Under Section 1031 of the Internal Revenue Code, a taxpayer may sell real property (the relinquished property) and replace it with real property of a like-kind (the replacement property) without recognizing tax on the sale if certain requirements are met. Two of those requirements involve deadlines:  the taxpayer must identify replacement property within 45 days of the sale of the relinquished property and acquire the replacement property within 180 days of the sale of the relinquished property.

Opportunity Zones have similar deadlines:  under Section 1400Z-2 of the Internal Revenue Code, taxpayers may defer capital gains that are invested in a Qualified Opportunity Fund within 180 days. These capital gains may usually be deferred until December 31, 2026, potentially avoiding any taxable gain on the liquidation of the Qualified Opportunity Fund Investment if the investment is held for at least 10 years.

As a result of the ongoing coronavirus pandemic, taxpayers were understandably concerned about their ability to meet these 45-day and 180-day requirements.  Thankfully, the Internal Revenue Service issued Notice 2020-23, which extends the deadline to July 15, 2020, for several types of returns and other requirements that were due to be performed between April 1, 2020 and July 15, 2020.

The notice specifically provides an automatic extension of the Section 1031 deadlines until July 15, 2020, and the Section 1400Z-2 deadline for any period that would end between April 1, 2020 and July 15, 2020.   Obviously, this is welcome news to taxpayers who were unsure if they could comply with looming deadlines.

On March 27, 2020, President Trump signed H.R. 748, the Coronavirus Aid, Relief, and Economic Security Act (Public Law No: 116-136, the “CARES Act” or the “Act”).  Title I of the CARES Act creates the Paycheck Protection Program (discussed in more detail here).  Generally speaking, the Paycheck Protection Program permits certain small businesses to apply for a small business loan which may be forgiven, in whole or in part, if the loan proceeds are used to pay for certain eligible expenses, e.g., the payment of certain payroll costs, interest on a covered mortgage obligation, payments under a covered rent obligation, and the payment of certain utilities.

This blog post summarizes significant uncertainties created by tax and accounting issues related to the Paycheck Protection Program.  A separate blog post containing a more detailed review of the tax changes contained is the Act is available here.  Additional details regarding the employment and employee benefits changes is available here.  Additional guidance related to the CARES Act is forthcoming.  All of Kean Miller’s guidance related to the coronavirus pandemic is located here.

UPDATE – Since April 2, the Treasury Department has been issuing interim final rules and additional guidance related to the Paycheck Protection Program.  That guidance is available here.  This blog post has been updated, where indicated, to reflect that guidance.  Please note that FAQ no. 17 in the new guidance suggests that applicants that have previously filed under prior guidance may rely on the rules in place at that time or may work with their lenders to revise their applications to apply the new rules. 

Tax and Accounting Issues Raised by the Paycheck Protection Program

Determination of Expenses Eligible for Forgiveness – While the preliminary hurdle for any taxpayer will be the amount of the loan that they are eligible for, it is just a loan unless eligible for forgiveness.  Therefore, of greater importance will be the manner and time within which the loaned funds must be spent to be forgiven.  Otherwise, it is simply a loan that must be repaid.  Section 1106 of the CARES Act defines the expenses that, if paid with the loan proceeds, are eligible for forgiveness.  Payments of eligible expenses related to covered mortgage or rent obligations and covered utility payments must relate to mortgage or lease obligations incurred or in force before February 15, 2020 and utility payments for which service began before February 15, 2020.  The amount eligible for forgiveness is calculated with reference to costs incurred and payments made related to an eligible expense during the 8-week period beginning on the date of the origination of the covered loan.  By computing the amount eligible for forgiveness based on both costs incurred and payments actually made the Act appears to create a hybrid-accounting accrual/cash method of accounting rule for the determination of eligible expenses.

The hybrid accounting method appears to indicate that certain costs, notably payroll costs related to eligible self-employed individuals, need not be actually paid during the covered period.  This may also make sense because it is possible that the date payroll checks are issued for services performed during a portion of the 8-week covered period could fall outside of the 8-week period.  For example, if the 8-week period ends on a Wednesday and the payroll for the week is paid on the following Friday, it appears the Act permits the portion of payroll costs incurred for services performed Monday through Wednesday to be eligible for forgiveness.

Because the amount of the loan is computed with reference to actual payroll costs, it is likely the majority of forgivable expenses paid will relate to payroll actually paid but based on the statutory language as written, it also appears that it may be possible to pre-pay certain eligible expenses.  While unlikely, this situation could arise if, for some reason, a borrower’s covered expenses did not equal or exceed the amount borrowed.  Absent additional guidance, in that situation, a borrower might read the statute to permit the borrower to pre-pay a covered expense.  At this time, it is not clear whether additional guidance will be issued to clarify or impose additional limitations on the calculation of the amount of covered expenses that are eligible for forgiveness.  One practical step a borrower should consider is timing the origination of the loan to coincide with payroll dates to avoid the potential payroll issue discussed above.

UPDATE – On the evening of April 2, 2020, the Treasury Department issued an interim final rule, 13 CFR Part 120, while the rule is largely silent on the accounting issue discussed here, it does contain a new, arguably arbitrary, cap on the calculation of forgivable expenses.  Specifically, the rules states that only 25% of the loan forgiveness amount may be used to pay non-payroll costs, e.g., rent, interest, and utilities.  There does not appear to be any basis for this rule in the CARES Act.  As a result, the rule appears to exceed the scope of the CARES Act.  If Congress intended to place this seemingly arbitrary cap on the loan forgiveness amount, a retroactive technical corrections bill may be required.

