fortune--2020-05-20--How a company misappropriated Native American culture to sell health insurance

Jill Goodridge was shopping for affordable health insurance when a friend told her about O’NA HealthCare, a low-cost alternative to commercial insurance.
The self-described “health care cooperative” promised a shield against catastrophic claims. Its name suggested an affiliation with a Native American tribe—a theme that carried through on its website, where a feather floats from section to section.
The company promises 24/7 telemedicine and holistic dental care on its website. It says it provides more nontraditional options than “any other health care plan,” including coverage for essential oils, energy medicine, and naturopathic care. All of that and conventional care, too.
It struck Goodridge as innovative. She signed up for a high-deductible plan, paying more than $9,000 in premiums and fees over 13 months, she said. Yet she could not get O’NA to cover her family’s medical bills. For example, O’NA applied only a small portion of more than $6,000 in hospital-related bills against her $10,000 deductible.
“It almost seemed like we were just spending the premium money every month for really not much,” said Goodridge, whose family runs a Rockland, Maine, restaurant that is temporarily shuttered because of the coronavirus pandemic.
Jill Goodridge, whose family runs a restaurant in Rockland, Maine, joined a nonprofit “health care cooperative” that promised to cover traditional medical services and holistic therapies through its ties to Indian tribes. “They seemed to be innovative in the idea that you could see holistic doctors or naturopaths,” Goodridge testified during a Maine Bureau of Insurance hearing on Sept. 3, 2019. Shelby Knowles for KHN
A yearlong investigation by the state insurance agency prompted by her complaint concluded she was right, uncovering a business scheme operating in the gray areas of insurance regulation and tribal law to appeal to patients looking to save money on health care.
Hers is a cautionary tale for anyone looking for cut-rate coverage at a time when the cost of commercial insurance is rising and a wide range of alternatives are on offer.
Temptingly low premiums may mean skimpy coverage with huge out-of-pocket expenses.
“Health insurance is getting so expensive, people are looking for other options,” Maine Bureau of Insurance superintendent Eric A. Cioppa said. “We tell everybody that if you do business over the Internet to call us first and make sure it’s licensed.”
O’NA stood out, with a polished website featuring its story of holistic health and sun-dappled photographs. The sales pitch: “We’re here to guide you to a new way for your mind, body, and soul.”
Goodridge felt led astray.
The company claimed Native American ties that would exempt it from state insurance regulations because of tribal sovereignty, which gives federally recognized tribes the authority to self-govern outside state or federal law. O’NA claimed it did not have to adhere to federal insurance requirements, such as guaranteeing standard coverage or maintaining a designated level of funds in reserve to pay claims.
O’NA HealthCare appears to be the first insurer to claim that Native American status exempted it from oversight, according to the National Association of Insurance Commissioners.
The company advertised it was “comfortably nestled under a Native American tribal corporate umbrella” and “protected by the many rights and privileges that Native American Indians enjoy today.”
It sent its customers a “tribal membership ID & benefits card.” And it said it derived its status from an affiliation with the United Cherokee Nation–Aniyvwiya. That tribe is not one of the three federally recognized Cherokee tribes.
But the troubles with O’NA went deeper than that, Cioppa and his team discovered during a yearlong investigation. Along with serious doubts that anyone involved with O’NA had valid indigenous roots, there were financial irregularities, allegations of embezzlement and phony professional credentials.
“The more we found out,” Cioppa said, “the more we wanted to keep digging.”
For patients, a tempting offer with red flags
There was much about Goodridge’s new coverage that seemed unorthodox to the investigators.
She paid a tribal membership fee of $165, which the company said was a tax-deductible contribution to an unspecified Native American tribe. In addition to traditional medicine, O’NA said, its members could seek care at “Native American Tribal Healing Centers” nationwide, though it did not identify the centers or their locations. Goodridge also paid a family premium of $751 a month for 13 months before canceling, according to her testimony before the Maine Bureau of Insurance.
Stranger still, investigators found that O’NA required physicians to pay $485 a year to join its network. Her doctor declined.
On top of that, Goodridge testified, the plan did not pay out when needed, including much of that $6,000-plus hospital bill.
Jill Goodridge took a chance on a nonprofit “health care cooperative” sold online by a Native American company called O’NA HealthCare. After paying more than $9,000 in premiums and fees over 13 months, Goodridge says, she could not get O’NA to cover her family’s medical bills. Shelby Knowles for KHN
It turned out, that was not uncommon for a company that describes its services as “low cost, high value.” According to a state inspection of O’NA’s unaudited books in fall 2019, the plan spent an “unusually low” amount of the $2.5 million it collected in premiums to cover customers’ medical bills—just 13% or less. Under federal law, most insurers spend 80% or more on benefits for subscribers.
“However low its prices may be, the value it delivers is even lower,” Cioppa wrote in his December order.
Cioppa told KHN that state investigators could not determine the full scope of the operation, partly because O’NA, which boasted an “open provider network across all 50 states,” refused to tell them how many members it had signed up nationwide. It covered only 27 people in Maine.
O’NA’s bookkeeping also turned out to be suspect. Maine investigators observed that in 2019 O’NA paid few medical bills and didn’t keep enough cash on hand to handle even a couple of catastrophic illness claims, a violation of state insurance regulations.
