Community Support & Business Response Legal Team

COVID-19 is impacting almost all aspects of business and our community. The drastic changes are happening daily, in real time. Our Community Support & Business Response Legal Team is analyzing COVID-19 and its effect on Arizona’s businesses. We’re building on our 40+ years in Arizona to offer thoughtful guidance on how businesses can navigate this complex and fast-changing situation. We’re here to help. If the information below does not answer your pressing questions, please feel free to contact our team of professionals.

Gallagher & Kennedy’s Business Continuity Response to COVID-19, 3/18/2020

Table of Contents to Business Guidance

Considerations for Board and Shareholder Meetings


Employment & Labor


Financial Distress, Bankruptcy & Creditor’s Rights

Franchising Issues

Government Agencies’ Inspections, Compliance Determinations, and Regulatory Reform in Response to COVID-19 Conditions

Impact on Litigation

Insurance Recovery for Business Losses and Expense

Occupational Safety and Health

Paycheck Protection Program (the “PPP”)

Real Estate


Tax – Federal Developments

Tax – State and Local Developments

Tort Liability for Businesses

Considerations for Board and Shareholder Meetings

Terry Thompson
(602) 530-8515

In-person meetings of shareholders, directors, partners, or other owners or managers may prove difficult to convene in light of governmental restrictions on the occurrence, size, time, or place of gatherings.

  • Under applicable law and governing documents, it may be feasible to implement an alternative such as telephonic or web-based communications or conferences. For example, for business corporations, Arizona Revised Statutes (A.R.S.) § 10-708 permits participation in shareholders’ meetings by remote communication under certain conditions.
  • Statutes and/or governing documents may provide alternative means of meeting in the case of “emergencies.” For example, under A.R.S. § 10-3303 facilitates the ability of the board of directors of a nonprofit corporation to take action during emergencies.
  • Written consents or other means can be used to take action in some instances. For example, in the case of limited liability companies, A.R.S. § 29-3407(D) permits an action requiring the approval of members or managers to be taken without a meeting if the action is approved by the minimum number of members or managers required to approve the action.

Obtaining signatures on legal documents may present logistical problems when people are away from business offices or in places where electronic communication is not available or reliable.

  • A government agency, contract party, or other person may be willing to accept instruments or methods that might facilitate the signing of documents. For example, the Arizona Corporation Commission allows persons to complete most business filings online and to fax or mail filings.
  • Traditional documents such as powers of attorney or proxies might help in consummating a transaction. For example, A.R.S. § 29-3407(D) permits a member of a limited liability company to appoint a proxy or other agent to vote, consent, or otherwise act for the member by signing an appointing record, personally or by the member’s agent.
  • Electronic means of obtaining or affixing signatures can be lawful and acceptable in a particular situation. For example, the Arizona Electronic Transactions Act (A.R.S. §§ 44-7001 et seq.) authorizes the use of electronic records and electronic signatures relating to a transaction.

With the temporary closure of certain governmental offices and private businesses, the obtaining of official certifications or other third-party confirmations might not be practical.

  • To the extent the certification is expected by another party to the transaction, it is possible that the law allows the requirement to be ignored, or the other party might be willing to waive the requirement or to accept delivery of the certificate after the fact. For example, a party might be willing to waive a requirement that a landlord certify that the tenant is not in default under a lease.
  • Often there is an alternative and lawful means of evidencing the matter in issue. For example, instead of having a copy of a limited liability company’s articles of organization certified by the Arizona Corporation Commission, a party might be willing to accept a certificate signed by one of the company’s officers attesting to the organizational documents.
  • A party might be able and willing to accept a previous certification in lieu of a recent certification. For example, a certificate of good standing of a limited liability company from the Arizona Corporation Commission pursuant to A.R.S. § 29-3211 might have been obtained last year in connection with a previous transaction, and a party might be willing to accept that as good evidence of the company’s existence, even though a more recent certificate would be preferable.

Terry Thompson is available to answer questions about Considerations for Board and Shareholder Meetings.


Matt Engle
(602) 530-8285

Force Majeure Clauses

Due to the Coronavirus (COVID-19) pandemic, many businesses are confronting unique and unforeseen circumstances that could either excuse or delay the obligation to perform under existing contracts as a result of the occurrence of a force majeure event. Force majeure is a contractual defense generally allowing a party to postpone, defer, or discontinue performance of its contractual obligations in certain specified circumstances. What constitutes a force majeure event is determined on a case-by-case basis and depends upon the terms of the relevant contract, applicable law, and the relevant facts and circumstances. Concerned business should be analyzing the following:

  • Reviewing and determining whether a contract includes a force majeure provision, including: (i) the specific events and circumstances that qualify for force majeure treatment; and (ii) other relevant terms and conditions in the contract (including governing law, events of default, dispute resolution, etc.).
  • Analyzing whether the performance of any of the parties to the contract will be impracticable or impossible because of COVID-19, as opposed to for a different reason.
  • Ensuring timely compliance with any notice requirements, including the production of documentary support and the specific method of notice.
  • Maintaining communication with the other party regarding on-going inability or ability to perform contractual obligations.
  • Documenting steps taken to mitigate or avoid the impact of COVID-19 on the ability to perform under the contract, as well as all other relevant facts and circumstances.
  • Considering if/when the impact of COVID-19 is no longer an unforeseeable event; did that happen when the World Health Organization declared COVID-19 a pandemic on March 11, 20202?

For businesses that have received a force majeure notice, they should be:

  • Reviewing the notice to determine whether it falls within the scope of the contract’s force majeure provision or applicable law and whether the form and timing of the notice was proper.
  • Determining when and how to respond, including whether to terminate the contract in response to the notice.
  • Considering whether the notice has an impact on any other contracts and whether a copy of the notice should be provided to other parties.
  • Evaluating whether the party claiming force majeure has fulfilled its other obligations under the contract.

Matt Engle is available to answer questions about Contracts and the possibilities of force majeure claims.

Updates to Contracts

International Chamber of Commerce Comments on Force Majeure Clauses

Additional Resources

Employment & Labor

Don Johnsen
(602) 530-8437

What are our basic legal obligations with regard to the prevention of infection in the workplace?

Employers do not have a legal duty to “guarantee” that no one in the workplace will ever be infected with COVID-19.  But you definitely should take reasonable steps to reduce the risk of infection, as recommended by the CDC and OSHA: frequent hand‑washing, sanitizing, and disinfecting of surfaces, and other proper hygiene practices.  And you should follow the CDC guidelines when employees show symptoms of COVID‑19 (see below).

What should we do when an employee actually has symptoms of COVID-19?

When an employee has symptoms (fever, cough, or shortness of breath), you should follow the CDC guidelines: Send the employee home, and don’t let him or her return to work until he or she meets the CDC’s announced criteria for discontinuation of home isolation.

If the employee reports that he or she actually has tested positive for COVID-19, it also is good practice to advise other personnel with whom that employee routinely had contact that “a company employee” has received a positive test result, and that other personnel should be even more conscientious about follow proper infection control practices (frequent hand‑washing, sanitizing, and disinfecting of surfaces), and that they also should closely monitor themselves for any their own wellbeing for any symptoms of COVID‑19.

If an employee has to be absent because of COVID-19, is that paid time off?

Absences that are due to the employee’s own illness, the need to care for a family member who is ill, or the need to stay home with a child whose school has been ordered closed qualify for Paid Sick Time under Arizona’s Proposition 206.  Employees who have PST available, therefore, must be permitted to use it to cover an absence caused by COVID‑19.

After April 2, absences caused by COVID‑19 also may qualify for paid time off under the new Emergency Paid Sick Leave Act.  That law applies to all employers with fewer than 500 employees, and basically mandates that employers provide 80 hours of paid sick time (subject to certain caps on the rate of pay) for various absences caused by COVID‑19.

Absences after April 2 due to an employee’s need to stay home to care for a child whose school has been ordered closed also will qualify for time off under the new Emergency FMLA Leave Expansion Act.  That new law similarly applies to all employers with fewer than 500 employees, and mandates up to 12 weeks of paid leave (again, subject to certain caps on the rate of pay) for employees who need to stay home due to a school closure.

Keep in mind that an employee who needs to be at home for one reason or another might still be able to work remotely.  If remote work is feasible and can be productive in any given case, the employee would not be “absent,” and therefore would not need or qualify for any of these types of paid time off.

We may need to implement some layoffs to deal with the economic crisis. What are the rules concerning reductions-in-force, furloughs, layoffs, etc.?