Uncertainty Regarding How Certain Business Concerns Should Apply for Relief – The CARES Act should be clarified, ideally by swift legislative action, to make it clear that partners and partnerships are not excluded from the relief provisions.  The Act contains a poorly worded definition of payroll costs that could be read so as to defeat the purpose of the statute.  Specifically, the Act refers only to the net self-employment earnings of a sole proprietor or an independent contractor in the definition of payroll costs, which language may be read to exclude the self-employment of partners in a partnership.  That is, as written the Act does not clearly specify that the net self-employment earnings of certain eligible self-employed individuals, such as partners, should be included in the definition of payroll costs, thereby, creating uncertainty as to the availability of loans to these otherwise eligible individuals and creating uncertainty as to the computation of the amount of loans available to these particular business organizations which constitute a significant part of the United States economy.

As a result of what appears to be at worst, a drafting error, the Act could be read to suggest that a partnership that is a small business concern could not include the net earnings from self-employment of its partners in its payroll costs.  Thus, if the partnership had no employees, under this interpretation, its payroll costs would be zero, and the applicant would effectively be ineligible for relief under the Paycheck Protection Program.  In contrast, if that partnership was structured as an S corporation for tax purposes and its owners received a combination of W-2 wages (included in payroll costs) and dividends (likely excluded from payroll costs) it would be eligible for a higher loan amount since the wages would be considered payroll costs.

The “payroll costs” of an owner of  a single member limited liability company on the other hand, is more clearly covered by the statute even if the limited liability company has no employees and thus no “payroll costs.”  This type of eligible small business concern and is no different in practice than a sole proprietorship operated by an individual in their individual capacity and for tax purposes, assuming no elections are made for an alternative tax treatment, they are indistinguishable.  A limited liability company with a single member is simply “disregarded”.  Nevertheless, while the “payroll costs” of such a limited liability company would not ordinarily include net self-employment income, the Act itself defines “payroll costs” as “the sum of payments of … income of a sole proprietor or independent contractor that is … net earnings from self-employment,…”  In contrast, if that individual did business as a sole proprietor (without the interposition of a limited liability company) his or her  net earnings from self-employment would be included in payroll costs and would more clearly be eligible for relief.

Some of the confusion in the Act is caused by the use loose of terms that have more specific meanings for tax purposes.  While the term “sole proprietor” has a unique meaning for income tax purposes, the term “independent contractor” is not an income tax classification for income tax imposition purposes.  The latter term relates more generally to whether or not a payor is required to withhold the recipient’s income taxes from payments to the recipient and also to whether the payor has to chip in for payroll tax purposes.  It is not an income tax classification like sole proprietor.

Additional confusion results because the Act does not make it clear as to who among possible applicants, in certain circumstances, is entitled to apply for a loan or whether all possible applicants may file.  That is, the Act is drafted in a manner that appears to permit both an eligible self-employed individual, such as a partner or the owner of a single member limited liability company, and the associated partnership or limited liability company to apply for a loan.  However, in both of those instances the unfortunate terminology in the Act used to define “payroll costs’ could cause the loan amount to be zero regardless of whether the individual owner or the entity applied for the loan because in either case the individual owner or owners’ net earnings from self-employment are not defined as payroll costs, for the reasons mentioned above.  Thus, in the case of an entity with no employees that suffered losses related to the pandemic, depending on how the language is interpreted by a decision-maker lender, neither the entity nor its individual owner(s) would be eligible for meaningful relief.

It is not clear how lenders will interpret the definition of payroll costs in this context.  Given the pressing need to distribute cash to business owners quickly, it may be that lenders include payroll costs related to an eligible self-employed individual in the loan calculation.  But issues may arise when the applicant seeks loan forgiveness depending on how the lender interprets the immunity provisions in Section 1106 of the CARES Act.

There is no indication that Congress intended to preclude a large swath of the American economy doing business in partnership form from receiving Paycheck Protection Program loans based solely on their choice of business organization.  It is our understanding that the Small Business Administration is in the process of drafting detailed regulations that will address the computation of “payroll costs” as it relates to partners and partnerships and other businesses as well as their owners, for a Paycheck Protection Program Loan.  As we understand it, the Small Business Administration intends to release that guidance on Friday, April 3.  What is not clear at this point is whether the apparent drafting error will be clarified by regulation or, ideally, a technical corrections act.  It should be noted that, if needed, Congress could pass a statute containing the necessary technical corrections, making the corrections retroactive to the passage of the CARES Act.  Although Congress is not currently in session, ideally any such action could take place prior to the time applicants began seeking loan forgiveness.  Nevertheless, uncertainty about loan eligibility for certain businesses and self-employed individuals may remain for some period of time.

Hopefully the regulations to be issued tomorrow will mitigate at least some of the uncertainty.

UPDATE – On April 14, 2020, the Treasury Department issued an interim final rule on Additional Eligibility Criteria and Requirements for Certain Pledges of Loans (13 CFR Part 120), which addresses this issue.  Specifically, the rule addresses the eligibility and calculation of payroll costs for partnerships, partners, limited liability companies filing their federal income taxes as partnerships, sole proprietors and independent contractors.  With respect to partnerships and partners, the rule states that the appropriate borrower is the partnership (and not each individual partner) and that the partnership may include up to $100,000 of the self-employment income of each “general active partner” in the partnership’s payroll costs.  While not explicitly stated, it appears a partner’s self-employment income would be their net earnings subject to self-employment tax on their individual income tax return (discussed in more detail below).  The term “general active partner” is not defined but it appears to be an attempt to distinguish an investor from a partner that actively participants in the partnership’s operations.  Additional guidance may be required to clarify this term.  As noted above, a retroactive technical correction may also be required to the CARES Act to clarify this issue.

