The passage of the CARES Act has created as many questions as it has solutions for the companies and individuals it was designed to help. The webinar “The Federal Government’s Response to the COVID-19 Pandemic: Implications for Equipment Finance Companies” hosted by the Equipment Leasing and Finance Association on April 22 provided guidance for navigating the rollout of the new legislation. One presenter compared the implementation of the complex law, including the Payment Protection Program (PPP), to “building a plane while flying it.”
More than 300 attendees participated in the online event to hear speakers Eric Holland, Partner at Reed Smith LLP, and David A. Javdan, Managing Director at Alverez & Marsal and former General Counsel at the U.S. Small Business Administration (SBA), discuss details of SBA loan and grant options, including the PPP, Title IV loan programs for larger businesses and the previously existing Economic Injury Disaster Loans (EIDLs). Moderator Andy Fishburn, ELFA VP of Federal Government Relations, discussed political implications for the near- to long-term, including the following.
Lobbying Efforts
ELFA has been actively involved in advocacy on issues such as clearly delineating equipment finance companies as essential businesses and advocating for their eligibility for PPP loans.
Following the webinar, on April 23, partially as a result of direct ELFA advocacy, a group of 28 House members wrote to Treasury Secretary Mnuchin and Administrator Carranza, encouraging them to make small finance companies eligible to receive funds from the PPP. The letter can be found on the ELFA website. ELFA is going to remain vigilant on this issue.
ELFA has also been engaged with the Federal Reserve regarding the Main Street lending program, pushing for a debt to EBITDA standard that would allow for equipment finance companies that are by their nature leveraged to be eligible for loans. Fishburn said the Fed’s strong understanding of financial markets and how financing is accomplished provides reason to be optimistic about this outcome.
Tax Provisions for the Mid-Term
One of the biggest impacts under the CARES Act is the change in net operating loss (NOL) carryback provisions. Under the 2017 Tax Act, the ability to carry back NOL was reduced, but the CARES Act suspends temporarily the limitation for 2018-2020 so that NOL can be carried back for five years. This means that losses can be deducted at a 35 percent tax rate, while revenues are being taxed at 21 percent. Due to many IRS closings, however, amended returns may not be processed quickly, especially if they are in paper form.
Business interest deductions have been increased from 30 percent of tax EBITDA to 50 percent of tax EBITDA for 2020, and could likely be extended into 2021 should economic conditions remain dire. A whole host of provisions delaying payroll tax payments and allowing filing extensions are also included.
What’s Next in the Long-Term
An increase in infrastructure spending has been discussed but depends on cooperation between a deeply divided Congress that hasn’t been able to agree on infrastructure spending in previous years. While not impossible, this legislative could be extremely difficult to get passed. Some of the long-term changes to expect are opening courts and access to notaries for state and federal filings, introducing pandemic insurance, reducing attendance at national political conventions, and instituting mail-in and absentee ballots for elections.
View the webinar recording and download the PowerPoint presentation.
More Webinars to Come
The April 22 webinar was part of ELFA’s “Wednesday Webinar” series designed to help equipment finance professionals navigate the current market and regulatory landscape and anticipate the changing environment in the face of the COVID-19 pandemic. The free webinars include live Q&A sessions so participants can connect with experts and colleagues on the issues they are grappling with. Register for upcoming webinars and view recordings of past events.