Modrall Sperling COVID-19 Task Force Updated May 12, 2021

*This article is authored by Roberta Cooper Ramo with Alicia Ubeda Harvey, Jamie L. Allen and other Modrall Sperling attorneys.


Modrall Sperling strives to be a resource for our clients as they strategize how to safely continue their businesses amidst the ever changing landscape of COVID-19 regulations. In these articles, we endeavor to provide answers to frequently arising questions and provide resources to our clients. Please note that the law, the regulations, and judicial interpretations are in a constant state of flux. Before acting upon any of the information contained in this article, please consult with one of our attorneys to ensure that there have not been changes that might affect your planned course of action. Earlier archived versions of this Article may be accessed here. Though some of the information they contain may be outdated, the history and fuller context of the issues discussed may be helpful.

The most recent piece of major federal legislation designed to respond to the economic and heath crises resulting from the ongoing COVID-19 pandemic is known as the American Rescue Plan Act (the “Rescue Act” or “ARPA” or “ARP”). This complicated bill was passed by Congress on March 10, 2021 and signed into law by President Biden the next day.

The ARPA builds upon the programs established by the CARES act and the Consolidated Appropriations Act (the “CAA”) and provides some new benefits to help Americans who have been harmed by the ongoing pandemic. As with the two previous COVID-related bills, the ARPA is long, complicated and at times less than clear.

With the complexity in mind, we have set out to identify and explain the major provisions that are most likely to affect our clients. We expect to update this article to reflect the future clarifications of the specific provisions of the ARPA and its predecessors.

On April 28, 2021, the New Mexico Department of Health issued an order lightening the state’s COVID-19 restrictions and setting New Mexico on a path to be re-opened without restrictions by the end of June. This order provides that vaccinated individuals are not required to wear masks in certain outdoor settings and makes it easier for counties to loosen mandatory restrictions by progressing through New Mexico’s Red to Green to Turquoise Framework. For more information, see Section 4 below or the Public Health Order itself, available here.

We have provided information addressing the following topics:

  1. What Federal Programs Are Available to Help Businesses and Individuals Under the Rescue Act?


  1. What is the Current Guidance for Seeking PPP Loan Forgiveness?


  1. What State Programs Are Available to Aid New Mexico Businesses Harmed by COVID-19?


  1. What COVID-19 Restrictions Are in Place in New Mexico?


  1. How has COVID-19 and the Rescue Act Affected Tax Matters and Retirement Plans?


  1. What are the Health Insurance or Other Benefits Changes related to the COVID-19 pandemic?


  1. How Have the Laws Passed in Response to COVID-19 Affected Employers?


a. What Should Employers Know as Their Businesses Go Through the Process of Re-Opening?


  1. How Have the Laws Passed in Response to COVID-19 Impacted Real Estate Leases?


  1. Creditor’s rights Issues Arising from the Pandemic


  1. Is it Possible to Execute Estate Planning Documents under the current New Mexico Governor’s Orders?


  1. Risk Management Litigation Related to the Pandemic


In light of the ever-changing nature of COVID-19 regulations at the state and federal level, we have created an Executive Summary as a preface to this article. This Summary is intended to serve as a reference to enable our clients to quickly access the most current COVID-19 regulations and identify what COVID-19 aid programs are currently active. The full text of this Article follows the Executive Summary and provides a fuller picture of the regulatory landscape surrounding the COVID-19 pandemic, including a detailed explanation of the aid that is currently available.


Executive Summary

Current Federal Regulations and Aid Programs

Paycheck Protection Program (“PPP”) Loans

  • Congress recently reopened the PPP to allow borrowers to apply for new PPP loans through May 31, 2021. These “second draw” loans are available to borrowers who have not yet received a loan through the program, and existing PPP borrowers are eligible to receive a second loan if they meet certain requirements. For more information, see Section 1.I.
  • The Consolidated Appropriations Act (the “CAA”) created a simplified forgiveness process for PPP loans less than $150,000. Qualifying borrowers are eligible to have their loans forgiven by submitting form 3508S to their lender. For more information, see Section 2.II.
  • The CAA and the ARPA made a number of other changes to the PPP, including expanding the categories of forgiveness-eligible expenses, giving borrowers more flexibility in determining the covered period for their loan, and expanding PPP eligibility to most 501(c) organizations, among others. For a full description of how the CAA changed eligibility requirements for the Program, see Section 1.I.For a description of the CAA’s changes to the loan forgiveness process, see Section 2.II below.

Shuttered Venue Operator (“SVO”) Grants

  • The CAA created a new funding source, later supplemented by the Rescue Act, that is designed to provide aid to certain types of businesses who have been hit hardest by the pandemic. Eligible entities include live venue operators, museums, motion picture theaters, and more. For a full discussion of the SVO program, see Section 1.VI below.

Restaurant Revitalization Grants

  • The Rescue Act allocated over $28 billion to provide grants to businesses in the restaurant industry that have been hit the hardest by the pandemic. Eligible entities include restaurants, bars, and any businesses designed to provide food and drink to patrons for on-site consumption. For a full discussion of this program, see Section 1.VII.

More Flexibility for Health Insurance Plans

  • Congress has given employers the option of allowing carryover for Health Flexible Spending Accounts and Dependent Care Reimbursement Accounts from 2020 to 2021 and 2021 to 2022. The CAA and the ARPA made several other changes to health plans that are detailed in full in Section 6 of this Article.

Current New Mexico State Regulations and Aid Programs

 How do I Register to Receive a COVID-19 Vaccine?

  • New Mexico’s vaccine rollout has progressed to Phase 2, which involves administering doses of the COVID-19 vaccine to all individuals aged 16 or over. The Department of Health has created a website to allow interested individuals to register for the vaccine, available here. More details on the rollout can be found in Section 4a.

The Red to Green to Turquoise Framework

  • The Department of Health’s Red to Green to Turquoise framework represents the most current public health regulations in effect in New Mexico. This framework determines a county’s applicable restrictions based on health metrics intended to measure the spread of COVID-19 in the county. The operational and occupancy restrictions on businesses in a given county loosen as the county’s health metrics improve. For more information, see Section 4.I.

Generally Applicable Public Health Regulations

  • Some restrictions apply to all counties equally, regardless of their position in the Red to Green to Turquoise framework. These restrictions include mandatory facemasks in public places (except when actively eating or drinking), a recommended (but not required) quarantine for all travelers entering New Mexico from out of state, and mandatory closures for COVID-19 “hotspots.” A full list of currently applicable restrictions can be found in Section 4.II.

The New Mexico Recovery Fund

  • The New Mexico Recovery Fund, L.P., is a $100 million direct lending facility designed to help larger New Mexico-based business make it through the current crisis. New Mexico businesses with 40 or more employees are eligible to receive loans between $500,000 and $10,000,000. For more information, including eligibility requirements, see Section 3.I.

Local Economic Development Act Grants

  • New Mexico recently created a fund to provide grants to businesses that have been harmed by the COVID-19 pandemic. LEDA grant funds must be used to cover the business’ mortgage, rent, or lease payments and are contingent on the business increasing its total number of full time employees from quarter to quarter. For a full description of the eligibility requirements and more information regarding the LEDA program, see Section 3.II.

Small Business Recovery and Stimulus Loan Fund

  • On March 3, 2021, the governor signed SB 3 into law, which reinstated the small business recovery loan program. This program provides low interest loans to small businesses in New Mexico. Recognizing that the majority of the allocated funds went unused under the previous iteration of the program, the Legislature modified the terms of these loans to make them more favorable to borrowers. For a full list of the terms and a discussion of the program more generally, see Section 3.III.