Determination of Payroll Costs for a Sole Proprietor, Partner, or Owner of an S corporation – The amount of compensation paid to an eligible self-employed individual is relevant to both determining the amount of the Paycheck Protection Program loan as well as the amount of the loan that may be forgiven.  The term eligible self-employed individual is defined with reference to Section 7702(b) of the Families First Coronavirus Response Act (Public Law No: 116-127).  The Families First Coronavirus Response Act defines an eligible self-employed individual as an individual who:

  1. Regularly carries on any trade or business within the meaning of [IRC Section 1402], and
  2. Would be entitled to receive paid leave during the taxable year pursuant to the Emergency Paid Sick Leave Act if the individual were an employee of an employer (other than himself or herself).

IRC Section 1402 defines self-employment income and generally includes income received by a sole proprietor or a partner in a partnership.

With respect to eligible self-employed individuals, the definition of payroll costs includes net earnings from self-employment.  Taken together with the reference to IRC Section 1402 in the definition of eligible self-employed individual, the reference to net earnings from self-employment appears to mean that the amount of a sole proprietor or partner’s payroll costs is the amount reported on their tax return that is subject to self-employment tax.   Thus, for purposes of determining the payroll costs related to a sole proprietor or an individual partner in a partnership, it appears appropriate to reference the amount of income reported on their individual income tax return that was subject to self-employment tax, which generally includes the gross income derived by an individual from any trade or business carried on by the individual, less deductions allocated to the business, and also includes a partner’s distributive share of income or loss from a trade or business carried on by a partnership.  This position appears to be supported by the Paycheck Protection Program Information Sheet for Borrowers, which was released by the Treasury Department on March 31, 2020.  That said, as noted above, at present a partner is not included in the definition of an eligible self-employed individual and it is not clear how a partnership (or its partners) should apply for a Paycheck Protection Program loan.

Generally speaking, the owner of an S corporation would receive wages (reported on Form W-2) from the S corporation.  It appears those wages would likely be considered to be the S corporation owner’s payroll costs, i.e., it is unlikely the owner of an S corporation could include dividends received in the payroll costs for purposes of the Paycheck Protection Program.

Because the determination of payroll costs for a sole proprietor, partner, or owner of an S corporation is not entirely clear, additional guidance is required.  The lack of guidance is problematic because the amount of a sole proprietor or partner’s payroll costs may be directly related to previously made tax elections or decisions or to decisions currently being considered for their 2019 return.  As a result, it may be necessary to amend previously filed returns or carefully consider decisions related to a 2019 return after additional guidance is released.

UPDATE – On April 14, 2020, the Treasury Department issued an interim final rule on Additional Eligibility Criteria and Requirements for Certain Pledges of Loans (13 CFR Part 120), which addresses this issue.  Specifically, the rule addresses the calculation of payroll costs for partnerships, partners, limited liability companies filing their federal income taxes as partnerships, sole proprietors and independent contractors.  The payroll costs of a sole proprietor or independent contractor that report their self-employment income on Schedule C, is the amount reported on Schedule C line 31 (net profit or loss).  Thus, a sole proprietor or independent contractor that operated at a loss does not appear to be eligible for relief under the Paycheck Protection Program.  The interim rule also creates a seemingly arbitrary rule that the loan forgiveness amount does not include any otherwise forgivable expense the sole proprietor or independent contractor did not claim or was not entitled to claim a deduction for on their 2019 return.

The calculation of a partners’ payroll costs is not entirely clear in the interim guidance.  By referencing the “self-employment income of general active partners” the guidance seems to imply payroll costs should be computed with reference to net earnings from self-employment from Schedule K-1 (Form 1065), box 14, code A, reduced for unreimbursed employee expenses.  Additional guidance may be required to clarify this point.

Loan Forgiveness –Section 1106 of the Act provides a mechanism under which certain indebtedness related to these loans can be forgiven.  Unless an exception applies, Internal Revenue Code (“IRC”) Section 61 requires a taxpayer to include cancelation of indebtedness income in its taxable income.  Section 1106 creates an exception to IRC Section 61 and provides that loan forgiven under the Act shall be excluded from a taxpayer’s taxable income for purposes of the Internal Revenue Code.  It should be noted that the Act is silent on whether a borrower’s tax attributes will be reduced under IRC Section 108 in the amount of the forgiven debt.  Additional guidance may be necessary to clarify this issue.

Employee Retention Credit for Employers Subject to Closure Due to COVID-19 – Section 2301 of the CARES Act provides an employee retention credit to employers, based on wages (and a proportionate amount of qualified health plan expenses) paid to employees, which is discussed in more detail here.  It is important to note that an employer taking a small business interruption loan under the Paycheck Protection Program is not eligible for the credit.

Deferral of Payment of Employer Payroll Taxes – Section 2302 of the Act also permits an employer to defer the payment of certain employer payroll taxes, which is discussed in more detail here.  The ability to defer payment of payroll taxes may not apply if the employer had indebtedness forgiven under the under the Paycheck Protection Program.

