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Small Businesses Face Tax Headaches on Top of Pandemic Woes

Submitted by jhartgen@abi.org on Tue, 2022-03-29 09:34

Tax season can be complicated for everyone, but as the April 18 filing deadline looms, small-business owners, contractors, entrepreneurs and others face a raft of ever-changing rules and regulations, the Associated Press reported. Plus, many are dealing with delayed returns and refunds from prior tax periods. The Internal Revenue Service has warned of a backlog and says more delays are to be expected. “It’s worse this year than last year,” said Gene Marks, owner of The Marks Group, a small business consulting firm in Bala Cynwyd, Pennsylvania. “It seems to get worse every year, and this year definitely worse than it’s been in prior years.” The IRS said earlier this month it was hiring 10,000 workers to deal with a backlog of 23 million items triggered by limiting operations during the coronavirus pandemic. But with understaffing at both the federal and state government levels, CPAs have found it difficult to reach anyone if problems or questions arise. “I’ve never seen this in my career, they’re all understaffed and all behind,” said Scott Orn, chief operating officer for the human resources and accounting startup Kruze Consulting. But he urged companies to be patient with the IRS and state-level tax officials. The government programs provided during the pandemic, including the Paycheck Protection Program and Economic Injury Disaster Loans, helped countless small businesses. Orn and other tax experts recommend filing for a tax extension this year, like most years.

Article Tags

Covid19

Small Business

Expanded Subchapter V Debt Limit Returns to Original Amount; Work Continues on Capitol Hill for Permanent Higher Threshold

Submitted by jhartgen@abi.org on Mon, 2022-03-28 12:40

Due to priorities and procedural issues, the Senate was not able to address proposed legislation to extend/permanently set the eligibility limit at $7.5 million for small businesses electing to file for bankruptcy under subchapter V of chapter 11. The debt limit had been raised from $2,725,625 two years ago and was extended last year, with a March 27 sunset. While work continues in Congress on this issue, the debt-eligibility limit has now returned to the original $2,725,625 threshold that had been established under the “Small Business Reorganization Act of 2019” (SBRA).

In response to the economic distress caused by the COVID-19 coronavirus pandemic, the “Coronavirus Aid, Relief, and Economic Security Act” (CARES Act; P.L. 116-136) was enacted on March 27, 2020, increasing the debt-eligibility limit for small businesses looking to file under the SBRA’s subchapter V from $2,725,625 to $7,500,000. Congress extended the limit last year with the enactment of the “COVID-19 Bankruptcy Relief Extension Act of 2021,” which expired on Sunday.

Sen. Charles Grassley (R-Iowa) introduced the bipartisan S. 3823, the “Bankruptcy Threshold Adjustment and Technical Corrections Act,” on March 14, aiming to make the subchapter V debt limit permanent at $7.5 million and index it to inflation, increase the chapter 13 debt limit to $2.75 million and remove the distinction between secured and unsecured debt for that calculation, make Small Business Reorganization Act technical amendments, and make Bankruptcy Administration Improvement Act technical amendments. Senate Judiciary Chair Richard Durbin (D-Ill.) and Sens. Sheldon Whitehouse (D-R.I.) and John Cornyn (R-Texas) co-sponsored the legislation.

There appears to be no opposition to the bill, and congressional efforts are being made this week to get it passed. ABI will continue to provide additional information on legislative news and developments in the ABI Daily Headlines. For more information on subchapter V and SBRA, be sure to visit ABI's SBRA Resources site.

Article Tags

Small Business

Monday, March 28, 2022 - 12:00

Bankruptcy Code

Topics

Bankruptcy Code

Topics

ABI Applauds Introduction of “Bankruptcy Threshold Adjustment and Technical Corrections Act”

Submitted by ckanon@abi.org on Fri, 2022-03-18 09:04

The American Bankruptcy Institute (ABI) applauds the introduction of S. 3823, the “Bankruptcy Threshold Adjustment and Technical Corrections Act,” which would permanently set the debt limit at $7.5 million for small businesses electing to file for bankruptcy under subchapter V of chapter 11. Consistent with the recommendations of ABI’s Commission on Consumer Bankruptcy, the bill also would raise the debt limit for individual chapter 13 filings to $2.75 million and remove the distinction between secured and unsecured debt for that calculation. “There is no doubt that the effects of the COVID-19 pandemic and its aftermath continue to put a significant strain on individuals and small businesses,” said ABI Executive Director Amy Quackenboss. “By permanently setting the debt limit for subchapter V at $7.5 million and increasing the eligibility of individuals to access relief under chapter 13, the ‘Bankruptcy Threshold Adjustment and Technical Corrections Act’ provides a greater number of struggling small businesses and families with an efficient path to reorganizing their finances.” Sen. Charles Grassley (R-Iowa) introduced the bipartisan S. 3823 on March 14, aiming to make the subchapter V debt limit permanent at $7.5 million and index it to inflation, increase the chapter 13 debt limit to $2.75 million, remove the distinction between secured and unsecured debt, make Small Business Reorganization Act technical amendments, and make Bankruptcy Administration Improvement Act technical amendments. The legislation is co-sponsored by Senate Judiciary Chair Richard Durbin (D-Ill.) and Sens. Sheldon Whitehouse (D-R.I.) and John Cornyn (R-Texas).

