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bbblawfirm · 5 years ago

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The CARES Act: Stimulus, Small Businesses, Safety Net

The 2.2 trillion dollar “Coronavirus Aid, Relief, and Economic Security Act” (the “CARES Act” or the “Act”) was signed by President Trump on March 27, 2020. The sweeping reform provides assistance to individuals and a large sector of businesses. The attorneys at Baker, Braverman & Barbadoro, P.C. (“BB&B” have compiled this list of important provisions in the CARES Act. Please be advised that this article does not constitute legal advice. Please contact the corporate, employment, bankruptcy, and real estate attorneys at BB&B with questions about your particular circumstances.

Individual Stimulus Payments and Consumer Protection

The CARES Act includes several elements aimed at helping keep people engaged in the economy. That means direct cash for many, plus expanded unemployment benefits and new rules for things like filing your taxes and making retirement contributions.

Tax Credits:

In 2020, taxpayers will benefit from a tax credit equal to the sum of: $1,200 for single filers ($2,400 for those filing a joint return) plus $500 for each qualifying child. These tax credits will be “phased-out” by 5% of the amount by which such eligible taxpayer’s adjusted gross income exceeds $150,000 for joint-filers, $112,500 for heads of household, or $75,000 for all other types of filers. This means, for example, the tax credit will not apply at all for childless joint-filers that make $198,000 or more.

The cash payments are based on either your 2018 or 2019 tax filings. Individuals who receive Social Security benefits, but don’t file tax return are still eligible. These individuals don’t need to file taxes; their checks will be based on information provided by the Social Security Administration. In general, the payments will be distributed to all eligible taxpayers in the same manner that each individual received their 2018 or 2019 tax refunds.

Coronavirus-Related Retirement Plan Distributions:

A “coronavirus-related distribution,” as defined under the CARES Act, is any distribution from an eligible retirement plan made during the 2020 calendar year to an individual who is diagnosed with COVID-19; whose spouse or dependent is diagnosed with COVID-19; or who experiences adverse financial consequences as a result of being quarantined, furloughed or laid off or had hours reduced, or other factors as determined by the Secretary of the Treasury during the COVID-19 pandemic.

Qualified employer plans may permit individuals who elect to receive a “coronavirus-related distribution” from their retirement plans will not be subject to the normal 10% tax penalty imposed under the Internal Revenue Code for early withdrawals, unless the aggregate amount of such distributions from all plans maintained by that employer are over $100,000. However, these distributions are still subject to regular income tax.

Any individual who receives a coronavirus-related distribution may generally, at any time during the 3 year period beginning on the day after the date such coronavirus-related distribution was received, make 1 or more contributions in an aggregate amount not to exceed the amount of such distribution to an eligible retirement plan of which such individual is a beneficiary. The repayments of the payment will be treated as having received the coronavirus-related distribution in an eligible rollover distribution.

Effects on the Limits on Loans from Qualified Employer Plans:

Limits on loans from an employer plan made to individuals during the six-month period beginning on the date of enactment will be increased from $50,000 to $100,000. In addition, should the due date of any loan occur between the date of enactment and December 31, 2020, it will be delayed for 1 year.

Required Minimum Distributions Threshold:

The CARES Act temporarily waives the minimum distribution requirements for most contribution plans (i.e., 401(k) plan) or IRAs. This applies for all required minimum distributions that otherwise would have been required to be made in 2020.

Tax Treatment of Charitable Donations:

The CARES Act allows taxpayers to take an above-the-line tax deduction for charitable contributions of up to $300 for the tax year beginning in 2020. Further, except for certain exclusions specified below, the carryover restrictions on charitable and other “qualified contributions” are disregarded. Said exclusions are as follows:

Qualified contributions for individuals will be allowed as deductions if the combined contributions do not exceed the excess of the individual’s adjusted gross income over or the amount of the charitable contributions made by the individual under certain other provisions of the CARES Act.

Contributions made by corporations will be allowed as deductions only if these contributions do not exceed 25% of the taxable income of the corporation over the amount of all other charitable contributions allowed under the CARES Act.

Foreclosure and Eviction Protection:

The CARES Act prohibits foreclosure of Federally-backed mortgage loans on residential real property of 1-4 units for 60 days beginning March 18, 2020. Additionally, borrowers on such loans may request forbearance based on financial hardship during the COVID-19 emergency, for up to 2 periods of 180 days. Multi-family borrowers also qualify for a more limited forbearance program for up to 3 periods of 30 days. The Act also prohibits eviction filings for 120 days against residents of property that has a Federally-backed mortgage loan or that participates in certain covered housing programs.

Unemployment Relief and Employer Guidance

The CARES Act greatly expands the classes of individuals covered by unemployment insurance, increasing both the monetary benefits and duration of the same.

Workers Covered by the Expanded Program:

The plan includes a lot more workers than are typically eligible for unemployment. Workers covered now include:

Workers that have lost their job due to COVID-19 (e., the employer shut down);

Workers that have symptoms of COVID-19, tested positive for COVID-19, or self-quarantined as a result of COVI -19;

Workers that have to care for a family member diagnosed with COVID-19;

Workers whose child’s school or daycare is closed down because of COVID-19;

Self-employed workers;

Part-time workers;

Gig Workers (e., Uber, Lyft);

Freelance workers;

Independent Contractors;

Workers that were about to start a new job but were laid off because the business closed due to COVID-19; and/or,

The unemployed dependent of a head of household who died as a result of COVID-19.

Workers Not Covered by the Expanded Program:

People that can work from home and receive payment for their work; and,

People who quit their job (or want to quit their job) out of fear of being exposed to or contracting COVID-19.

Monetary Benefit:

The increased monetary benefit varies by state. If Massachusetts enters into an agreement with the Secretary of Labor, eligible workers may get an extra $600 of Federal Pandemic Unemployment Compensation (“FPUC”) per week on top of their state benefit. The goal is to get workers close to their full pay. States have the option of providing the entire amount in one payment or sending the extra portion separately. However, it must all be done on the same weekly basis.

In Massachusetts individuals eligible for unemployment benefits typically receive 50% of their average weekly wage up to a maximum benefit of $823 per week. The “average weekly wage” is calculated by taking the wages for the 4 prior quarters (or 1 year), determining the 2 highest quarters then those 2 quarters are added together and then divided by 26 (the number of weeks in the 2 combined quarters), resulting in the “average weekly wage”. The “average weekly wage” is then divided in half to determine the weekly benefit amount.

Therefore, for example, if a worker (with no dependents, and full eligibility under MA unemployment) made $50,000 during the 4 prior quarters (or 1 year), the average weekly wage would be $961.54, which would be divided in half making them eligible for $ 480.77 per week under Massachusetts unemployment. Under the new expansion, if Massachusetts ends up providing the worker the full additional $600 of FPUC per week, that individual would receive a total of $1080.77 per week. Massachusetts has not yet finalized their regulations with respect to the FPUC unemployment income, and as of yesterday Governor Baker urged workers to wait to apply for this benefit until final guidance has been issued.