Ultimately, Cioppa ruled that O’NA had illegally operated an insurance company, falsely advertised its benefits, and failed to set aside adequate reserves to pay claims.
O’NA’s CEO, L.J. Fay, said the company is working hard to overcome past mistakes, noting: “We plan to make everything right. That is the ultimate goal.”
But in the meantime, Cioppa has prohibited O’NA from selling policies in the state.
The people behind O’NA
Over the years, Benjamin Zvenia has presented himself at various times as a doctor, a lawyer, and a tribal judge. O’NA was described by the United Cherokee Nation–Aniyvwiya as Zvenia’s “brainchild,” according to the Maine Insurance Bureau order.
He has a paper trail of criminal and civil infractions dating to the early 1990s, government records show.
In a sworn statement filed in Maine, Zvenia said he was a member and “administrative tribal judge” of the Nottoway Tribal Community Meherrin Band of North Carolina. That tribe is not among the 573 recognized by the federal government.
The elders of the United Cherokee Nation–Aniyvwiya described O’NA as the “brainchild” of Benjamin Zvenia, according to the Maine Insurance Bureau order. Courtesy of Foundation of Cannabis Unified Standards
Zvenia also told Maine officials he served on the board of directors of Tribal Active Management Services, O’NA HealthCare’s parent company, but had not been paid for his “voluntary” services and had no responsibility for day-to-day operations. In a sworn statement, Zvenia denied playing a major role in O’NA. He did not respond to repeated requests for comment for this story.
Zvenia, in fact, has a criminal conviction in Nevada for practicing medicine without a license, which prohibits him from overseeing an insurance company, according to Maine officials. He was sentenced to six years in prison, court records show.
In his statement, Zvenia wrote, “There was a crime, and I did the time. My previous history may be public information, but it is not part of my accomplishments today.”
Zvenia’s legal work also has drawn scrutiny. In March 1999, the Nevada Supreme Court removed him from a list of non-attorney arbitrators, citing his undisclosed criminal conviction. A State Bar of Nevada investigation found Zvenia had applied to practice in immigration court, claiming to hold a law license issued by the Supreme Court of the Federated States of Micronesia. But the state bar checked with Micronesia, and it could not verify his claims.
Zvenia also told a state bar investigator that he graduated from the Kensington College “School of Law” in California. The college said Zvenia had applied in June 1994 but “never completed enrollment,” according to an exhibit filed with the Nevada Supreme Court order.
A founder of O’NA HealthCare was Alan Boyer, a Utah musician who said he was a member of the Cherokee Nation. He was born in West Yorkshire, England, and immigrated to the U.S. in 1998, when he was nearly 40 years old.
Boyer was a founder of a British-style brass band in Utah but also dabbled in holistic healing arts and naturopathic products before his death in December 2018 from cancer at age 59. In one promotional video for O’NA, Boyer, who spoke with a pronounced British accent, said the word O’NA means “new beginnings.”
“One of Alan’s greatest achievements in his later years was acceptance as a sovereign member of the great Cherokee Nation,” reads an online obituary entered into the record in the Maine proceeding.
Maine regulators had their doubts: “It does not appear from the record that any Native Americans have been involved at any time in the establishment, management, or operation of O’NA,” reads the state order.
Lisa Hughes, the former CEO of O’NA and a resident of the Salt Lake City area, also raised Maine regulators’ eyebrows. Investigators found Hughes’s online résumé shows more than a decade of experience in rocket engineering and consulting work in Utah. She recently told Maine officials she had been hired at O’NA because of her prior experience in “systems development and cash-flow analysis.”
In an affidavit and other legal filings filed in January, Hughes asserted she worked for O’NA for several years “with no or very reduced salary” before the company suspended her in July 2019 amid a corporate power struggle. The next month, O’NA sent her a letter from a law firm accusing her of embezzling $295,000, filings in the Maine investigation show.
In her affidavit, Hughes said O’NA concocted the embezzlement accusations “for purposes of smearing me and making me the scapegoat for O’NA’s legal formation and structure.”
Lessons learned—or not
In his December order, Cioppa gave the insurer until Jan. 21 to create a $100,000 fund to satisfy any outstanding medical claims. O’NA failed to do so, and now state officials are seeking a $450,000 penalty, though they aren’t optimistic about collecting it.
Today, O’NA has promised to reinvent itself as a “different type of insurance company,” according to CEO Fay. She said in an affidavit that it is anticipating a capital infusion of as much as $120 million and has $500,000 in reserves in a money-market account in a Salt Lake City bank. She also indicated the company would file for a license to legally operate in Maine. So far, that has not happened.
Zvenia is still active online, offering professional and consulting services through Zvenia and Associates in Las Vegas, which says on its website that it is a “law firm guided by Benjamin Zvenia, Dr PH, JD.” The site posts a disclaimer: “All Nevada State legal matters are referred out; our lawyers & advocates are not licensed to practice Nevada State law.”
O’NA presents a new wrinkle in an ongoing conflict: The states regulate insurance, but the Internet allows for nationwide sales, leaving consumers basically on their own.
Goodridge, the Maine consumer who sparked the investigation, said in an interview that she holds little hope of getting any money back. But she has kept other Mainers from the same troubles.
Though O’NA health plans are still available in many states, its website notes that coverage is “not available in Maine.”
Kaiser Health News (KHN) is a nonprofit news service covering health issues. It is an editorially independent program of the Kaiser Family Foundation that is not affiliated with Kaiser Permanente.


