In Notice 80-20-002, May 5, 2020, the Mississippi Department of Revenue has advised that the due date for filing income tax returns and making first and second quarter estimated payments is extended t July 15, 2020, consistent with the Federal Covid extension. The notice applies to individual and fiduciary income tax returns and corporate income and franchise tax returns.
As we all work to address the growing personal and business challenges presented by COVID-19, Brunini wants to assure our clients, friends, and the public that we will continue providing top-notch legal services uninterrupted by the ongoing public health crisis. The firm activated its business continuity policies and procedures some time ago, and we are taking every precaution possible to protect the health, safety and welfare of our clients, the entire Brunini Team and their families.
We recognize that our clients, friends, and the public are being impacted by this challenging public health crisis and are dealing with many difficult and novel business issues. We are here to help with employment concerns, tax issues, insurance coverage questions or any other legal assistance you might need. Contact information is available on our website, or you may call (601)948-3101 for assistance in reaching any member of our team.
During the COVID-19 pandemic, employers have been forced to address the application of virtually every legal labor and employment obligation in the context of the pandemic. One of these obligations includes an employer’s responsibilities under the federal Occupational Safety and Health Act (OSHA), which is administered by the U.S. Department of Labor (DOL). The DOL previously published its Guidance on Preparing Workplaces for COVID-19, in which it outlined steps for employers to protect their employees.
On April 10, 2020, the DOL issued additional guidance addressing the agency’s enforcement of OSHA’s recordkeeping requirements amid the COVID-19 pandemic. Generally, OSHA recordkeeping requirements command “covered employers” to record certain work-related injuries and illnesses on their OSHA 300 log. However, since the on-set of this pandemic, employers have wrestled with whether they are required to record an employee’s COVID-19 illness—and if so, when.
According to the DOL, COVID-19 is “recordable” and must be included on an employer’s OSHA 300 log, if:
- The case is a confirmed case of COVID-19, as defined by Centers for Disease Control and Prevention (CDC);
- The case is “work-related,” (as defined by 29 CFR § 1904.5); and
- The case involves one or more of the general recording criteria, (as outlined by OSHA and set forth in 29 CFR §1904.7). Per OSHA, cases meet this recording criteria if it results in death, days away from work, restricted work or transfer to another job, medical treatment beyond “first aid,” or loss of consciousness.
In the same guidance, the DOL expressly stated that it will not require covered employers to make a determination regarding “work-relatedness” (Step # 2 above), except where:
- There is objective evidence that a COVID-19 case may be work-related; and
- The evidence was reasonably available to the employers.
The DOL expressly states that this limited recordkeeping waiver does not apply to employers in the healthcare industry, emergency response organizations (e.g., emergency medical, firefighting and law enforcement services), and correctional institutions.
The DOL’s stated goal of this limited enforcement is to “help employers focus their response efforts on implementing good hygiene practices in their workplaces, and otherwise mitigating COVID-19’s effects, rather than on making difficult work-relatedness decisions in circumstances where there is community transmission.”
In IRS Notice 2020-23 the IRS provides a list of additional returns and payments of tax that are due on or after April 1, 2020 for which filing and payment relief is provided. The listed payment obligations and return filings are now due on July 15, 2020.
IRS extends deadline for filing applications to carryback NOLs arising in 2018 and 2019.
The CARES Act contained provisions amending IRC Section 172(b)(1) to carry back any NOL arising in tax years beginning after December 31, 2017, and before January 1, 2021, to each of the five taxable years preceding the tax year of the NOL. However, the CARES Act did not amend the law extending the time for taxpayers realizing NOLs to apply for a tentative carryback adjustment of the tax liability in the carryback year and accelerate the refund of any resulting overpayments. In its Notice 2020-26, the IRS announced that it will grant a six-month extension of time to file a request for tentative carryback adjustment on Form 1045 or Form 1139 for an NOL arising in a taxable year that began during calendar year 2018 and that ended on or before June 30, 2019. These forms must now be filed by June 30, 2020. IRS Notice 2020-26.