Non‑union employers with 100 or more workers may need to consider whether a particular reduction or layoff might be subject to the federal plant closing law (the “WARN Act”) or to any state‑law version of the WARN Act.

But in the absence of WARN Act or similar coverage, non‑union owners and managers have significant discretion to exercise their best business judgment to structure workplace adjustments, reductions, and layoffs in the manner they feel is best for the operation.  Employers can use whatever business-related criteria they prefer to select personnel for a reduction or layoff: seniority, salary level, scores on most recent performance reviews, production levels, preservation of relationships, for example, and/or any combination thereof.  Employers also can weight those criteria however they wish, in the exercise of their own business judgment.  And employers are not legally required to provide workers with any specific “recall” or “rehire” rights.

Don Johnsen is available to answer questions about Employment & Labor issues.

Updates to Employment & Labor

Preparing to Re-Open the Workplace; Critical Issues for Arizona Employers

G&K Employment Law Alerts


Chris Leason
(602) 530-8059

EPA Delays TSCA Chemical Data Reporting

EPA’s extension of the 2020 CDR submission period will allow manufacturers, already stressed in the current COVID-19 business environment, to prioritize their environmental compliance and other obligations while attempting to navigate COVID-19 implications.

Although not directly related to the COVID-19 pandemic, on March 17, 2020, the U.S. Environmental Protection Agency (EPA or Agency) announced an extension of the submission deadline for 2020 Chemical Data Reporting (CDR) pursuant to the Toxic Substances Control Act (TSCA).  The new reporting period is June 1, 2020 – November 30, 2020 (extended from June 1, 2020 – September 30, 2020).

What is the TSCA CDR?

The TSCA CDR is a reporting program administered by EPA wherein manufacturers (including importers) of chemical substances identified on the TSCA Inventory must report information to EPA on a four-year cycle (the last submission period was in 2016, based on 2012-2015 data).

What information must be reported?

EPA requires manufacturers to report information on their production of chemical substances, as well as information on the down-stream processing and use of the substances.  The information reported for each substance includes the (a) company and plant site information, (b) chemical name and Chemical Abstracts Service number, (c) number of workers exposed to the substance during its manufacture, (d) physical form of the substance, (e) down-stream uses of the substance, (f) number of down-stream sites using the substance, (g) types of down-stream industrial sectors using the substance, (h) number of workers exposed to the substance in the down-stream operations, and (i) consumer and commercial uses of the substance (including whether the substance is used in any consumer products intended for use by children).

Are there exemptions from reporting?

Yes, EPA’s CDR regulations identify both exemptions and exclusions from reporting.  However, a manufacturer should thoroughly evaluate the applicability of an exemption/exclusion and document its conclusion in the event of an EPA inspection.

How is information reported to EPA?

Information must be electronically submitted to EPA using the Agency’s Central Data Exchange (CDX).

Why did EPA extend the 2020 CDR submission period?

EPA extended the 2020 CDR submission period because of recent changes to the CDR regulations contained in a March 17, 2020 final rule.  The final rule, which is effective for purposes of 2020 CDR reports, modifies a number of reporting data elements.

Chris Leason is available to answer questions about 2020 TSCA CDR obligations and Dal Moellenberg and Chris Leason are available to answer Environmental Law issues.

Updates to Environmental

OMB Issues Memorandum to Federal Agencies Regarding “Best Practices” in Enforcement Actions and Adjudication

EPA Sets Termination Date of August 31,2020, for its COVID-19 Enforcement Discretion Policy

EPA’s COVID-19 Policy Challenged by Lawsuits

While many businesses probably welcomed the flexibility offered by the U.S. Environmental Protection Agency (EPA) in a March 26, 2020 policy statement, several non-governmental entities and states disagreed, according to a motion for summary judgment and a lawsuit filed in the U.S. District Court for the Southern District of New York, State of New York et al., v. EPA.  On April 29, 2020, a group of non-governmental entities filed a motion for summary judgment, requesting that EPA file an emergency rulemaking, which would obligate facilities that intend to invoke the COVID-19 defense for non-compliance to formally notify EPA and for EPA to make that information available to the public.  Then, on May 13, 2020, the State of New York, along with several other states, filed a complaint alleging that EPA has exceeded its authority by issuing the policy, which gives “regulated parties free rein to self-determine when compliance with federal environmental laws is not practical because of COVID-19” and “makes it optional for parties to report that noncompliance to EPA, and to state and local agencies.”

The lawsuits challenge EPA’s March 26, 2020 temporary guidance regarding “EPA’s enforcement of environmental legal obligations” during the COVID-19 pandemic, which generally applies to noncompliance that occurs at time that the policy is in effect, and that results from the COVID-19 pandemic.  The policy only covers situations that may occur as a result of the COVID-19 pandemic and applies generally to those making good faith efforts to comply with obligations.  EPA sets forth several items that regulated entities should track and submit if compliance is not “reasonably practicable” due to COVID-19 related issues.

Following in EPA’s footsteps, both the Arizona Department of Environmental Quality (ADEQ) and the New Mexico Environmental Department (NMED), have provided guidance policies that rely heavily on EPA’s temporary policy. ADEQ issued one guidance document that summarizes several issues (following EPA’s policy) and discusses how ADEQ will implement any compliance assistance. NMED issued several policy guidance documents for different categories of environmental businesses, including Public Drinking Water Systems and Utility Operators, Solid Waste Facilities, Wastewater and Treated Effluent Facilities, and the Oil and Gas Industry (air quality compliance issues).

For a more in depth review of the EPA policy, ADEQ and NMED guidance, and a summary of the basis for the challenges: READ MORE…

Additional Resources

Financial Distress, Bankruptcy & Creditors’ Rights

Dale Schian
(602) 530-8140

COVID-19 will affect both prosperous and already distressed businesses. Bankruptcy, moratoriums, and other tools implemented to ameliorate the disruption are initially likely to apply to all companies seeking relief. It will be necessary to understand modifications of creditor rights as companies receive an opportunity to see if they can successfully operate in a post-COVID-19 economy.

There will be indirect consequences experienced by individuals and companies as their employees, customers, borrowers, and others struggle to meet their commitments.  It will be necessary to understand how defaults or delays in performance are best addressed and which transactions are no longer possible or prudent.

Below are some initial, practical steps businesses can take in evaluating their current situation and determining how to proceed in the future:

  • Realistically assess your situation.
  • Communicate with those you have relationships with, whether contractual or professional.
  • Understand that we are in this together and it will be much harder to get through it alone.
  • In light of the current uncertainty, it is unrealistic to expect hard commitments. Communicate and agree to set a time to talk again.
  • Do not look for a band aid or stop-gap solution until you understand what happens next.
  • Beware of extraordinary solutions or transactions. Consider those carefully with your advisors.
  • Expect additional delays in performance and remedies.
  • Understand that we will get through this.

Dale Schian is available to answer questions about Financial Distress, Bankruptcy & Creditors’ Rights.

Updates to Financial Distress, Bankruptcy & Creditors Rights

Arizona Bankruptcy Court Rulings Facilitate PPP Loans for Business in Chapter 11

CARES Act Expands Bankruptcy Relief for Small Businesses

Additional Resources

Franchising Issues

Josh Becker
(602) 530-8465

COVID-19 Impact on Franchise Disclosure Documents

The North American Securities Administrators Association (“NASAA”), the national association of state franchise regulators, issued new guidance on Item 19 financial performance representations that several states are implementing immediately. The newly published guidelines (See Additional Resources) require certain franchisors who include historical financial results in an Item 19 financial performance representation to amend already filed Franchise Disclosure Documents that should consist of up-to-date 2020 results. These guidelines will ensure that prospective franchise buyers are aware of the impact that COVID-19 has had on those businesses and reasonably reflect current economic conditions.

In determining whether a franchisor is obligated to file an amended FDD, the franchisor should consider the following factors:

  • Whether the COVID-19 pandemic has significantly impacted the franchise business;
  • The type of data the franchisor includes in the FPR;
  • The reasonable inferences a prospective franchisee can draw from the FPR:
  • When the franchisor estimates a prospective franchisee can expect to open for business after entering into a franchise agreement;
  • Whether and how the franchisor adapts the franchise business to account for current market conditions resulting from the COVID-19 pandemic; and
  • Whether and how the franchisor adapts the franchise business to account for future market conditions resulting from the COVID-19 pandemic.

