On Aug. 8, President Trump issued an executive order and three memoranda to his Cabinet and executive agency heads that provide or extend COVID-19 relief to individuals and organizations.
The three memoranda provide for supplemental unemployment payments, the deferral of collection of payroll taxes, and an extension of student loan payment deferments and reduction of interest rates for student loans.
The order also directs various Cabinet and executive agency heads to find means of limiting evictions and foreclosures.
Disaster relief/unemployment insurance benefits
The CARES Act provided $600 per week of federally funded unemployment compensation assistance to eligible unemployed individuals in addition to standard state unemployment benefits. That benefit expired July 31.
The disaster relief memorandum directs the Federal Emergency Management Agency (FEMA) to provide benefits from the Department of Homeland Security’s Disaster Relief Fund and directs states to use their Coronavirus Relief Fund allocation to provide financial relief to unemployed Americans affected by COVID-19, principally through an up to $400-per-week supplemental unemployment compensation benefit.
Seventy-five percent of the cost of the benefit shall come from those federal funds. State governments will be responsible for the remaining 25%, subject to an agreement between the federal government and the state with regard to the program and funding.
The disaster relief memorandum makes two significant changes in eligibility compared to the $600 supplemental benefit under the CARES Act.
First, the memorandum limits eligibility to individuals who receive at least $100 per week in unemployment compensation assistance.
Second, the memorandum requires the individual to certify that his or her lost wages are attributable to disruptions caused by COVID-19.
Payroll tax deferral
The payroll tax memorandum directs the Secretary of the Treasury to defer the withholding, deposit and payment of the employee portion of social security tax (but not Medicare tax) on wages paid from Sept. 1, 2020, through Dec. 31, 2020, if the employee’s pre-tax wage during any biweekly payroll period is generally less than $4,000.
Amounts deferred will be without penalties, interest, additional amounts or additions to tax. The payroll tax memorandum directs the Secretary of the Treasury to issue guidance to implement the memorandum and to also find ways to eliminate the deferred tax entirely.
It should be noted that the payroll tax memorandum provides only for the deferral of the employee portion of social security tax and, in the event the Secretary of Treasury does not eliminate the deferred tax entirely, an affected employee will ultimately be required to pay any remaining deferred tax.
However, until further guidance is issued, it is unclear how an employee would pay the deferred tax following the end of the deferral period.
Student loan payment relief
The student loan memorandum directs the Secretary of Education to effectuate waivers of and modifications to the requirements and conditions of economic hardship deferments and to provide such deferments as necessary to continue the temporary cessation of payments and the waiver of all interest on student loans held by the Department of Education until Dec. 31, 2020.
This memorandum further provides that student loan borrowers may continue to make payments if they wish to do so.
Eviction minimization
The housing executive order directs certain members of the Cabinet to consider, identify, review and take action necessary to minimize, to the greatest extent possible, residential evictions and foreclosures during the ongoing COVID-19 national emergency.
President Trump directs the Secretary of Health and Human Services and the Director of the Centers for Disease Control and Prevention to consider whether any temporary halting of evictions for failure to pay rent are reasonably necessary to prevent further spread of COVID-19.
President Trump directs the Secretary of the Treasury and the Secretary of Housing and Urban Development to identify Federal funds that could be used to provide temporary financial assistance to renters and homeowners who are struggling to make monthly payments as a result of financial hardships caused by COVID-19.
President Trump also directs the HUD Secretary to take action to promote the ability of renters and homeowners to avoid eviction or foreclosure, including providing Federal funds to landlords.
Finally, President Trump directs the Director of the Federal Housing Finance Agency, in consultation with the Secretary of the Treasury, to review existing authorities and resources that may be used to limit evictions.
Conclusion
How these measures will impact the economy is anybody’s guess. We are encouraging people to simply save the FICA that is not withheld by their employer. As we have mentioned in previous articles, the last person you want to owe money to is Uncle Sam.
Perhaps the biggest unintended consequence to the executive orders is the impact on valuations of multi-family residential projects, as landlords will have limited ability to evict under the order, which limits cash flow and, consequently, valuations. As a result, investors should approach residential real estate cautiously.
The same is true for retail real estate, which is trying to redefine itself. With Simon Properties announcing that the large now-vacant anchor tenant spaces are now considering re-purposing to fulfillment centers, at what I imagine for a fraction of the rent, this sector is poised to take a hit as well.
Perhaps the largest benefactor will be commercial real estate, which seems to be in continued demand, as companies are looking to expand their footprint to provide for adequate social distancing. Only time will tell.
This article is general in nature. In order to determine how the above impact your specific situation, consult a CPA or attorney. CLA’s Jennifer Rohen contributed to this article.
Michael Bosma, CPA, is Principal-in-Charge of the Reno office of CliftonLarsonAllen LLP. His NNBW column, “Covering Your Assets,” focuses on effective planning strategies for every business owner. He’s also the host of “Bosma on Business,” which airs Saturdays at 10 a.m. on Newstalk 780 KOH. Reach him for comment at mike.bosma@claconnect.com.
