{"id":5811,"date":"2020-05-06T17:03:24","date_gmt":"2020-05-06T17:03:24","guid":{"rendered":"https:\/\/www.sherin.com\/real-estate\/?p=5811"},"modified":"2026-06-22T17:05:33","modified_gmt":"2026-06-22T17:05:33","slug":"what-the-hospitality-industry-should-know-about-new-regulations-and-guidance-for-the-cares-act-2","status":"publish","type":"post","link":"https:\/\/www.sherin.com\/real-estate\/2020\/05\/06\/what-the-hospitality-industry-should-know-about-new-regulations-and-guidance-for-the-cares-act-2\/","title":{"rendered":"What the Hospitality Industry Should Know About New Regulations and Guidance for the CARES Act"},"content":{"rendered":"<p>Below is a brief synopsis of some of the recent regulations and guidance pertaining to the\u00a0<a href=\"https:\/\/www.congress.gov\/116\/bills\/hr748\/BILLS-116hr748enr.xml#toc-HB37C431F57484034A3D8B58B1EC16623\" target=\"_blank\" rel=\"noopener noreferrer\">CARES Act<\/a>, which the\u00a0<a href=\"https:\/\/www.sherin.com\/practice-areas\/hospitality\/\" target=\"_blank\" rel=\"noopener noreferrer\">Hospitality Practice Group<\/a>\u00a0at Sherin and Lodgen believes to be of particular concern to the hospitality industry.<\/p>\n<p><strong>PPP Forgiveness &amp; Laid-Off Employees Who Won\u2019t Return to Work<\/strong><\/p>\n<p>As the Hospitality Practice Group recently described in a\u00a0<a href=\"https:\/\/www.sherin.com\/hospitality\/2020\/05\/04\/recent-updates-to-the-paycheck-protection-program-ppp\/\" target=\"_blank\" rel=\"noopener noreferrer\">blog post<\/a>, on May 3, 2020, the SBA issued several new questions and answers to their\u00a0<a href=\"https:\/\/home.treasury.gov\/system\/files\/136\/Paycheck-Protection-Program-Frequently-Asked-Questions.pdf\" target=\"_blank\" rel=\"noopener noreferrer\">SBA CARES Act FAQs<\/a>, including Question #40, which indicated that an employer\u2019s ability to obtain forgiveness of a Paycheck Protection Program (\u201cPPP\u201d) loan under the CARES Act might not be adversely affected as a result of an employer being unable, after making good faith efforts (including having an employee reject a written offer), to rehire one or more laid-off employees. We expect further guidance and regulations to be issued soon to deal with such issue. For an explanation on why an employee not returning to work might affect PPP forgiveness, see our March 31, 2020\u00a0<a href=\"https:\/\/www.sherin.com\/firm-news\/client-alert-cares-act-a-summary-of-key-provisions-affecting-the-hospitality-industry\/\" target=\"_blank\" rel=\"noopener noreferrer\">Summary of Key Provisions of the CARES Act.<\/a><\/p>\n<p><strong>PPP Loans and Eligibility for ERTC<\/strong><\/p>\n<p>On May 4, 2020, the IRS issued an update to its\u00a0<a href=\"https:\/\/www.irs.gov\/newsroom\/covid-19-related-employee-retention-credits-interaction-with-other-credit-and-relief-provisions-faqs\" target=\"_blank\" rel=\"noopener noreferrer\">IRS ERTC FAQs<\/a>\u00a0pertaining to the Employee Retention Tax Credit (\u201cERTC\u201d). As background, an employer may not receive the ERTC if such employer also receives a PPP loan (See\u00a0<a href=\"https:\/\/www.irs.gov\/newsroom\/covid-19-related-employee-retention-credits-interaction-with-other-credit-and-relief-provisions-faqs\" target=\"_blank\" rel=\"noopener noreferrer\">IRS ERTC FAQs<\/a>\u00a0Question #79). While many hospitality owners initially applied for and received one or more PPP loans, a number of significant problems with the PPP (many of which were detailed by the\u00a0<a href=\"https:\/\/www.restaurant.org\/Home\" target=\"_blank\" rel=\"noopener noreferrer\">National Restaurant Association<\/a>\u00a0in their\u00a0<a href=\"https:\/\/sherin.sharefile.com\/d-sc4b4d9be28546129\" target=\"_blank\" rel=\"noopener noreferrer\">April 27, 2020 letter<\/a>\u00a0to the SBA) have made it very difficult for hospitality businesses to use PPP funds and\/or ultimately have such PPP loan(s) forgiven. As a result, some hospitality businesses have determined that the ERTC may actually be more advantageous than the PPP.\u00a0<strong><em>According to the May 4th update to Question #80 of the IRS ERTC FAQs, an employer who repays its PPP loan by May 7, 2020, is eligible for the ERTC.<\/em><\/strong><\/p>\n<p><strong>Extension of Date of Safe Harbor<\/strong><\/p>\n<p>On May 5, 2020, the SBA issued an update to its\u00a0<a href=\"https:\/\/home.treasury.gov\/system\/files\/136\/Paycheck-Protection-Program-Frequently-Asked-Questions.pdf\" target=\"_blank\" rel=\"noopener noreferrer\">SBA CARES Act FAQs<\/a>\u00a0pertaining to the so-called limited safe harbor with respect to PPP certification (the \u201cSafe Harbor\u201d). As background, all PPP applicants are required to complete and submit\u00a0<a href=\"https:\/\/www.sba.gov\/sites\/default\/files\/2020-04\/PPP-Borrower-Application-Form-Fillable.pdf\" target=\"_blank\" rel=\"noopener noreferrer\">SBA Form 2483<\/a>, which contains several certifications from the PPP applicant, including that: \u2018\u2018[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.