Interplay with the Families First Coronavirus Response Act – It should be noted that for purposes of the Paycheck protection Program payroll costs do not include qualified sick leave wages or qualified family leave wages for which a credit is taken under Sections 7001 or 7003 (respectively) of the  Families First Coronavirus Response Act.

Implications

The CARES Act contains an unprecedented economic stimulus and the tax provisions are designed to facilitate getting cash to individuals and businesses as soon as possible.  Unfortunately, the CARES Act requires many small businesses to make decisions quickly but because of the uncertainty created by the loose language of the Act and the lack of guidance to-date it is not clear how some businesses and business owners can make the decisions most appropriate for their businesses.  The apparent drafting error and lack of guidance is particularly problematic for certain business organizations, such as partnerships, because previously taken tax positions or tax positions currently being evaluated may directly impact the amount of their potential Payroll Protection Program loan, including the amount eligible for forgiveness.

Until additional guidance is released, if possible, it may make sense for a business refrain from taking action, which is unfortunate because many businesses are struggling or are in the midst of an existential crisis due to the coronavirus pandemic.  It is our hope that the Small Business Administration will release comprehensive guidance on these issues quickly that will mitigate the uncertainty.

For additional information, please contact the Kean Miller Tax Group: Jaye Calhoun at (504) 293-5936; Kevin Curry at (225) 382-3484; Jason Brown at (225) 389-3733; Angie Adolph at (225) 382-3437; J. Mark Miller at (318) 562-2701; Phyllis Sims at (225) 389-3717; Robert Schmidt at (225) 382-4621; or Willie Kolarik at (225) 382-3441.

While the Louisiana Department of Revenue (the “Department”) has extended some filing and payment deadlines, it has not extended the April 15 and June 15 deadline for making 2020 first and second quarter individual and corporate estimated state income tax payments. Nor has the Department extended the April deadline for reporting and remitting March state sales and use taxes.

Estimated Income Tax Payments for the 2020 Tax Year

Although the deadlines for filing 2019 income tax returns and paying 2019 income tax liabilities have been extended to July 15, 2020, the deadlines for making Louisiana state declaration (estimated income tax) payments for the 2020 tax year, for both individuals and corporations, have not been extended.  The Department has issued guidance (Rev. Rul. 20-002 (March 30, 2020)) stating that it will automatically grant a waiver of the underpayment of estimated tax (“UET”) penalty for first and second quarter estimated payments, under certain circumstances.  La. R.S. 47:118(I) provides that the Secretary may waive underpayment penalties when an individual’s failure to file was in good faith. The Secretary may presume an individual acted in good faith if the failure to make the estimated payment was attributable to extraordinary circumstances beyond the individual’s control. Revenue Ruling 20-002 provides that the public health emergency resulting from the COVID-19 pandemic and the general stay-at-home order creates extraordinary circumstances, including that taxpayers do not have their 2019 liability from which to base their 2020 estimated payments. As a result, the Department will automatically waive UET penalties otherwise due for the April 15 and June 15, 2020 estimated payments if:

  1. The estimated payment is made timely.
  2. The April 15, 2020 payment is at least 90% of the amount paid on the April 15, 2019 estimated payment.
  3. The June 15, 2020 payment is at least 90% of the amount paid on the June 15, 2019 estimated payment.

A taxpayer has until May 17, 2022, one year after the statutory due date of the 2020 return, to request the waiver.

For fiscal year filers, the UET penalty waiver will also be granted if the taxpayer’s timely-filed first and second quarter estimated payments satisfy the above criteria.

For corporate income taxes, the Department’s current guidance related to the coronavirus pandemic does not include estimated tax payment relief or an automatic penalty waiver.  But La. Rev. Stat. §287.655(D) provides safe harbors against the penalty for underpayment of estimated tax.  Nevertheless, since the determination of whether the penalty is due is based on various alternative mathematical computations, it is unclear how such relief would not be in some sense, “automatic.” See RIB 20-009 (March 23, 2020) for relief available with respect to income and franchise tax returns.

Late Filed Elections for Pass-Through Entity Tax

Rev. Rule 20-002 also states that the Department will consider an election by a flow-through entity to pay tax on its income as timely if the election is filed on or after April 16, 2020 but before July 16, 2020 (for a calendar year filer).  For a fiscal year filer with an election due between March 1 and May 30, 2020, the election will be considered timely if it is filed on or after the fifteenth day of the fourth month after the close of the taxable year but before the fifteenth day of the seventh month after the close of the taxable year.

Extension of Time or Transfer Credits (2019 Tax Period Only)

Rev. Rule 20-002 also extends the deadline for transferring a transferable credit or for the execution of a binding agreement to transfer such credit by thirty (30) days for income and franchise tax returns with an original due date between March 1 and May 30, 2020.  For a 2019 calendar year filer of returns for individual income tax, corporation income, composite partnership income tax and fiduciary income tax, the extended deadline is June 15, 2020.  For a fiscal year filer with an income or franchise tax return filing and payment due date between March 1 and May 30, 2020, the extended deadline is thirty days from the original due date of the return.

State Sales/Use Tax Returns Due in April of 2020

In Revenue Information Bulletin 20-008, the Department extended the deadline to report and remit February 2020 state sales and use taxes by sixty (60) days. The returns and payments are now due May 20, 2020 but the Department has not extended the April filing deadline for March 2020 taxes. Unless guidance extending this deadline is issued within the next week, the deadline for March 2020 taxes remains April 20, 2020.

