COVID-19 Response Center

New York State COVID-19 Capital Costs Tax Credit Program Now Available Until Program Funds are Exhausted

If you are an independently owned and operated business in New York State that incurred additional COVID-19-related operational costs – from structural changes and building upgrades to health-related supplies and materials – you may be eligible for financial assistance in the form of a refundable tax credit to help reduce pandemic-related financial impacts on your business.

The time to act is now.

Eligibility requirements for the State’s COVID-19 Capital Costs Tax Credit Program include:

• 100 employees or less
• Gross receipts of less than $2.5 million in New York State for the taxable year that includes December 31, 2021
• Have at least $2,000 of qualifying expenses (see below) between January 1, 2021 and December 31, 2022. 

Small businesses meeting eligibility requirements can receive a tax credit of 50% of qualifying expenses up to a maximum of $25,000 in tax credits (based on qualifying expenses of $50,000). 

New York Capital Costs Tax Credit Program Qualifying Expenses

The Empire State Development website provides additional details on the program, including this list of qualifying expenses you may have incurred in the following categories of items:

Qualifying Expenses New York COVID-19 Capital Costs Tax Credit Program
Supplies to disinfect and/or protect against COVID-19 transmission Restocking of perishable goods to replace those lost during the COVID-19 pandemic Physical barriers and sneeze guard Hand sanitizer stations Respiratory devices such as air purifier systems installed at the business entity's location Signage related to the COVID-19 pandemic including, but not limited to, signage detailing vaccine and masking requirements, and social distancing Materials required to define and/or protect space such as barriers Materials needed to block off certain seats to allow for social distancing Certain point of sale payment equipment to allow for contactless payment	Equipment and/or materials and supplies for new product lines in response to the COVID-19 pandemic Software for online payment platforms to enable delivery or contactless purchases   Building construction and retrofits to accommodate social distancing and installation of air purifying equipment but not for costs for non-COVID-19 pandemic related capital renovations or general "closed for renovations" upgrades Machinery and equipment to accommodate contactless sales Materials to accommodate increased outdoor activity such as heat lamps, outdoor lighting, and materials related to outdoor space expansions Other costs as determined by the department
Source: https://esd.ny.gov/covid-19-capital-costs-tax-credit#regulations-&-comment-period

How to Claim the New York Capital Costs Tax Credit

Credits will be awarded on a first come first serve basis until the $250 million program fund is depleted, so time is of the essence for businesses to apply and capture the credit.

To begin, complete a required eligibility screening tool to determine if your business qualifies for the program. Once qualified, you will be emailed a link to an application that must be completed and accompanied by documentation to show proof of expenses.

If you have any questions about eligibility, the application process, or required documentation for this New York State tax credit, please contact the Freed Maxick Tax Team.

Enacted in March 2021, the American Rescue Plan (ARP) Act was designed to combat the economic crisis caused by the COVID-19 pandemic. The $1.9 trillion package had a variety of mechanisms to deliver assistance to the American people via several federal agencies. The Department of Agriculture has recently unveiled the Emergency Rural Health Care (ERHC) program which is to provide immediate assistance to rural health care providers that have been affected by the pandemic as well as to improve health care delivery related to COVID-19.

This program provides up to $500 million in grant funding to help broaden health care access and improve community health outcomes as it pertains to the COVID-19 pandemic. Applicants will be awarded between $25,000 and $1 million for their respective grants.

Applications are due by October 12, 2021 and will continue to be accepted so long as funding remains available.

Who is eligible to apply for the ERHC grant?

Eligible applicants may consist of public bodies, community-based nonprofit corporations, and federally recognized tribes located in an eligible rural area.

What constitutes as an eligible rural area?

The term ‘rural area’ is defined in section 343(a)(13)(C) of the Consolidated Farm and Rural Development Act. A rural area may mean “…any area other than a city, town, or unincorporated area that has a population of greater than 20,000 (i.e. a population of not more than 20,000)." For purposes of the grant, population can be measured based upon the latest U.S. Census data.

Those statistics may be adjusted to exclude long-term prison populations as well as up to 1,500 service members living in government quarters on a military installation.

Applicants can be headquartered in urban areas and request funds for facilities located in – and primarily serving – rural areas.

What can the ERHC grant funds be used for?