IRS provides additional guidance regarding NOL carrybacks under the CARES Act.
The IRS has issued a Revenue Procedure providing additional guidance for net operating losses arising in 2018, 2019 and 2020. Under the CARES Act, such net operating losses may be carried back to the five taxable years immediately preceding the year of the loss. The Revenue Procedure addresses taxpayer elections to forego the carryback period, elections related to years in which foreign income is included in the taxpayer’s income under I.R.C. Section 965 and taxpayer options for net operating losses in tax years beginning before January 1, 2018, and ending after December 31, 2017. Rev. Proc 2020-24, 2020-17 IRB.
The Internal Revenue Service (IRS) has finally provided employers covered by the Families First Coronavirus Response Act (FFCRA)—those employers with less than 500 employees—with guidance concerning the documentation needed in order to seek the refundable payroll tax credits provided for under the FFCRA. In so doing, the IRS has essentially established the documentation employees should be prepared to provide to employers in order to obtain the new COVID-19 related paid sick leave rights.
As previously reported, President Trump officially signed the FFCRA into law on March 18, 2020. Among its provisions, the FFCRA set out several key mandates that impact employers, including:
- New, separate paid sick leave rights for employees impacted by COVID-19 and those serving as caregivers for individuals with COVID-19; and
- New, enhanced leave entitlements under the federal Family Medical Leave Act (“FMLA”), including paid leave under FMLA.
Since its passage, employers covered by the FFCRA have worked to understand and implement the FFCRA, including how to obtain the refundable tax credits provided by Congress as a way to offset the costs of these new mandates.
Recently, the Internal Revenue Service (IRS) provided its own initial guidance to assist covered employers with the mechanics of complying with the FFCRA. Of particular importance to employers, the IRS provided some guidance regarding what information covered employers should receive from an employee in order to “substantiate” eligibility for the FFCRA tax credits. You should maintain all records noted below for at least four (4) years after the payroll tax becomes due or is paid, whichever is later.
General Required Documentation
According to the IRS guidance, a covered employer will “substantiate eligibility” for the FFCRA’s paid sick leave and/or paid family leave credits if the employer receives a written request for such leave from the employee in which the employee provides:
- The employee’s name;
- The date or dates for which leave is requested;
- A statement of the COVID-19 related reason the employee is requesting leave and written support for such reason; and
- A statement that the employee is unable to work, including by means of telework, for such reason.
In addition, the IRS directs covered employers to “create and maintain records” that include the following information:
- Documentation to show how you determine the amount of qualified sick and family leave wages you paid to each employee, including records of work, telework, and qualified family leave;
- Documentation to show how you determine the amount of qualified health plan expenses that the employer allocated to wages;
- Copies of any completed Forms 7200, Advance of Employer Credits Due to COVID-19, that you submit to the IRS; and
- Copies of the completed Forms 941, Employer’s Quarterly Federal Tax Return, that you submit to the IRS.
In addition to the general requirements outlined above, several of the specific COVID-19 related reasons for leave require their own additional details. For example, in the case of a leave request based on “a quarantine order or self-quarantine advice,” the statement from the employee should include the name of the governmental entity ordering quarantine or the name of the health care professional advising self-quarantine, and, if the person subject to quarantine or advised to self-quarantine is not the employee, that person’s name and relation to the employee.
Similarly, in the case of a leave request based on “a school closing or child care provider unavailability,” the statement from the employee should include:
- The name and age of the child (or children) to be cared for,
- The name of the school that has closed or place of care that is unavailable, and
- A representation that no other person will be providing care for the child during the period for which the employee is receiving family medical leave.
Additionally, with respect to the employee’s inability to work or telework because of a need to provide care for a child older than fourteen (14) during daylight hours, a statement that special circumstances exist requiring the employee to provide care.