For additional information, please contact the Kean Miller Tax Group:  Jaye Calhoun at (504) 293-5936; Kevin Curry at (225) 382-3484; Jason Brown at (225) 389-3733; Angie Adolph at (225) 382-3437; J. Mark Miller at (318) 562-2701; Phyllis Sims at (225) 389-3717; Robert Schmidt at (225) 382-4621; or Willie Kolarik at (225) 382-3441.

The IRS recently issued Notice 2020-23, which extends the deadline for certain time sensitive actions that are required to be taken between April 1 and July 15.  July 15 is the new deadline.  The covered time sensitive actions include those actions relating to tax exempt bonds set forth in Revenue Procedure 2018-58, such as giving notice of defeasance escrows, filing Form 8038 or 8038G and making any rebate or yield reduction payments.  The notice also amplifies and updates previous notices.

This morning, the Federal Reserve announced the creation of a new liquidity facility to ensure that municipal governments can maintain cash flows and continue to operate.  Under the new Municipal Liquidity Facility, the Federal Reserve will lend up to $500 billion to a special purpose vehicle that will purchase eligible notes directly from eligible issuers.  “Eligible notes” includes tax anticipation notes, tax and revenue anticipation notes, bond anticipation notes, and other short-term notes with maturities less than 2 years.  “Eligible issuers” include US states, Washington DC, cities with a population over 1 million, and counties/parishes with a population over 2 million.  Political subdivisions must each designate one eligible issuer.  Issuers can borrow up to 20% of 2017 revenues and the proceeds may be used for most cash flow management purposes as a result of reduced revenue or increased expenses due to COVID-19.  Importantly, eligible issuers may also use proceeds to assist other entities that are not directly eligible for the facility.  The facility will expire September 30, 2020, unless extended.

On April 8, 2020, the CDC announced new guidance for how to handle essential workers who have been exposed to someone with COVID-19.  To ensure continuity of operations, the CDC says the employer no longer needs to send the exposed employee home to self-quarantine for 14 days assuming the employee remains asymptomatic and does not otherwise test positive for COVID-19.  Instead, the exposed employee can be allowed to continue to work if the employer can do the following:

  1. Pre-screen: The employer should take the employee’s temperature daily and assess for symptoms before the person is allowed to enter the facility.
  2. Self-monitor: The employee should be instructed to self-monitor for symptoms and not report to work if symptomatic.
  3. The employee should be required to wear a mask at all times at work for 14 days after the last known exposure.  The employer can provide the mask or approve employees’ supplied cloth face coverings in the event of shortages.
  4. Maintain social distancing (6 foot distance) as work permits.
  5. Clean and disinfect work spaces routinely.
  6. Increase air exchange in building (if possible)

If the employee becomes symptomatic, the employer should send the person home immediately and treat him/her as a suspected COVID-19+ person.

Practically, it may be difficult to comply with these new guidelines because employers are struggling to find infrared thermometers to monitor employee temps.  They are in short supply in many parts of the U.S., but the employer may have other options depending on the circumstances.  Keep in mind that co-workers may also be more likely to call-in sick or not show up at work due to fears of contracting the virus if they knew one of their colleagues was exposed to someone with the virus and is still allowed to work.  Hence the importance of keeping the information strictly confidential to the extent possible.

A link to the new guidance is here

In addition to certain entities, independent contractors, sole proprietors and “eligible self-employed individuals” may be eligible to apply for a Paycheck Protection Program loan under the CARES Act.

What is an eligible self-employed individual? It is important to note that the statute did not refer to “self-employed individuals” which would have been very easy for Congress to do. Instead, Congress used a term with a very specific meaning from a statute that Congress had just passed the week before.

The CARES Act provides that the term “eligible self-employed individuals”  has the meaning given in section 7002(b) of the Families First Coronavirus Response Act (“FFCRA”), which provides that the term means an individual who:

(1) regularly carries on any trade or business within the meaning of section 1402 of such Code, and

(2) would be entitled to receive paid leave during the taxable year pursuant to the Emergency Paid Sick Leave Act if the individual were an employee of an employer (other than himself or herself).

DIVISION E of the FFCRA contains the “Emergency Paid Sick Leave Act” and it provides:

(a) IN GENERAL.—An employer shall provide to each employee employed by the employer paid sick time to the extent that the employee is unable to work (or telework) due to a need for leave because:

(1) The employee is subject to a Federal, State, or local quarantine or isolation order related to COVID–19.

(2) The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID–19.

(3) The employee is experiencing symptoms of COVID–19 and seeking a medical diagnosis.

(4) The employee is caring for an individual who is subject to an order as described in subparagraph (1) or has been advised as described in paragraph (2).

(5) The employee is caring for a son or daughter of such employee if the school or place of care of the son or daughter has been closed, or the child care provider of such son or daughter is unavailable, due to COVID–19 precautions.

(6) The employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.

The intent of the FFCRA was to provide for paid leave up to a limited amount for those who suffer a COVID-19 qualifying need for leave that prevents them from working and prevents them from being paid. If an employer decides to continue to pay an employee his/her full salary during any leave, the employee would not be eligible for FFCRA paid leave. The DOL has provided some Q&As on the meaning of “unable to work” for FFCRA purposes. Below is one that offers some guidance on how the DOL has interpreted this statute:

What does it mean to be unable to work, including telework for COVID-19 related reasons?