fortune--2020-05-20--A world without Amazon? In France, shoppers get a taste

‘ Negative rates are not the answer ’ for Britain ’ s slumping economy—yet

One could almost hear the celebratory whoops coming from Amazon execs in France on Tuesday when they began reopening their six warehouses in the country. The company shut them down nearly five weeks ago when labor unions successfully sued for failing to protect 10,000 workers from the novel coronavirus.
“This is excellent news for our employees…for our customers, and for all French small and medium businesses that rely on Amazon,” Amazon’s France CEO Frédéric Duval cooed on French radio, promising to offer “continuous improvement in customer experience.”
It’s not such excellent news, however, for Amazon’s competitors.
For the past month, the company’s legal wrangles in France have served as a live experiment in how the world’s consumers might change their shopping habits if Amazon—the $1.2 trillion behemoth that’s No. 2 on the Fortune 500 list—was suddenly no longer an option.
For shoppers and companies alike, the results are mixed—and perhaps a sobering lesson for businesses about how to survive in an Amazon world.
Amazon shut its French warehouses on April 16 when a French judge sided with the unions and ruled that it had failed to adequately protect its workers from COVID-19 in its crowded, fast-paced warehouses. The judge ordered Amazon to sell only “essential items” and imposed a fine of 1 million euros (or nearly $1.1 million U.S.) per violation.
The company argued that it had gone beyond most others’ protective measures, issuing workers with facial masks and hand sanitizers and, as much as possible, imposing social distancing. But Amazon execs calculated that the court order could easily cost them 1 billion euros a week in fines. Rather than try to figure out which items were legal, they shut the company’s warehouses in France and countersued in late April, losing in court a second time.
The monthlong battle left 67 million French without the country’s biggest online retailer at the very moment that almost all physical stores were closed—until France’s severe seven-week lockdown ended on May 11. For those shut in at home in France, any trip to a pharmacy or food store during the lockdown required a government form stating the reason for leaving the house.
The impact of Amazon’s shutdown seems to have been almost immediate.
“We sold enormously all the things that Amazon usually sells, like PS4 players and books,” says Marie-Hélène Thomet, a sales representative in the city of Lyon for FNAC, the French retail chain whose 880 stores across France sell electronics, stereo equipment, and home appliances. “Our sales just about doubled.”
Sales rocketed about 40% in April for French online retailer Cdiscount, according to CEO Emmanuel Grenier, although he has declined to estimate how much was due to Amazon’s shutdown. “We’ve seen sales accelerate week after week,” he told a French journalist. The company began by selling CDs and DVDs in 1998, two years before Amazon launched in France, and before Amazon overtook it last year, it was France’s biggest online retailer. Just three months ago, Grenier told a journalist the company had seen sharp growth in 2019 because of “a generational revolution,” he said. “The young are totally connected.”
Thomet predicts that millions more French might have been converted into online shoppers during the country’s two-month lockdown.
Even so, FNAC rolled out strict COVID-19 rules when it reopened its physical stores on May 11, after the seven-week lockdown. Those rules included requiring customers to wear facial masks and limiting the number of people allowed to enter the store at any one time. Indeed, the moment the stores reopened last Monday, shoppers converged, seemingly desperate to leave their home.
“The French retain their pleasure in going into a store, browsing, touching,” Thomet says. “Good stores are like showrooms in France.” But even so, many are still likely making purchases online. “Afterward, many of them take time discussing with their family and maybe then they order it on the Internet,” she says.
But then a new question: From which website will they buy?
Thomet says they will need to work hard to cling to the business they have gained. “It is too early to see if we will keep the clients we got from Amazon,” she says. “But why not?”
There are clear reasons, as customers in France soon discovered—and as Thomet herself says, “we see that people want to get things immediately.”
Beyond Amazon, that is difficult in France. Delivery during the lockdown was already slowed down, with La Poste, France’s postal service, offering only three deliveries per week, rather than daily.
In a country where people were accustomed to waiting for service, Amazon introduced same-day delivery in 2016 and owns the French delivery company Colis Privé. With Amazon gone the past month, those of us shopping in France were left hunting on sites we had barely ever used.
When my rice cooker broke midway through the lockdown, I bought a new one on Cdiscount; it took several days to arrive. I found three Hunter x Hunter manga comic books—a request from my child’s friend for his birthday—on FNAC’s site. Two arrived a few days after my purchase; the third was left at a nearby drop-off center.
Many consumers might well be as relieved as Amazon execs that the company’s warehouses in France have reopened. Duval, Amazon’s CEO in France, said the reopening would be staggered over three weeks, allowing enough time for workers to be trained in new health-safety measures.
“We think of this as a victory,” says Stephane Enjalran, national secretary for the Solidaire union, which led the lawsuit against Amazon. He said that under the union agreement, an independent expert would examine Amazon’s six warehouses for two weeks to make sure they were COVID-19 safe.
Yet after weeks of legal battles with the company, Enjalran has decided to abandon his Amazon shopping habit. “I will find another way,” he says. “It will be difficult, of course.”
On Tuesday, he discovered just how difficult life without Amazon might be. Just as Amazon workers began returning to work, Enjalran—who is also a part-time high school philosophy teacher—went online to try to find a textbook he needed.
He could have bought it with one click on Amazon’s Kindle site, he says. But he stopped himself. “I looked everywhere,” he says. “FNAC did not have it.” Finally he found a PDF of the book, which was in the public domain. “For me, Amazon is finished.”
The same can probably not be said for millions of French shoppers.
More must-read stories from Fortune:
—Inside’s Facebook’s latest push into shopping
—What’s happening to Walmart’s sales during the pandemic
—How COVID-19 has affected America’s pet stores
—Why Amazon was built for the pandemic
—Which retailers are hurting the most


fortune--2020-05-20--Luckin Coffee’s Nasdaq delisting is fresh ammo for U.S. threats against Chinese stocks

Luckin Coffee, the upstart coffee chain once touted as a rival to Starbucks in China, is being delisted by the Nasdaq stock exchange. The three-year-old company, which raced to open 6,500 stores across China since its 2017 founding, received a notice from Nasdaq last Friday that its shares were being pulled.
According to Luckin, which shared the news of its delisting on Tuesday, Nasdaq cited “public interest concerns” following the company’s recent accounting scandal as the key reason it’s being delisted.
The Nasdaq suspended trading in the former unicorn on April 7, five days after an internal investigation uncovering massive fraud in the company’s accounts sent shares plummeting 83%. According to the company’s report, sales between the second and fourth quarters of 2019 were exaggerated by $310 million.
Last week, Luckin’s board fired both chief operating officer Liu Jian and company founder and CEO Jenny Qian. Luckin plans to appeal Nasdaq’s decision and says it will remain listed while pending an outcome of its request, which could take more than month.
The brouhaha over Luckin’s fraud, however, could become the impetus Washington needs to act on its longtime threat to impose tougher regulations against Chinese stocks.
Coffee to go
Luckin joined Nasdaq in 2019 through a $600 million IPO. Investors piled into the young brewhouse, praising Luckin as an innovative rival to Starbucks. Analysts were more skeptical of the firm’s growth prospects, however. By late 2018 Luckin had accumulated $2.4 billion in debt as it burned cash to spread stores across China and doled out free coffee to lure more customers.
The company’s business strategy of rapid expenditure and a rush to IPO is familiar among Chinese startups—consider electric-car maker Nio, which raised $1 billion in a 2018 IPO when it was just four years old and hemorrhaging cash. By the end of 2019, the car company had accumulated $5 billion in losses and its market cap had plummeted 74% from a peak of $11.9 billion.
The fallout from Luckin’s fraud will likely be bad news for others hoping to emulate that fast and furious model. Reuters reports Nasdaq plans to introduce new restrictions on foreign IPOs, including imposing a $25 million minimum sale value. Currently, Nasdaq has no requirements on minimum sales, and of the 155 Chinese companies that have listed on Nasdaq since 2000, 40 had IPOs worth less than $25 million.
Calls for greater scrutiny of Chinese stocks have echoed around Capitol Hill since at least 2011, when over 100 Chinese companies were forced to delist or had trading on the New York Stock Exchange suspended because of accounting irregularities. According to McKinsey, the scandal stripped more than $40 billion in value from the market.
Muddy waters
The issue is that although Chinese companies are required to undergo an audit in order to list, the Securities and Exchange Commission (SEC) struggles to vet the audits. Beijing runs interference, often treating the information as a state secret. As tensions between China and the U.S. escalate amid the coronavirus pandemic, however, Washington has grown more vocal about taking Chinese stocks hostage.
Responding to a question about reports of Nasdaq’s new rules Tuesday, White House economic adviser Larry Kudlow told Fox Business that “nobody really can invest with confidence in China.”
“We have learned that Chinese companies are not transparent. They do not meet the norms, the regulations,” Kudlow said.
A week earlier, President Donald Trump told the same network he was looking “very strongly” at requiring Chinese companies to comply with U.S. audit standards.