Article Tags

Legislation

Consumer Bankruptcy

Small Business

ABI Applauds Introduction of "Bankruptcy Threshold Adjustment and Technical Corrections Act"

Submitted by ckanon@abi.org on Fri, 2022-03-18 08:50

March 18, 2022, Alexandria, Va. — The American Bankruptcy Institute (ABI) applauds the introduction of S. 3823, the “Bankruptcy Threshold Adjustment and Technical Corrections Act,” which would permanently set the debt limit at $7.5 million for small businesses electing to file for bankruptcy under subchapter V of chapter 11. Consistent with the recommendations of ABI’s Commission on Consumer Bankruptcy, the bill also would raise the debt limit for individual chapter 13 filings to $2.75 million and remove the distinction between secured and unsecured debt for that calculation. “There is no doubt that the effects of the COVID-19 pandemic and its aftermath continue to put a significant strain on individuals and small businesses,” said ABI Executive Director Amy Quackenboss. “By permanently setting the debt limit for subchapter V at $7.5 million and increasing the eligibility of individuals to access relief under chapter 13, the ‘Bankruptcy Threshold Adjustment and Technical Corrections Act’ provides a greater number of struggling small businesses and families with an efficient path to reorganizing their finances.”

As a direct result of the work of ABI’s Commission to Study the Reform of Chapter 11, the Small Business Reorganization Act of 2019 (SBRA) became effective on February 19, 2020, to provide Main Street business debtors with a more streamlined path for restructuring their debts. Since then, more than 3,000 debtors have elected to file under subchapter V of chapter 11. In response to the economic distress caused by the COVID-19 coronavirus pandemic, the “Coronavirus Aid, Relief, and Economic Security Act” (CARES Act; P.L. 116-136) was enacted on March 27, 2020, increasing the debt eligibility limit for small businesses looking to file under the SBRA’s subchapter V from $2,725,625 to $7,500,000. Congress extended the limit last year with the enactment of the “COVID-19 Bankruptcy Relief Extension Act of 2021,” but the threshold is set return to $2,725,625 on March 27, 2022, without further congressional action.

Sen. Charles Grassley (R-Iowa) introduced the bipartisan S. 3823 on March 14, aiming to make the subchapter V debt limit permanent at $7.5 million and index it to inflation, increase the chapter 13 debt limit to $2.75 million, remove the distinction between secured and unsecured debt, make Small Business Reorganization Act technical amendments, and make Bankruptcy Administration Improvement Act technical amendments. The legislation is co-sponsored by Senate Judiciary Chair Richard Durbin (D-Ill.) and Sens. Sheldon Whitehouse (D-R.I.) and John Cornyn (R-Texas).

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ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. ABI was founded in 1982 to provide Congress and the public with unbiased analysis of bankruptcy issues. The ABI membership includes nearly 10,000 attorneys, accountants, bankers, judges, professors, lenders, turnaround specialists and other bankruptcy professionals, providing a forum for the exchange of ideas and information. For additional information on ABI, visit www.abiworld.org.

Article Tags

Legislation

Consumer Bankruptcy

Small Business

Friday, March 18, 2022 - 12:00

Second Circuit Holds that Debtors Are Properly Barred from Receiving PPP Loans

The first court of appeals to reach the issue decides that the SBA properly interpreted the CARES Act to bar chapter 11 debtors from receiving PPP ‘loans.’

SBA Can Deny PPP Loan Because of Bankruptcy, Appeals Court Rules

Submitted by ckanon@abi.org on Thu, 2022-03-17 08:54

The Small Business Administration (SBA) was within its rights to deny pandemic relief to a non-profit hospital based on the fact it was in bankruptcy, a federal appeals court ruled, Reuters reported. The Second U.S. Circuit Court of Appeals said in a decision that while bankruptcy law does prohibit government entities from denying a debtor a permit, license, or “other similar grant” due to its bankrupt status, the SBA’s Paycheck Protection Program (PPP). Though many courts have weighed in on whether PPP funding qualifies as a grant, the Second Circuit is the first appeals court to rule on the issue. The three-judge panel vacated a June 2020 ruling from U.S. Bankruptcy Judge Colleen Brown in Vermont that held the SBA could not reject Springfield Hospital Inc’s application for PPP funding. Springfield Hospital and Springfield Medical Care Systems Inc., a Vermont-based critical access hospital and medical services provider, filed for chapter 11 protection in June 2019 but continued operations during the bankruptcy. It applied for $3.6 million in PPP funds while in bankruptcy. Springfield sued the SBA in April 2020 after it rejected the hospital's request for funding. In response, the SBA argued that the funds it distributed through the PPP were loans, not grants protected by bankruptcy law. The hospital was approved to exit chapter 11 in December 2020. In Wednesday’s decision, the panel concluded that just because the SBA forgives many of the loans, that does not automatically qualify them as grants. Rather, businesses must meet certain financial criteria to obtain loan forgiveness. The case is Springfield Hospital Inc v. Guzman, U.S. Circuit Court of Appeals, No. 20-3902.