Duration of Additional Benefit:

The CARES Act provides all eligible workers with an additional 13 weeks of unemployment benefits subject to a cap. Many states already provide 26 weeks of benefits, Massachusetts provides 30 weeks. Therefore, participants in states with 26 weeks would be eligible for a total of 39 weeks. The total amount cannot exceed 39 weeks, therefore in Massachusetts eligible workers will receive an additional 9 weeks.

The extra $600 payment will last for up to 4 months, covering weeks of unemployment ending July 31, 2020 (if approved and provided right now).

Expanded coverage would be available to workers who were newly eligible for unemployment benefits for weeks starting on January 27, 2020, and through December 31, 2020.

Those Already Receiving Unemployment Benefits Will Still Receive the Extra Benefit:

If you’re already receiving unemployment benefits for reasons unrelated to COVID-19, your state-level benefits will still be extended by 13 weeks.

Workers already receiving unemployment for reasons unrelated to COVID-19 will also receive the extra $600 weekly benefit from the Federal government (if approved and provided right now as set forth above).

If Unemployment Benefits Recently Ran Out, You Are Eligible to Reapply:

If unemployment benefits have recently exhausted, eligible workers can generally reapply. The details depend on the state where that individual worked. All eligible workers get at least another 13 weeks, along with the extra $600 payment (if approved and provided as set forth above).

When to Expect the Unemployment Compensation and the Additional Benefit:

States have been incentivized to waive the one-week waiting period, and Massachusetts has already done so. Unfortunately, with the number of new claims being filed daily, it is unknown how long it will take to process claims given the huge spike in the filing of claims and each local state offices’ abilities to process the claims.

The additional $600 Could Make You Ineligible for Need-Based Programs:

The additional $600 benefit, if provided, counts as income when determining eligibility for means-tested programs, except for Medicaid and the Children’s Health Insurance Program (commonly known as “CHIP”).

Paycheck Protection Loans and Small Business Benefits

The CARES act includes new loan programs to assist small businesses, the cornerstone of which is the $349 billion Paycheck Protection Program. The goal of the Paycheck Protection Program is two-fold: 1) to incentivize small businesses to retain their employees; and 2) to help small businesses cover their operating costs during this challenging time. The covered period for the Paycheck Protection Program is from February 15, 2020 to June 30, 2020.

The Paycheck Protection Program:

The Paycheck Protection Program (“PPP”) provides an estimated $349 billion under the Small Business Administration (“SBA”)’s existing 7A Lender Program to assist businesses with keeping employees on payroll, paying rent or mortgage interest payments on business property, insurance premiums, utility bills and interest on other debt incurred before February 15, 2020.

PPP Loan Features:

The key features of the PPP loan are as follows:

Eligible borrowers include small businesses (those with under 500 employees or under the applicable SBA industry standard), 501(c)(3) non-profits, sole-proprietors, independent contractors, veteran’s organizations and certain Tribal businesses. The business must have been in business paying employees or independent contractors on February 15, 2020.

Borrowers can receive a loan up to 2.5 times the average monthly payroll costs (equivalent of 10 weeks of payroll costs), with an overall cap of $10 million. Payroll costs are broadly defined to include wages, salaries, IRA or 401K contributions, healthcare benefits, paid time off or other paid sick leave and other related expenses.

Loan proceeds are to be used to support payroll, mortgage interest payments or rent payments, utility payments and insurance premiums. Loan proceeds can also be used to pay interest on other debt obligations incurred before February 15, 2020, but such payments will not be eligible for the forgiveness grant provision described below.

There will be no personal guarantees required from the business owners.

There will be no security requirements.

Borrowers do not have to demonstrate current actual economic harm but will be required to certify that the loan is necessary due to the economic conditions caused by COVID-19 and that they will use the funds for the covered purposes.

There will be no payments for at least the first 6 months and up to the first 12 months from the date of disbursement.

There are no fees incurred by the borrower or the lender for the PPP program.

PPP Loans include a unique forgiveness grant feature, which allows for a borrower to apply for loan forgiveness based upon the use of the loan proceeds as intended. The forgiveness feature is discussed in more detail below.

After 1 year, all remaining amounts due on the loan that are not forgiven will convert to a term loan of 2 years years with an interest rate of 0.5%.

Borrowers will not be able to receive a PPP loan if they have already received SBA funds under the SBA’s disaster loan program or the Economic Injury Disaster Loan (“EIDL”) for the same purpose. However, EIDL loans originated after January 31, 2020 may be refinanced and added to the businesses’ PPP loan total.

How PPP Loans Differ from Traditional SBA Loans:

The PPP loan program has several important distinctions from the traditional SBA 7A loan program. For PPP borrowers, the following changes have been made:

SBA has waived its “credit-elsewhere” test, which generally prohibits borrowers who have the option of other credit options from receiving SBA loans.

SBA has waived its affiliation rules for hospitality and restaurant industry borrowers and franchisees, which measures eligibility by including their affiliates.

As noted above, SBA has waived the requirements of personal guarantees and security for the loan.

The forgiveness grant feature is unique to the PPP program.

The SBA’s guaranty of the PPP program is 100%, as compared to traditional SBA programs which range from 50%-90%.

SBA has waived all borrower guarantee fees for the PPP program.

PPP’s Forgiveness Grant Provision:

Arguably the most important feature of the PPP loan is the forgiveness provision, which essentially turns the loan into a grant to the business. Provided that the business has used the loan proceeds for their stated purposes, including employee wages (note that amounts over $100,000 per employee or contractor are excluded), mortgage interest payments, rent payments, utilities and insurance premiums, then the business can apply to the lender for loan forgiveness. The amount of forgiveness will be based on a formula that centers around employee retention and appropriate use of loan proceeds, the intended effect of which is to have the loan forgiveness amount equal to the sum spent on covered expenses during the 8-week period after the loan is disbursed to the business.

Forgiven amounts will not count towards gross income attributable to the borrower for tax purposes.

In order to qualify for PPP loan forgiveness, the business must maintain its pre-COVID-19 level of full-time equivalent employees. Importantly, if some businesses already laid off employees in response to the crisis, the PPP program allows them to re-hire them prior to June 30, 2020 and still be eligible for the loan forgiveness.

If the business has not retained its workforce, the loan forgiveness amount will be reduced proportionately.

After 1 year, the amounts forgiven will come off of the loan balance, with the remainder rolled into a term loan of 2 years with monthly principal and interest payments, (interest is capped at 0.5%).

Interaction with other Federal Programs:

As noted above, if a business has already received SBA funds through the EIDL disaster loan program then it can not receive a PPP loan for the same purpose. However, EIDL loans originated after January 31, 2020 may be refinanced and added to the PPP loan total.

It is also important for businesses to understand that if a business obtains a PPP loan, it will not be able to use the payroll tax credits issued through the Families First Coronavirus Act for employee retention. Likewise, a business with a PPP loan cannot defer the employer-wised social security payroll taxes available under other sections of the CARES Act.