While this IRS guidance does provide covered employers with additional clarity on the types of forms and other documentation needed to obtain the sought-after refundable tax credits under the FFCRA, the IRS guidance also raises other questions that will need to be answered. For example, the IRS guidance does not specify what would satisfy “statement of the COVID-19 related reason the employee is requesting leave and written support for such reason.” Legal commentators recommend that any certification forms distributed to employees requesting leave also include language indicating that “additional documentation may be required.”
As the IRS and DOL continue to release additional information on the process for employers to receive these important tax credits, we will continue to monitor further proposed legislation and its potential effects on employers.
Under the centralized audit procedures for partnerships enacted by Congress in 2015, partnerships generally may not file amended returns without express authorization of the IRS. To enable partnerships and partners to take advantage of certain retroactive law changes under the CARES Act, the IRS has issued its Revenue Procedure 2020-23 allowing partnerships that filed a Form 1065 and furnished all required Schedules K-1 for taxable years beginning in 2018 or 2019 before the date of the revenue procedure may file amended partnership returns and furnish corresponding Schedules K-1 to its partners before September 30, 2020. Rev. Proc. 2020-23, 2020-18 IRB (April 8, 2020).
In an Order of the Commissioner dated March 24, 2020, the Department of Revenue has suspended requirements associated with the International Registry Plan and the International Fuel Tax Agreement for any motor vehicle engaged in interstate emergency relief efforts and traveling through Mississippi as part of the emergency relief. This includes motor vehicles carrying medical supplies or pharmaceuticals, supermarket products or food, or fuel. Additionally, any apportioned registration issued under the International Registration Plan expiring on March 31, 2020, is suspended and the expiration date is extended to April 30, 2020.
The Order is effective for 60 days from its date.
The CARES Act provides $150 billion in Coronavirus Relief Funds for states, tribes and local governments. It is a centerpiece of the state aid in the CARES package, with the funds to be used to reimburse expenses incurred by the states and local governments as a result of Covid-19. Each state will receive funds based on population and at least $1.25 billion. Mississippi is expected to receive approximately $1.3 billion. The legislation provides that funding will be available directly to the states and to local governments serving populations over 500,000. Forty-five percent of the funds provided to each state are set aside for eligible expenses of local governments. With Mississippi not having a local government exceeding 500,000 in population, questions remain concerning access to funds by Mississippi cities and counties.
The CARES Act is the third COVID-19 relief package. Even as the Act is going into effect, a new fourth relief package is being developed. There have been numerous requests (1) for significant additional funds allocated to local governments with populations less than 500,000 or (2) to lower the threshold for direct Coronavirus Response Fund access through Section 5001 of the CARES Act.
On Wednesday, April 1, 2020, Governor Tate Reeves announced that Executive Order 1466 (“E.O. 1466”) will go into effect on Friday, April 3 at 5 p.m. and remain in effect until Monday, April 20 at 8 a.m. E.O. 1466 is a shelter-in-place order, also referred to as a stay-at-home order. As the name implies, it orders residents to stay within their residencies, but it is subject to exceptions. Important points from E.O. 1466 include:
- Essential businesses and operations “may remain open and shall operate as necessary to provide essential services and functions.” While these businesses are not subject to the prohibition on social gatherings in excess of 10 persons, they should take reasonable measures to comply with the Centers for Disease Control and Prevention (“CDC”) and Mississippi Department of Health (“MDOH”) recommendations, e.g., social distancing. Essential businesses and operations are defined by Executive Order 1463 and the Supplement to Executive Order 1463 (collectively “E.O. 1463”). The definition of essential businesses and operations is discussed below.
- Non-essential businesses and operations are prohibited from operating except for performing minimum operations. Minimum operations are those operations necessary for the business to maintain the condition of its facilities, premises and equipment, value of business inventory, administer payroll and employee benefits, provide security, and facilitate remote working.
