Legal Blogs and Updates

Bill Castner, the author of the following post, is the subject of the ROI-NJ article "Why businesses should expect more closures, stay-at-home orders — and to wait for federal grants."

New Jersey is moving at breakneck speed and advancing some of the most aggressive steps in the nation in an effort to mitigate the spread of COVID-19. The impact of these efforts remains to be seen but government has clearly made the calculation that the protection of our residents is paramount. To be clear, the various measures to confront the pandemic are having – and will continue to have –a seismic and disruptive impact on our state’s businesses, employees and economy at large. Here is what to expect, and what not to expect, in the weeks and days ahead in New Jersey as elected officials and policymakers continue to grapple with confronting this pandemic:

• What to Expect: Expanded business closures and additional stay-at-home orders:  We just witnessed the state of California — the equivalent of the 5^th largest economy in the world — announce a sweeping statewide “stay at home” order with exceptions for critical infrastructure workers as defined by the federal government. https://www.cisa.gov/identifying-critical-infrastructure-during-covid-19.  As the virus continues to spread, businesses in New Jersey should anticipate the prospect of similar and more expansive executive action. Businesses providing essential services or producing critical materials that need to stay open would be well served to begin preparing a letter or correspondence that can be delivered to authorities describing the importance of keeping their businesses open, the safety precautions they are taking to protect employees, and the adverse public health or safety consequences of shutting down business.      
• What NOT to Expect: State subsidies for businesses without a federal block grant:  It is possible that state agencies such as the New Jersey Economic Development Authority (EDA) may attempt to offer some modest relief measures to state businesses. In fact, the state Legislature yesterday passed a measure (A-3845) authorizing EDA to do so. However, unlike the federal government, the state of New Jersey has a balanced budget requirement under its constitution. The reality is that the state does not have the financial wherewithal to provide the types of massive subsidies necessary for our state businesses without assistance like block grants from the federal government. The state in all likelihood will need to utilize reserves to even balance the budget for the current fiscal year — so the idea that it can issue substantial grants to businesses during this period without massive federal assistance is not realistic. New Jersey needs help from Congress.  
• What to Expect: Uniform statewide standards on closures:  There has been a patchwork so far of various state, county, and municipal orders, announcements and directives in New Jersey related to business closures. Although many of these orders have been issued by well-intentioned local officials seeking to protect their residents, contradicting directives have resulted in considerable confusion. Paragraph 12 of Governor Murphy’s Executive Order No. 104 expressly states that county or local governments shall not “enact or enforce any order, rule, regulation, ordinance, or resolution which will or might in any way conflict with” State directives. The Governor clearly possesses the emergency powers under state law to impose uniform standards and it would not be surprising to see the State try to reign in conflicting directives currently happening at the local level. The County of Bergen should be applauded for coordinating with the Executive Branch and withdrawing its own stand-alone order: uniform State standards here are in everyone’s interests. 
• What NOT to Expect: Substantial participation in SBA loans:  The good news is that New Jersey businesses are eligible to apply for low-interest federal Small Business Administration (SBA) loans of up to $2 million. The bad news is that, unless businesses are facing “life and death” circumstances, to quote Governor Murphy, the State is strongly cautioning businesses against securing such loans. The reason for this is that New Jersey businesses and residents who secured SBA loans in the wake of Hurricane Sandy were later disqualified for eligibility for grants and certain direct assistance. Businesses, if possible, should avoid seeking SBA loans until there is a clearer picture of federal grants and subsidies that will be on the table for New Jersey businesses.       
• What to Expect: The deadline for paying state taxes will be extended:  Most annual gross income tax and corporation business tax returns are due on or before April 15 each year. The federal government already is allowing Americans an extra 90 days (July 15^th) to pay their taxes due to the current crisis but the filing deadline remains April 15. Both Houses of the New Jersey Legislature this week unanimously passed legislation (A-3841) that would automatically extend the time for filing and payment of a gross income tax or corporation business tax return to any new federal government due date for federal returns – provided, however, “the extended due date shall be no later than June 30, 2020.” The reason why the state Legislature likely selected a June 30^th deadline for payment as opposed to the federal government’s July 15^th deadline is that the state operates on an annual fiscal year budget and probably could not risk the loss of revenues to close out its fiscal year 2020  budget. Governor Murphy has not signed this bill into law yet but if he does — and absent further action from the federal government — most New Jersey taxpayers absent an extension will have to file on April 15^th and pay state taxes by June 30^th.   

And for additional information, New Jersey’s Business Action Center has established a helpful website and FAQ’s related to the current crisis:  www.cv.business.NJ.gov.     

The bottom line is that until the number of confirmed virus cases peaks and begins to decline in New Jersey, there is no chance that there will be business as usual in New Jersey. Especially now that governments in New Jersey can conduct official business remotely, businesses would be well served to prepare for expanded closure directives, to be on the lookout for federal and state assistance programs, and to closely monitor other fast-breaking federal and state measures related to the crisis. 

William J. Castner is a partner at Connell Foley who served as Chief Counsel to Governor Jon Corzine in the wake of the 2008 financial crisis, was Governor Murphy’s Senior Advisor on Firearms, and is formerly Senior Vice President of Corporate & Regulatory Affairs at Horizon Blue Cross Blue Shield.