Funds must be utilized in correlation with the COVID-19 pandemic, and there are a variety of uses that applicants can utilize the funds for, such as increasing capacity for vaccine distribution or increasing telehealth capabilities, but most notably is the potential to be reimbursed for health care-related lost revenue used to maintain capacity during the coronavirus pandemic. While the Provider Relief Funds (PRF) were primarily utilized for this purpose, many providers still had lost revenues in excess of the funds received via PRF. IMPORTANT: Applicant requests for reimbursement of lost revenue must also include a certification from a certified public accountant confirming that the calculation of lost revenue is accurate.

It is also important to note is that these funds are prohibited from being utilized for a number of purposes, including but not limited to:

• Expenses or losses reimbursed (or obligated to be reimbursed) from any other sources (i.e. losses previously reimbursed through PRF);
• Expenses related to staffing needs exceeding annual salaries of $100,000 as prorated over the applicable time period; or
• Payments for existing indebtedness unrelated to COVID-19

How are the ERHC grant awards calculated?

Applicants will be limited to percentages of the respective project cost (or lost revenues) ranging from 15% to 75%. Factors include total population of the eligible rural area and the median household income of the area.

What does my organization need to apply?

Nonprofit applicants must provide the following items in conjunction with their application:

• Articles of incorporation
• By-laws
• Evidence of good standing
• Evidence of ties to the local rural community as demonstrated by:
  • Close association with or control by a local unit of government; or
  • Broad-based ownership and control by members of the community, demonstrated through a listing of the board members that represent the community; or
  • Substantial public funding as demonstrated through taxes, revenue bonds, local government sources, or community-wide fundraising campaigns.
• Evidence of eligibility including:
  • Location of the facility and associated population demographics
  • Description of the service area
  • Evidence the facility primarily serves rural residents

Freed thoughts

While the items required for submission to the Emergency Rural Health Care (ERHC) program may be slightly more than what providers have previously had to submit for other rounds of funding, most providers’ lost revenue calculation has already been performed for the year ended December 31, 2020. Any lost revenue calculated for 2021 should follow the same methodology.

If you have any questions or need additional guidance, Freed Maxick Healthcare can help. Please contact Chirico Rozsa at 716.847.2651 or utilize our contact form.

On September 10, 2021, Heath and Human Services (HHS) announced the availability of an additional $25.5 billion of funding for health care providers. Included in the package is $17 billion of additional Provider Relief Funds (PRF) for a Phase 4 tranche, as well as $8.5 billion in American Rescue Plan (ARP) funding. On September 29, 2021, providers can begin their application process.

What are these COVID-19 relief funds for?

The Phase 4 distribution is meant to continue funding lost revenues and COVID-19 related operating expenses incurred between July 1, 2020 and March 31, 2021. This specific distribution is designed to provide additional support to smaller providers by reimbursing a higher percentage of lost revenues and COVID-19 related expenses as compared to larger providers.

The ARP funding is targeted to assist providers who service Medicaid/CHIP and Medicare beneficiaries living in rural areas as defined by the Federal Office of Rural Health Policy. Similar to the Phase 4 funding, the ARP is designed to provide additional support to providers that service Medicaid/CHIP patients, by utilizing the oftentimes higher Medicare reimbursement rates.

How do I know if my healthcare organization is considered ‘rural’?

Health Resources & Services Administration (HRSA) has provided an online tool that will assist providers in determining whether their organization can be considered. Click here for the HRSA eligibility analyzer.

What kinds of healthcare providers are eligible for this COVID-19 relief?

While acute care hospitals and skilled nursing facilities are the most thought of ‘providers’, any provider or supplier of health care is eligible.

What should my organization be doing?

Prior to the application process, HHS recommends that your organization gathers any supporting information such as recent tax documents and financial statements related to the second half of 2020 and first quarter of 2021.

Does my organization need to apply for PRF and ARP separately?

No. HRSA is allowing providers to apply for both payment streams in a single application.

Freed thoughts

Although HHS has not released official guidance regarding what these funds may be used for, signs point to them following the same terms and conditions from Phases 1-3 of the PRF General Distributions. Therefore, if you have any lost revenue and/or increased expenses that will not be covered by the funding you have already received from HHS, FEMA, PPP, and other sources, we recommend that you apply.

If you have any questions or need additional guidance, Freed Maxick Healthcare can help. Please contact Chirico Rozsa at 716.847.2651 or utilize our contact form.

Yet another unpleasant side effect of the COVID-19 pandemic and the ongoing battle with its variants is the potential state income/franchise, sales, and payroll tax consequences related to remote workers. Remote workers can create tax compliance issues for both the employer and for themselves. Consider the following:

1.) Remote workers can create physical nexus in another state subjecting the employer to another state’s income/franchise, sales and/or payroll tax filing requirements.