How to Apply for a Paycheck Protection Loan:

In order to facilitate the fast roll-out of the PPP Loan, the SBA is utilizing its existing SBA lending banks to finance the PPP loans and may also authorize new lenders. Borrowers must apply through one of the authorized SBA lender banks, not through the SBA itself as is required for the SBA’s disaster loan program. The list of SBA approved lenders can be found here: https://www.sba.gov/funding-programs/loans/lender-match.

Although the PPA loan program has not yet begun to accept applications, we expect them to be available in the coming days and will provide an announcement when SBA lender banks are able to accept applications.

When Continuation is Not Viable without Reorganization:

For businesses with viable income strategies but high debts that could benefit from bankruptcy reorganization, Section 1113 of the CARES Act provides temporary modifications to the bankruptcy code. The CARES Act significantly increases the debt limit under the Small Business Reorganization Act of 2019 (codified under subchapter V of Chapter 11 of the U.S. Bankruptcy Code). Subchapter V was initially designed for smaller, local, or “mom-and-pop” type debtors (an entity or individual) engaged in business with a total debt, secured and unsecured, not exceeding $2,725,625.

The CARES Act increases the debt limit to $7,500,000 for a period of 1 year. Subchapter V is more streamlined than its Chapter 11 counterpart, and it omits quarterly trustee payments and the requirement for both a disclosure statement and a plan, so long as the applicable provisions are all covered in the plan. Subchapter 5 allows businesses that have leveraged the owner’s home to “cram down” or modify the mortgage claim. The provisions grant greater flexibility to the debtor, but the process is designed to be quicker to limit the period of uncertainty for creditors. For both subchapter V and other chapter 11 bankruptcy filings, the CARES Act also excluded COVID-19 payments from the calculation of “disposable income” and allows a debtor to seek modification from a confirmed plan as a result of coronavirus-related financial hardship.

Industry-Targeted Relief and Financial Sector Provisions

The CARES Act provides specific relief to industries most affected by the coronavirus crises, specifically transportation, healthcare, and education. The Act also modifies lender and financial institution rights and requirements.

Direct Funding for Loans, Loan Guaranties and other Investments:

The Act appropriates $500 billion to the Secretary of the Treasury for loans, loan guarantees and other investments to support states and local governments, specific highly impacted industries, and funds for U.S. businesses that have not received “adequate economic relief.” Of this amount, the Act allocates $25 billion for passenger air carriers; $4 billion for cargo air carriers; and $18 billion for “businesses critical to maintaining national security.” Separate provisions of the Act provide additional financial assistance to continue employee wages, salaries and benefits to air carriers and their contractors.

The program provides up to $454 billion for other loans, guarantees, or investments focused on businesses, states or municipalities through the Federal Reserve System. These funds are directed at maintaining employment and liquidity, and eligible businesses must maintain at least 90% employment level (of what they had, using March 24, 2020 as a base) through September 30, 2020. The business must also certify that it is created or organized in the United States, with significant operations and a majority of its business here. The Secretary of the Treasury is also directed, as part of this assistance program, to develop a financial assistance program focused on businesses and nonprofit organizations with between 500 and 10,000 employees that are subject to similar provisions ensuring maintenance of United States employment. The Federal Reserve System may also establish a Main Street Lending Program directed at small and mid-size businesses. Businesses taking advantage of these stimulus programs must limit compensation of certain highly paid officers and employees.

Banks and other Financial Institutions:

Community banks are granted temporary relief in the form of a reduced leverage capital ratio, allowing the banks to maintain an 8% or greater ratio instead of 9% that would otherwise be applicable. The reduced level is effective until the end of the calendar year or conclusion, of the COVID-19 public health emergency, whichever occurs first.

Lenders of Federally-backed mortgage loans should also see the forbearance, foreclosure moratorium, and eviction moratorium provisions set forth in the consumer protection section.

The CARES Act relieves any depository institution, bank holding company, or affiliate thereof from compliance with Financial Accounting Standards Board Accounting Standards’ credit losses standard until the end of the calendar year or conclusion of the COVID-19 public health emergency, whichever occurs first.

Other Assisted Industries:

The CARES Act directly addresses COVID-19 testing and treatment by requiring health care coverage of certain coronavirus testing and, when available, medicine and vaccines to treat and prevent COVID-19. Furthering that goal, the CARES Act increases grants for COVID-19 drug development. The Act also includes telehealth, medical information sharing, and healthcare education provisions to address modified practices and encourage remote care. Further, Medicare will also temporarily cover up to 90 days of most prescription medicine in a single refill.

From an education front, the CARES Act addresses logistical issues with school and college shutdowns. The Act allows educators to omit affected semester’s grades from grant and loan analysis, and it authorizes continuation of financial aid, work study aid, and other education-related grants that are tied to actual performance. Section 3513 of the CARES Act also suspends federal student loan payments through September 30, 2020 without accruing interest during that period.

Manufacturing companies may also see an increased focus on developing additional facilities in the United States. Section 3101 of the CARES Act requires a national report assessing the dependence of the United States on other countries for health care needs and other items that could be manufactured in this country.

The CARES Act allocates funds to various Federal agencies to respond to coronavirus concerns and develop measures related to COVID-19.

Tax Relief and Extensions

In addition to the individual tax provisions previously discussed, the Federal April 15, 2020, payment and filing deadline has been extended for the majority of tax filings until July 15, 2020. These extensions specifically apply to forms 1040 (including -SR, -NR, NR-EZ, -PR, and -SS) 1041 (including -N and -QFT), 1120 (including -C, -S, -FSC, -H, -L -ND, -PC, -POL, -REIT, -RIC, and -SF), 8960, and 8991. The extension also applies to first quarter quarterly payments.

Important Business Tax Provisions:

Employee Retention Tax Credit. This is a payroll tax credit for 50% of qualified wages paid from 3/13/20 – 12/31/20 for employers whose (1) operations were fully or partially suspended due to forced shut downs; or (2) gross receipts declined by more than 50% when compared to the same quarter the prior year. This credit is capped at the first $10,000.00 of compensation, including health benefits, paid to employees.

Deferment of Social Security payroll tax. Employers and those Self-employed can defer the employer share of the Social Security payroll tax. Any amount deferred must be repaid over 2 years with at least 50% being repaid in 2021, and any remaining deferred amount due in 2022.

Changes to Net Operating Loss Rules. Net operating losses in 2018, 2019, and 2020 can be carried back 5 years. The 80% offset limitation has also been removed for 2018, 2019, and 2020, allowing businesses to offset up to 100% of taxable income with net operation losses.

Excess Business Loss Limitation has been repealed for 2018, 2019, and 2020.

Corporate AMT Credits. C-Corps can now obtain a refund of up to 50% in 2018 and the remaining balance in 2019 for carry over AMT credits.

Section 163(j) interest deduction limitation have been temporarily increased from 30% to 50% for 2019 and 2020.

Qualified Improvement Property (“QIP”). The recovery period for QIP was accelerated from 39 years to 15 years and can be eligible for bonus depreciation. If property is elected out of section 163(j), the alternative depreciation system has been accelerated to 20 years with no bonus depreciation.

Any 2020 excise tax due on distilled spirits used as hand sanitizer has been waived.