fortune--2020-05-20--South Korean schools are back in session after 5-month break

After an unprecedented five-month break, South Korean students are returning to their classrooms as government health officials declared that the country may have avoided a “second wave” of infections.
The schools are reopening in stages, with high school seniors returning first on Wednesday and middle and elementary students slated to go back to school in the following weeks. The third-year high school students are leading the return as they now only have half a year before their annual university entrance exams in early December, education officials said.
Unlike in the U.S., South Korea’s academic year starts in March, but students never returned to school after their winter break as the Asian nation confirmed its first Covid-19 infection in late January and then saw a spike in cases — peaking at near 1,000 a day — in February. Resumption of schools were delayed five times, and in April, all students were offered online classes instead.
Health and education officials had worried that a new cluster infections linked to nightclubs in Seoul earlier this month could once again jeopardize plans to reopen schools, but they concluded the latest outbreak appears under control.
Big Effort
South Korea has been able to sharply slow coronavirus infections by launching a massive testing and contact tracing campaign. Thirteen new cases were reported Tuesday, raising the total to 11,078.
“There are still worries over safety of our students, but the situation of the community spread is within the capacity of our health care system,” Prime Minister Chung Sye-kyun said before a meeting Tuesday. “If we, the government, school and families, act together, we could restart the off-line classes safely.”
South Korea’s government left detailed academic schedules and methodology for each age group to be decided by respective regional authorities. But most students in Seoul — representing more than 15% of all school-age children in the country — will not go to school every day, except for those in their final academic year, according to the Seoul Metropolitan Office of Education.
Depending on the school district, schools will start on different days and students will alternate between attending classes and online instructions at home. Class times and lunch hours are also being staggered. No extracurricular activities will be allowed.
Education officials said that a school would be shuttered immediately if an infection is confirmed among the school’s students, faculty and staff.


fortune--2020-05-20--Why every company must tackle mental health head-on

Expedia faces a novel coronavirus challenge : ‘ How long can they operate at near zero revenue ?
’

For many of us, this pandemic has transformed every aspect of our daily lives. We see it in the way we work—as our home also becomes our workplace and parents juggle kids and homework in between video calls. We feel it in the way we interact with friends and family—doing virtual celebrations and happy hours on Zoom. And we live it in our day-to-day—standing six feet apart in the grocery store with face masks securely on.
The common thread connecting all of these changes is the impact on our mental health and well-being. In the last few months, we’ve heard a lot from medical experts, business leaders, celebrities, and athletes on how to take care of our mind and body through this crisis. But, what does that really mean when the lines are blurred between home and work life?
The ability to work from home, once viewed as a perk, is now a double-edged sword. On one hand, there’s no commuting, and people are spending more time with family. However, the abrupt shift in work/life balance means that you never really turn off. For many people, the stress of work, coupled with household responsibilities and the general uncertainty of what lies ahead, has created a heightened level of anxiety and burnout.
Most employers acknowledge the challenges of working from home with children. However, segments that often get ignored are singles and those living with roommates. This group faces its own set of challenges in dealing with feelings of isolation and loneliness or simply difficult living situations. A new Kaiser Family Foundation survey found that nearly half of people in the U.S. feel that the coronavirus crisis is harming their mental health. Now, more than ever, the topic of mental health and wellness has become top of mind for CEOs as they find ways to help employees navigate a new reality and the challenges that may come with it. Frankly, this is long overdue.
Traditionally, the workplace has not been the most open environment for mental health dialogue. There is a misconception that mental health equals mental illness, but that is not always the case. Despite that, stigmas continue to persist and are a barrier to achieving workplace culture improvements. Employees feel a sense of shame and embarrassment to open up, fearing judgment and retaliation from bosses and peers, according to a 2006 survey. As CEOs and business leaders, we have the opportunity, and more importantly the responsibility, to transform that narrative.
Rewriting the story requires organizational leaders to be vocal—not just by talking the talk, but through concrete actions. Those actions trickle down and allow employees to feel safe engaging in candid dialogue. This cannot be a siloed effort that falls under one team. Every executive leader, department head, manager, and colleague has an important role to play in tackling the challenges and helping to normalize the conversation. The steps that organizations take now will go a long way in ensuring that employees are equipped with the tools and education needed to not only spark an open dialogue, but also take action.
Mental health and wellness initiatives aren’t just the right thing to do, it’s smart business. Untreated mental health conditions cost U.S. companies billions each year. The cost of ignoring mental health in the workplace can dramatically impact many aspects of the organization—from output to working relationships to overall culture. By ingraining awareness, education, and open dialogue, it creates an invaluable foundation for a healthy workplace that benefits everyone. When employees feel heard, seen, and supported, greater productivity results.
Valuing employees by addressing their needs can only have positive outcomes. Employees have expressed a desire for companies to address mental health and wellness. In order to truly support colleagues in times of normalcy—and moreover in times of crisis—it is essential to create an environment that fosters a mental health conscious community. Organizations that have successfully committed to supporting wellness in the workplace have implemented various forms of employee resources such as support groups, educational programs, access to medically trained professionals, and meditation sessions. At Verizon Media, for instance, we implemented mandatory mental health training to all of our employees and offer 24/7 confidential crisis counseling.
But we must do more. The urgency has never been greater.
Companies must prioritize mental health and wellness initiatives. No longer can it be a check-the-box effort. The global impact of COVID-19 has made mental health a broad societal issue with significant implications if left unattended. Everyone, especially those in positions of leadership, needs to collectively take action and be transparent on issues that affect employees’ mental well-being. By sparking that conversation, early and often, it will open the door to a new corporate culture that normalizes mental health. Employees will be equipped with the tools and education to tackle whatever lies ahead—working from home, juggling families, managing stress. And the post-coronavirus workforce will be even more resilient.
Guru Gowrappan is CEO of Verizon Media Group.
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fortune--2020-05-20--Richard Branson’s Virgin Orbit plans first space launch this weekend