-->On Aug. 8, President Trump issued an executive order and three memoranda to his Cabinet and executive agency heads that provide or extend COVID-19 relief to individuals and organizations.
The three memoranda provide for supplemental unemployment payments, the deferral of collection of payroll taxes, and an extension of student loan payment deferments and reduction of interest rates for student loans.
The order also directs various Cabinet and executive agency heads to find means of limiting evictions and foreclosures.
Disaster relief/unemployment insurance benefits
The CARES Act provided $600 per week of federally funded unemployment compensation assistance to eligible unemployed individuals in addition to standard state unemployment benefits. That benefit expired July 31.
The disaster relief memorandum directs the Federal Emergency Management Agency (FEMA) to provide benefits from the Department of Homeland Security’s Disaster Relief Fund and directs states to use their Coronavirus Relief Fund allocation to provide financial relief to unemployed Americans affected by COVID-19, principally through an up to $400-per-week supplemental unemployment compensation benefit.
Seventy-five percent of the cost of the benefit shall come from those federal funds. State governments will be responsible for the remaining 25%, subject to an agreement between the federal government and the state with regard to the program and funding.
The disaster relief memorandum makes two significant changes in eligibility compared to the $600 supplemental benefit under the CARES Act.
First, the memorandum limits eligibility to individuals who receive at least $100 per week in unemployment compensation assistance.
Second, the memorandum requires the individual to certify that his or her lost wages are attributable to disruptions caused by COVID-19.
Payroll tax deferral
The payroll tax memorandum directs the Secretary of the Treasury to defer the withholding, deposit and payment of the employee portion of social security tax (but not Medicare tax) on wages paid from Sept. 1, 2020, through Dec. 31, 2020, if the employee’s pre-tax wage during any biweekly payroll period is generally less than $4,000.
Amounts deferred will be without penalties, interest, additional amounts or additions to tax. The payroll tax memorandum directs the Secretary of the Treasury to issue guidance to implement the memorandum and to also find ways to eliminate the deferred tax entirely.
It should be noted that the payroll tax memorandum provides only for the deferral of the employee portion of social security tax and, in the event the Secretary of Treasury does not eliminate the deferred tax entirely, an affected employee will ultimately be required to pay any remaining deferred tax.
However, until further guidance is issued, it is unclear how an employee would pay the deferred tax following the end of the deferral period.
Student loan payment relief
The student loan memorandum directs the Secretary of Education to effectuate waivers of and modifications to the requirements and conditions of economic hardship deferments and to provide such deferments as necessary to continue the temporary cessation of payments and the waiver of all interest on student loans held by the Department of Education until Dec. 31, 2020.
This memorandum further provides that student loan borrowers may continue to make payments if they wish to do so.
Eviction minimization
The housing executive order directs certain members of the Cabinet to consider, identify, review and take action necessary to minimize, to the greatest extent possible, residential evictions and foreclosures during the ongoing COVID-19 national emergency.
President Trump directs the Secretary of Health and Human Services and the Director of the Centers for Disease Control and Prevention to consider whether any temporary halting of evictions for failure to pay rent are reasonably necessary to prevent further spread of COVID-19.
President Trump directs the Secretary of the Treasury and the Secretary of Housing and Urban Development to identify Federal funds that could be used to provide temporary financial assistance to renters and homeowners who are struggling to make monthly payments as a result of financial hardships caused by COVID-19.
President Trump also directs the HUD Secretary to take action to promote the ability of renters and homeowners to avoid eviction or foreclosure, including providing Federal funds to landlords.
Finally, President Trump directs the Director of the Federal Housing Finance Agency, in consultation with the Secretary of the Treasury, to review existing authorities and resources that may be used to limit evictions.
Conclusion
How these measures will impact the economy is anybody’s guess. We are encouraging people to simply save the FICA that is not withheld by their employer. As we have mentioned in previous articles, the last person you want to owe money to is Uncle Sam.
Perhaps the biggest unintended consequence to the executive orders is the impact on valuations of multi-family residential projects, as landlords will have limited ability to evict under the order, which limits cash flow and, consequently, valuations. As a result, investors should approach residential real estate cautiously.
The same is true for retail real estate, which is trying to redefine itself. With Simon Properties announcing that the large now-vacant anchor tenant spaces are now considering re-purposing to fulfillment centers, at what I imagine for a fraction of the rent, this sector is poised to take a hit as well.
Perhaps the largest benefactor will be commercial real estate, which seems to be in continued demand, as companies are looking to expand their footprint to provide for adequate social distancing. Only time will tell.
This article is general in nature. In order to determine how the above impact your specific situation, consult a CPA or attorney. CLA’s Jennifer Rohen contributed to this article.
Michael Bosma, CPA, is Principal-in-Charge of the Reno office of CliftonLarsonAllen LLP. His NNBW column, “Covering Your Assets,” focuses on effective planning strategies for every business owner. He’s also the host of “Bosma on Business,” which airs Saturdays at 10 a.m. on Newstalk 780 KOH. Reach him for comment at mike.bosma@claconnect.com.