You are unable to work if your employer has work for you and one of the COVID-19 qualifying reasons set forth in the FFCRA prevents you from being able to perform that work, either under normal circumstances at your normal worksite or by means of telework.

If you and your employer agree that you will work your normal number of hours, but outside of your normally scheduled hours (for instance early in the morning or late at night), then you are able to work and leave is not necessary unless a COVID-19 qualifying reason prevents you from working that schedule.

Unless a self-employed individual has been “unable to work (or telework)” due to one of the circumstances listed above, and not just as a result of a drop in demand for services, the individual does not appear to be an “eligible self-employed individual” within the meaning of FFCRA, and therefore does not appear to be an “eligible self-employed individual” within the meaning of the CARES Act, and therefore may not be eligible to individually apply for a PPP loan.

This analysis does not apply to individuals who operate under a sole proprietorship or as an independent contractor, but only other self-employed individuals attempting to determine eligibility for a PPP loan.

Unquestionably, Congress used the FFCRA’s very specific definition of “eligible self-employed individual” in addressing who can for apply for a Paycheck Protection Program loan under the CARES Act, adopted on March 27, 2020.  In the SBA’s interim final rule issued on April 2, 2020, it likewise referenced “eligible self-employed individual” in answering who is eligible.   Although certain guidelines published by the US Treasury Department reference “self-employed individuals” without the reference to “eligible” when discussing who is eligible for a Paycheck Protection Program loan, the loan application form published by the SBA and posted on Treasury’s website requires a certification that individual applying is an “eligible self-employed individual” – using the term used in the CARES Act and defined in the FFCRA.  The website guidance appears to be creating significant confusion but the CARES Act, FFCRA and loan application clearly require that self-employed individuals who apply be “eligible self-employed individuals” within the meaning of the FFCRA, and thus unable to work or telework as a result of a statutory listing of COVID related events.  Notwithstanding the fact that the above referenced statutory and regulatory language clearly points to Congress requiring self-employed individuals to have to meet different criteria than independent contractors and sole proprietors to be eligible for a PPP loan, it is hard to know how the SBA and banks will interpret these provisions.

The coronavirus continues to adversely impact so many, and the court systems across the country are adapting in kind.  On April 2, 2020, Louisiana’s Governor in Proclamation JBE 2020-41 suspended all legal deadlines at least until April 30, 2020.  Further, the Louisiana Supreme Court has issued orders over the last few weeks to help the court system navigate through these challenging times of our increasingly disrupted world.  Below is a digest of the most up-to-date information regarding courts in Louisiana as of the time of this posting.

As of April 6 2020, the Louisiana Supreme Court repealed all of its former orders and replaced it to continue all jury trials, both civil and criminal, civil bench trials, hearings, and court appearances scheduled to commence in any Louisiana state court before May 1, 2020, to be reset by local order for a later date no earlier than May 4, 2020.

Until at least May 4, 2020, courts may only conduct in-person proceedings to address emergency matters that cannot be resolved virtually. Courts must continue to take measures to limit access to courtrooms and other spaces, with absolute minimum physical contact, to practice social distancing and limit in-person court activity to only the emergency matters. As this situation is constantly changing, courts are further instructed to follow all guidelines issued by the Center for Disease Control, the President and the Governor, and to further limit access to courtroom and other spaces to the maximum number of people set forth in any future guideline or official proclamation that may be issued. All emergency matters should be conducted with the use of video and telephone conferencing whenever possible.

Hearings related to civil protective orders, child in need of care proceedings, emergency child custody matters, proceedings for children removed from their home by emergency court order, proceedings related to emergency interdictions and mental health orders,  temporary restraining orders and mental health orders, and matters of public health related to this crisis and other emergency matters necessary to protect the health, safety and liberty of individuals as determined by each court are considered emergency civil matters that should be conducted via video and/or telephone conferencing.

Court proceedings by telephone, video, teleconferencing, or any other means that do not involve in-person contact may proceed with consent of all parties and the judge. Further, courts may consider matters that can be resolved without in-person proceedings.

Courts should work with parish clerks to encourage in-person filings of court pleadings to be replaced with filing by other means, such as U.S. mail, e-filing, email or facsimile. In all criminal, juvenile and civil matters handled on an emergency or expedited basis, a record shall be kept under the direction of the acting judge for each action.

Please see below for additional court-specific information.

