Texas franchise tax, originally due on May 15, 2020, has been extended automatically to July 15, 2020.

In response to the COVID-19 pandemic, federal, state and local governments, through both legislative and executive means, have enacted or ordered a broad array of financial measures to mitigate the adverse economic effects experienced by businesses and nonprofit entities.

This Alert will identify and explain the economic programs established by both the federal government and state of Texas to help ease the financial effects of COVID-19.

Federal Economic Aid Programs

Economic Injury Disaster Loans and Loan Advances

Small business owners with fewer than 500 employees currently experiencing a temporary loss of revenue due to COVID-19 are eligible to apply for Economic Injury Disaster Loans (EIDL) to pay immediate expenses such as payroll, bills/accounts payable and fixed debts. Details of the program are discussed in our previous Alerts.

Loan amounts are up to $2 million, with loan advances of up to $10,000. The loan advance shall be awarded within three days of application. The advance can be used to keep employees on payroll, pay for sick leave, meet increased production costs or pay business obligations. The loan advance does not have to be repaid.

Note: As of April 16, 2020, the Small Business Administration (SBA) is currently unable to accept new applications. 

Businesses in certain industries may still qualify even if they have more than 500 employees, if they meet the SBA’s size standards.

Paycheck Protection Program

The SBA is offering a low-interest, no fee loan of up to $10 million for small businesses, nonprofits and sole proprietors to help retain employees and aid cash flow through the Paycheck Protection Program (PPP). Previous Alerts discuss the program, its FAQ guide and the interim final rule.

The SBA will forgive the loan if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, insurance, paid sick or medical leave, mortgage interest or utilities. The applying entity must have fewer than 500 employees. Loan repayments will be deferred for six months.

Applicants can apply through any existing SBA lender or through any federally insured depository institution, federally insured credit union and Farm Credit System institution that has agreed to participate.

The Paycheck Protection Program is available through June 30, 2020.

Note: PPP funds have run out, but Congress is discussing adding more money into the program

Express Bridge Loan Pilot Program

As businesses await proceeds from the EIDL program, the SBA is offering temporary financial assistance of up to $25,000 through the Express Bridge Loan pilot program.

The applicant must have a preexisting relationship with an SBA Express Lender. The borrower can use the loan while it is applying for the EIDL loan. However, the loan must be repaid in full or in part by the proceeds from the EIDL loan.

Texas Tax Assistance Programs

Franchise Tax Extension

Texas franchise tax, originally due on May 15, 2020, has been extended automatically to July 15, 2020.

Sales and Use Tax

Sales and use tax payments were due for quarterly filers on April 20, 2020. However, assistance is being given in the form of short-term payment agreements and, in most instances, penalty and interest may be waived for quarterly filers who were unable to file or pay on time due to COVID-19.

Texas Economic Programs

Shared Work Program

The Shared Work program provides Texas employers an alternative to layoffs by: 1) supplementing their employees’ wages lost because of reduced work hours with partial unemployment benefits, and 2) reducing normal weekly work hours for employees in an affected unit by at least 10 percent but not more than 40 percent. The reduction must affect at least 10 percent of the employees in that unit.

The Shared Work program unemployment benefits are payable to employees who qualify for and participate in an approved Shared Work Plan. Workers may choose not to participate. Employees who qualify will receive both wages and shared work unemployment benefits. Employers must continue to provide employee benefits.

Employers may create one or more Shared Work Plans for multiple areas of their business affected by COVID-19. Plans may be created for various departments/shifts/units provided that there are two or more employees in the department/shift/unit.

Employers may stop or continue the plan and employees are allowed to return to work full time for a week or two and then continue the plan.

The Shared Work Program supplements an employee’s wages with unemployment benefits equal to the percentage reduction in the employee’s work hours, up to 40 hours per week. An employee who normally works overtime may not receive shared work benefits for a reduction in overtime hours.

The Texas Workforce Commission provided the following example to calculate Shared Work Program benefits: An employee is qualified to receive $400 in regular unemployment benefits. The employer cuts that employee’s hours from 40 per week to 32 per week—a 20 percent reduction. To determine the amount of shared work benefits the employee would receive, multiply $400 (the regular benefit amount) by .20 (percent reduction in hours), which equals $80. The eligible worker would receive $80 in shared work benefits each week in addition to their regular wages for the 32 hours worked.

Mass Claims Program

The Mass Claims program streamlines the unemployment benefit claims process for employers faced with either temporary or permanent layoffs. Employers can submit basic worker information on behalf of their employees to initiate claims for unemployment benefits.

There are several benefits to using this program for both employers and employees:

• Layoff information may be submitted before the layoff, ensuring smooth transition for both employer and worker.
• Claims can be established more efficiently than workers submitting on their own.
• Proper payment is ensured by submitting worker’s final week of earnings.
• Severance pay or wage information may be submitted in lieu of notice of layoff, reducing subsequent contact by the Texas Workforce Commission.
• Employers will not be inundated with written notices of application for each individual who applies for unemployment.
• Party of interest status to each claim filed is automatically granted.

If an employer has already laid off staff, they cannot use Employer Benefits Services (EBS) to submit a mass claim. If the layoff date was in the past and there are 10 or more employees affected by COVID-19, the employer will need to fill out and submit Mass Claims program documents manually. The Texas Workforce Commission has also waived the five-day notice requirement.

Unemployment Insurance Program

Texas has waived the seven-day waiting period to apply for unemployment insurance benefits for those out of work due to COVID-19 closures or quarantines. Work search requirements are also waived.

The Texas Workforce Commission determines benefit eligibility based on past wages, the reason someone lost their job and ongoing eligibility requirements.

To qualify for unemployment benefits in Texas, an employee must have worked in Texas during the past 12 to 18 months and have at least a minimum amount of wages as required by the guidelines.

About Duane Morris

Duane Morris has created a COVID-19 Strategy Team to help organizations plan for, respond to and address this fast-moving situation. Contact your Duane Morris attorney for more information. Prior Alerts on the topic are available on the team’s webpage.

For More Information

If you have any questions about this Alert, please contact Sharon L. Caffrey, Joshua B. Long, any member of the COVID-19 Strategy Team or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.