Pub. 17 2020 Issue 2

6 O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S — H E L P I N G N E W M E X I C O R E A L I Z E D R E A M S ▪ For a business that operates for profit, the require- ments to qualify include that the business closed or reduced operations due to the public health order issued by the State’s Secretary of Health on March 23rd, 2020, had annual gross revenue of less than $5 million for 2019, gross receipts for the months of April and May of 2020 must have declined by at least 30% when compared to the business’s gross receipts for the same months for 2019, and satisfy an in-state ownership test. ▪ To be eligible under the Act, a for-profit business must satisfy an ownership test. For a sole propri- etorship, 100% of the business must be owned or leased by a New Mexico resident; and for a corpo- ration, partnership, joint venture, limited liability company, limited partnership or other business entity, at least 80% of the total voting power of the entity and at least 80% of the total value of the equity of the entity must be owned by one or more New Mexico residents. ▪ The maximum amount the business can borrow is the lesser of 200% of the business’s adjusted aver- age monthly business expenses or $75,000. ▪ The interest rate on the loan is one-half of the Wall Street Journal prime rate determined on the date of the loan. ▪ The loan is interest-only for the first two years of the loan, with accrued interest due and payable on the first and second anniversaries of the funding of the loan. Additional interest and principal are due and payable on the third anniversary of the fund- ing of the loan. The business may elect to extend the loan term and make monthly payments over the three years commencing on the third anniver- sary of the funding of the loan. ▪ No collateral or personal guarantees are required from the borrower. ▪ The NMFA will determine the creditworthiness of the business loan application. ▪ The loan may be used only for payment of ordinary and necessary business expenses and certain capital expenditures. ▪ The deadline to submit an application to the NMFA for a small business loan is December 31st, 2020. • Local Government Loans: SB 3 makes $100 million available to the New Mexico Finance Authority to make loans to local governments to provide emergency economic relief. Loans are required to be subject to the standards set forth in the Uniform Prudent In- vestors Act. Local government loan applications must demonstrate that the entity experienced at least a 10% decline in FY 20 operating revenue due to the impact of COVID-19. Loan applications are required to be received by September 30th, 2020. Local governments may borrow 50% of their projected budget shortfall for FY20, as determined by the Department of Finance and Administration. The bill requires the loans carry a 2% interest rate, and proceeds may be used for general op- erating expenses and revenue replacement. Loans will be backed by a dedication of future gross receipts tax n EXECUTIVE VICE PRESIDENT’S MESSAGE continued from page 5 revenue. Loan periods cannot exceed five years. The legislation requires that the interest on the loan will not compound for the 12 months, and payments will be interest-only for the first three years, after which the local government must make monthly principal and interest payments. • Unemployment Compensation: SB 3 amends the New Mexico Unemployment Compensation Act relating to the calculation of employer contributions to the un- employment compensation trust fund by omitting the employees’ unemployment claims data for March 1st, 2020 through June 30th, 2021. The legislation would require the use of the 2019 computation data reserve factor from January 1st, 2020 through June 30th, 2021, in calculating employers’ tax rate. As a result of the COVID-19 public health emergency, employers have laid off workers resulting in an extraordinary surge in unemployment claims since mid-March. As a result, New Mexico’s unemployment compensation trust fund is projected to be insolvent by September 2020. Increased layoff amid the pandemic means employers will pay higher unemployment insurance taxes. While SB 3 would keep the employer’s unemployment tax rates stable through the end of 2021, it will reduce income into the unemployment insurance trust fund. In the event New Mexico’s unemployment trust fund depletes its balances, the Department of Workforce Solutions can apply under Title XII of the Social Security Act for a zero-interest loan from the U.S. Department of Labor to stabilize the fund until it can be replenished through employer contributions. However, funds borrowed from the federal government would be interest-free for only two years. Any remaining loan balance would be subject to interest. Local Government Loans: SB 3 makes $100 million available to the New Mexico Finance Authority to make loans to local governments to provide emergency economic relief. Loans are required to be subject to the standards set forth in the Uniform Prudent Investors Act.