Title IV of the Coronavirus Aid, Relief and Economic Security Act (CARES Act) passed by Congress on March 27, 2020 provides significant, although temporary, regulatory relief to banks, savings institutions and their customers.

The key bank regulatory relief provisions of the CARES Act are the following:

  • Grant of Authority to FDIC for Unlimited Guarantee of Transaction Accounts. Section 4008 of the CARES Act provides Congressional authorization for the FDIC to establish a temporary debt guarantee program to guarantee debt (including noninterest-bearing transaction accounts) of depository institutions and their holding companies, without a maximum amount. This provision authorizes an FDIC guarantee similar to that offered by the FDIC’s Temporary Liquidity Guarantee Program in 2008. In addition, the NCUA is given authority to temporarily increase share insurance coverage for noninterest-bearing transaction accounts. Any such FDIC or NCUA guarantee or increase in deposit insurance coverage must terminate no later than December 31, 2020.
  • Optional Delay in CECL Implementation. Section 4014 permits banking organizations to delay their adoption of the new Current Expected Credit Losses (CECL) accounting standard for companies until the earlier of December 31, 2020, and the termination date of the national emergency concerning COVID-19 declared by the President. This would affect all SEC-registered banking organizations for which the CECL accounting standard would otherwise be reflected in their March 31, 2020 earnings statements. (Other banking organizations have adoption dates in 2021 and 2022, which would not be affected by the legislation.)
  • Temporary Troubled Debt Restructuring (TDR) Relief. Section 4013 permits financial institutions to suspend, for loan modifications related to the COVID-19 pandemic, requirements otherwise applicable under Generally Accepted Accounting Principles (GAAP) to categorize loan modifications as TDRs. Specifically, TDR classification would not be required if the loan modification is made in the period from March 1, 2020, through the date that is 60 days after the end of the COVID-19 national emergency for a loan that was not more than 30 days past due as of December 31, 2019.Note that on March 22, 2020, the federal bank regulatory agencies issued an Interagency Statement on Loan Modifications that similarly permits banks to avoid classification as TDRs of certain short-term modifications of loans in response to COVID-19. (Click here to see Jones Walkers’ analysis of the Interagency Statement). However, Section 4013 of the CARES Act appears to offer broader relief than is offered by the Interagency Statement, as the Act’s provisions both (i) impose fewer restrictions on banks’ ability to modify loan terms without the requirement of TDR classification and (ii) require the principal federal banking regulator of a financial institution to defer to the institution’s determination to suspend TDR classification for COVID-19 related loan modifications.
  • Grant of Authority to OCC for Legal Lending Limit Waiver. Section 4011 of the CARES Act amends the legal lending limit (loans to one borrower) framework applicable to national banks and federal savings associations by (i) allowing the Comptroller of the Currency to waive such limits for loans to nonbank financial companies and (ii) authorizing the Comptroller to exempt any transaction or series of transactions from the applicable legal lending limits upon a finding that such exemption is in the public interest and consistent with the purposes of 12 U.S.C. 84. The amendments to the lending limit statute will be effective until the earlier of December 31, 2020, and the termination date of the COVID-19 national emergency.
  • Temporary Reduction in Community Bank Leverage Ratio. Section 4012 instructs the federal bank regulatory agencies to issue an interim final rule reducing the minimum community bank leverage ratio (CBLR) from 9% to 8% until the earlier of December 31, 2020, and the termination date of the COVID-19 national emergency. In addition, the legislation provides that a qualifying community bank which falls below the CBLR, as reduced, during such period will be granted a reasonable grace period to come into compliance. The CBLR framework, as established in the final interagency rule issued in September 2019, permits qualifying highly capitalized banking organizations with less than $10 billion in total consolidated assets to satisfy their regulatory capital requirements, and to avoid calculating or reporting risk-based capital ratios, by maintaining the CBLR at the level established by the regulation.

Many states, counties, and cities have issued “stay-at-home” or “shelter-in-place” (collectively, SIP) orders to combat the spread of COVID-19. Below we are providing updates focusing on the impact these sweeping orders could have on new and ongoing construction projects in Alabama, Florida, Georgia, Louisiana, Mississippi, and Texas. As with all the effects of COVID-19, the issuance, interpretation, and enforcement of these orders are fast-breaking and in constant flux.

To view Jones Walker LLP’s construction team’s full summary on the impact of state and local “Stay-at-Home” or “Shelter-in-Place” orders on construction in AL, FL, GA, LA, MS, and TX, click here.