New Mexico Taxability of COVID-19 Relief Payments in New Mexico

  • The New Mexico Taxation and revenue department recently issued a tax bulletin addressing the taxability of aid individuals and businesses have received as part of various COVID-19 relief programs. The bulletin discusses the taxability of the following types of aid:
    • Economic Impact Payments (EIPs) – Direct payments provided to individuals through the CARES Act, also known as EIPs, are not subject to income tax. The IRS has provided clear guidance that these payments are not included in the federal definition of adjusted gross income (AGI). Because New Mexico income tax is calculated based on federal AGI, EIPs are not subject to New Mexico income tax.
    • PPP Loans – Loans received through the Paycheck Protection Program are not included in the definition of gross receipts provided in NMSA 1978 § 7-9-3.5 and therefore are not subject to the New Mexico gross receipts tax. Additionally, the CARES Act specifically provides that PPP loans shall not be considered taxable income. Therefore, such loans are not subject to either corporate or personal income tax.
    • Other CARES Act Grants – Most grants funded through the CARES Act, such as Albuquerque Small Business Economic Relief Grants, would not meet the statutory definition of gross receipts and are therefore not subject to New Mexico’s gross receipts tax. However, any grants that require a business to perform a service as a prerequisite for receiving funding could be considered gross receipts subject to taxation. Anyone who is unsure whether the gross receipts tax applies to a grant they or their business received should consult their attorney. Additionally, most grants received through the CARES Act would be considered income and be subject to corporate or personal income tax. However, each type of grant has its own rules and some are specifically excluded from taxation. Therefore, anyone who is unclear whether a specific grant is subject to New Mexico income tax should consult their attorney. 

Latest Federal Action

1. What Federal Programs Remain Available to Help Businesses and Individuals Under the New Rescue Act (ARPA)?


I. The Rescue Act Modifies, and Extends certain elements of the Paycheck Protection Program (PPP)

The Paycheck Protection Program Flexibility Act of 2020 (PPP Flexibility Act) funded by the Coronavirus Aid, Relief and Economic Security Act, “the CARES Act”, was created to provide loans for businesses harmed by COVID-19.  On August 8, 2020, the Small Business Administration (SBA) stopped accepting Paycheck Protection Program (PPP) loan applications under the CARES act.

However, the Consolidated Appropriations Act (CAA) appropriated $284 billion for a second round of PPP loans. The SBA has announced that the application period for this second round of funding opened on January 11, 2021. Businesses that did not receive PPP loans during the first round of funding were able to apply as soon as the application period opened, while businesses that did receive PPP loans during the first round of funding were able to apply for second draw loans starting January 13, 2021. On January 8, 2021, the SBA issued Interim Final Rules providing guidance for how this second round of PPP funding will be administered. The Rule providing guidance for first-time borrowers can be found here, and the Rule providing guidance for second round loans can be found here. The Rules and recent federal legislation made the following important changes to the Program:

The CAA extended the application period through March 31, 2021 for the additional funding. That deadline was subsequently extended to May 31, 2021 by the PPP Extension Act, signed into law on March 30, 2021. First time applicants can apply by submitting this form to a qualified lender along with supporting documentation. The SBA released a new form for use in applying for second round loans that can be found here.

  • The Rescue Act appropriated an additional $7.25 billion to fund PPP loans during this second round of funding.

Businesses that did not receive PPP loans during the first round of funding are eligible for a loan under the CAA if:

  • The business employs 500 or fewer employees (this number is reduced to 300 for otherwise eligible 501(c)(6) organizations);
  • The business was in operation on February 15, 2020; and
  • The business had employees for whom it paid salaries, the business paid independent contractors as reported on Form 1099-MISC, or the business is a self-employed individual, independent contractor, or sole proprietorship with no employees.

Businesses that received PPP loans during the first round of funding are eligible for a second loan if:

  • The business has spent the full amount of its first round PPP loan, or will spend the full amount on or before the date the second loan will be disbursed;
  • The business employs 300 employees or fewer; and
  • The business can produce gross receipts data demonstrating a 25% reduction in 2020 revenue, as compared to the same quarter of 2019. Businesses can choose which quarter to use as a baseline for this comparison, and businesses submitting applications after January 1, 2021 may establish eligibility using gross receipts from the fourth quarter of 2020.

Businesses that were in operation for all four quarters of 2019 can also establish the necessary reduction in revenue on an annual basis by submitting copies of their annual tax forms showing a 25% or greater decline from 2019 to 2020.

The maximum amount a business can receive in a second round PPP loan has been reduced to $2 million, down from the $10 million limit applicable to first round loans.

  • Businesses operating in the accommodation or food services industries will be allowed to receive PPP loans of up to three and one half times their monthly average payroll costs, all other businesses are eligible for loans of up to two and one half times their average monthly payroll costs (the $2 million limit applies in all cases).

Businesses can calculate their monthly average payroll cost using data from either 2019 or 2020.

The Rescue Act expanded the scope of PPP eligibility to include a wide variety of non-profit organizations that were previously ineligible to receive a loan under the program. Under the Rescue Act, all entities organized under Section 501(c) of the Internal Revenue Code are eligible to receive PPP loans, other than those entities described in Section 501(c)(4). To be eligible, a 501(c) organization:

  • Must employ no more than 300 employees; and,
  • Cannot be primarily engaged in political or lobbying activities
    • Specifically, the lobbying activities of the organization cannot comprise more than 15% of the organization’s total activities, the organization cannot receive more than 15% of its gross receipts from lobbying activities, and the cost of the organization’s lobbying activities cannot exceed $1 million per year, calculated using the organization’s most recent tax year ending prior to February 15, 2020.

Certain news organizations that were ineligible for funding under the CARES Act due to their affiliation with newspapers are now eligible to apply for PPP funds. Any FCC licensed news station is eligible for funding if it either:

  • Employs fewer than 500 employees per physical location (or otherwise complies with applicable SBA size standards); or
  • Is a non-profit news organization designated as a public broadcasting entity by the Communications Act of 1934.

To be eligible, a for-profit news organization must be majority owned or controlled by a newspaper publishing company or business engaged in the radio or television broadcast industry.

Any news organization receiving PPP funds must certify that PPP funds will be used to pay expenses related to distributing locally-focused or emergency information

The Rescue Act also broadened PPP eligibility to include internet publishing organizations that meet certain eligibility criteria. A full list of the criteria an internet publisher must meet to be eligible for PPP funds can be found in the SBA’s Interim Final Rule discussing the Rescue Act’s changes to the PPP, available here.

Businesses affiliated with the People’s Republic of China or Hong Kong are barred from receiving any PPP funding under the Supplemental Act. A business is excluded from receiving PPP funds if 1) it is owned by an entity created in or organized under the laws of either China or Hong Kong, if that entity owns 20% of the business or more, or 2) a member of the business’ board of directors is a resident of People’s Republic of China.

Publicly traded businesses are not eligible for PPP loans under the CAA.

We expect more information regarding this new round of PPP loans to be released by the Small Business Administration and other government agencies in the coming weeks. We will continue to update the Modrall Sperling Website to reflect this guidance as it becomes available.

II. The Main Street Lending Program

The Federal Reserve established the Main Street Lending Program to support lending to small and medium-sized businesses and nonprofit organizations that were in sound financial condition before the onset of the COVID-19 pandemic. This program stopped accepting applications on January 8, 2021. More information on the Program can be found on the Federal Reserve’s website.

III. Student Loan Payment Relief

On August 8, 2020, Then-President Trump issued the Memorandum on Continued Student Loan Payment Relief During the COVID-19 Pandemic, available here. Essentially, this allowed borrowers of student loans that are held by a federal agency to suspend payments until December 31, 2020 without penalty or accrual of interest. However, this relief does not apply to borrowers whose student loans are held by private entities. President Biden later extended this emergency relief to suspend payments on federally held student loans through September 30, 2021.

IV. Mortgage Assistance

The Rescue Act appropriated $9.961 billion to create a Homeowner Assistance Fund  (HAF) designed to help homeowners cover qualified expenses related to mortgages and housing. The Department of the Treasury is charged with distributing funds to individual states who then have the freedom to decide how best to use those funds to help homeowners in the state. The Rescue Act itself provides that assistance can be used to help homeowners make mortgage payments, utility payments, payments for internet service, payments for homeowner’s insurance, or homeowner’s association fees. HAF assistance can also be used to facilitate interest rate reductions or reinstate a mortgage that is currently in a state of forbearance, delinquency, or default.