A franchisor that included actual historical sales and profits data in their 2020 FDD and whose business has been impacted by the pandemic should update their FDD to include disclosures concerning that impact. NASAA did not provide specific guidelines on the required amendments. Still, the State of Washington, which has implemented similar requirements already is requiring franchisors to acknowledge that the virus has negatively impacted their business and to include sales results for the first part of 2020 in their financial performance representation. We suspect that other states will accept similar disclosures. The sale of franchises without these disclosures might increase risk because franchisees may later claim that they would not have purchased a franchise if they knew about the impact that COVID-19 had on the franchised business.

Josh Becker is available to answer any questions about Franchising issues.

Additional Resources

Government Agencies’ Inspections, Compliance Determinations, and Regulatory Reform in Response to COVID-19 Conditions

Stan Curry
(602) 530-8222

New Federal Order Combats Economic Impact of COVID-19 through Regulatory Reform

On May 19th, President Trump signed Executive Order 13924 with the goal of combating “the economic consequences of COVID-19 with the same vigor and resourcefulness” as the health and safety fight against the outbreak.  To the extent allowable under federal statutes, EO 13924 seeks to stimulate economic growth and job creation through the following directives to federal agencies:

  • Use the same emergency authorities already invoked in response to COVID-19 to now address the economic fallout from the outbreak;
  • Identify regulations that inhibit economic growth and consider how to temporarily or permanently suspend them through waiver, enforcement discretion, enforceable agreements to extend deadlines, or rulemakings to rescind or modify them;
  • Accelerate procedures for a regulated person to get a pre-enforcement ruling on whether proposed conduct in response to the outbreak (including responses to economic stimulus legislation and regulations) is permissible;
  • Consider issuing policies of enforcement discretion regarding those who have attempted in “reasonable good faith” to comply with applicable statutory and regulatory standards, a pre-enforcement ruling, or CDC’s COVID-19 guidance and other similar guidance;
  • Consider ensuring fairness in enforcement proceedings by revising procedures to ensure the government has the burden of proof, enforcement is prompt and fair, adjudicators are not the same people as the enforcers, the government discloses exculpatory evidence in its possession, an opportunity to respond is offered before liability is imposed, and other reforms; and
  • Review the regulatory standards temporarily suspended, waived, etc. during the COVID-19 health emergency and make a written report to OMB and others whether making them permanent would promote economic recovery.

Most of these directives require future agency action to take effect, and time will tell how many bear fruit.  A company with the means to do so might help bring some of these to pass through direct communications with an agency or through a trade association.  However, the directives identified in the second, third, and fourth bullets might be of more immediate benefit to regulated persons and entities facing difficult decisions or immediate compliance concerns.

Stan Curry is available to answer questions regarding Arizona state and county inspections, permitting, and compliance enforcement issues for businesses.

Updates to Government Agencies’ Inspections, Compliance Determinations, and Regulatory Reform in Response to COVID-19 Conditions

A Company’s Rights after the Inspection

A Company’s Rights during an Inspection

Coming Soon after COVID-19:  When the State Reopens and the Regulators Return

Impact on Litigation

Mike Ross
(602) 530-8498

COVID-19 continues to create significant uncertainty for companies and individuals with respect to business and contractual relationships.  The impact of the pandemic on current and future litigation is dynamic, changing on a daily basis, but some of the key issues businesses are facing include:

  • What, if any, legal duties are on “hold” during the pandemic?
  • Can my business still demand that other people or companies honor contracts?
  • If not in the courtroom, are there practical, efficient ways for parties to resolve disputes?
  • If we have no choice but to file a lawsuit, or if we are sued, are the courts still open and available?
  • Are there quick, available forums for real legal emergencies?

The Federal and State courts throughout Arizona continue to balance the ongoing health risks with the necessity to remain operational.  Courts have adjusted aspects of the process to minimize any potential delay while still ensuring litigants are not prejudiced in the enforcement and protection of their legal rights.  Some elements of the civil litigation process have been halted in light of the social distancing guidelines.

Here are some key ways in which COVID-19 has impacted Federal and Arizona State Court litigation and some of the ways in which these Courts are responding:

  • The United States District Court for the District of Arizona postponed all civil jury trials scheduled to begin on or before June 1, 2020, until further notice.  District of Arizona Judges, at their discretion, may postpone trial-specific deadlines for civil cases and will conduct proceedings remotely where feasible.  New filings are still permitted and cases are, subject to the Judges’ discretion, continuing to move forward.
  • As with the U.S. District Court, new filings are still permitted and cases are, subject to the Judge’s discretion, still moving forward in the Superior Courts for the counties in Arizona.  In the Superior Courts, no new juries will be empaneled through June 1, 2020.  Further, the Arizona Supreme Court ordered all in-court proceedings to be avoided as much as possible.  Like the federal courts, Superior Court Judges have wide latitude to determine how cases should proceed.
  • In light of the limitations on in-person proceedings, Judges are scheduling and conducting appearances by video and telephone.   Despite that flexibility, some matters are being postponed or rescheduled to later dates.
  • Parties to ongoing litigation are increasingly utilizing electronic means to conduct discovery.  For example, depositions are increasingly being conducted via videoconferencing on platforms such as Zoom.
  • Courts have adopted procedures to handle requests for emergency relief, like temporary restraining orders or other injunctions.  To the extent litigants need emergency relief, the forums are available – although Judges are understandably reassessing their definition of “emergency.”
  • Parties and counsel continue to use alternative dispute resolution (“ADR”) methods including private arbitration and mediation to resolve their disputes outside of the courtroom.  As with the Courts, arbitrators and mediators are increasingly willing to use video conferences in lieu of in-person appearances.

Mike Ross is available to answer questions about the Impact on Litigation for businesses in litigation or contemplating litigation.

Updates to Impact on Litigation

Maricopa County Superior Court Establishes Late Case Fair Limits Proceeding

Maricopa County Superior Court Guidelines to Reopen

Arizona Supreme Court Authorizes Limited Court Operations

Additional Resources

Insurance Recovery for Business Losses and Expense

Community Support & Business Response Legal Team

Jennifer Cranston
(602) 530-8191

Many businesses are and will continue to be financially impacted by COVID-19. Depending on the circumstances and terms of the policy, insurance coverage may be available to defray some of the losses and additional expenses incurred as a result of the virus outbreak.  Below are steps businesses can take to evaluate their potential insurance coverage.

  • Gather all policies.
    • If you don’t have complete or current copies, contact your agent/broker or the insurance companies directly.
    • Don’t be discouraged by warnings from your agent/broker or carrier indicating that coverage is not available; it’s important to check for yourself.
  • Review all polices carefully.
    • Be sure to review all portions of the policies, especially endorsements which can reduce or expand the scope of your coverage.
    • Note any provisions that appear to apply to your situation as well as provisions that confuse or surprise you.
    • For many businesses, the most likely candidates for coverage of business losses are (1) business owner policies and (2) property damage policies with business interruption clauses. Key provisions to review in these policies include:
      • Language requiring “direct” or “actual” loss or damage to property: Such requirements are found in standard form policies and are already being relied upon by carriers to reject business loss claims. However, not all policies use the standard forms and, for those that do, legal arguments are being developed based on the theory that – for some industries – exposure of property to the virus meets the actual physical damage requirement.
      • Exclusions for viruses, contagions, or pandemics: Some standard form policies contain these kinds of exclusions. If clearly worded and easily identifiable, these exclusions are typically enforceable to preclude coverage, which is another reason why reading policies in their entirety is so critical. Also, the absence of such exclusions in an otherwise standardized policy may support a claim for coverage.
      • Provisions or endorsements that add additional coverage for “extra expense” or “civil authority”: These provisions may be broad enough to provide relief if your business is forced to shut down due to the virus. They may include prerequisites (such as a requirement that the suspension is caused by property damage or is necessary to provide civil authorities with access) as well as sub-limits to your coverage (limiting the recovery available to a specific dollar amount or cap on the number of days/weeks of suspension).
  • Businesses in specialized industries may have additional policies or endorsements addressing unique businesses losses and needs during emergency and crisis situations, which is why we recommend gathering and reviewing all policies.
  • Contact your agent/broker or carrier:
    • Once you’ve reviewed your policies, contact your agent/broker or the carrier about the specific provisions you believe provide coverage.
    • Be prepared to provide specific examples of your loss (including lost income and additional expenses incurred or expected to be incurred).
    • Make sure you provide notice of your claim using the procedures outlined in the policy or policies (typically found in a portion of the policy describing “conditions” or duties/obligations in the event of a loss).

Jennifer Cranston is available to answer questions about coverage and communicating with carriers regarding your business insurance policies.

