It now seems like decades ago, but it has been only a matter of weeks since the Coronavirus Aid, Relief and Economic Security (CARES) Act was signed into law (March 27). When we first talked about the act, legislators were hearing from small-business owners who were anxious about the future of their businesses -- and that’s what led Congress to set up the Paycheck Protection Program (PPP). Since then, the Small Business Administration (SBA) has processed more than 3.8 million loans, totaling more than half a trillion dollars of economic support.

Some of those businesses that received loans will be complying with rules allowing for forgiveness of up to 100% of the loan.

The rules are pretty rigid. According to the SBA, the loan proceeds must go to payroll costs, rent, utilities and interest on mortgages, with 75% of the forgiven amount having been used for payroll. In addition, the employer must be able to show that the business maintained or quickly rehired employees, maintaining salary levels. The amount of forgiveness will also depend on full-time headcount and salaries and wages; if those amounts decrease, forgiveness decreases.

Business owners are asking about what counts as “payroll costs.” The SBA issued guidance on that question and many others, which can be found at https://www.federalregister.gov/documents/2020/04/15/2020-07672/business-loan-program-temporary-changes-paycheck-protection-program.

The list of payroll costs includes: “compensation to employees (whose principal place of residence is the United States) in the form of salary, wages, commissions, or similar compensation; cash tips or the equivalent (based on employer records of past tips or, in the absence of such records, a reasonable, good-faith employer estimate of such tips); payment for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums, and retirement; payment of state and local taxes assessed on compensation of employees; and for an independent contractor or sole proprietor, wages, commissions, income, or net earnings from self-employment, or similar compensation.”

What’s excluded from the definition of payroll costs? The CARES Act excludes the following:

“i. Any compensation of an employee whose principal place of residence is outside of the United States;

“ii. The compensation of an individual employee in excess of an annual salary of $100,000, prorated as necessary;

“iii. Federal employment taxes imposed or withheld between February 15, 2020 and June 30, 2020, including the employee's and employer's share of FICA (Federal Insurance Contributions Act) and Railroad Retirement Act taxes, and income taxes required to be withheld from employees; and

“iv. Qualified sick and family leave wages for which a credit is allowed under sections 7001 and 7003 of the Families First Coronavirus Response Act (Pub. L. 116-127).”

So, understanding how the PPP loan can be used in order to qualify for forgiveness, like many other things, is a matter of following the rules.

Some new issues have arisen. According to a notice (https://www.irs.gov/pub/irs-drop/n-20-32.pdf) issued last week, the IRS has concluded that business expenses paid for by a PPP loan that is forgiven cannot be deducted as business expenses. Sen. Ron Wyden called this a “gut punch” for businesses struggling to stay afloat.

In response, Sen. Marco Rubio, chairman of the Senate Committee on Small Business and Entrepreneurship, joined by Sens. John Cornyn, Senate Finance Committee Chairman Chuck Grassley, Finance Committee ranking member Ron Wyden, and Tom Carper, introduced new legislation (Small Business Expense Protection Act) to clarify that small businesses can deduct expenses paid with a forgiven PPP loan from their taxes.

“The congressional intent of the PPP program was to keep workers connected to their jobs and to ease the financial burden on small businesses so they could weather this pandemic,” Rubio said. “Borrowers should not be penalized by new taxes because they sought help during this unprecedented crisis.”

We’ll see whether the bill will be passed.

In the meantime, to keep current on developments, which I’m sure will be coming, check out the SBA’s website (www.sba.gov). If you have questions about a PPP loan that you have already received, I highly recommend contacting the Lender Relations Specialist in the local SBA Field Office. A list of offices can be found here: https://www.sba.gov/tools/local-assistance/districtoffices.

For a quick video that covers the topics we’ve discussed in today’s column, go to vimeo.com/416409979/98d2ad33d1.

Julie Jason, JD, LLM, a personal money manager (Jackson, Grant Investment Advisers Inc. of Stamford, Connecticut) and award-winning author, welcomes your questions/comments (readers@juliejason.com). Please visit www.juliejason.com.

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Just a few months ago, we enjoyed a stock market that reached all-time highs on Feb. 19, 2020, when the S&P 500 index closed at 3,386.15.

Just six trading days later, we were in a correction (a decline of 10% or more).

What changed? Who can forget? An unexpected virus that was spreading fast and injecting great uncertainty into the financial markets. The markets do not like uncertainty.

While we did not know it at the time, a bear market (20% decline) was developing. By March 23, 2020, the S&P 500 index had fallen 34% to 2,237.40. Looking back from today, March 23 marked the current bottom. That’s the day the Federal Reserve announced asset purchases to ensure that financial markets would function properly.

Now (April 30), just 50 trading days after the peak, the S&P 500 is at 2,912.43, up 30% from March 23.

In the interim, we’ve seen some of the most volatile trading days in history.

Here are the worst and the best days so far this year.

Worst: 1) March 16 (down 12%), ranked the third worst in a list of 30. 2) March 12 (down 9.5%), ranked as the sixth worst decline. 3) March 9 (down 7.6%), the 19th worst.