The New Mexico Mortgage Finance Authority has announced a COVID-19 Housing Cost Assistance Program that will use federal HAF funds to provide grants to eligible homeowners to help make mortgage payments. To be eligible, a homeowner must:

  • Have an annual gross household income of 80% or less of the area median income adjusted for family size OR reside on tribal lands;
  • Have a residence in New Mexico
  • Have been current on all housing payments through February 28, 2020; AND
  • Certify that they have suffered a COVID-related financial hardship

The application period for the Housing Cost Assistance Program opened on March 4, 2021. More details about the Program as well as information on how to apply can be found here.

V. Deferring Payroll Tax Obligations

On August 8, 2020, President Trump issued the Memorandum on Deferring Payroll Tax Obligations in Light of the Ongoing COVID-19 Disaster, available here. While most employers did not offer this option, for those that did the Internal Revenue Service, later issued guidance, available here, stating that repayment of payroll taxes for applicable wages was postponed until the period beginning on January 1, 2021, and ending on April 30, 2021. Congress subsequently extended this repayment period for deferred payroll taxes through December 31, 2021 as part of the Consolidated Appropriations Act.

VI. Grants for Shuttered Venue Operators

The Rescue Act and the Consolidated Appropriations Act have appropriated $16.25 billion for the Small Business Administration to make grants to certain businesses with operations that have been severely impacted by the virus. Qualifying businesses include live venue operators or promoters, theatrical producers, live performing arts organization operators, museum operators, motion picture theater operators or talent representatives that meet certain requirements. Any of these businesses that can demonstrate a 25% reduction in revenue as compared to 2019 are eligible to apply. Of the $15 billion in available funding, $2 billion has been set aside specifically for eligible businesses that employ fewer than 50 full-time employees. Because the new statute contains many fine points and distinctions as to what businesses qualify, individuals with questions about whether their business qualifies for funding under this program should consult legal counsel.

Businesses receiving funds under this program are limited in how they use those funds to pre-determined categories of eligible expenses. These categories of eligible expenses are similar to the eligible expenses under the PPP and include payroll costs, mortgage/rent payments, utilities, personal protective equipment for employees, payments on loans in existence before February 2020, and maintenance expenses.

While the SBA has not yet opened the application for Shuttered Venue Operators Grants (SVOGs), it has released FAQs concerning different business’ eligibility for the program, which can be found here. Additionally, the CAA itself mandates an incremental approach to distributing funds. During the first 14 days of the program, grants will only be awarded to eligible entities who can demonstrate a 90% or greater revenue loss. For the 14 days following the initial 14-day period, grants will only be awarded to eligible entities who can demonstrate a 70% or greater loss of revenue. After these two periods have passed, grants can be awarded to any eligible entity. The SBA estimates the SVOG application period will open toward the end of April 2021. Interested businesses can create an account and sign up to be notified when the application opens, by visiting the SBA’s website, available here.

The Rescue Act amended the SVOG program to allow businesses that received a PPP loan in the past to apply for SVOG funding as well. However, any entity that received a PPP loan after December 27, 2020 will have their SVOG funding reduced by the amount of the PPP loan. Further, once a business is approved for SVOG funding, it cannot subsequently apply for a PPP loan.

The maximum grant a business can receive under this program is limited to the lesser of $10 million, or 45% of the business’ gross revenue in 2019.

VII. Restaurant Revitalization Grants

The Rescue Act appropriated $28.6 billion to create a Restaurant Revitalization Fund designed to provide grants to businesses in the food and beverage sector. Eligible businesses include restaurants, food stands, food trucks, food carts, caterers, saloons, inns, taverns, bars, lounges, brewpubs, tasting rooms, taprooms, licensed facilities or premises of a beverage alcohol producer where the public may taste, sample, or purchase products, and other similar places of business in which the public assembles for the primary purpose of being served food or drink. However, publicly traded companies and any business that owns or operates 20 or more establishments is ineligible. Any business that has applied for or received Shuttered Venue Operator Grants is also ineligible.

An Eligible Business can receive a total amount of funds equal to its “pandemic related revenue loss,” which is calculated by subtracting its 2020 gross receipts from its 2019 gross receipts. If the business was not in operation for the entirety of 2019, the maximum grant amount is the difference between twelve times the business’ average monthly gross receipts in 2019 and twelve times the business’s average monthly gross receipts in 2020.

Similar to PPP loans and other COVID aid programs, Restaurant Revitalization Grant Funds can only be spent towards certain categories of eligible expenses. Those categories are: payroll costs, mortgage/rent payments, utilities, maintenance expenses (which includes construction costs incurred to accommodate outdoor seating), supplies such as protective equipment and cleaning supplies, inventory costs, certain covered supplier expenses, paid sick leave, and any additional categories of expenses that may be determined by the SBA. Additional details surrounding the eligible uses of RRG funds, as well as other aspects of the RRG program can be found in the SBA’s Restaurant Revitalization Grant Program Guide, available here.

The SBA has released a form for businesses to use in applying for RRG funds, which can be found here. However, the SBA has not yet opened the RRG application period, which is expected to launch in early May 2021. Once the application period opens, eligible businesses will be able to submit applications through the SBA’s online portal located here. We will update this page with additional details on the RRG program as further guidance becomes available.

VIII. Targeted Economic Injury Disaster Loan Advances

The Rescue Act allocated an additional $15 billion to the SBA to fund Targeted Economic Injury Disaster Loan Advances (TEIDLAs). Despite their name, TEIDLA funds are distributed as grants, and there is no obligation to repay a TEIDLA once it is issued. Further, TEIDLA funds are not included in the recipient’s gross annual income and are therefore not subject to state or federal income tax.

TEIDLA funds are limited to businesses operating in low income communities. The business must have fewer than 300 employees and have suffered an economic loss of more than 30% due to the pandemic. A business’ pandemic related loss is calculated by comparing the business’ gross receipts from any eight week period between March 2, 2020 and December 31, 2021 with the corresponding eight week period prior to March 2, 2020.

Currently, the SBA has further limited eligibility for TEIDLA funds to two “priority” groups. The first group includes businesses that received an EIDL advance of less than $10,000 during 2020. The second group includes businesses that applied for an EIDL advance before December 27, 2020 but did not receive one due to EIDL advance funds being exhausted. The SBA will contact eligible businesses via email to notify them of their eligibility for TEIDLA funds.

If funds remain after “priority” businesses are given a chance to apply, the SBA will open the TEIDLA program to eligible businesses who do not fit within either priority group. While SBA has not yet announced any plans to open the program beyond these priority groups, we will update this page with new information as it becomes available.


2. What is the Current Guidance for Seeking PPP Loan Forgiveness?


The guidance for PPP loan forgiveness has evolved over time. The frequent changes to the PPP forgiveness process can be confusing. The information below is intended to provide a general overview of the current PPP loan forgiveness provisions. For specific questions regarding your PPP loan you should contact your lender and consult legal counsel with additional questions.

PPP loan borrowers apply for forgiveness through their SBA approved lender, not the SBA. Forgiveness guidance is available on SBA’s PPP page.

For those borrowers who already applied for forgiveness, the SBA began approving PPP forgiveness applications and remitting forgiveness payments to PPP lenders October 2, 2020. If you have already submitted a loan forgiveness application and you are uncertain of the status of your application, it is very important that you check with your lender and not assume that the application has all of the information required under any new funding act. Every item required to be documented must be complete for a lender to submit a forgiveness application to the SBA.

Note that if a borrower does not submit a forgiveness application within 10 months of the end of the Covered Period (borrowers may choose any time period between 8 and 24 weeks beginning immediately upon disbursement of PPP funds as their Covered Period), deferral on PPP loans ends, and borrowers must begin making payments. This and other helpful guidance can be found on SBA’s Loan Forgiveness webpage, available here.

The SBA has also offered guidance on appealing rejections of PPP loan forgiveness applications. See Subsection B below for an outline of the procedure to appeal PPP loan forgiveness applications that have been rejected.