Continue Reading As of 3/30/2020: Continued Updates on the Impact of State and Local “Stay-at-Home” or “Shelter-in-Place” Orders on Construction in AL, FL, GA, LA, MS, and TX

On March 26, 2020, the Environmental Protection Agency announced a temporary policy of enforcement discretion for noncompliance as a result of COVID-19 or its protective measures that have been put in place. The policy is based on the recognition by EPA that worker shortage and social distancing measures may impact the ability of regulated entities to conduct and report certain monitoring activities required by federal permits, regulations, and statutes. The policy also recognizes that the pandemic and the measures put in place to address it impact the ability of the regulated entities to meet consent decree milestones and obligations, enforceable limits of air and water permits, hazardous waste management requirements, and safe drinking water requirements. This policy is retroactive to March 13, 2020, and will apply to conduct that occurs even after the policy terminates. EPA will notify the public at least seven days prior to ending this policy. Below is a summary of the major sections of the policy:

General Conditions

In general, EPA expects all regulated entities to comply with the requirements provided by their permits, regulations, and statutes. The exercise of EPA’s enforcement discretion under this policy is conditioned on the entities complying with the following:

  1. “Entities should make every effort to comply with their environmental compliance obligations.
  2. If compliance is not reasonably practicable, facilities with enforcement compliance obligations should:
    • Act responsibly under the circumstances in order to minimize the effects and duration of any noncompliance caused by COVID-19;
    • Identify the specific nature and dates of the noncompliance;
    • Identify how COVID-19 was the cause of the noncompliance, and the decisions and actions taken in response, including best efforts to comply and steps taken to come into compliance at the earliest opportunity;
    • Return to compliance as soon as possible; and
    • Document the information, action, or condition specified in a. through d.”

Continue Reading EPA Exercises Enforcement Discretion in Response to COVID-19 Pandemic

With nearly all (980 of 989) commercial and tribal casinos in the United States closed, affecting more than 650,000 directly employed persons during the novel coronavirus shutdown, there are specific sets of issues facing the gaming industry. We summarize some of the more important ones below.

Employee Issues

Many gaming industry employers have taken one of several general tracks with respect to their employees. Some have elected to pay their employees for a defined period of time, regardless of whether they are presently able to perform their jobs or not. Others have issued blanket temporary furloughs to employees or terminated the employees, hoping to rehire those employees when conditions improve in the future. The federal legislation will provide benefits to employees and/or their employers, depending on the choice of how to proceed and what path to take under the possible scenarios. Culture of the companies also impacts decisions on these points; some company executives are deferring cash salaries for stock to improve company cash positions and keep more employees on the payroll, while others are taking reduced salaries or working for free, while still others are taking a salary but donating it to an employee fund. Benefits available to employers and employees under pending federal legislation may significantly impact the decisions employers make with respect to their employees.

Continue Reading Challenging Times: Specific Issues Facing the Gaming Industry During the Coronavirus Crisis

Alabama Governor Kay Ivey, on March 27, 2020, brought more clarity statewide to businesses continuing to operate during the COVID-19 outbreak. Her statewide order, effective at 5:00 p.m., March 28, 2020, prohibits non-work gatherings of over 10 people and gatherings of any size where a six-foot distance cannot be maintained. Governor Ivey’s order mandates closure only of certain designated non-essential businesses, including most retail and personal service establishments. In an FAQ issued on March 28,2020, and posted below, Alabama Public Health emphasized that, unless a business is specifically designated as non-essential, it may continue “normal operations.” Governor Ivey also ordered the postponement of all non-emergency medical and surgical procedures. The order is in effect until April 17, 2020, and could be extended or curtailed based on ongoing circumstances. Following the issuance of this statewide order, the Public Health Officer of Jefferson County withdrew his previous order bringing further clarity to the state’s overall handling of the outbreak.

Alabama Statewide Order (3/27/2020)

“Safer at Home” Statewide Public Health Order FAQ

Earlier today, the House of Representatives passed the CARES Act, the $2 trillion coronavirus relief package that passed the Senate on Wednesday night. The bill will now be delivered to the President who will sign it into law in short order. Links to the bill as passed by the Congress together with summaries of key sections of the bill can be found below.

Division A – BAI20215

Division B – Emergency Appropriations

Summaries:

CARES ACT Small Business Relief Summary – SBA Paycheck Protection Program and Other Programs
Curtis R. HearnGina M. JacobsJoshua DeCuir, and Elisabeth B. LeBlanc

CARES ACT Emergency Relief Fund Program
Daniel H. Burd

Summary of Federal Reserve Credit Facilities Announced
Robert L. Carothers, Jr.

CARES ACT Tax Provisions Summary 
Rudolph R. Ramelli and B. Trevor Wilson

CARES ACT  Provisions Impacting Employers and Retirement Plans 
Timothy P. Brechtel and Alex H. Glaser

CARES ACT – Healthcare Provisions Summaries
William W. Horton and Meredith Guthrie Maxwell

  • Healthcare Provider Funding
  • Improvements to Supply Chain
  • Telehealth and Greater Insurance Coverage
  • Workforce Improvement & Training

What many states call a “force majeure” clause is often called an “Act of God” clause in Mississippi. In contracts for services and contracts for real estate, contractual force majeure/Act of God clauses are enforceable, but there is no Act of God defense absent a contractual clause.