Article Tags

Finance and Banking

Small Business

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Topic Tags

Asset Sales

Bankruptcy Litigation

Executory Contracts/Leases

Business Reorganization

Small Business

Telecom/Tech

February Total Bankruptcy Filings Increase 3 Percent from Last Month, Commercial Chapter 11s Decrease 10 Percent

Submitted by jhartgen@abi.org on Mon, 2022-03-07 21:54

Alexandria, Va.— Total bankruptcy filings for February increased 3 percent over January, according to data provided by Epiq. Total filings in February were 26,985, up slightly from the January filing total of 26,200. The total noncommercial filings of 25,565 for February increased 4 percent from the January noncommercial filing total of 24,695. Conversely, February’s commercial filing total of 1,420 represented a 6 percent decrease from the January commercial filing total of 1,505. Commercial chapter 11 filings totaled 203 in February 2022, a 10 percent decrease from the 225 filings recorded the previous month.

“With government stabilization programs and lender deferments tapering off, consumers and businesses are navigating an economic landscape that includes rising inflation, worker shortages and growing supply chain challenges,” said ABI Executive Director Amy Quackenboss. “Congressional consideration of extending or permanently making the expanded eligibility limit of small businesses electing to file for subchapter V under chapter 11 before it expires on March 27 would provide a reliable path for small businesses to successfully restructure, reduce liquidations and save jobs.”

Since the Small Business Reorganization Act of 2019 (SBRA) became effective on February 19, 2020, to provide Main Street business debtors with a more streamlined path for restructuring their debts, more than 3,000 debtors have elected to file under subchapter V of chapter 11. In response to the economic distress caused by the COVID-19 coronavirus pandemic, the “Coronavirus Aid, Relief, and Economic Security Act” (CARES Act; P.L. 116-136) was enacted on March 27, 2020, increasing the debt eligibility limit for small businesses looking to file under the SBRA’s subchapter V from $2,725,625 to $7,500,000. Congress extended the limit last year with the enactment of the “COVID-19 Bankruptcy Relief Extension Act of 2021,” but the threshold is set return to $2,725,625 on March 27, 2022, without further congressional action.

ABI’s Annual Spring Meeting, taking place on April 28-30 in Washington, D.C., will feature top bankruptcy experts examining key insolvency trends, including the “Texas Two-Step” strategy, subchapter V developments, senior care facilities in distress and more. For more information and to register, please click here.

Total, consumer and business filings continued their decline in February 2022 compared to last year, according to Epiq’s data. February’s filing total represented a 14 percent decrease from the February 2021 filing total of 31,221. Consumer filings decreased 13 percent, falling to 25,565 in February 2022 from the 29,256 total recorded in February 2021. The 1,420 commercial filings in February 2022 were 28 percent less than the 1,965 registered in February 2021. Commercial chapter 11 filings in February 2022 totaled 203, a 52 percent drop from the 420 commercial chapter 11 filings in February 2021.

The average nationwide per capita bankruptcy filing rate (total filings per 1,000 population) was 1.03 for February, a decrease from the 1.25 rate registered in January. The average daily filing total in February 2022 was 1,420, a 14 percent decrease from the 1,643 total daily filings registered in February 2021. States with the highest per capita filing rates (total filings per 1,000 population) in February 2022 were:

1. Alabama (2.94)

2. Tennessee (2.35)

3. Georgia (2.17)

4. Mississippi (1.99)

5. Nevada (1.83)

For further information about the statistics or additional requests, please contact ABI Public Affairs Officer John Hartgen at 703-894-5935 or jhartgen@abi.org.

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Epiq is a leading provider of managed technology for the global legal profession. Epiq offers innovative technology solutions for electronic discovery, document review, legal notification, claims administration and controlled disbursement of funds. Epiq’s clients include leading law firms, corporate legal departments, bankruptcy trustees, government agencies, mortgage processors, financial institutions, and other professional advisors who require innovative technology, responsive service and deep subject-matter expertise. For more information on Epiq, please visit https://www.epiqglobal.com/en-us.

Article Tags

Consumer Bankruptcy

Business Reorganization

Covid19

Small Business

Monday, March 7, 2022 - 12:00

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