Whether or not you have submitted your loan forgiveness application, it is important to keep detailed records of how you are complying with the stringent PPP loan rules. Applicants should continue to maintain detailed records of receipts and expenditures of the PPP loan from the beginning of the covered period. While the PPP rules only require that you keep records for 6 years, we suggest you keep your records for the 7 years required by the IRS because there can be tax implications associated with the loans. Applicants should draft memos—reviewed by counsel—to document eligibility for loan forgiveness.

I. Loan Forgiveness Requirements 

Loan forgiveness is based upon the business’ actions during the covered eight to twenty-four-week period. From there, the amount forgiven is determined by certain costs incurred and payments made throughout the covered period. Payroll costs are the primary eligible costs, and include:

  1. Salary, wages, commission or similar compensation (limited to $100,000.00 compensation or less per employee)
    1. Notably, the Rescue Act amended the PPP forgiveness requirements to exclude payroll costs that are used to determine an employer’s eligibility for the Employee Retention Tax Credit and the Disaster Credit from the amount eligible for forgiveness. Any payroll costs taken into account to determine the amount of credit an employer receives are not eligible for forgiveness.
  2. Payments for vacation, parental, family, medical or sick leave (this may be limited if the Employer got benefits under the Families First Corona Virus Response Act, FFCRA)
  3. Allowance for dismissal or separation
  4. Payments for the provision of group health care benefits, including insurance premiums
  5. Payments for retirement benefits
  6. State or local payroll taxes

Under the PPP Flexibility Act, available here, no more than 40 percent of the loan forgiveness amount can be attributable to non-payroll costs. Those non-payroll costs eligible for forgiveness include:

  1. Interest payments on mortgages incurred in the ordinary course of business on real or personal property so long as the mortgage was in existence as of Feb. 15, 2020


  1. Rent payments under leasing agreements in existence as of Feb. 15, 2020


  1. Utility payments for electricity, gas, water, transportation, telephone or internet for which service was in existence as of Feb. 15, 2020.

The Consolidated Appropriations Act, passed in December 2020, expanded the types of costs eligible for forgiveness under the PPP. In addition to the categories above, eligible costs also now include:

  1. Covered Operations Costs – Payment for business software or cloud computing services that help facilitate business operations.


  1. Covered property damage costs – Costs related to property damage due to public disturbances that occurred during 2020 that are not covered by insurance.


  1. Covered supplier costs. Expenditures to a supplier pursuant to a contract, purchase order, or order for goods that were in effect prior to taking out the loan that are essential to the recipient’s operations at the time at which the expenditure was made. Payments to suppliers for perishable goods can be made before or during the life of the loan.


  1. Covered worker protection expenditure. Personal protective equipment and adaptive investments to help a loan recipient comply with federal health and safety guidelines or any equivalent State and local guidance related to COVID-19 during the period between March 1, 2020, and the end of the declared national emergency(currently set to expire on July 20, 2021).

It is possible that the borrower’s forgiveness amount could still be proportionately reduced if the business has reduced its number of full-time equivalent (FTE) employees, or if the business has reduced the salary or wages of certain employees. The PPP Flexibility Act has loosened those restrictions in the following ways:

Workforce Restoration Timeline Extended: Borrowers were given until December 31, 2020, to restore their workforce levels and wages to qualify for full loan forgiveness. The prior deadline was June 30, 2020.

Forgiveness Requirements Eased: If borrowers can in good faith document that from February 15, 2020 to December 31, 2020 they could not: (1) rehire individuals who were employees on February 15, 2020, or hire similarly qualified employees for unfilled positions on or before December 31, 2020; or (2) return to the same level of business activity at which such business was operating before February 15, 2020, because of COVID-19-related operating restrictions, they may still have their loans fully forgiven without fully restoring their workforces.

As mentioned above, the rules for PPP loan forgiveness have changed over time. For a full chronological list of all the interim rules posted starting April 2 up until now, go here or visit past versions of our site to see their evolution.

II. Loan Forgiveness Applications

The Consolidated Appropriations Act, passed in December 2020, created a simplified forgiveness process for PPP loans under $150,000. Under this simplified process, borrowers need only submit a signed letter of certification to their lender verifying their eligibility for forgiveness. This letter, limited to one page or less, must state:

  • The number of employees the borrower was able to retain because of receiving the PPP loan;
  • An estimated amount of the PPP loan the borrower spent on payroll or other categories of covered costs; and
  • The total amount of the loan.

The Small Business Administration has created a simplified form for borrowers to use in submitting this letter of certification, available here.

Borrowers are NOT required to submit any additional supporting documentation under this simplified forgiveness process, but borrowers should nonetheless retain relevant records in the event of an audit.

If your loan was for over $150,000, you must determine whether you qualify for Form 3508EZ which may only be used by borrowers who are either self-employed, independent contractors, or sole proprietors. If none of these apply to you, then your forgiveness application must be done on Form 3508, last updated January 19, 2021. Both forms have further requirements regarding employees’ salaries and wages, as well as possible deductions. For those specifics you should consult the forgiveness application instructions for each form and the SBA’s Frequently Asked Questions regarding Paycheck Protection Program Loans, last updated October 13, 2020 and available here. 

There is a review process for borrowers whose PPP loan forgiveness applications are denied by their lender. This process is only available to borrowers who have had their forgiveness applications denied by their lender in full, lender decisions that deny a borrower’s forgiveness application in part and approve it in part are not reviewable. A borrower whose forgiveness application is denied in full may notify their lender that they intend to seek SBA review of the denial within 30 days of the lender’s decision. The lender will then convey the borrower’s request for review to the SBA. The SBA has discretion to decide whether to accept a borrower’s request for review or deny the request and let the lender’s decision stand.

If the final SBA review process also denies the borrower’s PPP loan forgiveness application, the borrower may appeal through the SBA’s Office of Hearings and Appeals. To appeal, borrowers must follow the steps outlined in this interim final rule.

III. Additional Forgiveness Considerations

Under the CARES Act, if a borrower applying for PPP loan forgiveness also received an Economic Injury Disaster Loan Advance (EIDLA), the SBA was required to reduce the borrower’s loan forgiveness amount by the amount of the EIDL advance. The Coronavirus Response and Relief Supplemental Appropriations Act repealed this requirement. As such, borrowers who received EIDLAs will be eligible for forgiveness up to the total amount of their loan.

PPP recipients should be aware that the SBA may review any PPP loan, regardless of size, to determine if the borrower was eligible for PPP loans under the CARES Act, whether the borrower calculated the loan amount correctly and used the funds for eligible costs, and whether the borrower is eligible for the amount of loan forgiveness it requests. For this reason, it is critical that borrowers keep all paper and electronic records related to loan disbursement and spending for at least 6 years after the date that the loan is forgiven or repaid in full. (Six years is the minimum for PPP purposes, but for tax purposes, as noted above, we recommend seven years.)

However, FAQ 46, available here, provides that if the SBA in the course of its forgiveness review comes across a mistake on the part of the borrower, the SBA will notify the borrower, who can repay the loan without penalty. If you received a PPP loan and are contacted by the SBA regarding a mistake you should contact your legal counsel and accountants right away.

Borrowers who received a PPP loan of $2 million or more are required to fill out a Loan Necessity Questionnaire, available here, as part of the SBA’s review process. Borrowers who received $2 million or more in PPP loans should consult legal counsel regarding their responses to and possible consequences of these questionnaires for the Borrower.

If you are PPP recipient contemplating a sale of assets of your business, you need to consider the SBA rules regarding loan forgiveness in that context. On October 2, 2020, the SBA issued a procedural notice clarifying when borrowers of PPP loans and their lenders need SBA permission for changes of ownership. The recently issued procedural notice changed the definition of a “change of ownership.” Part of the change in definition means that if the sale or transfer is less than 50% of the company’s equity or assets and the borrower has already completed a PPP forgiveness application with the lender, PPP borrowers and lenders do not need to seek SBA approval. If the sale or transfer is 50% or more of the company’s equity or assets, the borrower may need SBA approval depending on whether the borrower has completed the following requirements with the lender: (1) the borrower has completed a PPP loan forgiveness application; (2) the borrower has submitted the PPP loan forgiveness application to its PPP loan lender; and (3) the borrower has set up an interest-bearing escrow account with that lender to cover the PPP loan. However, if any of those requirements cannot be met, the borrower must still get SBA approval for the sale or transfer. Previously, SBA approval was always required. Notably, even if business ownership is transferred, the original borrower is still responsible for the PPP loan.

