The Department of Transportation has waived the minimum business hours requirement for dealerships during the public health disaster emergency. The waiver does not mean that dealerships are relieved of their statutory obligation to perform warranty repair work, including safety recalls. Most manufacturers have been in contact with their dealers about contractual obligations that may be in conflict with government mandates related to the emergency. Be certain you have written confirmation of what franchise permissions are being waived. While all dealerships must comply with government orders, IADA encourages dealerships not to exceed what is mandated by the state or federal government without documentation of permission from your manufacturer.
The CARES Act established the Paycheck Protection Program (PPP), which provides SBA loans to businesses with fewer than 500 employees, and enacted tax relief for individuals and businesses.
- NADA: CARES Act FAQ
- NADA Webinar: Making Sense Out of the New SBA Paycheck Protection Program: Practical Considerations for Dealers
- SBA: PPP Lender Finder
- Treasury Department: Paycheck Protection Program Loans Frequently Asked Questions
- Treasury Department: Paycheck Protection Program How to Calculate Maximum Loan Amounts – By Business Type
Loan Options Based on Size
The PPP loans are limited to employers with fewer than 500 employees. Dealership groups that operate under one separately organized entity, file employee compensation with the IRS under one tax ID number for that one entity, and employ 500 or more people in that one entity are not eligible to apply for a PPP loan, even with a franchise identifier code.
Dealership groups that have separate entities that individually employ fewer than 500 people should use franchisor identification codes.
NADA has developed draft language for borrowers to consider using in response to question three on the borrower application. (Your attorney can help you decide whether to use the language or modify it for your own application.) NADA also suggests that borrowers consider listing their businesses that are under common management and control.
Dealerships that exceed the 500 employee threshold and operate a single entity have options despite not being eligible for the PPP loans. They can utilize the employee retention tax credit , which is not available for businesses that receive PPP loans. The Treasury Department was also granted authority under the CARES Act to administer a mid-size loan program. Although the CARES Act Loan Guarantee Program for mid-size businesses hasn’t begun, we know some preliminary information, including that interest rates will be capped at 2% with principal and interest deferred for the first six months, and that the loan must be used to retain at least 90% of the applicant’s workforce at full compensation and benefits until September 30, 2020.
Employee Retention Credit
The IRS has issued guidance for claiming the Employee Retention Credit created by the CARES Act and the credits for emergency paid sick leave and emergency paid childcare leave under the FFCRA.
IRS Form 7200 combines the application for obtaining those credits into a single form.
Some Tax Benefits Not Available to Loan Recipients
Dealers who obtain a Paycheck Protection Program loan will not be able to defer the payment or payroll taxes or utilize the employee retention tax credit from the CARES Act. IADA encourages dealerships to consult with their financial advisors to compare the cash flow benefits of the tax provisions vs. the potentially forgivable loan. (More details can be found on page 11 of The Small Business Owner’s Guide to the CARES Act from the Senate Committee on Small Business & Entrepreneurship.)
County Treasurer Closings
Most, if not all, county treasurer offices are closed for in-person visits but are conducting services by mail, by email, online, and over the phone. County treasurers will be noting the date of postmark as the date of receipt and therefore IADA recommends submission by mail.
DOT Vehicle Services Operations
Iowa DOT Vehicle Services has launched a new live chat and suspended the customer service line (515.237.3110). The live chat is accessible through the DOT website by clicking on the red chat button and will offer live customer service support from 8:30 a.m. to 4:30 p.m.
Drivers licenses that were valid when Governor Reynolds proclaimed the public health disaster emergency remain valid. Licenses that expired prior to March 17 remain expired.
The Department of Homeland Security has issued guidance that includes automotive repair and maintenance facilities on the list of the nation’s essential critical infrastructure workforce.
Additionally, Governor Reynolds has emphasized that she prefers to not close any business that can safely be open in compliance with CDC guidelines. Some states that have had shutdowns are permitting limited sales by telephone, appointment, or remote processes.
Best practice is to encourage sales by appointment and pushing as much as possible to telephone and remote processes.
Essential Employee Letters
Dealer may create essential employee letters for employees that are essential, which may be particularly helpful in situations where essential employees are not Iowa residents. IADA recommends that the letters (sometimes referred to as CISA letters) be printed on dealership letterhead and include the following:
- The employee’s name
- The name of the employer/business
- The address of the business
- Information on the service the business provides. (For example, “[Name of Employee] is an automotive technician at [Dealership Name], a business that performs automotive repair, maintenance, and supply, which has been deemed by the US Department of Homeland Security to be essential to the nation’s transportation infrastructure.”)