This is not the case for contracts for the sale of goods. Unlike with other states, Mississippi’s version of the Uniform Commercial Code (UCC or the Code) specifically addresses force majeure. Mississippi Code § 75-2-617 provides:

Deliveries may be suspended by either party in case of Act of God, war, riots, fire, explosion, flood, strike, lockout, injunction, inability to obtain fuel, power, raw materials, labor, containers, or transportation facilities, accident, breakage of machinery or apparatus, national defense requirements, or any cause beyond the control of such party, preventing the manufacture, shipment, acceptance, or consumption of a shipment of the goods or of a material upon which the manufacture of the goods is dependent. If, because of any such circumstance, seller is unable to supply the total demand for the goods, seller may allocate its available supply among itself and all of its customers, including those not under contract, in an equitable manner. Such deliveries so suspended shall be cancelled without liability, but the contract shall otherwise remain unaffected.

Importantly, this provision applies only to the seller — not the buyer — of goods. So even if a contract for the sale of goods does not contain a force majeure clause, Mississippi law reads one into the contract for the seller.

Continue Reading FORCE MAJEURE IN MISSISSIPPI

Suppliers and purchasers of any kind of movable, tangible property may be unaware that they have a powerful tool under the Uniform Commercial Code (UCC) for protecting themselves in this national time of uncertainty: a demand for adequate assurance.

Every state has adopted at least some portion of the UCC, though there are state-to-state variations. Article 2 of the UCC generally applies to any contract for the sale or purchase of goods (but not service or real estate contracts). When contracts cover both goods and services, some states look to whether the dispute centers on the goods, while others examine the predominant purpose of the contract.

If the UCC governs the parties’ contract, then under UCC Section 2-609, when one party to a contract is reasonably insecure that the other party won’t perform, it can send a written demand for adequate assurance. If assurance isn’t received in a reasonable time, not to exceed 30 days, the requesting party can treat the contract as terminated and seek damages.

A demand for adequate assurance is nothing more complicated than a writing asking for some form of assurance that the other party will perform. Types of assurance that courts have found reasonable include letters of credit, heightened warranties, and access to the other party’s books and records. Some courts have allowed verbal demands, but since the model statute requires that the demand be in writing, the safer course of action is to send a demand in writing.

Continue Reading COVID-19 Insecurity: Using a Demand for Adequate Assurance Under the UCC

Over the past five days many states, counties, and cities issued “stay-at-home” or “shelter-in-place” (collectively, SIP) orders to combat the spread of COVID-19. Here, we focus on the impact these sweeping orders could have on new and ongoing construction projects in Alabama, Florida, Georgia, Louisiana, Mississippi, and Texas. As with all the effects of COVID-19, the issuance, interpretation, and enforcement of these orders are fast-breaking and in constant flux.

DHS Cybersecurity and Infrastructure Security Agency Guidelines

A threshold question to evaluate the impact of a SIP order on a construction project is whether your operations and workforce impact “essential” or “critical” infrastructure. Many states and localities are incorporating the Guidelines published by the Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency (CISA) to help identify “essential critical infrastructure workers” for exemption from SIP restrictions. These Guidelines are general and do not specifically address the construction industry. Nevertheless, the construction industry significantly impacts each of the sectors and industries specified in the Guidelines, and thus, a number of projects may likely fall within CISA’s definition of “critical infrastructure.”

Continue Reading Impact of State and Local “Stay-at-Home” or “Shelter-in-Place” Orders on Construction in AL, FL, GA, LA, MS, and TX

This afternoon the Mississippi Department of Revenue issued a notice containing updated information related to multiple extended filing deadlines and audit procedures. Among the changes are the following:

  • Income and franchise tax filing deadlines remain extended to May 15 (no change from prior notice)
  • Sales and use tax return filing deadlines remain unchanged, but interest and penalty imposition on any unpaid balances will be extended during any period covered by the presidentially declared national emergency
  • Homestead exemption applications are extended until May 1
  • Tax sale deadlines in Amite, Quitman and Sunflower counties are extended until May 4
  • Personal property renditions are extended until May 1; the mandatory 10% penalty will also be extended until that date
    • NOTE: the notice does not address deadlines for filing free port warehouse license applications, inventory reports, and reports of inventory movement, so taxpayers should assume normal March 31 deadlines still apply; as noted in our prior newsletter, failure to file these reports by that deadline could result in a loss of the exemption for the current tax year per prior Attorney General opinions
  • The deadline for local tax assessors to furnish real and personal property tax rolls to the boards of supervisors has been extended by thirty (30) days
    • NOTE: it is unclear at this time whether the normal August deadline for filing ad valorem tax objections will be similarly extended
  • Affordable rental housing owners have until April 15 to provide statements of actual net operating income to the local tax assessors
  • Interest and penalty accrual has been suspended on all new assessments and prior liabilities effective March 15; this suspension will continue until the end of the national emergency
  • The Department will continue to work its pending audits, but will agree to abate penalties and interest on any audits closed during the period of national emergency if the taxpayer agrees to settle the audit without appeal and pay the tax due
  • Withholding requirements remain unchanged based on an employee’s temporary telework location, and the Department will not use any changes in the employees’ temporary work location to impose nexus or alter any income apportionment while those temporary telework requirements are in place
  • The Department must adhere to existing statutory appeal deadlines, but remind taxpayers that electronic filing is already permitted

Jones Walker LLP will continue to monitor these Mississippi filing issues and will update as additional information is made available.