If your business is a PPP borrower and has not obtained PPP forgiveness, you should consult with your lender before planning any sale of equity or assets. Additionally, we recommend consulting legal counsel prior to agreeing to any transfer of equity or assets so that a clear plan to maintain loan forgiveness is determined. Meg Meister and Ian Bearden are working in this area.


Latest New Mexico State Action

3. What State Programs Are Available to Aid New Mexico Businesses Harmed by COVID‑19?


I. The New Mexico Recovery Fund 

The New Mexico Recovery Fund, L.P., is a $100 million direct lending facility designed to help larger New Mexico-based business make it through the current crisis. The money comes from the State Private Equity Investment Program and is administered by Sun Mountain Capital. This fund is for New Mexico business with 40 or more employees. Loans sizes vary based on the entity’s operating expenses but can range between $500,000 and $10,000,000. Note that there is no loan forgiveness component to the New Mexico Recovery Fund, L.P. The basic eligibility requirements are that the business:

  • Meet the definition for a “New Mexico based business.”
  • Employ 40 or more New Mexico based employees.
  • Demonstrate negative COVID-19 economic impact.
  • Commit to spending at least 80% of loan proceeds in New Mexico.

To learn more about eligibility requirements and the application process visit Sun Mountain Capital’s website.

II. Local Economic Development Act Recovery Grants Related to COVID-19

 New Mexico House Bill 11, signed into law on February 26, 2021, as Ch. 3, Laws 2021, created a program to provide grants to New Mexico businesses for use on mortgage, rent, or lease payments. The bill, termed the Local Economic Development Act (“LEDA”), appropriates $200 million to the New Mexico Finance Authority to administer the grant program and make payments to qualifying businesses. To be eligible, a business must:

  • Operate in New Mexico;
  • Have no more than 75 employees working at any one business location;
  • Be current on all state and local tax obligations;
  • Demonstrate a loss of revenue during at least one quarter of 2020 as compared to the same quarter in 2019; and
  • Certify that grant proceeds will be exclusively used to make rent, lease, or mortgage payments on behalf of the business.

LEDA grants will be paid out to the business in four equal installments with one payment being disbursed per quarter. A business that receives a LEDA grant must demonstrate a net increase in the number of full-time employees every quarter in order to continue to receive payments. The exact formula for determining the total funding a business can receive has not been established, but LEDA itself implements a $100,000 cap on all recovery grants.

The New Mexico Finance Authority is charged with developing rules and issuing guidance as to how the LEDA program will operate, but it has not yet done so. This guidance, when issued, will answer many of the remaining questions around the LEDA grant program, including how businesses can apply for grants, how the amount of each business’ grant will be determined, and when businesses that are approved for funding can expect to receive their first payment. We will update this page with new information as it becomes available.

III. The Small Business Recovery and Stimulus Loan Fund

 On March 3, 2021, the Governor signed The Small Business Recovery and Stimulus Act (the “SBRSA”) into law. The SBRSA extends the program established by the Small Business Recovery Act of 2020, which provided low interest loans to small businesses in New Mexico that were impacted by COVID-19 and the accompanying economic shutdown. The SBRSA appropriates $500 million for the New Mexico Finance Authority to extend loans to qualifying businesses. To qualify for an SBRSA loan, a business must:

  • Demonstrate, in a manner to be determined by the New Mexico Finance Authority, a “substantial decline” in gross revenue or a “substantial disruption” to the business’ operations due to the COVID-19 pandemic; AND
  • Have an annual net revenue of less than $5 million (as determined by the Finance Authority);

Additionally, only non-profit entities and certain types of for-profit entities are eligible for SBRSA funds. Specifically, a for-profit business must fit into one of three categories to be eligible. Those categories are:

  • Sole proprietorships where 100% of the business’ assets are owned or leased by New Mexico residents;
  • Other types of business entities wherein at least fifty-one percent of the total voting power of the entity and at least fifty-one percent of the total equity is owned by New Mexico residents; and
  • Any type of business entity that maintains a physical business location within New Mexico and has employed at least ten New Mexico residents as full time employees at any time since January 1, 2019

The SBRSA provides for more generally favorable loan terms as compared to the SBRA. Loans under the SBRSA are subject to the following terms:

  • SBRSA loans are capped at a maximum of $150,000 per business. Each individual business’ maximum loan amount is the lesser of $150,000 or three times the business’ average monthly expenses, as determined by the Finance Authority.
  • Businesses must spend the majority[1] of SBRSA funds on 1) “ordinary and necessary business expenses,” 2) making adaptations or improvements to the business’ assets that have been made necessary by the COVID-19 pandemic, and 3) purchasing or improving any assets for the purpose of developing and growing the business’ capacity to engage in e-commerce.
  • Loans may be made for terms up to ten years, and interest will not begin to accrue on the loan until the second year.
  • The interest rate for an SBRSA loan is fixed at one-half of the prime rate as of the day the loan is made.
  • Loan recipients are not required to make any payments during the first year of the loan, and payments during years two and three are limited to interest-only payments.

The SBRSA directs the New Mexico Finance Authority to create an application process for SBRSA loans and release guidance clarifying some of the more complex provisions of the Act. As of yet, this guidance has not been released. We will update this page with details on how interested businesses can apply as the information becomes available.

If you have questions, please contact:  Meg Meister and Robin James.


4. What COVID-19 Restrictions are in Place in New Mexico?


The statewide public health emergency first proclaimed by Governor Michelle Lujan Grisham in Executive Order 2020-004 has been renewed and extended many times. Most recently, it was renewed through May 28, 2021 in Executive Order 2021-012. This most recent order marks a significant change in New Mexico’s COVID-19 response. The state’s facemask requirement has been loosened to allow individuals to exercise or attend small outdoor gatherings without needing a mask. Restrictions on businesses have also been lightened, signaling that New Mexico is finally nearing the end of this pandemic. This section aims to highlight the major regulations impacting New Mexico businesses and non-profit corporations. For more information, a copy of the newest public health order can be found here.

I. The Red to Green to Turquoise Framework

 On November 30, 2020, the New Mexico Department of Health issued an order announcing a tiered county-by-county system for determining the public health restrictions applicable in a given county. This system, called the Red to Green to Turquoise Framework (the “Framework”), is designed to enable counties to shed burdensome restrictions as soon as public health data shows the virus is retreating within their borders. The Framework became effective December 2, 2020. The Department later modified the Framework via an April 28, 2021 order that lightened applicable restrictions for counties at low risk from COVID-19 and added vaccination rates as a metric to be considered when determining a county’s COVID-19 risk. A general description of the Framework is outlined below but for detailed information read the Department’s Public Health Order  issued on April 28, 2021or go to the Department’s Red to Green to Turquoise Framework page.

The Framework has 4 levels: Red, Yellow, Green, and Turquoise.

A county’s Framework level is based on specified health metrics.

The required public health restrictions vary depending on the county’s Level.

The Department’s official map displays each county’s current Level and is updated every Wednesday.

If a county fails to meet the specified metrics for a given level, the county must begin operating at the lower level’s restrictions within 48 hours of the map’s update.

If a county begins meeting specified metrics for a less restrictive level, the county may begin operating at that level’s restrictions immediately upon the map’s update.

Similar to previous amended orders, there are different operational and occupancy restrictions depending on the classification of the business or entity in question. For example, “essential businesses” have very different restrictions than “Food and Drink establishments” and each category’s restrictions vary depending on the county’s level. There are different restriction levels for each classification and within each Level. These differences are explained on the Department’s Red to Green to Turquoise Framework page.