2.) Remote workers may subject themselves to another state’s income tax. The employer may be required to register and withhold state income tax on behalf of their remote workers. The remote worker may be entitled to claim a resident credit to avoid double tax.

3.) Six states: Arkansas, Connecticut, Delaware, Nebraska, New York, and Pennsylvania, employ a “convenience of the employer rule”. Massachusetts temporarily employed this rule during the pandemic. Under this rule, employees are taxed by the employer’s home state where they normally work if the employee is working remotely for their own convenience. Grace period’s that certain states employed during the pandemic are expiring which may result in double tax paid by the remote worker.

4.) Some states include payroll as a factor when apportioning income to their state. Remote workers increase the payroll factor which increases state income/franchise tax liability.

5.) Due to the lack of uniformity among states, employers must address the specific rules that apply in those states to determine whether to register for income/franchise, sales, and/or payroll taxes, and whether to withhold and remit payroll taxes to those states. This will increase the cost of state tax compliance.

New Approach to Remote Work State Tax Compliance

Due to the pandemic, it is necessary for employers to address whether additional state tax compliance is required when employees are working remotely during the year in other states. Employers should develop a process to track the work location of their employees during the year to determine if/when the employer is required to comply with the tax laws in another state. The employer may be required to register as “doing business” for income/franchise, sales and payroll taxes based on the physical presence of remote workers in another state.

The Tax Team at Freed Maxick can assist in determining the state tax consequences of your remote workforce. For a complimentary discussion of your situation, please contact me at don.warrant@freedmaxick.com, or reach me by phone at 716.847.2651.

6 Recommendations to Help Your Small Business Recover from COVID-19

The COVID-19 Pandemic caused many small businesses to struggle or close, and has demonstrated the importance of having a Business Continuity Plan (BCP) in place. According to the United States Small Business Administration, 90% of businesses fail within two years if they’re unable to restore their operations within 5 days after the disaster. In other words, the longer the recovery takes, the greater the risks of permanent closure.

Recovering from a disaster like COVID-19 has affected all industries, particularly those classified as a small business. According to the Washington Post, 100,000 small businesses were forced to close permanently due to the COVID-19 pandemic.

Source: Small Business Majority

COVID-19 Guidance: Getting Your Business Operations and Finances Back to Normal or to a “New Normal”

Having a Business Continuity Plan (BCP) and Disaster Recovery (DR) in place can help lessen impacts and speed recovery for returning to normal or creating a new normal.

Here are five recommendations from the Freed Maxick Risk Advisory Team for achieving these ends:

1.) Assess the Financial Damage

The first step in getting your business back to normal or to a new normal is determining how deeply your small business has been affected. While only a small number of businesses can say they benefited from the pandemic, it’s possible the damage you have incurred is not as bad as you believe. Updating financial statements can show the true affect this disaster has had on your small business, like a current and accurate profit and loss statement.

When assessing damages, you or your advisors need to factor in expenses cut during the pandemic, such as laying off employees, cutting advertising or marketing or loss of customers to competitors. Identifying these problem areas can help you rebuild faster and help recognize the areas you need to recover. For example, if you laid off employees, then you will need to assess the operating effectiveness of your current employees to determine if new employees need to be hired. Also, if you cut advertising or marketing costs you may assess whether you need to reintroduce these costs into your budget or if another approach is necessary.

2.) Take a Fresh Look at Your Business Plan

While your business may have been successfully running pre-COVID, it’s likely that the pandemic highlighted problem areas in which you may need to fine-tune. Consider how your business needs to operate in the new normal. Looking at your competitors can give you insights as to how changing business operations can help you succeed - or not succeed - post-COVID. Your CPA or other advisors can help with strategic business planning.

3.) Get the Funding You Need to Recover

Unless you had a large amount of cash on hand prior to the pandemic, you may need some working capital to stimulate your business operations. When it comes to financing your small business during COVID, there are several options to consider, like the Paycheck Protection Program that provides funding to small businesses struggling to retain their employees.

Economic Injury Disaster Loans can also help with short-term financing for things other than employee retention. Funding is limited for these government sponsored options, therefore, talk with your CPA or other financial advisor to discuss loan options for rebuilding efforts.

4.) Revamp Your Budget to Account for New Spending

Everyone has heard the saying that you must spend money to make money. This is also true when rebuilding your business. You may have to spend money on hiring and training employees to function in the new normal. Inventory may need to be purchased and you may need to invest in new marketing and advertising again to draw customers back. As part of rebuilding, you should have a clear idea of what you will need in your budget and what costs can be cut to make the most out of your revenue and cash flow.