Best: 1) March 24 (up 9.4%), ranked ninth best. 2) March 13 (up 9.3%), ranked 10th best. Then, another day in the top 30, April 6 (up 7%), which ranked 30th best.

To give you some perspective, since the 1920s, the worst one-day decline was Black Monday, Oct. 19, 1987 (down 20.5%). The second worst was Oct. 28, 1929 (down 12.3%), and the third was March 16, 2020 (down 12%).

The month of March 2020 made records: down 12.5% for the month, the 19th worst in history, according to Sam Stovall, chief investment strategist for CFRA. CFRA is one of the world’s largest independent research firms. Looking at the top 30 daily movers (up or down), March landed on the “worst” list three times and the “best” list twice.

April also made the record books. The month of April 2020 was the 12th best month, the strongest of any April since 1938.

Stovall explained: A positive performance in April is not surprising, however, since it is the best month of the year in terms of average price change since World War II and the second best in frequency of advance.

What’s next? “A continuation of the market’s climb is less certain, however, since May’s typical performance has been below average on a percentage change and frequency of advance,” said Stovall.

A bumpy ride may still be ahead. While it might be tempting to look to safety above all else in uncertain times, thinking long-term can benefit most investors. We don’t know yet if March 23 will be THE bottom for this coronavirus market. But we do know that long-term investors look to add to their portfolios when prices are lower.

Now is the time to prepare a buy list, if you haven’t done so already. Let me give you one resource now: The Outlook, published by CFRA Research. The Outlook is the oldest continuously published investment newsletter in the U.S. You can try it out for free here: https://advisor.marketscope.com/#/Outlook90.

We’ll talk more about other stock research tools, but I’d like to hear from you. What are your favorite sources for stock research? What questions do you have about investing during the Coronavirus market? Go to tinyurl.com/yaa399g7 to take a survey to let me know or write to me at readers@juliejason.com.

Julie Jason, JD, LLM, a personal money manager (Jackson, Grant Investment Advisers Inc. of Stamford, Connecticut) and award-winning author, welcomes your questions/comments (readers@juliejason.com). Please visit www.juliejason.com.

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Every now and then, the Uniform Law Commission (ULC) proposes a law that states adopt. One such law allows you to title your house in transfer-on-death (TOD) form.

Called a TOD deed, this mechanism works somewhat like an IRA account’s beneficiary designation. That is, when you open an IRA account, you are provided a beneficiary designation form to fill out naming who you want to be your beneficiary in the event of your death.

The TOD deed essentially does the same thing. Say you want your house to go to your daughter Mary. Your deed would be titled: “John Jones, transfer-on-death, Mary Jones.”

In such a case, the house transfers to Mary, subject to mortgages and liens, with a lawyer’s help, but not as part of the assets that need to be probated by the court. Keep in mind that probate courts help decedents’ assets transfer to heirs; if an asset transfers through a TOD or other will substitute, the court does not need to effect the transfer.

TOD deeds are a creature of statute. That is, only those states that have TOD deed laws permit TOD deeds. My home state, Connecticut, does not have such a law just yet, but a proposed bill is currently under consideration. I personally would like to see it passed. Why should Connecticut be in the minority? The majority of states have TOD deed laws in place.

If you would like to check your state, I’ve posted a list on my website at juliejason.com/blog/tod-deed.

Some would say the goal of a TOD deed is to avoid probate; I would say that a TOD deed would make the transfer of the property more efficient. But, beware: An expensive estate plan can easily be thwarted if a TOD re-titling occurs without the knowledge of the lawyer who drafted your estate plan.

These are some of the benefits of TOD deeds, quoting the ULC (URPTDOA is the model TOD deed law):

“URPTDOA is an alternative to expensive estate planning for simple estates. People with a high net worth or a complex estate often use trusts and gifting strategies to transfer wealth outside of probate, but those strategies are prohibitively expensive for smaller estates ... URPTDOA fills the gap by providing a way for families, with the aid of an adviser, to easily transfer title to real property outside of probate.”

“URPTDOA allows owners to retain control of their property. ... With a TOD deed, the owner retains all rights in the property, including the right to change his or her mind and revoke the deed or sell the property. The TOD beneficiary has no interest until the owner’s death.

“URPTDOA has been proven effective in other states ... Today, more than half of the states allow transfers by means of a TOD deed. Despite some initial resistance in those states to the new procedure, over time the TOD titling process has been well received by recording officers, real estate attorneys, and the title insurance industry. TOD deeds are no longer novel, and the citizens of the remaining states should also benefit from the opportunity to transfer real property outside of probate simply and effectively.”

As Ben Orzeske, chief counsel at ULC, said: “States should adopt the model TOD deed act to provide a simple, inexpensive method of transferring real property to a beneficiary when the owner dies, without going to court for probate.”

I see that as progress at a time when we could all use a little help during this coronavirus pandemic.

Julie Jason, JD, LLM, a personal money manager (Jackson, Grant Investment Advisers, Inc. of Stamford, Conn.) and award-winning author, welcomes your questions/comments (readers@juliejason.com). Please visit www.juliejason.com.

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