The IRS is not actively pursuing collections and is not issuing new liens and levies. Additionally, installment agreements and offer in compromise payments have been deferred.

If you have questions regarding the CARES Act or strategies for you or your company during this COVID-19 crisis, please reach out to our team at Baker, Braverman & Barbadoro, P.C. Our attorneys are working remotely but the office is fully functional, and we are ready to assist.

With attorneys available in corporate, employment, bankruptcy, real estate, tax, estate planning, probate, and litigation, we can handle a host of issues that may be affecting you or your business. We look forward to working with you during this unprecedented time. – Richard Ash, Esq., Theresa Barbadoro Koppanati, Esq., Elizabeth Caruso, Esq., Kimberly Kroha, Esq., and Susan Molinari, Esq.

from QUINCY ATTORNEYS-Baker, Braverman & Barbadoro P.C. 300 Crown Colony Dr #500 Quincy, MA 02169 (781) 848-9610 https://ift.tt/2JtaxAY via https://bbb-lawfirm.com

#QUINCY ATTORNEYS-Baker #Braverman & Barbadoro P.C. 300 Crown Colony Dr 500 Quincy #MA 02169 (781)

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bbblawfirm · 5 years ago

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Can two separate provisions of the CARES Act truly provide a lifeline to small businesses?

The CARES Act passed March 27, 2020 provides several different avenues of relief to individuals, small business and large businesses, airlines and healthcare industries, including COVID-19 small business loans and funding. Packed into this enormous piece of legislation are several provisions for short term loans for small businesses to be provided under the Small Business Administration program, one of which includes the Paycheck Protection Program (“PPP”). For a small business to qualify for a PPP loan, it must employ no more than 500 employees, and provide proof that it was in business as of February 15, 2020. If a small business qualifies, the terms and other provisions of the loan program are quite favorable to the borrower. They include:

Maximum loan amount of $10,000,000;

Fixed interest rate of 0.5%;

Repayment term of 2 years with potential forgiveness of some of the debt;

No fees or pre-payment penalties;

No guarantees as the loans will be non-recourse to owners, partners or shareholders;

No collateral is required;

Payments are deferred for at least 6 months; and

Loan proceeds can be used for payroll, taxes, health benefits, utilities, mortgage debt interest, rent, and interest on pre-existing loan obligations.

The PPP is certainly very encouraging considering that the above allowed uses are the overwhelming majority of the average small business’s day to day operational expenses. The question however, is whether this CARES Act funding truly is a lifeline as it has been touted, or will the delays in implementation and roll- out be too late for many small businesses? Overwhelmingly, March saw tens of thousands of small businesses shuttered with virtually no advance warning. Restaurants, pubs, hotels, hair salons, dental and chiropractic practices, concert and music halls, movie theatres, and countless other businesses have closed. Quite possibly, the large majority of these businesses did not have a stockpile of cash on hand or have the necessary funds to pay mortgages, rents, payroll, benefits or their utilities moving forward. As a consequence, it’s predicted that many of these businesses will succumb to this immediate financial pressure. Lenders, taxing authorities, landlords and other creditors will probably not sit idly by waiting for this pandemic to pass. They are in business too. Some are no doubt going to begin exercising their rights and remedies and calling loans, filing tax liens or evicting tenants. Not to mention the hardship that the employees are experiencing with a lack of compensation and threatening loss of their health benefits.

The second piece of the CARES Act which provides interesting potential relief for small businesses is the increase in debt limits for small business reorganizations. The Small Business Reorganization Act of 2019 (SBRA) became effective in February 2020, and it provides a more streamlined process for small businesses to reorganize through bankruptcy without the excessive and time consuming requirements of the traditional Chapter 11 reorganization. The small business provision, known as Subchapter V of Chapter 11 of the U.S. Bankruptcy Code, was enacted in August 2019 and became effective February 19, 2020. As enacted, the SBRA capped debt limits for eligibility at $2,725,625. Debtors with a debt load greater than this were not eligible. The CARES Act has temporarily increased this debt limit to $7,500,000, clearly expanding those businesses that can take advantage of the SBRA. Some of the streamlined provisions of the SBRA include a combined disclosure statement and plan, a relaxation of US Trustee fees, and more importantly, it allows for an early exit out of bankruptcy and the ability of the business owners to retain their equity interest without violating the enormous obstacle of the absolute priority rule that plagues many traditional business reorganizations.

Because the roll-out of the PPP may be delayed some while the SBA and Treasury adopt working regulations, many businesses may fail in the meantime, lose their lease, or fall into tax trouble before this happens. The SBA and Treasury have been given 30 days to adopt and implement the regulations of the various new loan programs offered under the CARES Act.

Because of this delay in implementation and the inevitable immediate insolvency of many small businesses, I submit that the answer for these nearly doomed businesses would be to take advantage of both provisions. Hypothetically, an eligible business could file a Chapter 11 under the SBRA that would impose the automatic stay provided in bankruptcy and prevent third party creditors from permanently shuttering them. Choosing this route would provide the business with 90 days to present a plan of reorganization. That plan, simply, would be a PPP loan.

Now, to be clear, there is no current express provision in the PPP that allows for a debtor in possession loan—the loan that ordinarily allows Chapter 11 debtors to exit bankruptcy. That provision would have to be incorporated into the regulations adopted by the SBA. Debtor in possession loans are often the vehicle used for businesses to complete Chapter 11 and are not traditionally provided by conventional or SBA lenders—they are often too risky. But in this time of emergency, coupled with the paramount goal of saving our small businesses and more importantly, their employees’ jobs, it makes perfect sense. Further, considering the relaxation of many traditional underwriting rules for business loans, the PPP is the model debtor in possession loan and could undoubtedly bridge that economic gap and save many businesses from inevitable and ultimate failure.

Contact the attorneys at Baker, Braverman & Barbadoro, P.C. for additional CARES Act law counsel or corporate and bankruptcy advice. – Gary Hogan, Esq.

from QUINCY ATTORNEYS-Baker, Braverman & Barbadoro P.C. 300 Crown Colony Dr #500 Quincy, MA 02169 (781) 848-9610 https://ift.tt/2wROGjS via https://bbb-lawfirm.com

#QUINCY ATTORNEYS-Baker #Braverman & Barbadoro P.C. 300 Crown Colony Dr 500 Quincy #MA 02169 (781)

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bbblawfirm · 5 years ago

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Small Business Bankruptcy in the time of COVID-19

The Small Business Reorganization Act of 2019 (SBRA) became effective February 2020, providing a more streamlined process for small businesses to reorganize through bankruptcy without the constraints of several features of Chapter 11 reorganization. The small business provision, known as Subchapter V of chapter 11 of the U.S. Bankruptcy Code, was enacted in August 2019 and became effective February 19, 2020. The timing appears fortuitous considering the economic impact of COVID-19 and its likely effect on businesses. In a sweeping increase to the provision, the Coronavirus Aid, Relief and Economic Security Act (the CARES Act), enacted March 27, 2020, increased the eligibility for businesses filing under subchapter V from $2,725,625 of maximum debt to $7.5 million in maximum debt. The debt limit will return to $2,725,625 after one year.