  1. Louisiana Supreme Court: All filings which were or are due to the Court between March 12, 2020 through, May 1, 2020 shall be considered timely if filed no later than May 4, 2020.
  2. First Circuit Court of Appeal: The court is closed until April 30, 2020 unless extended by further order. The court will still handle administration of emergency matters. All oral arguments are continued without date and will be scheduled to take place as soon as possible after May 1, 2020. The court will accept filings via U.S. Mail and e-filing. All deadlines set by the court in all cases pending before the cout are extended until Friday, May, 1, 2020.  All filings due during the period of March 12, 2020 through May 1, 2020 or which become due during this period shall be deemed timely if filed on or before May 1, 2020.
  3. Second Circuit Court of Appeal: All parties must submit filings via e-filing, mail or fax (fax filings are allowed only with prior notification and authorization from the Clerk of Court during normal court business hours). Payments for fax or e-filing fees must be mailed. No in-person filings will be accepted. The entire April docket has been re-set for May 18, 2020.
  4. Third Circuit Court of Appeal: The courthouse shall maintain restricted access until April 30, 2020 and will reopen on May 1, 2020 unless extended by further order.  All deadlines are extended until April 30, 2020. All oral arguments scheduled to take place through April 30, 2020 and May 31, 2020 will be submitted on briefs.  All filings must be submitted by email, U.S. mail, or fax filing. For purposes of computing the timeliness of filings, this period of suspension shall be considered a legal holiday; and therefore, pleadings otherwise due in this Court during this legal holiday shall be deemed timely if filed on or before Friday, May 1, 2020.
  5. Fourth Circuit Court of Appeal: All oral arguments scheduled to take place through April 30, 2020 are continued unless parties notify the court to have their matters submitted on briefs. All filings must be submitted via e-filing.  The court will send all notices by electronic means.
  6. Fifth Circuit Court of Appeal: The court is closed, but court operations are occurring remotely.  All filing deadlines for the court will be suspended until at least May 1, 2020. For purposes of computing the timeliness of filings, this period of suspension shall be considered a legal holiday; and therefore, pleadings otherwise due in this court during this legal holiday shall be deemed timely if filed on or before May 4, 2020. Appellee briefs otherwise due between March 12, 2020 and May 1, 2020 shall be considered timely if filed on or before May 26, 2020. The court will accept e-filings and emergency fax filings while closed.  Filings by mail will be processed as circumstances allow.  No in-person filings are allowed.
  7. United States Court of Appeals for the Fifth Circuit: In-person oral arguments scheduled in New Orleans for April are cancelled. Parties are advised that the court has suspended until further notice the requirement to file paper copies of electronically filed pleadings and documents. The Clerk’s Office remains open for telephonic, electronic, and mail operations. The Clerk of the Court may direct the parties or counsel to provide paper copies of filings on a case-by-case basis, and at a future date, parties or counsel may be directed to provide paper copies of filings previously submitted electronically. All current deadlines for attorney filers remain in effect, except for those regarding production of paper copies. Extensions with justification may be requested from the Clerk’s Office following normal procedures and rules.
  8. United States District Court, Eastern District of Louisiana: The court building is closed. All civil and criminal bench and jury trials, hearings, proceedings and conferences scheduled before or on May 1, 2020 are continued to a date to be reset by each presiding judge. Those continuances do not continue any pending deadlines other than the trial dates. Attorneys should contact the presiding judges in their continued cases if they seek to modify such other deadlines. Litigants may file documents electronically, by U.S. mail, or by facsimile. Due to concerns regarding COVID-19, until May 1, 2020, the Clerk’s Office for the Eastern District of Louisiana will not accept sealed documents on paper for filing. Sealed documents should be submitted by email to the Court.
  9. United States District Court, Middle District of Louisiana:  All civil and criminal (bench and jury) trials are postponed to a date to be determined by the presiding judge on or after May 1, 2020.  This postponement does not affect any other pending deadlines other than the pre-trial conference and trial dates. Parties seeking to modify other deadlines must do so by written motion. All civil evidentiary hearings and other in-court hearings and proceedings requiring personal appearances, on the dockets of the United States District Court and the United States Bankruptcy Court, set before April 30, 2020 are hereby postponed, to be reset by, and at the discretion of, the presiding judge. Prescriptive, peremptive and statute of limitation deadlines are hereby suspended until April 30, 2020. No in-person filings will be accepted through April 30, 2020 or until further order of this Court. Filings in sealed matters which are required to be filed conventionally (in-person) pursuant to administrative procedures shall be filed by facsimile by sending an electronically signed pleading in PDF format via encrypted or secure email (if available).  Non-sealed pleadings and sealed pleadings that are not required to be filed conventionally pursuant to administrative procedures should not be submitted to this email box and must be submitted for filing through CM/ECF. Electronic filing via the CMECF system will be fully functional and help desk support will be available.
  10. United States District Court, Western District of Louisiana: All civil and criminal jury trials scheduled to begin on any date from now through May 1, 2020, are continued, to a date to be reset by each presiding judge. All other hearings, conferences and/or proceedings are subject to the discretion of the individual judge presiding over the proceeding. Any court filings or correspondence may be time-stamped and placed in the drop box located in each division.  Any and all payments made to the Clerk, U. S. District Court for the payment of fines, fees, criminal debt or restitution must be made online via www.pay.gov or paid via money order or check and mailed to any divisional office.
  11. Civil District Court for the Parish of Orleans: On April 7, 2020, the court issued an order extending the closure of Civil District Court for the Parish of Orleans, First City Court, and Second City Court, until8:00 AM on Monday, May 4, 2020.  All civil matters, which are set during the closure, are continued and will be rest by request or by order of the court, and the parties are instructed to contact the division clerk for further instructions. The court’s order does not prohibit any court proceeding by telephone, video conferencing, or any other means that do not involve in-person contact. And the court’s order does not affect the court’s consideration of matters that can be resolved without in-person proceedings. All judgments rendered by a First and Second City Court or Civil District Court judge during the suspension perios will be mailed pursuant to La. C.C.P. article 1913 after April 30, 2020.With respect to the Civil Division of the Civil District Court for the Parish of Orleans, you can continue to electronically file (e-file) documents and can fax file documents. Additionally, the Clerk of Civil District Court has offered free subscriptions to the Remote Access system, including civil records and land records, to ensure public access.  Existing subscriptions are being extended. For more information, please visit the Civil District Court for the Parish of Orleans’ website or the Clerk of Civil District Court for the Parish of Orleans’ website
  12. 19th Judicial District Court for the Parish of East Baton Rouge: The 19th Judicial District Court for the Parish of East Baton Rouge is closed until 8:00 AM on Friday, May 1, 2020, and those with pending criminal cases and civil matters set during this closure will be notified of a new court date. All dockets are cancelled except for emergency and time-sensitive matters as determined by the court that may be held by teleconference or video conference. The Court’s order expressly does not prohibit any court proceedings by telephone, video conferencing, or any other means. The East Baton Rouge Parish Clerk of Court’s Office will be closed to the general public through April 30, 2020, except that it will be open only for emergency filings between the hours of 8:00 AM to 12:00 PM Monday thru Friday. During this period of closure, e-filing through Clerk Connect and fax filing will be accepted. For more information, please visit either the 19th Judicial District Court’s website or the East Baton Rouge Clerk of Court’s website.
  13. 15th Judicial District Court for the Parishes of Acadia, Lafayette and Vermilion: In all parishes, the courthouses shall be closed to the public except to provide services in the following categories: (1) civil domestic protective orders under title 46:2131 (domestic violence), 46:2181 (post-separation family violence), and 9:361 (sexual abuse); (2) emergency child custody matters pursuant to La. C.C.P. article 3945; (3) proceedings for children removed from their home by emergency court order; and (4) emergency interdiction/commitment matters. In Lafayette Parish, the public is instructed to call the Clerk’s Office between the hours of 10:00 AM to 2:00 PM Monday thru Friday for all other business. And in Acadia Parish, the public is instructed to call the Clerk’s Office between the hours of 8:30 AM to 4:00 PM Monday thru Friday for emergencies or questions until further notice. For more information, please visit the 15th Judicial District Court’s website, the Acadia Parish Clerk of Court’s website, the Lafayette Parish Clerk of Court’s website, or the Vermilion Parish Clerk of Court’s website.
  14. 1st Judicial District Court for the Parish of Caddo: The Court’s website advises that you should not come to the courthouse unless absolutely necessary, and you will only be allowed in the courthouse if necessary. Through May 1, 2020, all civil and domestic trials, hearings and court appearances are hereby continued, to be reset by order with the following exceptions: (1) civil protective orders; (2) emergency child custody matters pursuant to La. C.C.P. article 3945; (3) emergency interdictions; (4) public health matters related to the current health emergency; (5) civil commitments where the party is in continued involuntary custody; and (6) any matter in which a rule to show cause is granted after the moving party sets forth written grounds why the matter should proceed despite the concerns surrounding the coronavirus and that rule is set for hearing by the court. The Clerk’s Office will be open from 8:30 AM to 1:00 PM Monday thru Friday until further notice. A small staff will be on hand until 4:30 PM Monday thru Friday to answer phones and to complete filings and e-recordings. For more information, please visit the Caddo Parish Clerk of Court’s website.
  15. 14th Judicial District Court for the Parish of Calcasieu: All civil hearings and court appearances set for any date between March 23, 2020 and April 13, 2020, are hereby continued to a date to be reset by the appropriate judge, except for the following: (1) civil protective orders; (2) emergency child custody matters; (3) matters of public health; and (4) matters deemed necessary by the Duty Judge as provided by the Louisiana Supreme Court Order. A judge will be available at the courthouse between 8:30 AM to 4:30 PM Monday thru Friday to handle such matters. The Clerk’s Office has no public access and has reduced hours from 8:30 AM to 12:30 PM Monday thru Friday for calls. All business with the Clerk’s Office at this time should be only that which is deemed an emergency or critical in nature. Customers are encouraged to use e-recording, e-filing, fax filing, US mail, Fed-Ex, or UPS when available for matters that are urgent, as Document Exchange will no longer be staffed at the door. For more information, please visit the Calcasieu Parish Clerk of Court’s website.