5.) Develop a Timeline for Rebuilding

You may have a list of things you want or need to do to recover from the pandemic, but prioritizing and creating a timeline for rebuilding is the best way to track, monitor and complete all of your projects. According to Infrascale, 1 in 6 small business executives don’t know their own recovery objectives.

Identifying these objectives should be reflected in your timeline for rebuilding. Your first goal should be to secure funding for your business. Once you’ve done that, setting a timeline for rehiring employees, restocking inventory, and reopening your doors should be next. Tracking your progress is a crucial step to determine if changes are necessary. You may want to start with weekly check-ins to see what’s working and what’s not. Then, you can review your financials monthly as things begin to stabilize.

Create a Contingency Plan for the Next Crisis

While the coronavirus pandemic may seem like a once-in-a-lifetime event, the reality that disasters and emergencies can happen to a business is not out of the realm of possibility. Take what you have learned from this current disaster and use it to prepare for the next crisis.

Building up liquid cash flow may be a priority if you had little or nothing set aside prior to the pandemic. You can choose to focus on debt and cost-trimming to keep your budget in check, or you may need to find ways to help your staff work more efficiently to cut operating costs. Having a Plan B can help improve your business’s odds of surviving the next disaster or emergency.

Get More Information and Guidance on COVID-19 Business Recovery Planning

The Coronavirus may have caused your small business to struggle, but it does not have to fail due to this unfortunate event. If you want to develop a Business Continuity Plan and/or Disaster Recovery, or you would like further advice on how to return your small business back to normal, we are available to help. For a complimentary consultation, please contact us via form; call me at (716) 332-2761, or email me at nicole.fitzgerald@freedmaxick.com.

Did you start a business after February 15, 2020? If you can answer “yes”, you MAY be eligible for a maximum $50,000 per quarter refundable Employee Retention Credit in Q3 and Q4 of 2021, for a grand total of $100,000.

The Employee Retention Credit for tax year 2021 is a refundable payroll tax credit based on 70% of qualified wages paid to each employees up to a maximum credit amount of $7,000 per employee, per quarter ($10,000 of wages per employee per quarter). Employers claiming ERC under the Recovery Startup Businesses clause are limited to a maximum credit claim of $50,000 per quarter in total.

As part of the American Rescue Plan Act signed into law in March 2021, there are enhanced provisions for Q3 and Q4 for “Recovery Startup Businesses” to be eligible for the Employee Retention Credit without having to show a significant decline in gross receipts or a full or partial suspension of operations due to a Government order.

If this is the first time you’ve heard about the Employee Retention Credit, please review our previous blogs to learn more:

• Employee Retention Credit: 2021 Update
• Paycheck Protection Program and Employee Retention Credit in 2021? New IRS Guidance May Provide Additional Relief for 2020

What is a “Recovery Startup Business”?

The term “Recovery Startup Business” identifies any employer that:

• a) Began carrying on any trade or business after February 15, 2020,
• b) Whose average annual gross receipts for the 3-taxable-year period ending with the taxable year which precedes the calendar quarter for which the credit is determined under subsection (a) does not exceed $1,000,000.

Gross Receipts Test for Recovery Startup Businesses

The gross receipts rules will mainly apply to recovery startup businesses whose owners operate and own other trade or businesses that have been in operation prior to 2/15/20. The gross receipts test requires aggregation of all related business and entities based on common ownership to prevent an established business with average gross receipts over $1M from starting a “new” entity just to claim the credit.

If you are an entrepreneur who decided to start a new business and hire employees after February 15, 2020, you could be eligible for a potential $100,000 refundable tax credit. However, each situation is different, so facts and circumstances must be evaluated on a case by case basis to determine eligibility and to be aware of the limitations.

The 2/15/20 Line of Demarcation

Startup business established after 2/15/20 were not eligible for the Paycheck Protection Program so they missed out on up to two rounds of enormous government relief during the pandemic. To reward new businesses that started over the last 18 months, the Employee Retention Credit for Recovery Startup Businesses, represents the government’s effort to level the playing field for new businesses that previously missed out on government relief.

Additional Insight and Guidance

If you believe you might be eligible for the Employee Retention Credit as a Recovery Startup Business, The Freed Maxick Tax Team is prepared to help you navigate through the program and are available for a complementary consultation to this end.