What is Subchapter V for Small Business Bankruptcy Reorganization?

When businesses are overwhelmed by debt but have sustainable income, Chapter 11 of the Bankruptcy Code provides a mechanism for reorganization of debts and continuation of operations. The costs for Chapter 11 add up, however, and there are several aspects that can make it difficult for a smaller struggling business to effectively reorganize. The new Subchapter 5 is aimed at local or mom and pop type businesses on a smaller scale than their national counterparts. The provision eliminates several time and cost consuming aspects of Chapter 11 while providing protection to creditors.

Subchapter V was initially designed for debtors (an entity or individual) engaged in business with a total debt, secured and unsecured, not exceeding $2,725,625. The debt does not include “contingent” or “unliquidated” debt, and at least 50% must have arisen from business matters. The CARE Act significantly increased the debt limit to $7,500,000. Single asset real estate businesses are excluded from Subchapter V. Additionally, debtors must affirmatively elect on their petition to proceed under Subchapter V.

What does this mean for your business or your role as a business creditor?

Chapter 11 is an effective procedure for distressed businesses to obtain relief, but it is riddled with administrative costs and detailed logistics. Subchapter V eliminates or modifies several of these roadblocks and makes it easier for small businesses to reorganize in Chapter 11. Several differences that Subchapter V offers from the standard Chapter 11 procedure are as follows:

Mortgages of Residential Property with Funds for Business Purposes: Subchapter V is likely to have the biggest effect, when compared to Chapter 11, on lending relationships where debtors leveraged their home to fund their business. As long as the loan was obtained after purchase and funds were used in connection with business, the debtor may cram down or modify the mortgage claim by proposing a lower interest rate or extending maturity.

Debtors can also have their plan confirmed without acceptance by an impaired class of unsecured creditors, thus doing away with the absolute priority rule for these small business filings.

To offset these provisions that increase power of debtors, Subchapter V filings are typically quicker. Plans in Subchapter V must be filed within 90 days, unlike Chapter 11 cases that can take significantly longer.

The debtor remains a debtor-in-possession as in Chapter 11, but a trustee is also appointed to facilitate reorganization and follow through of the plan. No United States Trustee fees are required, as they are in Chapter 11, but the locally appointed trustee shall be entitled to earn fees. The process itself is also streamlined, and the lengthy disclosure statement and confirmation plan may be merged into a single more comprehendible document.

Subchapter V makes it easier for debtors to retain collateral after reorganization. Instead of requiring equity holders to provide “new value” to retain their equity interest without paying creditors in full, debtors in Subchapter V must distribute projected disposable income for at least three years from the date the first plan payment is due.

If you have any questions regarding small business assistance available due to COVID-19, contact our corporate and bankruptcy attorneys at Baker, Braverman & Barbadoro, P.C. and we can help navigate the best solutions for your business, whether based in loans, grants, workouts, or filing bankruptcy. Baker, Braverman & Barbadoro, P.C. – Kimberly Kroha, Esq.

from QUINCY ATTORNEYS-Baker, Braverman & Barbadoro P.C. 300 Crown Colony Dr #500 Quincy, MA 02169 (781) 848-9610 https://ift.tt/3dxNH94 via https://bbb-lawfirm.com

#QUINCY ATTORNEYS-Baker #Braverman & Barbadoro P.C. 300 Crown Colony Dr 500 Quincy #MA 02169 (781)

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bbblawfirm · 5 years ago

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Michael Barbadoro Appointed First Registrar

Congratulations to Attorney Michael Barbadoro on his appointment as First Assistant Registrar of Probate for Norfolk County. Mike has been an integral part of the BBB team for the last few years specializing in Probate and Litigation matters. As a former 10 year employee of Norfolk Probate and as a practitioner, Mike brings a wealth of knowledge and compassion to the Court. We will miss Mike at BBB but our loss is a gain for the litigants and attorneys in Norfolk County. We wish him great success as he begins his new position.

from QUINCY ATTORNEYS-Baker, Braverman & Barbadoro P.C. 300 Crown Colony Dr #500 Quincy, MA 02169 (781) 848-9610 https://ift.tt/3blR6WI via http://bbb-lawfirm.com

#QUINCY ATTORNEYS-Baker #Braverman & Barbadoro P.C. 300 Crown Colony Dr 500 Quincy #MA 02169 (781)

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bbblawfirm · 5 years ago

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Families First Coronavirus Act – Key Provisions for Employers

On March 18th, the U.S. Congress passed and President Trump signed, the Families First Coronavirus Act (“FFCA”). FFCA includes numerous sweeping measures designed to help both families and businesses during the COVID-19 pandemic.

Below is a summary of some of the key provisions of the FFCA for employers.

Emergency Paid Sick Leave

Duration of Emergency Paid Sick Leave

FFCA provides that all employers with fewer than 500 employees (including government employers) must provide Emergency Paid Sick Leave as follows:

For full-time employees, employers must provide 80 hours of emergency paid sick leave; and

For part-time employees, employer must provide a pro-rated amount that is equal to the average of two weeks of work for the part-time employee.

Eligible Reasons for Emergency Paid Sick Leave

FFCA’s Emergency Paid Sick Leave may be used by employees if they are unable to work (at their place of work or remotely) for one of the following reasons:

The employee (or an individual that the employee is caring for) is subject to COVID-19-related quarantine by the federal, state or local government;

The employee (or an individual that the employee is caring for) has been instructed to self-quarantine for COVID-19 reasons by a health care provider;

The employee is experiencing symptoms of COVID-19 and is seeking medical diagnosis;

The employee is caring for a child whose school or child-care provider is closed due to COVID-19; or

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

Amount of Emergency Paid Sick Leave

The payment amount for Emergency Paid Sick Leave varies depending on the reason for leave as follows:

If the leave is due to the employee being quarantined by government order, or in self-quarantine by the advice of a physician or if the employee is experiencing symptoms of COVID-19 and seeking diagnosis, then the amount of leave is the rate at which the employee is normally paid for such time subject to a cap of $511 per day and $5,110 in aggregate per employee.

If the leave is for any other reason (to care for someone else in quarantine or advised to self-quarantine, due to school/daycare closures or if the leave falls into the “substantially similar conditions” category), then the amount of the leave is the rate at which the employee is normally paid for such time subject to a cap of $200 per day and $2,000 in aggregate per employee.

Other Important Provisions

The FFCA states that the Emergency Paid Sick Leave provisions go into effect “no later than 15 days after enactment of the law.”

The Emergency Paid Sick Leave provisions expire on December 31, 2020.

Employers can not require that employees use other paid leave prior to using Emergency Paid Sick Leave.

Employees however, can elect to use other paid leave first if they so choose.

Employers of health-care workers and emergency responders may elect to exempt such employees from the FFCA provisions.

FMLA Public Health Emergency Leave

FFCA adds a “Public Health Emergency” as a new qualifying reason for employees to receive paid FMLA leave. The Emergency Family and Medical Leave Expansion Act becomes effective no later than 15 days after becoming law and expires on Dec. 31, 2020.