Richard Branson’s Virgin Orbit is targeting the coming weekend for its first attempt to launch a demonstration payload into space aboard a rocket released from beneath the wing of a Boeing 747.
The air launch is scheduled for Sunday off the coast of Southern California and will only proceed if conditions are satisfactory, the company said Wednesday.
“Although air-launched systems like ours are less vulnerable to bad weather than fixed ground-launch systems, we’ll be watching the weather closely and being cautious for this maiden flight. Should our flight slip, we have a launch window open at a similar time on May 25th,” it said.
The carrier aircraft, named Cosmic Girl, will take off from Mojave Air and Space Port in the Mojave Desert and fly out over the Pacific.
Release of the LauncherOne rocket would occur near San Nicolas Island, part of the Channel Islands off the California coast.
Earlier this year, Virgin Orbit conducted a rehearsal flight that simulated release of the rocket.
Headquartered in Long Beach, Virgin Orbit is a sister company to Virgin Galactic, which is preparing to carry tourists on suborbital flights high over New Mexico.
Virgin Orbit’s system will be capable of launching small satellites into space from locations around the world.
The launch rehearsal comes after years of development and recent extensive modification of operations because of the coronavirus pandemic, as well as putting team members to work on the development of medical ventilators.


fortune--2020-05-20--Expedia faces a novel coronavirus challenge: ‘How long can they operate at near zero revenue?’

Is the coronavirus mutating ?
China ’ s new COVID-19 outbreak is raising concerns

Caught in the headwinds of world-wide coronavirus shutdowns and travel restrictions, Expedia missed earnings estimates for the 1st quarter, reporting a loss of $1.83 per share (versus consensus estimates of a $1.29 loss per share), while posting sales of $2.2 billion for the quarter (down 15% from the year-ago quarter, its first quarterly decline in eight years) as the travel industry has been pummeled.
Investors seemingly weren’t too surprised: the stock was up 3% in after-hours trading on Wednesday following a brief drop. “Ultimately, investors are well aware of how bad the numbers are going to be both in Q1 and Q2,” Evercore ISI’s Lee Horowitz told Fortune.
Like its peers, the coronavirus has proved “painful,” Expedia Group executives said on an earnings call. The group, which owns the likes of Hotels.com, Vrgo, Travelocity, (and, of course, Expedia) among other brands, took a beating in the 1st quarter. The company reported meaningful declines and “unprecedented” cancellations—lodging revenue fell 10% in the 1st quarter of 2020 on a 14% decrease in room nights stayed, which the company said was partly offset by a 5% increase in revenue per room night, while total gross bookings fell 39% from the year-ago quarter to $17.9 billion. In air travel, cancellation inquiries for air travel managed without an agent increased from 65% in February to over 95% in April, the company said.
Yet Expedia had been struggling before the crisis—execs called attention to cost-saving measures (which have included cutting 3,000 jobs in February) that were in place before the coronavirus hit: “Fortunately, we were ahead of the game having implemented cost savings measures earlier this year, and with the added pressure from COVID-19 we accelerated and expanded our ambition on improving our long-term cost structure,” vice chairman and CEO Peter Kern (who became CEO in April) said in a statement.
Kern told analysts on a call that the progression of its cost-cutting measures, which had initially been in a range up to $500 million for the full year, have now been intensified and sped up: “Our ambition has increased significantly and our speed has increased significantly,” Kern said, but declined to provide updated numbers on the cost-cutting.
Expedia’s big challenge this year: operating on trickling (if not dried up) revenues. The focus for some analysts including Morningstar’s Dan Wasiolek has been the company’s plan of shoring up liquidity—”namely, how long they can operate at near zero revenue,” he told Fortune in a note. The company has been proactive in raising both debt and equity amid the pandemic—it sold a $1.2 billion equity stake to Silver Lake and Apollo Global Management in April, and raised $2.8 billion in debt financing. The measures should “strengthen our liquidity position as we navigate this disruption and position the business for recovery,” the company said in its earnings report.
Yet the travel industry’s woes may last much longer than quarantines do. Analysts at RBC Capital Markets are “not expecting a recovery in global leisure travel until well in 2021,” according to a recent note. But analysts at Jefferies believe Street estimates of travel recovery by 2023 are still too optimistic: “We recommend a patient approach to owning travel, as past cycles show it can take 3-5+ years for fundamentals to fully recover,” Jefferies’ Brent Thill wrote Tuesday.
Like many companies right now, the 2nd quarter is going to show the “biggest carnage,” notes Evercore ISI’s Horowtiz, as March and April will likely prove the toughest months.
Some analysts aren’t quite so bearish. “While our forecasts head lower, we do see some signs of encouragement in the macro backdrop, as states begin to reopen and third-party data providers continue to report improving U.S. hotel data, with occupancy exceeding 30% in the first week of May (though we caution that non-tourist demand generators such as government-contracted rooms for essential workers and the homeless are likely driving some of the reported occupancy recovery),” Wells Fargo’s Brian Fitzgerald wrote in a note to clients Monday.
Expedia’s stock has been pummeled in recent months, trading down nearly 30% year-to-date. Expedia’s stock closed up 4% on Wednesday, and extended its rally in after-hours trading. The Seattle-based company withdrew its full-year forecast in March just as lockdowns were beginning to affect travel and flights worldwide.
In the meantime, Expedia’s Kern advises cautious optimism as the company sees encouraging growth in May: “We’ve seen … green shoots in the areas you would expect, places where movement has become possible and people can start to think about their summer holidays,” but notes, “I would not get overly excited about it.” CFO Eric Hart added: “we’re not out of the woods yet.”
More must-read finance coverage from Fortune:
—Saving lives vs. saving the economy is a false tradeoff, economists say
—Real unemployment rate soars past 24.9%—and the U.S. has now lost 33.5 million jobs
—17% of unemployed workers aren’t looking for work—and that’s warping the official unemployment rate
—Does Apple’s stock buyback strategy make sense in this market?
—Goldman Sachs doubts there will be a Round 3 of PPP loans for small businesses
—Listen to Leadership Next, a Fortune podcast examining the evolving role of CEO
—WATCH: Why the banks were ready for the financial impact of coronavirus
Subscribe to How To Reopen, Fortune’s weekly newsletter on what it takes to reboot business in the midst of a pandemic