Helpful Articles

Occupational Safety and Health

Chris Leason
(602) 530-8059

OSHA Issues COVID-19 Interim Enforcement Response Plan

On April 13, 2020, the U.S. Occupational Safety and Health Administration (OSHA) issued an Interim Enforcement Response Plan (the “IRP”) regarding how OSHA will investigate COVID-19-related complaints, referrals, and severe illness reports.  The IRP includes specific inspection and citation guidance for potentially applicable standards, which describe when to exercise enforcement discretion.

What does the IRP say about investigating violations of OSHA standards as a result of the COVID-19 pandemic?

OSHA states that its regional offices should investigate complaints, referrals, and employer-reported fatalities and hospitalizations to identify potentially hazardous occupational exposures and to ensure that employers take prompt actions to mitigate hazards and protect employees.  According to OSHA, complaints received during the initial months of the COVID-19 outbreak describe concerns related to lack of personal protective equipment (PPE), such as respirators, gloves, and gowns.  In addition, OSHA received complaints expressing concern about a lack of training on appropriate standards and about possible COVID-19 illnesses in the workplace.

Will OSHA inspect workplaces under the IRP?

It depends.  Prior to any inspection regarding COVID-19-related alleged violations, each OSHA Area Director (AD) should evaluate the risk level of exposure to COVID-19 in the workplace, and prioritize resources in coordination with the OSHA regional offices to determine if an on-site inspection is necessary.  If the AD determines an on-site inspection is warranted, the OSHA compliance officer assigned to the matter must carefully evaluate potential hazards and limit any possible exposures.  For such inspections, the IRP requires the AD to maximize the use of electronic means of communication (e.g., remote video surveillance, phone interviews, email correspondences, facsimile and email transmittals of documents, and video conferences).

Whenever an OSHA compliance officer identifies a workplace with the potential for high-risk exposure to COVID-19, and determines that an inspection is warranted under the IRP, the officer should immediately coordinate with his supervisors and regional office, and, if necessary, contact the Office of Occupational Medicine and Nursing (OOMN).  OOMN may then serve as a liaison with relevant public health authorities, and can facilitate Medical Access Orders to obtain worker medical records from employers and healthcare providers.

COVID-19 inspections will be treated as unique cases.  This means that before a citation is issued, the OSHA Directorate of Enforcement Programs must be notified of all proposed citations and OSHA notices that relate to a COVID-19 exposure.  In addition, states with authorized programs, such as Arizona, should report any COVID-19 inspections to their OSHA regional office.

How does OSHA handle a workplace with a shortage of PPE?

In view of the shortages and limitations of PPE, OSHA provides specific enforcement discretion for inabilities to comply with the OSHA Respiratory Protection Standard, 29 C.F.R. § 1910.134, during the COVID-19 outbreak.  At a minimum, employers should make a “good-faith” effort to provide and ensure workers use the most appropriate respiratory protection available for exposures to COVID-19.  The IRP sets forth how employers can meet the “good faith” requirement.

Chris Leason is available to answer questions about OSHA’s Safety and Health Law issues.

Updates to Occupational Safety and Health

OSHA Issues Enforcement Discretion Memorandum Regarding Violations Due to COVID-19

Additional Resources

Paycheck Protection Program (the “PPP”)

Matt Engle
(602) 530-8285

In response to the COVID-19 crisis, the PPP authorizes up to $349 billion in forgivable loans with a fixed 1% interest rate to small businesses to assist them to continue to pay their employees during this challenging time. These loans may be used to pay payroll costs of up to $100,000 on an annualized basis for each employee. The payment on the loans can be deferred for six (6) months, and businesses may be eligible for complete loan forgiveness if the funds are used only for the following purposes in the first 8 weeks after getting the loan:

  • Payroll costs, including benefits;
  • Interest on mortgage obligations, incurred before February 15, 2020;
  • Rent, under lease agreements in force before February 15, 2020; and
  • Utilities, for which service began before February 15, 2020.

The loan forgiveness is only available to businesses that maintain their staff and payroll—your forgiveness will be reduced if you decrease your full-time employee headcount or decrease compensation by more than 25% for any employee that made less than $100,000 annualized in 2019; but, if you restore your full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020, eligibility for forgiveness can also be restored. Businesses that receive loans may be eligible for a portion of the loan to be forgiven if used for other costs.

If a business applies for and receives a loan under the PPP, it will not be eligible to defer the employer’s 6.2% of social security taxes nor will it be eligible for the 50% credit on the first $10,000 of wages paid to employees.

See Tax Developments guidance for a more detailed discussion of this deferral and credit.

Applications for the PPP are available starting April 3, 2020 for payroll and other expenses for small businesses and sole proprietors. Independent contractors and self-employed may apply starting on April 10, 2020. The typical requirement that an applicant for an SBA loan seek some or all of the loan funds from other sources are waived under the PPP.

All businesses (including nonprofits) with 500 or fewer employees can apply. Larger employers can apply if they meet applicable SBA employee-based size standards for those industries.

The application for the PPP (available at the link below) requires certain documentation and certifications. Gallagher & Kennedy’s attorneys can help answer questions you may have about the application and provide guidance on your business’s eligibility and requirements.

Matt Engle is available to answer questions about the Paycheck Protection Program.

Updates to Payroll Protection Program (the “PPP”)

SBA Releases Revised PPP Loan Forgiveness Applications, Including New Streamlined EZ Application; Deadline
for New Loan Applications Fast Approaching

On June 17, 2020, the U.S. Small Business Administration released a revised loan forgiveness application for the Paycheck Protection Program, along with a new EZ version of the forgiveness application that requires fewer calculations and less documentation.  The EZ application applies to borrowers that:

  • Are self-employed and have no employees; or
  • Did not reduce the salaries or wages of their employees by more than 25%, and did not reduce the number or hours of their employees; or
  • Experienced reductions in business activity as a result of health directives related to COVID-19, and did not reduce the salaries or wages of their employees by more than 25%.

Both applications give borrowers the option of using the original 8-week covered period (if their loan was made before June 5, 2020) or an extended 24-week covered period. Both applications are available on the SBA’s website.

The application deadline to obtain a PPP loan remains June 30, 2020, so business owners who might want to apply for funds need to act fast. The SBA reported that, as of June 10, 2020, more than 4.5 million PPP loans have been approved, so the program remains very popular.

President Trump Signs the Paycheck Protection Program Flexibility Act

On June 5, 2020, President Trump signed into law the Paycheck Protection Program Flexibility Act (“PPPFA”), which makes several important changes to the Paycheck Protection Program designed to address concerns expressed by the small business community. The key features of the PPPFA include:

  1. Extending the time period to use PPP funds from 8 weeks to 24 weeks. The PPP required businesses to spend funds in the 8 week period starting from the date funds were received.  For businesses that were shut down, this meant spending funds when, perhaps, it would have been more advantageous to hold the funds and spend them after reopening for uses such as purchasing inventory.  The PPPFA addresses this by extending the time period to spend the loan funds to 24 weeks.  Businesses will still need to spend the funds on payroll and other authorized expenses, but they now have until the end of 2020 to do so.  The PPPFA, however, does not require businesses to wait for 24 weeks to apply for forgiveness – they can still do so after 8 weeks if they choose.
  2. Extending the maturity date of PPP loans from two years to a minimum of five years.
  3. Reducing the percentage of PPP loan funds that must be spent on payroll from 75% down to 60%, thus increasing the amount of funds available for other expenses up to 40%.  The list of expenses eligible for forgiveness remains unchanged, and still includes rent, mortgage payments, utilities, and interest on loans.
  4. Changing the date by which employees who were laid off between February 15 to April 26, 2020, must be rehired from June 30 to December 31, 2020.  This change provides companies significantly more time to ramp up their businesses.
  5. Easing rehire requirements.  Because the PPP was intended to preserve the number of employees on payroll as were used to calculate the amount of the PPP loan, it required businesses to rehire the same number of full time or full-time equivalent employees by June 30, 2020, with the only exception being if an employer could document an attempt to rehire an employee who rejected the offer.  The PPPFA makes two main changes to this requirement.  First, it extends the rehire date to December 31, 2020, and second, it adds additional exceptions for a reduced headcount.  Under the PPPFA, a borrower can still receive forgiveness on payroll amounts if it can document (a) that it was unable to rehire an individual who was an employee on or before February 15, 2020, (b) an inability to hire qualified employees for unfilled positions on or before December 31, 2020, or (c) an inability to restore its operations to comparable levels of business activity due to social distancing, sanitation requirements, or customer safety needs established by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration during the period from March 1, 2020, to December 31, 2020.