What’s Different from Traditional FMLA

The law amends the Family and Medical Leave Act (FMLA) to provide up to 12 weeks of leave “because of a qualifying need related to a public health emergency.”

Prior to the Act, for employees to be eligible for FMLA they had to be employed for a year and have worked a minimum of 1250 hours, however under the FMLA Public Health Emergency Leave, eligible employees only have to have been employed for at least 30 calendar days at the time of the request for leave.

The definition of “covered employers” has also changed to now include all private employers with fewer than 500 employees. Under traditional FMLA small business (i.e. fewer than 50 employees) were excluded.

Qualified employees are entitled to paid leave.

What is a Qualifying Need

A qualifying need related to a public health emergency arises when the employee is unable to work (or telework) due to a need for leave to care for the son or daughter under 18 years of age of such employee if the school or place of care has been closed, or the child care provider of such son or daughter is unavailable because of an emergency with respect to COVID-19 declared by a federal, state or local authority. This amendment narrows the conditions precedent for taking leave.

Employees are Entitled to Paid Leave

The first 10 days of leave are unpaid, but an employee may elect to substitute any accrued vacation leave, personal leave or medical/sick leave, and employers are prohibited from requiring the substitution of paid leave.

If leave for a qualifying need related to a public health emergency continues beyond 10 days, it must be paid.

The leave paid at a rate of two-thirds of employee’s regular rate of pay as determined under the Fair Labor Standards Act (FLSA) and is based on the number of hours the employee normally would have been scheduled to work. For employees with varying work hours, a special formula is provided. In all cases, an employer need not pay an employee more than $200 per day and $10,000 in the aggregate.

Employees are Returned to Pre-Leave Status

Generally, employers with 25 or more employees must restore employees to their positions following their return from leave in the same manner as generally mandated by the FMLA.

Employers with less than 25 employees also must reinstate employees unless certain conditions are satisfied.

The U.S. Department of Labor (DOL) May Issue Regulations to Provide Exclusions to Assist Small Businesses

The U.S. Department of Labor (DOL) will have the authority to issue regulations to exempt businesses with fewer than 50 employees from having to provide emergency leave if doing so would jeopardize the viability of the business. In addition, an employer of an employee who is a healthcare provider or emergency responder may elect to exclude that employee from the leave provisions provided by the Act.

Employer Tax Credit – Emergency Paid Sick Leave and FMLA PHE Leave

In order to assist employers by offsetting the costs of Emergency Paid Sick Leave and FMLA Public Health Emergency Leave, FFCA creates an employer tax credit. The credit for employers is against the employer’s share of social security taxes.

Tax Credit for Emergency Paid Sick Leave

The tax credit corresponds to the amount paid out by the employer

Subject to the same caps ($511 per day and $5,110 in aggregate per employee for employee-related leave and $200 per day and $2,000 in aggregate per employee for others-related leave).

Tax Credit for FMLA Public Health Emergency Leave

The tax credit corresponds to the amount paid out by the employer

Subject to the same caps ($200 per day per employe and $10,000 in the aggregate per employee).

Should you have any specific questions or concerns regarding how COVID-19 relates to your business please contact Susan Molinari, Esq. or Theresa Barbadoro Koppanati, Esq. at 781-848-9610, we are ready to help.

from QUINCY ATTORNEYS-Baker, Braverman & Barbadoro P.C. 300 Crown Colony Dr #500 Quincy, MA 02169 (781) 848-9610 https://ift.tt/39dhz7p via http://bbb-lawfirm.com

#QUINCY ATTORNEYS-Baker #Braverman & Barbadoro P.C. 300 Crown Colony Dr 500 Quincy #MA 02169 (781)

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bbblawfirm · 5 years ago

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Gatekeepers in Zoning Disputes

Zoning disputes range from single family homes to complex commercial, residential, or mixed use developments. Regardless of the monetary value of the project from a cost-standpoint, the zoning disputes that get to court all have one thing in common – someone owning a nearby property is not happy. Anyone can talk at a local hearing about zoning-based concerns. To get to court after a decision issues, however, there is a two-part analysis. First, does the neighbor have standing to argue that there was an error with the relief granted and second, was there actually an error? For that unhappy neighbor to have a court decide whether there was a zoning error at the local level, the neighbor must also show actual harm that is particular to his or her property.

Standing is typically the main hurdle faced by plaintiffs seeking to overturn a building permit or other zoning relief granted to a construction project or development. Certain properties directly across a street, sharing lot lines, or within 300 feet and adjacent to the shared lot line abutter have presumptive standing under G.L. c. 40A, § 11, but their proximity is not enough for standing if the defendant adequately challenges harm. When the defendant presents evidence that a plaintiff would not actually be harmed, a plaintiff must show that the adverse effect from the local action will be “substantial enough to constitute actual aggrievement such that there can be no question that the plaintiff should be afforded the opportunity to seek a remedy.” Kenner v. Zoning Board of Appeals of Chatham, 459 Mass. 115, 122 (2011). There are a host of aspects to the test – what is the actual harm, are expert reports required, and how is the claimed harm specific to that plaintiff?

Massachusetts zoning law has focused on this standing gatekeeper to place zoning determinations with the local town or city unless the chance of error on the local level has actually harmed a nearby property. The courts are not designed to second-guess every zoning decision, and they will typically only do so if the zoning decision – right or wrong – has caused some identifiable harm to the plaintiff.

A recent case in Sherborn highlights the importance of standing as a gatekeeper and the importance of knowledgeable counsel when zoning issues are heading to court. In 2016, the Town of Sherborn issued a building permit for a single-family home on a three-acre lot. The abutters directly across the street challenged the permit by arguing that the house should not be constructed because the lot was 50-60 feet short of the 250-foot “minimum lot width” requirement in the zoning regulations. The defendants countered that the abutters were misinterpreting the bylaws, but as a preliminary matter, the abutters were not actually harmed by the permit and the case must be dismissed. After a four-day trial in early 2018, the Land Court judge agreed that the abutters lacked standing under zoning laws and found that “Plaintiffs simply do not want any construction” on the lot across the street. Because the Land Court dismissed the case based on standing, the judge never decided whether there was any zoning error. The plaintiff-abutters appealed. The defendant property owners, both attorneys, had handled the trial court action themselves and chose to do the same on appeal. The defendants focused most of their brief on evidence presented to rebut the plaintiffs’ presumption of standing, with minimal argument about the absolute lack of harm caused by the alleged error. The Appeals Court issued a published decision on September 30, 2019, reversing the Land Court.

The Appeals Court concluded that the alleged zoning error would allow the “house across the street [to be] closer to [the plaintiffs] than is permitted by the density-protective bylaws.” In and of itself, the court found that this proximity infringement was enough to show an actual harm. The decision was contrary to many cases of established precedent. The court did not analyze the level of harm in the context of the property circumstances – these were three-plus acre sites and the trial judge found that there was no credible harm to light or air. The defendants had asked for the case to be decided in an unpublished decision, as 80% of decisions issued by the court are handled, but the fact that the Appeals Court published the decision most likely saved the defendants from years more of protracted litigation.