II. Ongoing Public Health Requirements and Restrictions

 No matter a county’s level on the Framework, the following requirements remain in place throughout New Mexico:

  • Facemask Mandate: Facemasks are required to be worn in public except when actively eating or drinking, exercising outdoors alone or with members of the same household, or attending a small, outdoor gathering of fully vaccinated individuals. Individuals with medical instructions not to wear a mask are exempt from this requirement.
  • Recommended Quarantine for Individuals Traveling into New Mexico: On February 10, 2021, the Governor issued an executive order rescinding the mandatory 14-day quarantine that was in place for all individuals travelling into New Mexico from states deemed high-risk. While this new order recommends that anyone travelling into New Mexico from out of state quarantine or self-isolate for 14 days upon arriving in the state, the quarantine period is no longer required. The text of Executive Order 2021-006, which rescinds Executive Order 2020-075, can be found here.
  • Rapid Response COVID-19 Watch List: Any organization with two or more “rapid responses” in the last 14 calendar days is included on the New Mexico Environment Department’s Rapid Response COVID-19 Watchlist. A “rapid response” refers to a reported incident of COVID‑19 in the workplace to a state agency. Reporting of COVID-19 incidents in the workplace is required. Frequently Asked Questions about the watch list are available here.
  • Temporary Closure of Hotspot Businesses: Businesses that accrue a significant number of positive COVID-19 cases within their workforce in a two-week span are subject to temporary closure by the Department of Health. The Department’s press release is available here.
  • The closure process is triggered if four or more rapid responses occur within a 14-day period.
  • An essential business may be permitted to continue operating if state agencies determine the business is a necessary provider of goods or services within the community in light of geographic considerations.
  • Businesses that test each employee every two weeks and regularly provide contact tracing data to the Environment Department will not be subject to closure under this framework
  • Enhanced Safety Requirements for Businesses and Nonprofits: Businesses and nonprofits must adhere to the state’s COVID-Safe Practices. 

III. Shareholder Meetings During COVID-19 Public Health Emergency

 On November 24, 2020, Governor Michelle Lujan Grisham issued an Executive Order stating that any corporate bylaw requiring in-person shareholders’ meetings is temporarily invalid and unenforceable to the extent that it would require violating a Public Health Order. Furthermore, it directs that any shareholders’ meetings scheduled in January, February and March of 2021 are to be conducted by audiovisual means. The November 24th Executive Order is available here. The Governor renewed this Order on March 3, 2021 to extend the audiovisual requirement to all shareholder’s meetings held in April, May, and June of 2021. The March 3 Order is available here.

Shareholders’ meetings and Board of Directors meetings have not been identified as “essential” and have not been exempted from the Department’s Executive Order prohibiting “mass gatherings.” For a complete list of categories and definitions visit the Department’s website, available here. Under the Framework system, the number of individuals considered to be a “mass gathering” changes based on the county’s current level. Under the Red Level, all “mass gatherings” of more than five individuals are prohibited. For other levels, check the Department’s Red to Green to Turquoise Framework page.

Note that the United States Securities and Exchange Commission issued “Staff Guidance for Conducting Annual Meeting in Light of COVID-10 Concerns” which relaxes certain requirements and explains how virtual or hybrid meetings can be lawfully conducted under federal law during the COVID-19 pandemic. That guidance is available here.

If you have any concerns about conflicts between the SEC guidance and the state requirements for shareholders or directors meetings or are not sure how to comply with both, you should check with legal counsel.


4.5. How Do I Register to Receive a COVID-19 Vaccine?


New Mexico is currently in the midst of a highly successful vaccine rollout and boasts one of the highest COVID-19 vaccination rates in the nation. As of April 5, all New Mexicans over the age of 16 are eligible to receive a vaccine. The Department of Health maintains a registration page that allows individuals to sign up for an appointment to receive the vaccine. That page can be found here. Individuals with questions about New Mexico’s rollout of the vaccine or the registration process can call 855-600-3453 or visit the Department of Health’s website for assistance.

These are the lawyers who have been working in this area: Walter SternLynn SladeStuart R. ButzierBrian NicholsVanessa Kaczmarek,  Marjorie RogersRoberta RamoJennifer Andersonand Meg Meister.


Blended State and Federal Issues

5. How have COVID-19 and the Rescue Act affected tax matters and retirement plans?


I. Federal Tax Issues

As a result of the CARES Act, for 2020, individuals who do not itemize deductions are nevertheless allowed to take a deduction for cash gifts made to charitable organizations, other than donor advised funds or supporting organizations. The amount of the allowed charitable deduction is the lesser of the value of the cash gifts or $300 ($600 if married filing jointly).

For 2020, as to an individual who does itemize deductions, the individual is entitled to a deduction for cash contributions made to charitable organizations, other than donor advised funds or supporting organizations. The amount of the allowed deduction is the lesser of the value of the cash gifts or 100% of the individual’s adjusted gross income.

A corporation may claim a deduction for cash gifts made to charitable organizations, other than donor advised funds or supporting organizations. The amount of the allowed deduction is the lesser of the amount of the cash donations or 25% of the corporation’s taxable income. These increased deduction limits for charitable contributions only apply to cash gifts made in 2020.

Businesses may also claim a 100% deduction for business meal expenses incurred in 2021 or 2022. This deduction, which was included in the CAA, only applies to “food or beverages provided by a restaurant.” The meal does not need to be consumed on the restaurant’s premises to qualify for the deduction, meaning meals that are delivered or taken “to-go” are eligible for the 100% deduction.

The Consolidated Appropriations Act clarifies that PPP recipients will be allowed to deduct from their taxable income deductible expenses paid with the proceeds of a PPP loan, even if that loan is ultimately forgiven. As a result, PPP recipients will be able to deduct business expenses as if they had used non-PPP funds to cover those costs.

The Rescue Act contained several exemptions and other tax provisions that our clients should keep in mind as they prepare to file their 2020 returns and assess their 2021 tax liability.

  • The Rescue Act allows individuals making up to $150,000 to deduct up to $10,200 in unemployment benefits from their 2020 Annual Gross Income (AGI). Because New Mexico calculates its income tax based on an individual’s federal AGI, this deduction applies to both state and federal income tax.
  • The Rescue Act extended the Employee Retention Tax Credit (ERTC), originally enacted by the CARES Act, through December 31, 2021. The ERTC grants businesses a refundable tax credit equal to 50% of the “qualified wages” an employer pays to employees between March 12, 2020 and December 31, 2021.
    • Qualified wages include any wages paid to employees during a period where a business’ operations were suspended or the business was experiencing a decline in gross receipts as a result of the COVID-19 pandemic. An employer may only claim up to $10,000 in qualified wages per employee.
  • The Rescue Act also codified tax credits for businesses that provide sick and family leave to their employees. These credits were initially created under the Families First Coronavirus Response Act and provide an employer with a 100% tax credit towards any amount the employer expended providing paid coronavirus-related sick or family leave to its employees. The credits are capped at $12,000 per employee and extend through September 30, 2021.
  • The Dependent Care Tax Credit (DCTC) was also expanded under the Rescue Act. The Act significantly increased the cap on expenses for which the DCTC can be claimed, up to $8,000 for taxpayers caring for a single dependent and $16,000 for taxpayers with two or more dependents. Taxpayers can claim a credit equal to 50% of their qualifying dependent care expenses, up to the aforementioned cap. Additionally, the Rescue Act converted the DCTC to a refundable credit for 2021. This allows individuals to have any credit amount exceeding their overall tax liability issued as a refund. All of these changes are temporary and only apply for tax year 2021.