While questions will certainly arise as the SBA implements these changes, the PPPFA should come as a welcome supplement to the very popular PPP for business owners as they transition to reopening following the extraordinary COVID-19 shutdown.

SBA Issues Additional Guidance Regarding PPP Certifications

On May 13, 2020, the Small Business Administration extended the date from May 14, 2020, to May 18, 2020 by which borrowers that have received PPP funds may repay the loan and as a result be deemed to have made the required certification concerning the necessity of the loan request in good faith.

Also on May 13, 2020, the SBA issued additional guidance regarding how it will review borrowers’ required good faith certifications of the necessity of a PPP loan request.  Under the new guidance, borrowers that received PPP loans of less than $2 million will be deemed to have made the required certification in good faith.  The SBA felt that borrowers with loans below this threshold are generally less likely to have had access to adequate sources of liquidity in the current economic environment than borrowers that obtained larger loans.  The new guidance provides some well-needed certainty to smaller borrowers.  As previously announced, the SBA will review loans in excess of $2 million prior to approving forgiveness of some or all of the loan proceeds.  However, the SBA made clear that borrowers with loans greater than $2 million may still have an adequate basis for making the required good-faith certification based on their individual circumstances.

The SBA also announced that if it determines in the course of its review that a borrower lacked an adequate basis for the required certification concerning the necessity of the loan request, the SBA will seek repayment of the outstanding loan balance and will inform the lender that the borrower is not eligible for loan forgiveness.  If the borrower repays the loan after receiving this notification, the SBA will not pursue administrative enforcement or referrals to other agencies based.  This new guidance appears to reflect a shift in SBA’s treatment of the certification that greatly reduces the risk to borrowers, especially in terms of fines and other potential penalties.

Notice 2020-32: Deductibility of Expenses When Loan is Forgiven Under the Paycheck Protection Program

On April 30, 2020, the IRS issued Notice 2020-32 providing guidance regarding the deductibility for federal income tax purposes of certain otherwise deductible expenses incurred in a taxpayer’s trade or business when the taxpayer receives a “covered loan” pursuant to the Paycheck Protection Program (PPP).

Notice 2020-32 clarifies that no deduction is allowed for an expense that is otherwise deductible if the payment of the expense results in forgiveness of a covered loan pursuant to provisions of the CARES Act and the income associated with the forgiveness is excluded from gross income under the CARES Act.

Treasury Announces Audits of PPP Loans in Excess of $2,000,000

Treasury Secretary Steven Mnuchin recently stated that all PPP loans in excess of $2 million will be audited by the U.S. Small Business Administration prior to being forgiven, in order to ensure they were justified and that loan proceeds were used for proper purposes. Although details on procedures for loan forgiveness are still forthcoming, Mnuchin stated to the Wall Street Journal in an April 28 report that “[o]ne of the things that will be required is you will have to show a payroll report that you actually spent the money on payroll and other items that qualify for forgiveness.”

Reminder: The Payroll Tax Credit May be Available to Businesses if the PPP is Not

If your business is not eligible for a PPP loan because it does not qualify as a “small business” or if your business was unable to obtain a PPP loan, don’t forget about the employee retention payroll tax credit, which can provide a credit of up to $5,000 per employee.  For more details on the employee retention payroll tax credit, see the Tax – Federal Developments summary on this page.

Guidance from the SBA on PPP Funds and Additional Funding Appropriated

On Thursday April 23, 2020, the U.S. Small Business Administration issued guidance in response to outcry following revelations that some businesses owned by large public companies and institutions had applied for and in some cases received loans under the Paycheck Protection Program, which is intended to principally support small businesses.  A new entry to the SBA’s ongoing Frequently Asked Questions guidance clarifies that large companies will have to prove they actually need the funds, and that doing so might prove difficult.  Specifically, before submitting a PPP application, borrowers should review carefully the required certification that current economic uncertainty makes the loan necessary to support the ongoing operations of the borrower.  This certification must be made in good faith, taking into account the borrower’s current business activity and ability to access other sources of liquidity sufficient to support its ongoing operations in a manner that is not significantly detrimental to the business.  The SBA notes that it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith.  Borrowers that have already received funds and are concerned that they might not have been able to make this certification in good faith can return the funds by May 7 without penalty.

On Friday April 24, 2020, President Trump signed legislation providing an additional $484 billion in funds to bolster the federal government’s efforts to combat the COVID-19 pandemic.  The bill adds another $310 billion in appropriations to the popular Paycheck Protection Program, $60 billion of which will be set aside for issuance of PPP loans by community development lenders, credit unions, and other smaller lenders.  Funds initially appropriated for the PPP had been exhausted, so these additional funds will allow more businesses to obtain loans.  The legislation also includes $75 billion for hospitals, $25 billion to support testing efforts, and $60 billion for emergency disaster loans and grants.

Initial Funding for the PPP is Exhausted

As of April 14, the U.S. Small Business Administration has approved approximately 1,680,000 loans originated by 4,700 lenders nationwide.  On Thursday morning, however, the SBA announced that the $349 billion initially appropriated to fund PPP loans had been exhausted. Due to strong demand, the Treasury Department and lawmakers continue to work on adding $250 billion to the PPP loan program. As of now, the SBA is no longer accepting and processing applications for new PPP loans, although some banks continue to accept applications with the expectation that additional funds will be made available.

Increased Funding for the PPP

Interest in the PPP remains very strong. Recently, the U.S. Small Business Administration reported that banks have already approved more than 725,000 loans totaling over $205 billion from the initial $349 billion appropriated for PPP loans. Due to continuing demand, the Treasury Department and lawmakers are working on adding $250 billion to PPP loan program.

Certain lenders have instituted requirements beyond those set forth in the PPP legislation itself.  For example, some lenders require a potential borrower to have a pre-existing lending relationship with the lender. Following public outcry, at least one major lender recently changed this requirement to expand the potential applicant pool to include customers with any banking relationship and not just current customers with a pre-existing lending relationship.

We continue to work with businesses to evaluate whether they qualify and should apply for a PPP loan. For example, there was some initial confusion as to whether franchise businesses are eligible for the PPP. However, the SBA has made clear that franchisees are eligible and should apply for a PPP loan, as are independent contractors, sole-proprietors, and certain self-employed individuals.

Gallagher & Kennedy is also assisting clients in determining what expenses qualify as reimbursable “payroll costs” under the PPP. In general, payroll costs include salaries, wages, commissions, and similar compensation payments; payments for vacation, and parental, family, medical, and sick leave; payments required for group health care benefits such as insurance premiums; payments for retirement benefits; and payments of state and local tax on such compensation payments. Nevertheless, certain questions remain as to the practical implementation for business owners, such as whether it is advisable for businesses to open a new bank account solely for the PPP funds in order to better track the use of such funds.

Additionally, the SBA published extensive responses to FAQs on April 14, 2020. See Additional Resources below.

We continue to stay abreast of the situation and are working with clients with the PPP, the CARES Act, and the tax consequences and other legal issues relating to COVID-19 and its impact on businesses

Businesses and Banks Struggle as PPP Rolls Out

Applications became available on Friday April 3, 2020, and already hundreds of thousands have been submitted. As lenders struggle to handle the deluge of applications, certain bottlenecks have arisen which lenders are struggling to address.  In one case, a lender operating under a cap on its lending base of $10 billion has already reached its limit.  Other questions have arisen as to whether a business that is currently is bankruptcy proceedings is eligible for the relief programs. We are constantly monitoring the situation to update our guidance to businesses.

Additional Resources

Real Estate

COVID-19 Business Response Team

Jim Connor
(602) 530-8524

For many aspects of a real estate transaction, a pandemic, a public emergency, and perhaps (if applicable) a “stay in shelter” order, may rise to the level of “force majeure” or act of God, which in turn allows for the excuse, delay, extension or waiver of performance. Where the performance by a party to a contract is rendered impossible, or materially and adversely affected, by unforeseeable factors, then under the principles of force majeure that party may be excused.

In assessing whether an event or condition would qualify for such treatment under the concept of force majeure, often the “foreseeability” of the event is a significant factor. At its essence, a force majeure clause is an attempt to recognize that some risks are not reasonably foreseeable, and therefore, no single party should suffer the resulting consequences and losses.