fortune--2020-05-20--AT&T to drop misleading ‘5G’ marketing for non-5G networks

AT&T says it will stop advertising its wireless network as “5G Evolution” after a division of the Better Business Bureau determined that its language was misleading. The network AT&T branded this way is not, in fact, 5G — a new technology for fast wireless data.
While AT&T and other wireless carriers in the U.S. have now begun rolling true 5G wireless networks, AT&T in December 2018 began talking about a “5G Evolution” service that was already available in hundreds of markets, and placed a “5G E” icon on phones when they connected to the network. But it was not 5G. It was merely the existing 4G network with minor speed boosts, at least compared to the fastest type of 5G networks.
Now, a division of the Better Business Bureau that regulates the ad industry has recommended that AT&T stop using “5G Evolution” and “5G Evolution, The First Step to 5G” claims in its marketing. Rival T-Mobile had brought a complaint about AT&T’s language.
The panel found that this language “will mislead reasonable consumers into believing that AT&T is offering a 5G network.”
AT&T said it disagreed with the group’s reasoning but will comply with the decision. It’s not clear what that means and how much AT&T uses the “5G Evolution” branding today in its stores and ads today. “5G Evolution” is on the company’s website, and AT&T phones carry a “5G E” icon when you connect to the 4G network. AT&T spokeswoman Kate MacKinnon declined to comment on how AT&T uses the “5G Evolution” branding today or what would change.
AT&T has built out an actual 5G network since then, and says nationwide coverage will be available this summer. But it will be a while before most consumers actually notice, since so far only a handful of new phones are 5G-enabled.


fortune--2020-05-20--Is the coronavirus mutating? China’s new COVID-19 outbreak is raising concerns

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Chinese doctors are seeing the coronavirus manifest differently among patients in its new cluster of cases in the northeast region compared to the original outbreak in Wuhan, suggesting that the pathogen may be changing in unknown ways and complicating efforts to stamp it out.
Patients found in the northern provinces of Jilin and Heilongjiang appear to carry the virus for a longer period of time and take longer to test negative, Qiu Haibo, one of China’s top critical care doctors, told state television on Tuesday.
Patients in the northeast also appear to be taking longer than the one to two weeks observed in Wuhan to develop symptoms after infection, and this delayed onset is making it harder for authorities to catch cases before they spread, said Qiu, who is now in the northern region treating patients.
“The longer period during which infected patients show no symptoms has created clusters of family infections,” said Qiu, who was earlier sent to Wuhan to help in the original outbreak. Some 46 cases have been reported over the past two weeks spread across three cities—Shulan, Jilin city and Shengyang—in two provinces, a resurgence of infection that sparked renewed lockdown measures over a region of 100 million people.
Scientists still do not fully understand if the virus is changing in significant ways and the differences Chinese doctors are seeing could be due to the fact that they’re able to observe patients more thoroughly and from an earlier stage than in Wuhan. When the outbreak first exploded in the central Chinese city, the local health-care system was so overwhelmed that only the most serious cases were being treated. The northeast cluster is also far smaller than Hubei’s outbreak, which ultimately sickened over 68,000 people.
Still, the findings suggest that the remaining uncertainty over how the virus manifests will hinder governments’ efforts to curb its spread and re-open their battered economies. China has one of the most comprehensive virus detection and testing regimes globally and yet is still struggling to contain its new cluster.
Researchers worldwide are trying to ascertain if the virus is mutating in a significant way to become more contagious as it races through the human population, but early research suggesting this possibility has been criticized for being overblown.
“In theory, some changes in the genetic structure can lead to changes in the virus structure or how the virus behaves,” said Keiji Fukuda, director and clinical professor at the University of Hong Kong’s School of Public Health. “However, many mutations lead to no discernible changes at all.”
It’s likely that the observations in China don’t have a simple correlation with a mutation and “very clear evidence” is needed before concluding that the virus is mutating, he said.
Northeast differences
Qiu said that doctors have also noticed patients in the northeast cluster seem to have damage mostly in their lungs, whereas patients in Wuhan suffered multi-organ damage across the heart, kidney and gut.
Officials now believe that the new cluster stemmed from contact with infected arrivals from Russia, which has one of the worst outbreaks in Europe. Genetic sequencing has showed a match between the northeast cases and Russian-linked ones, said Qiu.
Among the northeast cluster, only 10% have turned critical and 26 are hospitalized.
China is moving aggressively to stem the spread of the new cluster ahead of its annual political gathering in Beijing scheduled to start this week. As thousands of delegates stream into the capital to endorse the government’s agenda, China’s central leadership is determined to project stability and control.
The northeast provinces have ordered a return of lockdown measures, halting train services, closing schools and sealing off residential compounds, dismaying residents who had thought the worst was over.
“People should not assume the peak has passed or let down their guard,” Wu Anhua, a senior infectious disease doctor, said on state television on Tuesday. “It’s totally possible that the epidemic will last for a long time.”


fortune--2020-05-20--Senate overwhelmingly approves bill to delist certain Chinese companies. Here’s who it could affect