\u2019\u2019 On April 23, 2020, the SBA updated the\u00a0<a href=\"https:\/\/home.treasury.gov\/system\/files\/136\/Paycheck-Protection-Program-Frequently-Asked-Questions.pdf\" target=\"_blank\" rel=\"noopener noreferrer\">SBA CARES Act FAQs<\/a>\u00a0by adding Question #31, which states:<\/p>\n<p>\u201c31. Question: Do businesses owned by large companies with adequate sources of liquidity to support the business\u2019s ongoing operations qualify for a PPP loan?<\/p>\n<p>Answer: In addition to reviewing applicable affiliation rules to determine eligibility, all borrowers must assess their economic need for a PPP loan under the standard established by the CARES Act and the PPP regulations at the time of the loan application. Although the CARES Act suspends the ordinary requirement that borrowers must be unable to obtain credit elsewhere (as defined in section 3(h) of the Small Business Act), borrowers still must certify in good faith that their PPP loan request is necessary. Specifically, before submitting a PPP application, all borrowers should review carefully the required certification that \u201c[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.\u201d Borrowers must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business. For example, it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith, and such a company should be prepared to demonstrate to SBA, upon request, the basis for its certification.<\/p>\n<p>Lenders may rely on a borrower\u2019s certification regarding the necessity of the loan request. Any borrower that applied for a PPP loan prior to the issuance of this guidance and repays the loan in full by May 7, 2020, will be deemed by SBA to have made the required certification in good faith.\u201d<\/p>\n<p>Then, on April 24, 2020, the SBA issued an\u00a0<a href=\"https:\/\/home.treasury.gov\/system\/files\/136\/Interim-Final-Rule-on-Requirements-for-Promissory-Notes-Authorizations-Affiliation-and-Eligibility.pdf\" target=\"_blank\" rel=\"noopener noreferrer\">Interim Final Rule On Requirements for Promissory Notes and Authorizations of Affiliation and Eligibility<\/a>, which formalized the safe harbor concept first raised in\u00a0<a href=\"https:\/\/home.treasury.gov\/system\/files\/136\/Paycheck-Protection-Program-Frequently-Asked-Questions.pdf\" target=\"_blank\" rel=\"noopener noreferrer\">SBA CARES Act FAQs<\/a>\u00a0Question #31. Section 5 of such IFR provides that: \u201c\u2026[a]ny borrower that applied for a PPP loan prior to the issuance of this regulation and repays the loan in full by May 7, 2020, will be deemed by SBA to have made the required certification in good faith. The Administrator, in consultation with the Secretary, determined that this safe harbor is necessary and appropriate to ensure that borrowers promptly repay PPP loan funds that the borrower obtained based on a misunderstanding or misapplication of the required certification standard.\u201d\u00a0<em><strong>According to the May 5th update to the<\/strong><\/em>\u00a0<a href=\"https:\/\/home.treasury.gov\/system\/files\/136\/Paycheck-Protection-Program-Frequently-Asked-Questions.pdf\" target=\"_blank\" rel=\"noopener noreferrer\">SBA CARES Act FAQs<\/a>,\u00a0<em><strong>Question #43, the \u201cSBA is extending the repayment date for this safe harbor to May 14, 2020. Borrowers do not need to apply for this extension.\u201d<\/strong><\/em><\/p>\n<p>Throughout the COVID-19 crisis, Sherin and Lodgen\u2019s\u00a0<a href=\"https:\/\/www.sherin.com\/practice-areas\/hospitality\/\" target=\"_blank\" rel=\"noopener noreferrer\">Hospitality Practice Group<\/a>\u00a0will continue to monitor the PPP and other new laws and regulations of interest to the hospitality industry and provide updates as frequently as possible.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Below is a brief synopsis of some of the recent regulations and guidance pertaining to the\u00a0CARES Act, which the\u00a0Hospitality Practice Group\u00a0at Sherin and Lodgen believes to be of particular concern to the hospitality industry. PPP Forgiveness &amp; Laid-Off Employees Who Won\u2019t Return to Work As the Hospitality Practice Group recently described in a\u00a0blog post, on [&hellip;]<\/p>\n","protected":false},"author":18,"featured_media":5804,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_monsterinsights_skip_tracking":false,"footnotes":"","_links_to":"","_links_to_target":""},"categories":[],"tags":[],"class_list":["post-5811","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.8 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>What the Hospitality Industry Should Know About New Regulations and Guidance for the CARES Act - Real Estate<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.sherin.com\/real-estate\/2020\/05\/06\/what-the-hospitality-industry-should-know-about-new-regulations-and-guidance-for-the-cares-act-2\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"What the Hospitality Industry Should Know About New Regulations and Guidance for the CARES Act - Real Estate\" \/>\n<meta property=\"og:description\" content=\"Below is a brief synopsis of some of the recent regulations and guidance pertaining to the\u00a0CARES Act, which the\u00a0Hospitality Practice Group\u00a0at Sherin and Lodgen believes to be of particular concern to the hospitality industry. 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