COVID-19 has created significant uncertainty in the real estate industry, and we are currently sorting through numerous issues including the following:

  • How might a pandemic, or a resulting governmental mandate, impact a party to a real estate transaction?
  • Would tenants or borrowers be excused from prompt satisfaction of payment obligations? Or of non-payment obligations?
  • If a purchaser is required to fund an acquisition, and is informed that due to the turmoil in the credit markets the lender cannot perform when required, what is the status of the transaction and what might be the remedies?
  • How are contract provisions interpreted, or in absence of an express contract provision, how is a pandemic to be addressed?
  • Would the economic loss be subject to insurance coverage, including under business interruption insurance?
  • How would a pandemic alter the standard of care, for businesses conducting a retail business?
  • Is there a reasonable, mutually acceptable solution to the situation, where all parties can absorb some of the impact?
  • Is there a requirement – whether express or implied – of prompt notification to the other party in the event of a materially adverse condition?

Jim Connor is available to answer questions about the impact of the current business climate on commercial and residential Real Estate.

Updates to Real Estate

City of Phoenix Extends Several Permit Deadlines Due to COVID-19

By action taken on May 20, 2020, the City Council for the City of Phoenix extended several deadlines which apply in the plan review and development process.  Overall, the City is being very sensitive to the impact of the COVID-19 situation on the development process.  The City has created a “Service Model” with links and guidelines to assist developers.  See:

As a general rule, non-vested entitlement approvals, which if not acted upon within the time frames provided in the applicable development ordinance (by paying requisite fees, submitting follow up materials, or otherwise pursuing the development effort), will lapse.  If an approval lapses, for example, a developer may be required to commence the process from the beginning, thus wasting the time and investment incurred to such point.

In general, with a recognition that developers may need additional time to complete certain entitlement processes, including when permits are required to be issued, the time periods affecting preliminary plats, preliminary development review, building and civil plan reviews and/or permits, have been extended by 12 months.  Further, certain time limits for planning schedules for sign permits and zoning adjustment matters have also been addressed.  For specific time extensions, see Additional Resources below.

We would expect other Arizona municipalities to either provide such extensions, or alternatively, to be receptive to grant specific extensions upon request.

We encourage developers to be proactive to avoid any risk of having an entitlement approval lapse, particularly if the present circumstances have resulted in unforeseen delays.

Issues When Considering Lease Modifications in a COVID-19 Business Environment

In this current environment, many tenants are seeking relief on rent and other monetary obligations under leases.  Landlords are weighing the alternatives:  negotiating short term relief versus pursuing eviction and other enforcement action, retaking possession, and then marketing and re-leasing the recovered, vacant premises. There are several matters to be considered by both sides in structuring any short term lease modification, and any modification should be written by all parties to a lease, including guarantors.  Factors to consider include:

  1. Should the relief be an abatement or deferral?  Should it involve only the “base” rent, or extend as well to the common area maintenance (CAM), operating expenses and/or other charges under the lease?  How long should the relief extend, and if characterized as a deferral, over what time period should the repayment occur?
  2. As noted in Governor Ducey’s Executive Order 2020-21, which addresses leases with small businesses and temporarily suspends (presently, through May 31, 2020) lease eviction actions, any tenant receiving government funded relief should apply at least a portion of such relief to any rent obligations then due.  (Note:  This EO also encourages the parties to communicate and attempt to resolve issues and the difficult circumstances.)
  3. Should the amount deferred be characterized as a credit obligation of the tenant or merely as additional “rent” payments due over time during the remaining term of the lease?  Should the amount deferred or abated be due (i.e., accelerated) in the event of a default by the tenant?
  4. Does the landlord have any restrictions or impediments to modify a lease, under the terms of any mortgage loan encumbering the landlord’s real property?
  5. Finally, if a lease termination is recognized by the parties as a mutually better arrangement, landlords need to be careful in the drafting of such an agreement in order to avoid a characterization of the termination as a fraudulent conveyance (should the tenant file for bankruptcy protection following the termination), leaving the landlord potentially liable for alleged “market value” of the lease (i.e., for the then remaining term of the lease).

Additional Resources


COVID-19 Business Response Team

Steve Boatwright
(602) 530-8301

Raising Capital with COVID‑19 As a Disclosure Requirement

Securities laws require disclosures of material factors that may impact among other things business operations and financial results. Disclosures are both of existing conditions and prospective impact of macroeconomic events or so called acts of God. Clients raising capital will need to consider how COVID‑19 could impact sales, result in layoffs, create supply issues if components need to be shipped from China or Italy and related logistics of reduced transport options with flight curtailments, consider whether key employees are not able to work due to illness from COVID‑19, and many other factors specific to their business.

For example, a medical facility meant to be a surgical center may need disclosure as it may be repurposed for COVID‑19 patients.

Disclosures need to be in private offering documents and public securities reports both in the form of risk factors and the narrative on the business itself. They may even be in the management discussion impacting liquidity particularly if the client has a blown covenant with a lender. There is no “one size fits all” and working with the management team and auditor will help securities counsel determine the needed disclosures.

Steve Boatwright is available to answer questions about Securities Law, Raising Capital, and Disclosure Requirements.

Helpful Articles

Tax – Federal Developments

Tim Brown
(602) 530-8530

Administrative Relief

  • Extension of Tax Filing and Payment Deadlines – Pursuant to IRS Notice 2020-23, the deadline for filing any tax return and paying any tax (including self-employment taxes and 2020 estimated tax payments) that has a filing or payment deadline on or after April 1, 2020 and before July 15, 2020, has been extended until July 15, 2020.  This relief is automatic and no election or other filing is required by a taxpayer.  This extension does not apply to any return that was due on March 15, 2020 (e.g., partnership tax returns).  Returns due on July 15, 2020 may be further extended to October 15, 2020 by filing an extension request on or before July 15, 2020.
  • Extension of “Time-Sensitive Actions” – IRS Notice 2020-23 also provides relief with respect to “time-sensitive actions” that are due to be performed on or after April 1, 2020 and before July 15, 2020.  These actions include filing all petitions with the Tax Court, seeking review of a decision rendered by the Tax Court, filing a claim for credit or refund of any tax, and bringing suit upon a claim for credit or refund of any tax.  In addition, the list of “time-sensitive actions” includes the following:
    • Like-Kind Exchanges – Under Notice 2020-23, a taxpayer whose 45-day identification period or 180-day exchange period ends between April 1, 2020 and July 14, 2020 has until July 15, 2020 to complete the identification or exchange, as the case may be.
    • Qualified Opportunity Funds – Under Notice 2020-23, a taxpayer’s deadline to invest in a qualified opportunity fund (QOF) under IRC Section 1400Z-2(a)(1)(A) is considered a “time-sensitive action.”  IRC Section 1400Z-2(a)(1)(A) requires a taxpayer to generally invest in a QOF during the 180-day period beginning on the date of the sale or exchange giving rise to the gain.  Under Notice 2020-23, a taxpayer has until July 15, 2020 to make its investment in a QOF if the taxpayer’s 180-day-period ends between April 1, 2020 and July 14, 2020.
  • IRS’s People First Initiative – On March 25, 2020, the IRS announced its People First Initiative in news release IR-2020-59, which provides additional administrative relief on several fronts including the following:
    • No New Audits – Until July 15, 2020, the IRS will not start new field, office, and correspondence examinations and will continue to work refund claims where possible and without in-person contact. However, the IRS may start new examinations where deemed necessary to protect the government’s interest in preserving the applicable statute of limitations.
    • Installment Agreement Payment Deferrals – For taxpayers under an existing Installment Agreement with the IRS, payments due between April 1 and July 15, 2020, are suspended, although interest will continue to accrue on any unpaid balance.
    • Offer-in-Comprise (OIC) Relief – The IRS will allow taxpayers until July 15, 2020 to provide requested additional information to support a pending OIC. The IRS will also not close any pending OIC request before July 15, 2020, without the taxpayer’s consent. Taxpayers also have the option of suspending all payments on accepted OICs until July 15, 2020, although interest will continue to accrue on any unpaid balances. The IRS will not default an OIC for those taxpayers who are delinquent in filing their tax return for tax year 2018, provided that it is filed on or before July 15, 2020.
    • Field Collection Activities – Liens and levies (including any seizures of a personal residence) initiated by field revenue officers will also be suspended until July 15, 2020. New automatic, systemic liens and levies will also be suspended until July 15, 2020.