The Senate overwhelmingly approved legislation Wednesday that could lead to Chinese companies such as Alibaba Group Holding Ltd. and Baidu Inc. being barred from listing on U.S. stock exchanges amid increasingly tense relations between the world’s two largest economies.
The bill, introduced by Senator John Kennedy, a Republican from Louisiana, and Chris Van Hollen, a Democrat from Maryland, was approved by unanimous consent and would require companies to certify that they are not under the control of a foreign government.
If a company can’t show that it is not under such control or the Public Company Accounting Oversight Board isn’t able to audit the company for three consecutive years to determine that it is not under the control of a foreign government, the company’s securities would be banned from the exchanges.
“I do not want to get into a new Cold War,” Kennedy said on the Senate floor, adding that he wants “China to play by the rules.”
So far, no companion measure has been introduced in the House of Representatives, according to a Senate aide familiar with the bill.
“Publicly listed companies should all be held to the same standards, and this bill makes common sense changes to level the playing field and give investors the transparency they need to make informed decisions,” Van Hollen said in a statement. “I’m proud that we were able to pass it today with overwhelming bipartisan support, and I urge our House colleagues to act quickly.”
The legislation — S. 945 — is another example of the rising bipartisan pushback against China in Congress that had been building over trade and other issues. It has been amplified especially by Republicans as President Donald Trump has sought to blame China as the main culprit in the coronavirus pandemic.
GOP lawmakers have in recent weeks unleashed a torrent of legislation aimed at punishing China for not being more forthcoming with information or proactive in restricting travel as the coronavirus began to spread from the Wuhan province, where it was first detected.
But the president’s focus on blaming China for the pandemic has threatened what had been a strong bipartisan consensus that the U.S. needs to get tougher on the country. Some Democrats have begun to shy away from initiatives that could be seen as further politicizing the issue as the U.S. heads toward November’s presidential election.
Kennedy told Fox Business on Tuesday that the bill would apply to U.S. exchanges such as NASDAQ and the New York Stock Exchange.
“I would not turn my back on the Chinese Communist Party if they were two days dead,” Kennedy said. “They cheat. And I’ve got a bill to stop them from cheating.”
At issue is China’s longstanding refusal to allow the PCAOB to examine audits of firms whose shares trade on the New York Stock Exchange, Nasdaq and other U.S. platforms. The inspections by the little-known agency, which Congress stood up in 2002 in response to the massive Enron Corp. accounting scandal, are meant to prevent fraud and wrongdoing that could wipe out shareholders.
Since then China and the U.S. have been at odds on the issue even as companies including Alibaba and Baidu have raised billions of dollars selling shares in American markets. The long-simmering feud came to the forefront last year as Washington and Beijing clashed over broader trade and economic issues, and some in the White House have been urging Trump to take a harder line on the audit inspections.
Last week, Trump said in an interview on Fox Business that he’s “looking at” Chinese companies that trade on the NYSE and Nasdaq exchanges but do not follow U.S. accounting rules. Still, he said that cracking down could backfire and simply result in the firms moving to exchanges in London or Hong Kong.
While not technically part of the government, the PCAOB is overseen by the Securities and Exchange Commission. The ability to inspect audits of Chinese firms that list in the U.S. is certain to come up at a roundtable that the SEC is holding on July 9 on risks of investing in China and other emerging markets.
Senators Kevin Cramer, Tom Cotton, Bob Menendez, Marco Rubio and Rick Scott are also sponsors of the bill. Rubio applauded the passage of the Kennedy-Van Hollen bill and said it incorporated aspects of a similar bill he introduced last year.
“I was proud to work with Senator Kennedy on this important legislation that would protect American retail investors and pensioners from risky investments in fraudulent, opaque Chinese companies that are listed on U.S. exchanges and trade on over-the-counter markets,” Rubio said in a statement. “If Chinese companies want access to the U.S. capital markets, they must comply with American laws and regulations for financial transparency and accountability.”
According to the SEC, 224 U.S.-listed companies representing more than $1.8 trillion in combined market capitalization are located in countries where there are obstacles to PCAOB inspections of the kind this legislation mandates.
(Updates with statement by co-sponsor, details on oversight beginning in sixth paragraph)


fortune--2020-05-20--It was once valued at $12.7 billion. Now Luckin Coffee isn’t even a unicorn

It’s more than just coffee beans getting roasted Wednesday morning.
Shares of Luckin Coffee dropped 36% early Wednesday in its first day of trading since it was halted in early April over reports of fraud. Now facing a potential delisting from the Nasdaq altogether, investors are racing out of the company, reducing a business once valued as high as $12.7 billion to a fraction of its former glory: $731.5 million.
The delivery-first coffee upstart once wowed investors with ambitious plans to go toe-to-toe with Starbucks in China. But instead of a sprawling café empire, the three-year-old company served up massive fraud in its accounting books, revealing in April that it had exaggerated sales between the second to fourth quarters of 2019 by $310 million. Luckin fired CEO Jenny Zhiya Qian and COO Jian Liu last week, while at least one of the underwriters in Luckin’s public listing was reportedly been pushed out of the starry WeDoctor IPO in part over the scandal.
Luckin said Tuesday that the Nasdaq plans to delist Luckin over “public interest concerns as raised by the fabricated transactions.” Luckin plans to request a hearing to appeal the decision, though shares will continue trading on the Nasdaq for the time being.
The selloff bodes ill for Luckin’s lenders. An entity controlled by Luckin chairman Charles Zhengyao Lu defaulted on a $518 million margin loan in April, leading banks to ink out plans to sell the collateral: some 76.3 million shares in the company now worth $226.6 million.
Revelations of Luckin’s fraud have also once again reinvigorated calls for greater scrutiny around the IPOs of Chinese companies in the U.S., an issue compounded by rising tensions between the two nations during the coronavirus.
In a filing with the Securities and Exchange Commission signed Monday, the Nasdaq proposed tighter listing standards for companies in areas that have “secrecy laws, blocking statutes, national security laws, or other laws or regulations restricting access to information by regulators of U.S. listed companies.” While the proposed rules did not call out China specifically, such changes would impact Chinese companies seeking a U.S. listing most heavily.


fortune--2020-05-20--Where does the six-foot rule for social distancing come from?