- The employee’s typical work schedule
- A contact telephone number for the dealership
- The signature of an owner or executive of the employer
While service, maintenance, and collision techs and parts employees are considered essential under federal guidance, other dealership employees may be able to work remotely and should not be given an essential employee letter. Discretion is advised, as abuse of the essential employee designation has the potential to cause significant problems for an employer.
The Department of Labor’s Employee Benefits Security Administration issued deadline relief and other guidance related to employee benefit plans. Certain timeframes impacting participants’ rights to healthcare coverage and continuation of coverage under COBRA, and the time for plan participants to file or perfect benefit claims or appeals of denied claims have been extended.
The Families First Coronavirus Response Act (FFCRA) mandates that employers with fewer than 500 employees provide up to 80 hours of paid sick leave for certain employees who are affected by the COVID-19 virus. It also expands partial paid leave for certain employees. The expanded leave is available between April 1, 2020 and December 31, 2020.
Documentation is required in order to comply with the law. IADA encourages dealerships to use a leave request form, like this sample leave application, for employees to request paid sick leave or FMLA under the FFCRA.
Employers with fewer than 500 employees must post the “Employee Rights: Paid Sick Leave and Expanded Family and Medical Leave Under the Families First Coronavirus Response Act” poster and share it with workers who are working remotely, on vacation, or on other leave. The poster, which clearly explains the new paid leave law, is required to be displayed from April 1, 2020 to December 31, 2020.
- NADA: New Federal Emergency Leave Mandates Frequently Asked Questions
- Department of Labor: Families First Coronavirus Response Act Notice – Frequently Asked Questions
Main Street Lending Program
The Federal Reserve and Treasury Department launched a new lending program, the Main Street New Loan Facility, which will provide additional liquidity for businesses, including mid-size businesses that were ineligible for PPP loans. The Federal Reserve confirmed in its release announcing the program that PPP loan recipients will also be eligible for Main Street Loans.
Any business with 10,000 or fewer employees or up to $2.5 billion in 2019 revenue is eligible to apply. Businesses can borrow a minimum of $1 million, and the primary purpose of the loans is to fund payroll.
- Federal Reserve: Main Street Lending Program FAQ
- NADA: Federal Reserve and Treasury Department Announce New Main Street Lending Program
Off-Site Sales Resources
Property Tax Payment Penalties & Interest Suspended
Governor Reynolds has temporarily suspended penalties and interest for the delay in payment of property taxes. Dealerships do not need to pay their property taxes until the conclusion of the emergency declaration.
Remote Notarization & Witnessing
Governor Reynolds temporarily suspended the personal appearance requirement if the notarial act complies with the requirements of section 6 of 2019 Iowa Acts chapter 44 and any guidance issued by the Iowa Secretary of State regarding approved communication technology. Reynolds also temporarily suspended the requirement that a witness be physically present, provided that the person can see or hear the acts by electronic means, such as video conference, Skype, FaceTime, Zoom, or other means, regardless of whether it is recorded.
Temp Tags & License Plates
The requirement to obtain permanent license plates within 45 days is waived during the duration of the public health disaster emergency. Dealerships should continue to issue temp tags and date then for expiration as usual, but the temp tag will not expire during the emergency.
Titling, Registration & Lien Preservation
The requirement to apply for title and registration within 30 days is waived by the state of Iowa, but bankruptcy laws have not been suspended and dealerships continue to have an obligation to funding sources to perfect liens in a timely manner. In order to preserve the lien and avoid a chargeback from the lender, dealerships need to submit title and registration paperwork and payments within 30 days of delivery of the vehicle.
Although some counties are still accepting paperwork via a drop box in their lobby, IADA recommends dealers do not drop off paperwork and instead send everything through the United States Postal Service. The law provides that a lien is preserved when the paperwork and payment are placed in the mail with the proper postage. The Iowa DOT has directed county treasurers to use the date stamp on postage is what they will use for the purposes of perfecting the lien.
Under current Iowa law, manufacturers may not reject warranty claims if they are made within 60 days of completion. If your warranty clerk is working from home, make sure to establish processes for doing those submissions remotely.