For more information about state district courts, parish and city courts not mentioned here, visit the Louisiana Supreme Court website for frequently updated court information.

The Louisiana Tax Commission previously issued an advisory suspending hearings and extending property tax filing deadlines to April 13th to sync with the Governor’s Executive Order.  Today, the Louisiana Tax Commission issued a revised advisory extending those deadlines to April 30th, as provided in the most recent Executive Order.

The Fifth Circuit issued an important decision on April 7, 2020, Texas Brine Company, L.L.C. v. American Arbitration Assoc. et al, No. 18-31184 (5th Cir. 2020).  For the first time, the Court analyzed the propriety of “snap removals.”  Those can occur when a plaintiff sues several defendants in state court.  Complete diversity between the parties exists, but at least one of the named defendants is a citizen of the forum state.  This means that once the forum-defendant is served, the “forum defendant” rule would prevent the non-forum defendant from removing the case to federal court.

A “snap removal” occurs when a named non-forum defendant removes the case to federal court before the named forum-defendant is served.  Essentially, it’s a race to remove before service can be effected on the forum defendant.  The Fifth Circuit analyzed whether this type of removal is proper, or whether it is contrary to the intent of the forum defendant rule and an abuse of the statute.  Relying on the unambiguous statutory language, the Court concluded that “snap removal” is proper:  “A non-forum defendant may remove an otherwise removable case even when a named defendant who has yet to be ‘properly joined and served’ is a citizen of the forum state.”

All parties litigating in the Fifth Circuit should be aware of this decision.  It is especially important for defendants, because their ability to file a “snap removal” in such situations has a short window.  By not acting quickly (before the forum-defendant is served), then one path to removal may be foreclosed.