Legislative Tax Relief

  • Families First Coronavirus Response Act – President Trump signed the Families First Coronavirus Response Act on March 18, 2020. The Act provides the following two new refundable payroll tax credits to employers, which are designed to immediately and fully reimburse them, dollar-for-dollar, for the cost of providing Coronavirus-related leave to their employees:
    • Paid Sick Leave Credit – For an employee who is unable to work because of COVID‑19 quarantine or self-quarantine or has COVID‑19 symptoms and is seeking a medical diagnosis, eligible employers may receive a refundable sick leave credit for sick leave at the employee’s regular rate of pay, up to $511 per day and $5,110 in the aggregate, for a total of 10 days. For an employee who is caring for someone with COVID‑19, or is caring for a child because the child’s school or child care facility is closed, or the child care provider is unavailable due to the COVID‑19, eligible employers may claim a credit for two-thirds of the employee’s regular rate of pay, up to $200 per day and $2,000 in the aggregate, for up to 10 days. Eligible employers are also entitled to an additional tax credit determined based on costs to maintain health insurance coverage for the eligible employee during the leave period.
    • Child Care Leave Credit – In addition to the sick leave credit, for an employee who is unable to work because of a need to care for a child whose school or child care facility is closed or whose child care provider is unavailable due to the COVID‑19, eligible employers may receive a refundable child care leave credit. This credit is equal to two-thirds of the employee’s regular pay, capped at $200 per day or $10,000 in the aggregate. Up to 10 weeks of qualifying leave can be counted towards the child care leave credit. Eligible employers are entitled to an additional tax credit determined based on costs to maintain health insurance coverage for the eligible employee during the leave period.
  • CARES Act Tax Provisions – President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) on March 27, 2020. The CARE Act includes several tax provisions affecting business and individuals, including the following:
    • Business Tax Provisions
      • Exclusion of Forgiveness of Paycheck Protection Program Loans from Income – IRC Section 1106(i) of the CARES Act specifically excludes the forgiveness of any loan under the Paycheck Protection Program from income.
      • Non-Deductibility of Expenses when Loan is Forgiven under Paycheck Protection Program – Notice 2020-32 clarifies that no deduction is allowed for an expense that is otherwise deductible if the payment of the expense results in forgiveness of a covered loan pursuant to provisions of the CARES Act and the income associated with the forgiveness is excluded from gross income under the CARES Act.
      • Deferral of Employer Social Security Taxes and Self-Employment Taxes – The 6.2% portion of an employer’s social security taxes and an individual’s self-employment taxes due after the enactment of the CARES Act may deferred. Fifty percent (50%) of any such deferral is due on December 31, 2021 and the other 50% is due on December 31, 2022.
      • Payroll Tax Credit for Employee Retentions – The CARES Act provides a refundable tax credit for 50% of wages paid by certain employers whose operations have been fully or partially suspended by the COVID-19 virus or whose quarterly gross receipt have declined by 50% from the prior calendar quarter. The credit is refundable if it exceeds the employer’s portion of social security taxes reduced by paid sick leave and paid extended FMLA provided by earlier COVID-19 legislation. For businesses relying on the reduction in gross receipts, relief ends when gross receipts are more than 80% of the employer’s gross receipts for the same calendar quarter in the prior calendar year. The credit is only for the first $10,000 of compensation (including health benefits). The credit applies to all wages for employers with 100 or less full-time employees and only to the wages paid to employees not providing services as a result of COVID‑19 for employers with more than 100 full-time employees.
      • Extension of NOL Carryback Period – The CARES Act provides a five-year carryback period for corporations for calendar years 2018-2020, and the 80% taxable income limitation for pre-2021 tax years is eliminated.
      • Deferral of Retirement Plan Funding – Employer retirement plan contributions due in 2020 may be deferred until December 31, 2020.
      • Relaxation of Business Interest Expense Limitations – The CARES Act increases the adjusted taxable income (“ATI”) used in calculating the business interest expense limitation from 30% to 50% in 2019 and 2020 (2020 only for partnerships). The Act also allows partners to deduct 50% of their 2019 excess business expense limitation passed through from a partnership in 2020. Taxpayers may also use their 2019 ATI for their 2020 ATI.
      • Repeal of Excess Business Loss Limitations for Non-Corporate Businesses – For businesses other than C corporations, the CARES Act repeals the excess business loss limitations for years prior to 2021.
      • Increase in Charitable Contribution Limitation for Corporations – The CARES Act increases the taxable income limitation in 2020 for charitable contributions by C corporations from 10% to 25%.
    • Individual Tax Provisions
      • Charitable Contribution Deduction for Non-Itemizers – The CARES Act enables individuals who do not itemize to deduct up to $300 of charitable contributions made in 2020.
      • Exclusion of Employer Provided Student Loan Benefits – The CARES Act allows individuals to exclude from income up to $5,250 received prior to 2021 from an employer for use in repaying student loans.
      • Waiver of Early Withdrawal Penalty – The CARES Act waives the 10% penalty for early retirement plan withdrawals up to $100,000 by individuals affected by COVID-19 and allows the tax on such withdrawals to be paid over three-years or avoided by recontributing the withdrawal.
      • Waiver of Required Minimum Distribution (RMD) Requirements – The CARES Act waives the RMD requirement for 2020 for individuals required to start taking mandatory distributions at age 72.

Tim Brown is available to answer questions about the challenges in Tax Developments for businesses.

Updates to Tax- Federal Developments

Notice 2020-32: Deductibility of Expenses When Loan is Forgiven Under the Paycheck Protection Program

On April 30, 2020, the IRS issued Notice 2020-32 providing guidance regarding the deductibility for federal income tax purposes of certain otherwise deductible expenses incurred in a taxpayer’s trade or business when the taxpayer receives a “covered loan” pursuant to the Paycheck Protection Program (PPP).

Notice 2020-32 clarifies that no deduction is allowed for an expense that is otherwise deductible if the payment of the expense results in forgiveness of a covered loan pursuant to provisions of the CARES Act and the income associated with the forgiveness is excluded from gross income under the CARES Act.

IRS Adds New FAQs on Faxing Fefund Claims, NOL Carrybacks Under CARES Act

On April 30, 2020, the IRS updated a set of “frequently asked questions” (FAQs) addressing how taxpayers can file applications for eligible refund claims related to the net operating loss (NOL) carryback provisions of the CARES Act.

As a way of background, certain measures included in the CARES Act provide that:

  • A taxpayer with a NOL arising in a 2018, 2019, or 2020 taxable year can carry that loss back to each of the five preceding years unless the taxpayer elects to waive or reduce the carryback; and
  • The modified credit rules for prior-year minimum tax liability of corporations, including to accelerate the recovery of remaining minimum tax credits of a corporation for its 2019 taxable year from its 2021 taxable year, allow a corporation to instead elect to recover 100% of any of its remaining minimum tax credits in its 2018 taxable year.

On April 30, 2020, the IRS:

  • Updated certain of the previously issued FAQs relating to applications to refund claims filed on Form 1045 (Application for Tentative Refund) (as well as those on Form 1139 (Corporation Application for Tentative Refund));
  • Added new FAQs 15 to 17 relating to the e-filing of Forms 1120-X (Amended U.S. Corporation Income Tax Return) in advance of submitting a Form 1139 via fax; and
  • Added new FAQ 18 relating to the filing of a refund claim by an exempt organization.

Read the full FAQs, as updated on April 30, 2020

Federal Tax – Administrative Relief

On April 9, 2020, the IRS issued Notice 2020-23 which extends additional key tax deadlines for individuals and businesses in response to the COVID-19 pandemic.  Notice 2020-23 expands on the relief previously provided in Notice 2020-18 and Notice 2020-20.  While the previous notices generally extended until July 15, 2020 the time to file and pay federal income taxes originally due on April 15, 2020, Notice 2020-23 now expands this relief to additional returns, tax payments, and other actions.  The July 15, 2020 extension generally now applies to all taxpayers (including individuals, trusts, estates, corporations, and other non-corporate tax filers) that have a filing or payment deadline on or after April 1, 2020 and before July 15, 2020.  This relief is automatic and no election or other filing is required.  Taxpayers who need additional time beyond July 15, 2020 to file a return may choose to file the appropriate form by July 15, 2020 to obtain an extension to file the return, but the extension date may not go beyond the original statutory or regulatory extension date.

Notice 2020-23 also provides relief with respect to “time-sensitive actions” that are due to be performed on or after April 1, 2020 and before July 15, 2020.  These actions include filing all petitions with the Tax Court, seeking review of a decision rendered by the Tax Court, filing a claim for credit or refund of any tax, and bringing suit upon a claim for credit or refund of any tax.