II. State Tax Issues

The New Mexico Taxation and revenue department recently issued a tax bulletin addressing the taxability of aid individuals and businesses have received as part of various COVID-19 relief programs. The bulletin discusses the taxability of the following types of aid:

  • Economic Impact Payments (EIPs) – Direct payments provided to individuals through the CARES Act, also known as EIPs, are not subject to income tax. The IRS has provided clear guidance that these payments are not included in the federal definition of adjusted gross income (AGI). Because New Mexico income tax is calculated based on federal AGI, EIPs are not subject to New Mexico income tax.
  • PPP Loans – Loans received through the Paycheck Protection Program are not included in the definition of gross receipts provided in NMSA 1978 § 7-9-3.5 and therefore are not subject to the New Mexico gross receipts tax. Additionally, the CARES Act specifically provides that PPP loans shall not be considered taxable income. Therefore, such loans are not subject to either corporate or personal income tax.
  • Other CARES Act Grants – Most grants funded through the CARES Act, such as Albuquerque Small Business Economic Relief Grants, would not meet the statutory definition of gross receipts and are therefore not subject to New Mexico’s gross receipts tax. However, any grants that required a business to perform a service as a prerequisite for receiving funding could be considered gross receipts subject to taxation. Anyone who is unsure whether the gross receipts tax applies to a grant they or their business received should consult their attorney. Additionally, most grants received through the CARES Act would be considered income and be subject to corporate or personal income tax. However, each type of grant has its own rules and some are specifically excluded from taxation. Therefore, anyone who is unclear whether a specific grant is subject to New Mexico income tax should consult their attorney.

During the 2021 regular session, the New Mexico Legislature passed and the Governor signed House Bill 255, which creates new and sizable tax deductions for certain liquor license holders. To be eligible for these deductions, an individual or business must hold a dispenser’s license. Retail and restaurant license holders do not qualify. Further, sales of alcohol for off premises consumption must account for less than fifty percent of the business’ total alcoholic beverage sales in order to claim the deductions. HB 255 created two separate deductions:

  • Individuals or businesses that hold liquor licenses and lease them to another are eligible to deduct the total amount of alcohol sales made by the lessee (up to $50,000) from the lessor’s taxable income.
  • Individuals or businesses that hold liquor licenses as of June 30, 2021 may deduct from their taxable gross receipts an amount equal to the alcohol sales made by the license holder (up to $50,000).

Both of these deductions may be claimed every year for taxable years 2022 through 2025.

The 2021 New Mexico Legislature also passed House Bill 278 (signed by the Governor on April 5, 2021), which establishes a gross receipts tax reduction for goods and equipment sold to “manufacturing service providers.” “Manufacturing service providers” are defined as businesses engaged in the business of “combining or processing components or materials owned by another.” Notably, businesses engaged in construction, farming, energy generation, or preparing meals for immediate consumption are excluded from the definition of “manufacturing service providers.” The bill allows entities that sell or lease equipment or consumable goods used in the manufacturing process to manufacturing service providers to deduct the revenue from that sale or lease from the business’ gross receipts.

III. Retirement Plan Issues

The CARES Act had a number of very important exemptions or changes to rules concerning retirement plans of all kinds.  These range from changes providing large loans and distributions from qualified plans for those qualifying for them to suspension of required minimum distributions (RMDs) for 2020. Other changes were made that might make a difference in your decisions about charitable gifts from IRA’s and certain estate planning matters.  For example, qualified individuals have three years to return COVID-19 related distributions from IRAs and retirement plans

For Retirement Plan questions of all kinds, Karen Kahn is working on these matters.

For other tax matters, including state taxes and estate tax questions the following lawyers are able to help: Vanessa KaczmarekMarjorie RogersZack McCormickRoberta Ramo and Nadine Shea.

If you have questions about New Mexico State Gross Receipts Tax issues generally, please contact Zack McCormick.


6. Are There Any Health Insurance or Other Benefits Issues?


Certain protections for continuation of health benefits are covered by the CARES Act.  However, many of these depend upon the hour requirements of the employer’s plan and there may be state insurance rulings that have changed.  The U.S. Department of Labor (DOL) and the IRS have waived health plan claims deadlines for both employees and employers, including deadlines for paying COBRA premiums. The waiver of deadlines has continued into 2021 based on each individual participant’s original deadline. The Consolidated Appropriations Act of 2021 (“CAA”) permitted carryover for Health FSAs and Dependent Care Reimbursement Accounts (DCRAs). Under the CAA, Employers can 1) permit the carryover of all unspent Health FSA and DCRA funds from 2020 in to 2021 and from 2021 to 2022; 2) permit prospective Health FSA and DCRA account changes in 2021 without a qualifying status change, 3) allow unused DCRA funds for childcare reimbursement incurred in 2020 and 2021 for children up to age 14, and 4) permit employees who cease participation in 2020 and 2021 to use unspent pre-termination funds through the end of the plan year in which the participant terminated. Employees can still use telehealth services without disqualifying Health Savings Account (HSA) contributions Amendments to plan documents are required by December 31, 2021.

The CAA also made major changes to surprise billing and reporting requirements for health plans. Surprise billing comes from obtaining medical services in emergency rooms, hospitals or from medical groups that are not covered by an individual’s health insurance, which is unknown to them at the time the medical care is rendered. The law attempts to solve surprise billing starting on 01/01/2021 by prohibiting it in certain circumstances and limiting amounts paid in other circumstances. Guidance is needed in this area. Starting in 2022, employer group plans will need to disclose significant amounts of information about cost-sharing and will have to report to the federal government extensive demographic information, pharmacy costs, and other claims data. For mental health and substance abuse, plans will need to perform annual compliance tests for mental health parity.

Further, the New Mexico Office of Superintendent of Insurance has issued various guidance documents relating to the COVID-19 pandemic. A continually-updated collection of these documents can be found here. 

ARPA allows employers to increase the amount employees can contribute to Dependent Care Account Plan to $10,500 only for 2021. Plans can be amended retroactively to reflect this change so long as the amendment is adopted by the last day of the plan year in which the amendment is effective and the plan is operated in accordance with the amendment’s terms beginning on its effective date. The Rescue Act made a number of other significant changes that affect employer provided benefits. Specifically:

  • ARPA created a 100% COBRA premium subsidy for employees (and their families) who have lost group health plan coverage due to an involuntary termination of employment or reduction of hours. The Rescue Act requires an employer to pay 100% of the employee’s COBRA premium for April 1 to September 30 if the employee elects coverage and is neither eligible for any other group health coverage nor Medicare. The employer will be reimbursed for this expense via a credit against Medicare taxes. Any credit amounts that exceed an employer’s Medicare tax liability will be issued as a refund.
    • Individuals who experienced an involuntary termination or reduction in hours within the last 18 months but did not elect COBRA coverage or have since dropped COBRA coverage can elect now. Coverage based on this subsidy is prospective only. Employers are required to provide new COBRA notices to these individuals informing them that they have a new 60-day election period to opt-in to coverage beginning the day they receive the notice. There are significant penalties for not issuing the new notice. The Department of Labor has created a model notice for employers to use in complying with this requirement, which can be found
  • The Rescue Act also made temporary but significant changes to the existing ACA premium subsidies. For years 2021 and 2022, the Act eliminated the upper income limit for eligibility for premium tax credits, which is currently set at 400% of the federal poverty level. The Act effectively increases the amount of the premium tax credit by decreasing the minimum amount an individual must contribute to the cost of coverage. Individuals with incomes at or above 400% of the poverty limit must contribute at least 8.5% of their household income to the cost of coverage to be eligible for the credit.
    • New Mexico also took steps towards creating premium subsidies for low income individuals who obtain coverage through New Mexico’s Health Insurance Exchange. The state recently enacted legislation creating a Health Care Affordability Fund (HCAF), which will be funded using the proceeds from a tax levied on insurance providers equal to 3.75% of the total premiums and policy fees received by the insurance provider. Funds in the HCAF may be used for several purposes, including subsidizing premiums for low income New Mexicans, providing assistance to small businesses who are struggling with health care costs, and providing aid to uninsured New Mexicans who do not qualify for federal assistance. The Superintendent of Insurance has been charged with developing a plan for how HCAF funds will be used, but details on that plan are not expected to be available until 2022, with funds being distributed beginning in 2023.
  • Finally, the Rescue Act changed the funding rules for all defined benefit pension plans and provided significant financial assistance to underfunded multi-employer pension plans. For qualifying multi-employer pension plans, this financial assistance comes in the form of a fund administered by the Treasury Department created to provide grants.