- Essential activities by residents are permitted, and include performing tasks such as buying groceries, working for an essential business, caring for someone in a vulnerable population, and individual outdoor recreation, e.g., walking or running. People who are outside for exercise must follow social distancing guidelines of maintaining at least a 6-foot distance and groups of 10 or less.
- Essential travel by residents is permitted, and includes travel related to an essential business or operation, an essential activity, care for dependents, minors, elderly, disabled, or otherwise vulnerable persons, picking-up distance learning materials from an educational institution, to and from place of residence, or that required by law enforcement, court order, or child custody arrangement.
- Expressly prohibited activities include social and non-essential gatherings in excess of 10 persons where individuals are less than six feet from one another, and operating indoor and outdoor places of amusement and recreation, such as museums, movie theaters, playgrounds, children’s parties, social clubs, and parks including all beaches, lakes, and reservoirs (but not walking trails). These are mandated closed. Dine-in service at restaurants and bars is also prohibited, but restaurants and bars may remain open only for drive-thru, curbside pick-up, or delivery service.
- Evictions are suspended, but individuals are not relieved of contractual obligations to pay rent, mortgage, or otherwise comply with other obligations of their tenancy or mortgage contract.
The Order provides that it may be enforced by all state, county, and local law enforcement, as well as other government entities, and that violations are subject to Miss. Code Ann. § 33-15-43, which provides for a fine of up to $500 or imprisonment not to exceed six months, or both. Nothing in E.O. 1466 prohibits a local government from taking more restrictive action except that it may not prevent an essential business or operation “from operating at such level necessary to provide essential services and functions.”
An important initial question raised by many residents is what constitutes an “essential business or operation.” E.O. 1463 defines this term by providing 19 categories of essential businesses and operations. Although E.O. 1463 provides more specificity to the list below by providing specific examples of businesses that fall within each category, the categories are, in brief:
- Essential government functions such as those related to public safety, health, and corrections.
- Essential healthcare operations such as hospitals, laboratories, and nursing homes. The term is meant to be construed broadly but does not include gyms, spas, salons, barber shops, and similar personal care and grooming facilities.
- Essential infrastructure such as power generation, fuel and transmission, communications networks, and airports.
- Manufacturing such as food processing and production, medical equipment, and household products.
- Agriculture and farms such as food cultivation, livestock, gas, diesel, and farmer’s markets.
- Essential retail such as supermarkets, pharmacies, and hardware.
- Essential services such as trash collection, mail services, home repair, automotive sales and repair, laundromats/laundry service, and warehouse, distribution, and fulfillment centers.
- Media such as newspapers, television, digital, and radio.
- Education such as educators supporting distance learning, performing critical research, or providing free and reduced meals.
- Financial services such as banks, insurance, and accounting.
- Professional Services such as legal services, accounting, insurance, and real estate.
- Providers of basic necessities to economically disadvantaged populations (e.g., non-profits, businesses, and churches providing these necessities).
- Construction and construction related services such as building and construction, lumber, electricians, cleaning and janitorial, or skilled trades.
- Essential services necessary to maintain safety and sanitation of essential businesses and operations and residencies.
- Defense Industrial Base including businesses and workers who provide essential products and services required to meet national security commitments to the Federal Government and the U.S. Military.
- Vendors providing essential services and products needed to ensure the continued operations of essential businesses and operations, government, and provide for the health, safety, and welfare of the public.
- Religious entities, provided they adhere to CDC and MDOH guidelines.
- Categories of workers identified by the U.S. Department of Homeland Security, Cybersecurity & Infrastructure Security Agency (“CISA”) in its “Memorandum of Identification of Essential Critical Infrastructure Workers During COVID-19 Response.” Note CISA updated its guidance over the weekend of March 28, 2020.
- Other categories as deemed necessary by MDOH, Mississippi Emergency Management Agency, or other state agency
If you have questions about any of the above, including whether your business qualifies as an essential business or operation, it is recommended you read E.O. 1463, the Supplement to E.O. 1463, and E.O. 1466, all of which provide more specificity, and also consult with an attorney.