After the decision issued, the defendants asked the Supreme Judicial Court (SJC) for further appellate review. The SJC receives approximately 700 requests for further appellate review each year, and it grants about 3.5% of the requests. The Court is much more likely to grant further appellate review on a published decision because unpublished decisions are not binding on lower courts.

For the SJC appeal, the defendants hired well-recognized zoning counsel for this appeal, and the case was argued in front of the SJC on March 5, 2020. Typically a decision from the SJC will issue between 2 and 6 months after oral argument. In a very rare act, the SJC issued an order the next day affirming the Land Court (thereby reversing the Appeals Court decision).

The old adage “time is money” is especially relevant to development and construction projects. The best way to move a project forward is to resolve any neighbor issues before courts are involved, but that’s not always possible. There are methods available to shorten time frames involved in defending an appeal. Having a knowledgeable zoning lawyer at the trial and appellate level after appeal of a zoning board decision can minimize the time value lost during this process. Please contact our real estate or litigation departments with question on this or other zoning or land use issues. – Kimberly Kroha, Esq.

from QUINCY ATTORNEYS-Baker, Braverman & Barbadoro P.C. 300 Crown Colony Dr #500 Quincy, MA 02169 (781) 848-9610 https://ift.tt/33exEbH via http://bbb-lawfirm.com

#QUINCY ATTORNEYS-Baker #Braverman & Barbadoro P.C. 300 Crown Colony Dr 500 Quincy #MA 02169 (781)

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bbblawfirm · 5 years ago

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Client Alert on COVID-19

To reduce the impact of COVID-19 outbreak conditions on businesses, workers, customers, and the public, it is important for all employers to plan now for COVID-19. COVID-19 has the potential to cause extensive outbreaks and because there is no current vaccine, an outbreak may become an extended event, as a result, workplaces may experience:

Higher rates/wide-spread absenteeism

Changes in the patterns of commerce

Interrupted supply/delivery

Employers who have not prepared for pandemic events should prepare themselves and their workers as far in advance as possible of potentially worsening outbreak conditions. The Center for Disease Control (CDC) is encouraging employers to develop and implement strategies that aim to both:

Limit the spread of COVID-19 by implementing steps to decrease workplace exposure to the virus; and

Lower the impact of COVID-19 on business operations.

Many organizations are putting out guidance for employers to assist employers in managing this pandemic:

S. Department of Labor Occupational Safety and Health Administration’s (OSHA) Guidance on Preparing Work Places for COVID-19 can be found at: https://www.osha.gov/Publications/OSHA3990.pdf.

The CDC has issued Interim Guidance for Businesses and Employers, to Plan, Prepare and Respond to Coronavirus Disease 2019 which can be found at: https://www.cdc.gov/coronavirus/2019-ncov/community/guidance-business-response.html.

Employers should also consult with their insurer to determine what coverage they may have for business interruption should the current situation escalate to the point where it directly affects the productivity of your business and interrupts revenue.

Should you have any specific questions or concerns regarding whether you can require employees to use earned sick time or other paid time off as a result of COVID-19 or whether or not you can require an employee to remain out of work if they have been exposed to COVID-19, or should you need assistance in develop an infectious disease preparedness and response plan that can help guide protective actions against COVID-19 please contact Susan Molinari, Esq. or Theresa Barbadoro Koppanati, Esq. at 781-848-9610, we are ready to help. – Susan M. Molinari.

from QUINCY ATTORNEYS-Baker, Braverman & Barbadoro P.C. 300 Crown Colony Dr #500 Quincy, MA 02169 (781) 848-9610 https://ift.tt/2xvGqWM via http://bbb-lawfirm.com

#QUINCY ATTORNEYS-Baker #Braverman & Barbadoro P.C. 300 Crown Colony Dr 500 Quincy #MA 02169 (781)

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The Small Business Reorganization Act of 2019

Congress has enacted and on Friday, August 23, 2019 the President signed a bill which will add a new subchapter V to Chapter 11 of the United States Bankruptcy Code designed to streamline the reorganization process for small businesses. This new law follows some unsuccessful stories about small businesses being unable to successfully reorganize under the existing Chapter 11 rules which have been in effect for decades. In prior revisions to the Code, Congress added several provisions, most notably to Chapter 11 with the underlying goal of providing a pathway for small businesses to reorganize more smoothly. Debtors and courts have struggled with the refined rules and this latest Act is an attempt to smooth out the wrinkles.

A small business debtor is defined in the Bankruptcy Code as a person engaged in commercial or business activities, excluding a person whose primary activity is owning or operating real estate that has an aggregate of not more than $2,725,625 of secured and unsecured debt at the time of filing of the petition for relief. Person includes a natural person, a partnership and a corporation. Some of the more notable provisions contained in the new act include, (i) only the debtor may file a plan of reorganization, (ii) the plan must be filed within 90 days of the filing of the petition, (iii) there is no longer a requirement that the debtor draft and have approved a disclosure statement, nor is the debtor required to solicit votes in favor of its plan, and (iv) a standing trustee will be appointed to oversee the reorganization, where historically, in a traditional Chapter 11 case, counsel from the office of the United States Trustee would oversee the reorganization process.

Two very important practical features included in the Act are first, that it removes the requirement of new value where a debtor intends to retain its equity interest without paying the creditors 100% of their claim. While the so-called “new value rule” is too comprehensive a topic to cover here, suffice to say, that its requirement in the prior version of the Code, prevented many small business debtors from effectively reorganizing as the new value requirement was difficult to overcome in most cases. Subsection V will allow debtors to retain their equity so long as the plan does not discriminate unfairly, is fair and equitable and all of the debtor’s projected disposable income will be used for payments under the plan. Additionally, and perhaps most importantly, the prohibition against modifying mortgage debt on one’s principal residence is lifted and will now parallel the provision that existed under Chapter 12 for the family farmer. Theoretically, a debtor will be able to modify his mortgage in certain circumstances and reduce the interest rate, extend the term and even recast the principal amount due at current values. Prior to the Act, a debtor was unable to do this in Chapter 7, 11 or 13 on a principal residence.

The Act will take effect on February 22, 2020. Small businesses, lenders and creditors may be impacted by this new law and should be prepared. Attorneys at Baker, Braverman & Barbadoro, P.C. will be ready to assist any party that finds itself involved in this new bankruptcy proceeding. – Gary M. Hogan.

from QUINCY ATTORNEYS-Baker, Braverman & Barbadoro P.C. 300 Crown Colony Dr #500 Quincy, MA 02169 (781) 848-9610 https://ift.tt/2Nm1tQ3 via http://bbb-lawfirm.com

#QUINCY ATTORNEYS-Baker #Braverman & Barbadoro P.C. 300 Crown Colony Dr 500 Quincy #MA 02169 (781)

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bbblawfirm · 6 years ago

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Taxes and Insurance and Inspections, Oh My! Considering Actual Costs of Airbnb and other Short-Term Rental Income

According to Airbnb, hosts in Massachusetts earned over $256 million from 1.2 million renters. The growth of private vacation rentals deriving from Airbnb, HomeAway, VRBO, and similar websites has provided extra income for property owners in Massachusetts and additional options for travelers to the state. The tremendous growth, however, has also prompted state and local regulations that grant a piece of the pie to the government and establish safety measures.