Also important are the requirements of HIPAA when an employer finds that an employee has been diagnosed with COVID-19.  Kevin Pierce is ready to answer HIPAA questions and Karen Kahn can help with health plan, cafeteria plan, and retirement plan questions.


7. How Have the Laws Passed in Response to COVID-19 Affected Employers?


The DOL is requiring employers to post a notice of the Families First Coronavirus Response Act (FFCRA).  The FFCRA became effective on April 1, 2020.  The current poster applicable to non-federal employees (last updated March 26, 2020) can be found here.  The DOL has provided additional information regarding the FFCRA and related posters on the DOL website here.

Employers are required to inform employees of the rights afforded by the FFCRA.  The DOL counsels that an employer may satisfy this requirement by emailing or direct mailing this notice to employees, or posting this notice on an employee information internal or external website.

As businesses reopen, they should review the guidelines from the CDC, available here and here, and the State of New Mexico, available here. Note that businesses that are currently open must follow many requirements in the Governor’s Orders, including the number of people that can be in their business and other requirements. The CDC has also released guidance for employers to consider in determining whether and how to secure COVID-19 vaccines for their employees. That guidance can be found here. The New Mexico Department of Health recently announced that businesses will soon be able to sign up for COVID-19 vaccination clinics for their employees. The Department has not yet announced how interested businesses may sign up for a clinic, but it is expected to release guidance to that effect soon.

Attorneys in our Employment Group, including Jennifer Anderson and Megan Muirhead can help with these kinds of issues.


7a. What Should Employers Know as Their Businesses Go Through the Process of Re-Opening?


The Department of Labor and the Equal Employment Opportunity Commission have issued guidance—available here—to help employers apply sick leave and the expanded Family Medical Leave Act and to avoid claims for discrimination, retaliation, and harassment in the workplace based on COVID-19.  The Guidance covers matters such as the ability for employers to take the temperatures of employees entering the workplace, and limitations on disclosing the identity of a COVID‑19 positive employee. The EEOC recently released further guidance addressing other questions employers may have, such as whether an employer may require employees to be vaccinated, whether an employer may inquire about the vaccinated status of employees, and the duty to accommodate an employee’s request for accommodation based on a fear of contracting COVID‑19. That guidance can be found here.

Modrall Sperling’s Employment Group is ready to navigate employers through these and other potential areas of exposure.  These guidelines continue to change and you should consult with your attorney before you take action.


8. How Have the Laws Passed in Response to COVID-19 Impacted Real Estate Leases?


Both residential and commercial leases are impacted by the COVID-19 shutdown.

For commercial leases, look first to the language of the lease. Many tenants have stopped paying rent during the shutdown and both landlords and tenants are looking at their leases. The result of that analysis is in part dependent upon the language of the leases.  However, many leases do not address a virus in a clear way.  Additionally, tenants who were recipients of PPP loans may be required to pay rent under certain terms of that loan.  Other loans may not have a similar requirement.  Landlords should be clear about following the notice provisions of the default clauses in their leases and tenants would be well advised to get in touch with their landlords directly.  Any written communication by either the landlord or tenant should be reviewed by your attorney.  Meg Meister and Roberta Ramo are working in this area.

For residential leases, the following information may be helpful:

The CARES Act contained a 120-day “moratorium” on landlords evicting tenants or imposing fees/fines due to a tenant failing to pay rent.  This moratorium expired on July 24, 2020, but the CDC recently extended the moratorium through June 31, 2021. This eviction moratorium applies to “covered dwellings” and “covered properties”, which include any property that participates in a covered housing program including such as (among other programs) the Low Income Housing Tax Credit program (26 U.S.C. § 42) and programs pursuant to which the landlord’s mortgage is a HUD, VA, USDA or Fannie Mae or Freddie Mac loan.

Additionally, the Consolidated Appropriations Act allocated $25 billion to provide financial assistance to renters who are unable to pay their living expenses. To qualify, a household must show:

  • The aggregate income of all members of the household does not exceed 80% of the Area Median Income established by the Department of Housing and Urban Development;
  • One or more members of the household can demonstrate a risk of experiencing homelessness or housing instability; and
  • One or more members of the household qualifies for unemployment benefits or has experienced financial hardship due to the pandemic.

Disbursement of these funds will be overseen by state and local governments. The New Mexico Finance Authority (NMFA) recently opened the application period for its COVID-19 Housing Cost Assistance Program. That program provides grants to New Mexico residents who have been unable to make housing payments due to the pandemic. Information on how eligible individuals can apply for funding is available on the NMFA’s website, available here. To be eligible, an individual must:

  • Maintain their primary residence in New Mexico,
  • Have an annual gross household income of less than or equal to 80% of the applicable area median income adjusted for family size (a chart listing income limits by county can be found here),
  • Certify they have suffered financial hardship as a result of the COVID-19 pandemic, and
  • Have been current on all payments to housing providers through February 28, 2020.

In addition to the federal moratorium, relief for renters continues to be in effect at the state level. Before the enactment of the CARES Act, the New Mexico Supreme Court issued an Order staying the execution of all writs of restitution under the Owner Resident Relations Act for non-payment of rent, provided the resident “has demonstrated by a preponderance of the evidence a current inability to pay monthly rent established by the rental agreement.”  The Order does not contain a termination date, and instead, “shall remain in effect until amended or withdrawn by future order of the Court.”  Accordingly, the Order continues to apply. There is a list of Frequently Asked Questions on New Mexico Courts website, available here.


9. Creditor’s Rights Issues Arising from the Pandemic


In addition to leases, COVID-19 has had a dramatic effect on loan repayments. Businesses that extend credit are being requested to forbear collection and the CARES Act has expanded certain bankruptcy relief.  Moreover, the dramatic oil price reduction has hurt businesses and individuals within, and dependent on, the oil and gas industry for revenue.  Creditors should understand their rights and the rights of their borrowers, including the revisions to the Bankruptcy Code under the CARES Act.

On Friday, June 5, 2020, the New Mexico Supreme Court handed down an order, available here, suspending any issuance of new writs of garnishment and writs of execution in consumer debt cases. Previously-issued writs and domestic support obligations are unaffected.

Attorneys Paul FishDoug Vadnaisand Spencer Edelman can provide guidance on these issues.


10. Is it possible to execute new Estate Planning Documents during the shutdown?


Yes.  In New Mexico, documents that only need to be witnessed by a notary may be notarized by video (i.e. Zoom or FaceTime), if certain requirements are satisfied. Initially, the notary by video was allowed until June 20, 2020 but that time limit has since been extended until rescinded by Governor Lujan-Grisham under Executive Order 2020-039.

Most states have enacted some form of remote notarization. However, state laws and guidance are evolving quickly during the ongoing pandemic, so it is a good idea to check the laws of the state where you are notarizing the documents. A helpful resource that summarizes approaches from different states is available here.

Additionally, and especially important now, is letting someone in your family know where your original wills, trusts, durable powers of attorney and health care directives are kept.  If you have questions about creating or updating your estate planning documents, the attorneys in our Trusts and Estates Group, including Marjorie Rogers, Vanessa Kaczmarek, Roberta Ramo and Nadine Shea can help.


11. Risk management and related litigation


The Long Term Care and Healthcare industries are facing regulatory and personal injury claims related to COVID-19. Our attorneys have handled regulatory and litigation matters for our clients in the Long Term Care and Healthcare industries, such as skilled nursing facilities and assisted living facilities, and hospitals, including regulatory proceedings, trials and appeals, and they are well-versed in recent COVID-19 developments.  Should you be threatened with COVID-19 related litigation or regulatory enforcement matters, attorneys, Michelle A. HernandezTomas J. GarciaTim L. FieldsSusan Miller and Jeremy Harrison can help you.


The most important advice of all:  Stay safe, practice social distancing, wash your hands, wear your masks and know that we all care about our whole community and are here now and in what we know will be a robust recovery for New Mexico.


[1] Businesses that have no paid employees must spend at least 50% of the loan on qualifying expenses. All other businesses are required to spend at least 80% of loan funds on qualifying expenses.

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