The recently enacted Families First Act and CARES Act authorize refundable tax credits for employers paying qualified leave wages or qualified retention wages under the Acts. In Notice 2020-22, the Internal Revenue Service has announced that no failure to deposit penalties or will be imposed on amounts of employment taxes that are not deposited to the extent such amounts are equal to or less than the amount of such refundable tax credits. Relief from Penalty for Failure to Deposit Employment Taxes
IRS Publishes FAQ on Employee Retention Credit
The CARES Act provides a refundable employee retention credit against payroll taxes for wages paid by employers that carry on a trade or business in 2020 that either (i) fully or partially suspends operations during any calendar quarter in 2020 due to appropriate governmental action or (ii) experiences a significant decline in gross receipts during the calendar quarter. The IRS has published a FAQ addressing, among other things, eligibility for the credit, how the credit is calculated, limits on the credit and how it relates to the refundable credit for sick or family leave wages allowable under the Families First Coronavirus Relief Act. IRS: Employee Retention Credit available for many businesses financially impacted by COVID-19; FAQs: Employee Retention Credit under the CARES Act
Mississippi Department of Revenue Installs Drop Box
The Mississippi Department Revenue headquarters is closed, but the Department has advised on Twitter that there is a drop box outside the building for any important documents taxpayers may need to submit.
IRS Publishes Extensive FAQ on Refundable Tax Credits for Paid Leave required under the Families First Coronavirus Response Act (FFCRA).
The FFCRA requires employers to pay employees up to 80 hours of additional sick and family leave required under the Act. The IRS has published a lengthy FAQ addressing the issues that may be encountered by affected employers including a full description of the credits and how they are calculated, limits on the credits and how they are calculated. COVID-19-Related Tax Credits for Required Paid Leave Provided by Small and Midsize Businesses FAQs
As rapidly as the coronavirus is spreading its footprint across the globe, businesses of all shapes and sizes are closing their doors … and losing income. Unfortunately, Mississippi businesses are not exempt from this fast moving reality. Indeed, coffee shops, boutiques, restaurants, office complexes, and a variety of other businesses across the State have been forced to drastically change their operations or, in some cases, completely shutter their businesses in response to the coronavirus pandemic and the related government directives concerning travel and social distancing. As a result, many companies are already reporting lost profits, as well as a significant concern about the future of their businesses.
Fortunately, most companies carry a commercial property insurance policy, which typically includes not only coverage for property damage but also coverage for lost profits incurred as a result of damage to the covered property. In other words, a business may have coverage for its coronavirus lost profits through its commercial property policy. To know that, an insured should first review its policy to determine if it contains any of the following types of coverages which are frequently included in a commercial property policy.
Business Income/Interruption Coverage provides coverage for the loss of income an insured sustains as a result of a suspension of an insured’s operations. However, most policies require that the suspension stem from “direct physical loss or damage” caused by a “covered peril” (typically theft, fire, wind, falling objects or lightning) to the specific covered property. This type of coverage is most commonly found in circumstances where an insured’s covered property is damaged by a fire, or perhaps a storm, forcing the insured to suspend its operations for a period of time. In that scenario, the fire or storm damage to the subject property would be readily apparent, and assuming it is a covered peril, the claimant would have a strong claim for the income lost during the restoration period. However, a claim for lost income as a result of the coronavirus will be much more complex.
First, an insured will need to demonstrate “direct physical loss or damage” to its covered property. Given the nature of the coronavirus, however, there likely will be no apparent damage to the property. So, insureds will likely contend that, regardless of its visibility or lack thereof, the virus is within their workplace – albeit at a microscopic level – and that it is has in fact damaged their covered property.