In addition, the list of “time-sensitive actions” includes the 45-day identification period and the 180-day exchange period under IRC Section 1031 for like-kind exchanges.  Specifically, under Notice 2020-23, a taxpayer whose 45-day identification period or 180-day exchange period ends between April 1, 2020 and July 14, 2020 has until July 15, 2020 to complete the identification or exchange, as the case may be.

Notice 2020-23 also includes as a “time-sensitive action” a taxpayer’s deadline to invest in a qualified opportunity fund (QOF) under IRC Section 1400Z-2(a)(1)(A).  IRC Section 1400Z-2(a)(1)(A) requires a taxpayer to generally invest in a QOF during the 180-day period beginning on the date of the sale or exchange giving rise to the gain.  Under Notice 2020-23, a taxpayer has until July 15, 2020 to make its investment in a QOF if the taxpayer’s 180-day-period ends between April 1, 2020 and July 14, 2020.

Tax – State and Local Developments

The vast majority of states have extended state income tax filing deadlines commensurate with the federal extensions. A more limited number of states have recently begun providing various forms of relief for sales taxes, at least for small businesses meeting certain annual gross revenue thresholds. These forms of relief may include: extended deadlines for sales tax returns; waiving penalty and interest for late-filed sales tax returns; and granting use tax deductions for COVID-19 related donations.

The states currently offering some form of sales tax relief include: Alabama, California, Colorado, Connecticut, District of Columbia, Florida, Illinois, Indiana, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, New York, North Carolina, Pennsylvania, South Carolina, Texas, Vermont, Virginia, and Wisconsin.

Work-from-home and Nexus: Multistate businesses whose employees are required to work-from-home should be mindful of physical presence nexus and monitor guidance from states in which employees work from home.  The District of Columbia, Indiana, Minnesota, and Pennsylvania have issued guidance that in general, employees required to work from home do not establish nexus for the employer while a federal, state, or local government order is in effect. Maryland has issued a notice that nexus determinations are based on the specific facts and circumstances of each taxpayer.

Information on the Arizona and New Mexico responses to COVID-19 is below.

New Mexico: New Mexico Taxation & Revenue Department (TRD) COVID-19 Response

Income Taxes and Estimated Payments:

  • Annual Returns: The deadline for New Mexico personal, fiduciary, and corporate income tax returns, which were originally due on or before April 15th, 2020, has been extended to July 15th, 2020. Penalty and interest will not be assessed if the tax due is paid by July 15th, 2020.
  • Estimated Payments:
    • The deadline for estimated payments, which were originally due on or before April 15th, 2020, has been extended until July 15th, 2020. No penalty or interest will be assessed if the amount due is paid by July 15th, 2020.
    • The deadline for estimated payments originally due between April 16th and July 14th, 2020 is also July 15th, 2020. No penalty will be assessed, but interest will apply to payments made after their original deadline.


  • Withholdings that are reported and paid using the Combined Reporting System (CRS), and that were originally due between March 25th, 2020 and July 25th, 2020 are now due on July 25th, 2020. No penalty will be assessed for late withholding, but interest will apply to payments made after their original due date.

No Other Extensions:

  • TRD has not extended deadlines for any other tax programs. Thus, the ongoing deadlines for Gross Receipts Tax, Governmental Gross Receipts Tax, Compensating Tax, Leased Vehicle Gross Receipts Tax, the Leased Vehicles Surcharge, Insurance Premium, and other taxes remain unchanged.

New Mexico Taxation and Revenue Department Bulletin 100.35

Operations and Tax Enforcement Actions:

  • Until further notice, TRD’s five district offices and the Compliance Bureau are open on an appointment-only basis to limit in-person contact. Appointments can be made through the contact numbers listed here.
  • Tax liens, seizures and injunctions will cease until July 1, 2020.
  • Taxpayers undergoing audits can request a 60-day suspension of the audit.
  • Taxpayers on payment plans can request 60-day extensions to make payments.

Arizona: Arizona Department of Revenue (ADOR) COVID-19 Response

2019 Income Taxes and Estimated Payments:

  • Annual Returns: The deadline for filing and paying 2019 Arizona state income tax- for individual, corporate, and fiduciary tax returns- has been extended from April 15th, 2020 to July 15th, 2020. Penalty and interest will not be assessed on 2019 income tax returns that are filed on or before July 15th, 2020.
  • Estimated Payments and Contributions: However, the due dates for certain estimated payments and contribution applications remain April 15th, 2020 and have not been extended, including:
    • Any estimated payment that was originally due April 15th, 2020; and
    • Contributions to certified school tuition organizations, public schools, and qualifying charitable organizations.
  • Credit for Increased Excise Taxes and Property Tax Refund: The due dates for these credit claims have also be extended to July 15th, 2020.


  • Customers requiring in-person assistance a ADOR’s customer service locations in Phoenix, Mesa, and the Southern Regional Office in Tucson must schedule an appointment with a ADOR representative by
  • Customers can also access most information, and make payments, at or


Unemployment Reports and Payments:

  • Arizona Department of Economic Security (“DES”) has extended the first quarter 2020 unemployment tax and wage report from April 30, 2020 to June 1, 2020.
  • DES will not charge unemployment benefits, during the current crisis, to an employer’s experience rating.

Frank Crociata is available to answers questions about State and Local Tax Developments for businesses.

Additional Resources

Tort Liability for Businesses

COVID-19 Business Response Team

Shannon Clark
(602) 530-8194

Potential Liability for Exposure to COVID-19

As the economy re-opens, many employers and businesses have expressed concern about civil liability arising from exposure to COVID‑19. Companies are wondering about their potential liability to persons who claim they were exposed to COVID‑19 while on their property and became ill following that exposure. Such allegations will require a careful analysis of the facts and circumstances relating to the particular claim.

Claims for sickness and injury to an employee may be subject to worker’s compensation laws, such that an employee’s exclusive remedy, with limited exceptions, would be through the worker’s compensation system. During that process, the employee would need to establish that the injury resulted from exposure in the workplace while performing a function in the course and scope of the employee’s work duties.

For non-employees, a company may face claims from a social guest or business invitee if the business knew or had reason to know of a dangerous condition that caused the guest or invitee harm. The elements of such a claim would include establishing (1) the existence of a legal duty owed by the company to the claimant, (2) the company’s fault, (3) injury sustained by the claimant, and (4) a causal connection between the company’s conduct and the claimant’s injury.  Of these elements, fault and causation will likely be the key focus of most disputes. Specifically, claimants will bear the burden of proving that the business failed to act as a reasonably careful person would act under the circumstances, including following any industry-specific standards, and that the business’s conduct helped produce the injury and that the injury would not have happened without the business’s conduct.

Accordingly, in addition to following all requirements established by federal, state, and local authorities in connection with re-opening, businesses should research any guidelines or recommendations applicable to their industry and develop reasonable policies and practices based thereon. Likewise, businesses should carefully document all efforts to implement their adopted standards, as that documentation be used as evidence in defending future exposure claims.

Liability Waivers

Many businesses routinely require customers, guests, or other persons coming onto the premises to sign “waivers of liability” or other “assumption of risk” documents.

Businesses and property owners should be extremely wary about relying on such waivers to avoid potential liability for exposure to COVID‑19. As one might expect, judges tend to scrutinize prospective waivers very carefully, and in any given case can be tempted to search for some way to void the waiver (and permit the injured person to proceed with his or her suit).

Under those circumstances, businesses and property owners who are considering using such waivers should not use any “pre‑Coronavirus” forms, but should consult with legal counsel to develop documents that are tailored to the particular nuances and risks of the COVID‑19 pandemic.

Arizona Proposed Legislation

Arizona legislators have made protecting Arizona business from tort liability a priority. HB 2912 is currently pending in the Arizona House of Representatives, and the proposed law would raise the standard of liability from mere negligence to “gross negligence.” That is, a plaintiff claiming an injury related to COVID-19 caused by a business or similar educational, non-profit, or governmental entity would have to prove by clear and convincing evidence that the entity acted with reckless disregard for the safety of the plaintiff and other members of the public.

As of late May 2020, the bill is still being debated in committee, but even if it doesn’t become law in the current legislative session it is very likely to come up again in the expected legislative special session to deal with the impact of the pandemic later in 2020. As with all pending legislation the specific details of the bill are very likely to change, but it is possible that some sort of law protecting businesses and other entities from COVID-19 liability will be enacted in the near future.

Shannon Clark and Lincoln Combs are available to answer questions about the interaction between tort liability and workers’ compensation laws and risk management best practices.