Some towns and cities have already regulated the industry, but all vacation rentals in Massachusetts are affected by a new state-wide law that becomes effective July 1, 2019. The law is codified in sections of G.L. c. 64G. This state law, local regulations, and liability risks create additional costs for short-term vacation rentals that the average owner-host may not be anticipating.

First, the new law mandating excise taxes applies broadly. It applies to properties that are rented out as a whole and to single room rentals within a property for a consecutive period of 31 days or less. It is not limited to vacation rental taxes but includes business and other type of short-term rentals. Hosts can include the property owner, tenant, or licensee – whoever is actually renting the property to a short-term renter. All hosts who rent property for short-term rentals more than 14 days per year must pay a state-wide lodging tax of 5.7% and, if applicable, an additional municipality tax. Not all municipalities have a local rooms tax, but many do. For example, the local room tax in Quincy and Braintree is 6%. Additional fees are applicable in cities like Boston or in certain Cape towns.

Second, all hosts are required to register with the Department of Revenue using MassTaxConnect. Hosts that rent 14 days or less per year do not need to pay the taxes, but they still need to register and declare that they are entitled to the excise tax exemption.

Third, cities and towns can adopt additional regulations and many have done so. These regulations can require registration with the municipality, inspections, fees, and penalties for noncompliance. The regulations also authorize publication of a list of all registered short-term rentals. Hosts should always check with the municipality to confirm whether they are complying with location regulations.

Fourth, there are other considerations beyond the excise taxes and local regulations. State and federal income taxes apply to short-term rentals and other sources of income. Additional governmental fees may apply if a host engages a professional management company to assist with the short-term rentals.

Fifth, hosts are required to maintain $1 million dollars in liability insurance to cover each short-term rental. If the hosting website does not provide this coverage, the host is still responsible. Traditional homeowners’ policies may not cover liability from short-term rentals. This additional use should be discussed with an insurance agent. The rentals may still make sense after deducting the fees, taxes, and expenses. An injury that is not covered by insurance, however, could be devastating.

The short-term rental market can be lucrative and convenient, but hosts need to understand the actual costs for embarking on or continuing this venture. If you have questions on short-term rentals or other uses of property, please contact one of the Real Estate attorneys at Baker, Braverman & Barbadoro, P.C. to get the expert legal advice you need. – Kimberly Kroha.

from QUINCY ATTORNEYS-Baker, Braverman & Barbadoro P.C. 300 Crown Colony Dr #500 Quincy, MA 02169 (781) 848-9610 https://ift.tt/2CgaK7A via https://bbb-lawfirm.com

#QUINCY ATTORNEYS-Baker #Braverman & Barbadoro P.C. 300 Crown Colony Dr 500 Quincy #MA 02169 (781)

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bbblawfirm · 6 years ago

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Beach Right Disputes: When the Beach is So Close, Yet So Far Away

Like many seaside areas of Massachusetts, Dennis has a sought-after beach on Cape Cod Bay. So much so in fact that access to one particular beach area is the subject of three appellate decisions.

The seaside neighborhood in dispute consists of approximately 200 acres, which was developed into residential lots beginning approximately 1903. Generally, the inland property owners seek to confirm rights to access the beach through certain ways and rights to use private portions of the beach. The shorefront property owners seek to protect the beach in front of their homes from such use. The area is registered land, which often invokes different legal analysis than recorded land.

The first appellate decision was published by the Supreme Judicial Court in 2015, and the second and third decisions were published by the Appeals Court on July 27, 2018. In the first case (Hickey I), the SJC determined that certain inland property owners had easement rights to use a way leading to the beach despite the fact that language on the certificates of title for the shorefront properties did not expressly, or through explicit reference, reserve any such easement for the benefit of these inland owners. The decision was somewhat groundbreaking in that the Court applied a particular easement analysis applicable to recorded land to registered land for the first time. Specifically, the Court allowed an inferential leap between the shorefront certificates of title to the inland certificates, a connection that was not explicitly referenced on the shorefront certificates or those documents specifically referenced therein. The Court concluded that shorefront property owners had a burden to review plans and certificates not directly referenced in their certificates of title because language on documents referenced on the certificate suggested that additional documents may affect their property rights. After making the leap to the additional documents, the shorefront owners would have been aware of easement grants in certificates of title for certain inland property owners.

After the Court confirmed certain inland property owners’ rights to use the access way leading to the beach, the inland owners sought to effectuate the rights settled in Hickey I by constructing a walkway and stairs to access Cape Cod Bay and by confirming the scope of their beach rights. The inland owners prevailed in arguing that the shorefront owners lacked standing to appeal a conservation decision granting them authority to construct a walkway. However, the shorefront owners have another appeal pending that could affect authority to construct the walkway. Additionally, shorefront owners prevailed in the second Appeals Court case, where inland owners were found not to have private rights to use the beach in front of the seaside lots.

As to the walkway, the Appeals Court determined that shared easement rights do not automatically grant standing to one easement holder to challenge the attempts of another to improve the easement through appealing a conservation decision. Specifically, shared easement holders can only challenge a conservation project through allegations that they have wetland-related concerns that are within the zone of interest protected by wetlands law. The court concluded that the damages alleged by the shorefront owners concerned the scope of the easement, a concern that was not implicated in conservation decisions. Accordingly, the shorefront conservation appeal was properly dismissed.

This victory is limited by the shorefront owners’ other avenues available to challenge the proposed project and because the Appeals Court also concluded, on the same day, that even after the inland owners reach the beach, they have no special rights to use the intertidal beach area that lies seaward of the shorefront lots beyond those of the general public. Massachusetts is in the minority of seaside states that allow private ownership of intertidal beach areas. Such ownership is limited by reserved public rights generally known as fishing, fowling and navigation. The inland plaintiffs sought to confirm that they have rights to use this beach area beyond those reserved for the public. Applying the analysis in Hickey I, the Appeals Court rejected this argument because language on the applicable certificates of title would not have given any indication the inland property owners had such rights. Although not decided in the case, the court left open the possibility that inland owners may have full beach rights to the area of land that follows the trajectory of the access way in which they were found to have rights in Hickey I.

It can be a long, granular, and uncertain path to enjoy private Massachusetts beaches as an inland property owner, and it can be an expensive component of seaside ownership to protect private beach rights granted with ownership of the land. If you own or are purchasing property in a seaside development, please contact one of the Real Estate attorneys at Baker, Braverman & Barbadoro, P.C. to get the expert legal advice you need. – Kimberly Kroha.

from QUINCY ATTORNEYS-Baker, Braverman & Barbadoro P.C. 300 Crown Colony Dr #500 Quincy, MA 02169 (781) 848-9610 https://ift.tt/2AXA5oD via https://bbb-lawfirm.com

#QUINCY ATTORNEYS-Baker #Braverman & Barbadoro P.C. 300 Crown Colony Dr 500 Quincy #MA 02169 (781)

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