to planning for a dormant period for the restaurant to wait out the panic. Most of the changes that you can make will not provide immediate financial respite, so we believe it is prudent to take the long view of this situation, but be prepared to be decisive.

Our primary financial concern through this period - and, by extension, yours - is on preservation of working capital and ensuring organizational viability through a period of uncertain sales declines. Accomplishing this goal may require some difficult decisions and extraordinary effort, but it will be achievable for most organizations.

Up through yesterday, we have seen very little impact on sales volume, but we expect this to change as the situation further develops.  We are working closely with industry representatives and government officials to try to influence the creation of relief packages that are timely, accessible, and useful.  We will work closely with you to avail your organization of any aid packages offered by the government - the fact that our teams maintain impeccable books for you will make it significantly easier to attain relief.  We will continue to constantly monitor the developing situation and provide you with steady guidance and best practices advice throughout this period.

Yours,
Matt Hetrick, CPA
President and Owner of CPA Eats