Courts have heard similar arguments in other contexts (e.g. asbestos, gasoline fumes, etc.) and reached varying conclusions. Some have sided with the insureds that the contaminant damaged the property, while others agreed with the insurers that the contaminant had not damaged the insured’s property. This determination, which will involve a detailed analysis of the relevant policy and applicable law, will be the critical issue in evaluating these claims for coverage.
Next, an insured should review its policy to determine if it excludes coverage for business interruption claims based on communicable diseases. Due to the SARS outbreak in 2003, the insurance industry purportedly paid out a significant amount of claims based on “business interruptions” caused by SARS. After the SARS outbreak, and to avoid a repeat, the insurance industry began excluding losses incurred by communicable disease. Perhaps most importantly, in 2006, the heavily relied upon Insurance Services Office (ISO) issued form CP 01 40 07 06 excluding “loss or damage caused by or resulting from any virus, bacterium, or other microorganism that induces or is capable of inducing physical distress, illness or disease.” Determining whether the insured’s policy contains this exclusion will be a critical component of any coverage analysis.
Contingent Business Interruption
Commercial property policies routinely include coverage for disruptions in an insured’s supply chain. This coverage applies when damage occurs not to the insured’s property but to the property of others relied on by the insured to supply materials to the insured or its customers. Again, it is important to note that these policies usually require damage or physical loss caused by a covered peril to the supplier’s property. As with the Business Income/Interruption claim, the specific language of the policy will be critical in this analysis.
Order of Civil Authority
Many commercial property insurance policies provide coverage for business income losses sustained when a “civil authority” prohibits or impairs access to the policyholder’s premises. Some of these policies do not require “physical loss” to the insured’s covered property, and those that do sometimes do not require that the physical loss occur to the insured’s own property. Thus, if a governmental authority – federal, state, or local – prohibits or even limits access to an area including an insured’s business, the insured may have coverage for its loss of income under its “civil authority” coverage. Yet again, analysis of the specific language in the policy and applicable law will be critical in determining coverage.
The First Coronavirus Coverage Case
On March 16, 2020, Oceana Grill in New Orleans, Louisiana filed what is thought to be the first lawsuit – of many more to come – dealing with a coronavirus business interruption coverage dispute (Cajun Conti, LLC, et al. v. Certain Underwriters at Lloyd’s London, et al., Civil District Court for the Parish of Orleans, Louisiana).
In its Petition for Declaratory Judgment, Oceana Grill requested a declaration of coverage for coronavirus-caused losses under a business interruption policy. Oceana contends that it purchased an “all risk policy” from Lloyd’s of London, “which covers all risks unless clearly and specifically excluded” and further contends that “the policy does not provide any exclusion due to losses, business or property, from a virus or global pandemic.”
With respect to harm caused by the virus, Oceana contends that:
[T]he scientific community, and those personally affected by the virus, recognize the Coronavirus as a cause of real physical loss and damage….The virus is physically impacting public and private property, and physical spaces in cities around the world….The global pandemic is exacerbated by the fact that the deadly virus physically infects and stays on the surface of objects or materials, ‘fomites,’ for up to twenty-eight days, particularly in humid areas below eighty-four degrees….It is clear that contamination of the insured premises by the Coronavirus would be a direct physical loss needing remediation to clean the surfaces of the establishment.
Oceana also pointed out that the Louisiana Governor issued a statewide order banning gatherings of 250 or more people and the New Orleans Mayor issued additional operating restrictions on businesses.
For these reasons, Oceana has asked the Court to declare that:
- The policy provides coverage to Plaintiffs for any future civil authority shutdowns of restaurants in the New Orleans area due to physical loss from Coronavirus contamination; and
- The policy provides business income coverage in the event that the coronavirus has contaminated the insured’s premises.
This will be an important case to monitor as the coronavirus crisis and resulting business interruption coverage disputes continue.
The Brunini attorneys are closely monitoring developments in the coronavirus crisis and are counseling clients through the various legal and business issues involved in the crisis.