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One of the core disruptions of life during the coronavirus pandemic is the new necessity for social distancing—also and more accurately called “physical distancing.” Because the coronavirus can travel on liquid droplets breathed or coughed out by infected people, an array of health authorities recommend staying away from crowds and maintaining physical separation from others. It’s why restaurants, bars, stores, and other places where people mingle closely have faced such economically devastating restrictions. The U.S. Centers for Disease Control and Prevention (CDC) specifically recommends a six-foot buffer.
But where does that number come from? Why six feet—and not 10 or four?
There is disagreement at the very highest levels: The World Health Organization (WHO) recommends just three feet of physical distancing, while some emerging evidence suggests the coronavirus can spread over much greater distances. The varied messages illustrate the sometimes awkward dance between evolving, complex science and simple, straightforward public health guidelines—choreography that’s particularly tricky amid increasing distrust of health authorities.
The WHO’s three-foot guideline follows some of the earliest research into how diseases spread. In the 1930s, Harvard researcher William F. Wells measured how far large exhaled droplets traveled and arrived at the three-feet figure.
But more recent science suggests Wells’ research didn’t capture the whole picture. In 2003, a group of researchers found that SARS—an illness caused by another type of coronavirus—was transmitted to others as far as six feet away from an infected person while traveling on an airplane. Several experts have cited this study as the most likely source for the CDC’s six-foot guideline.
Other studies, however, suggest even more caution may be warranted. Lydia Bourouiba, an MIT researcher who works at the intersection of fluid dynamics and epidemiology, argued in a recent report that coughs and sneezes create complex “turbulent gas clouds” that might carry pathogens as far as 27 feet. A new University of Nebraska study specifically examining patients with COVID-19 found that the virus may travel not just on heavy, short-range droplets but also in much finer—and more mobile—aerosol clouds. New laboratory research released last week by the National Academy of Sciences found potentially infectious droplets can remain suspended in air for as long as 14 minutes.
The steady flow of new scientific findings is a challenge for agencies like the CDC, who want to communicate best practices to the public in the clearest and most consistent way possible.
“The CDC is making the best recommendation that they think they can make based on limited evidence,” says Janet Baseman, a professor of epidemiology at the University of Washington. But the evolution of such guidelines can actually be a threat to the effectiveness of public health messages. Shifting messages about the role of protective masks in controlling the coronavirus, for instance, may have undermined public trust. Across America, that distrust—which has also been fueled by mixed messages from politicians and media figures—is increasingly blossoming into overt defiance of public health guidelines.
Krys Johnson, an epidemiologist at Temple University, says that uncertainty and changing recommendations are inevitable when fighting a completely new disease, making transparency especially important.
“It’s better to communicate something and state that you don’t know certain things than to wait until you know everything,” says Johnson, who previously helped battle the Zika outbreak in Florida that began in 2016. “Otherwise, it might seem like you’re withholding information.”
That makes one element of the CDC’s communication strategy particularly confounding: While experts interviewed by Fortune and other outlets have pointed to the 2003 SARS transmission study as a likely source, the CDC itself has so far declined to explicitly outline the thinking behind its six-foot guideline. Reporters at the news website Quartz say they sought clarification for nearly two weeks without receiving a response. The CDC also did not reply to Fortune’s request for further insight.
The CDC may be reluctant to show its work out of a desire to keep things simple. “I think people want more certainty,” Johnson admits, instead of endless reminders of how little we know about a deadly, invisible disease.
But certainty isn’t even the true goal of the six-foot rule. “[The CDC] is not saying, ‘If you’re six feet apart then you won’t get sick,’” says Baseman. “Because there’s not actually evidence that that’s true.”
Instead, this and other guidelines are all about improving the odds.
“Scientists in general are going to emphasize reducing risk,” says Johnson. “Because there are no absolutes in science.” Even for those who follow coronavirus guidelines rigorously, she says, “there’s still going to be some amount of risk. You can wear a mask, and it will help protect you and those around you, but you can still become infected.” She says a good analogy is the use of speed limits: They don’t eliminate the risk of injury on the road, but they meaningfully reduce it.
And, like speed limits and seatbelts, the various coronavirus guidelines work best together. “None of them by itself is intended to provide complete protection,” says Baseman. “Each one of them confers one level of protection, and, in combination, they will provide more.”
That appears to be particularly important given our evolving understanding of the novel coronavirus. Even if studies showing longer transmission distances are accurate, the six-foot rule and masks still reduce risk, leading to fewer infections and deaths overall.
Johnson acknowledges changing messages can be confusing for the public, but argues changes should be welcomed, not taken as grounds for mistrust.
“Anytime you see a change in the science, it’s a change for the better,” she says. “Because it means we have more information. It means we can better protect people.”


fortune--2020-05-20--Paying during a pandemic: Venmo, PalPal, and other money transfer apps are surging

A new study of payment habits during the pandemic reveals a surprising trend: Even as lockdowns forced businesses to shut and consumers to stay home, use of peer-to-peer payment apps like Venmo has surged.
According to findings by Apptopia, which studies app usage, the use of the most popular money transfer apps has risen by nearly 11% since March 1.
According to Adam Blacker, a VP at Apptopia, the number of U.S. downloads for Venmo grew 16.5% and those for Square’s Cash App grew 20.1% from April to May. Meanwhile, PayPal downloads soared 32.3% during this period.
In raw numbers, Cash App was the most popular with nearly 4 million new downloads, while Venmo and PayPal respectively saw around 2.5 million and 2 million downloads.
Activity on all three apps also climbed with Venmo posting over 600 million sessions—a rough proxy for transactions—in April. Cash App had the next most usage, with around 250 million sessions, followed by PayPal, which had just under 200 million sessions.
Other apps included in Apptopia’s survey, including Zelle and cross-border money transfer service TransferWise, all recorded similar uptakes in usage.
Apptopia’s research did not delve into why the use of payment apps surged during a period of huge economic decline. But Blacker speculates that, in the case of PayPal, an increase in e-commerce during the lockdown helped fuel the growth. As for the spike in Venmo and Cash App usage, he suspects that it was driven in part by consumers wishing to avoid in-person banking, and by people sending money to family and friends affected by the pandemic’s economic fallout.
More must-read finance coverage from Fortune:


fortune--2020-05-20--It’s true: ‘Justice League’ Snyder cut coming to HBO Max in 2021

The long-rumored alternate version of the 2017 DC Comics superhero film Justice League is becoming a reality, HBO and Warner Bros. announced Wednesday.
The so-called Snyder cut—named for director Zack Snyder, who worked on the original film—will have its world premiere exclusively on HBO Max sometime in 2021. HBO Max is WarnerMedia’s direct-to-consumer offering that will debut on May 27 of this year.
The decision comes after fans on social media called for the alternate version’s release. The campaign, which started in the wake of the original film’s underwhelming release, never subsided, the filmmakers said.
“The chant to #ReleaseTheSnyderCut has been a daily drumbeat in our offices and inboxes,” said Robert Greenblatt, chairman of WarnerMedia’s entertainment and direct-to-consumer business, in a statement. “Well, the fans have asked, and we are thrilled to finally deliver. At the end of the day, it really is all about them, and we are beyond excited to be able to release Zack’s ultimate vision for this film in 2021.”
The original Justice League raked in just $94 million during its opening weekend—dozens of millions less than superhero flicks Suicide Squad (2016) and Man of Steel (2013), the latter of which was directed by Snyder.
More must-read stories from Fortune:
—Drive-in theaters are back. These are the movies you can see, and where you can see them
—What to expect on network TV during the 2020–21 season
—3 reasons why Quibi is “losing the attention game”
—Another Star Trek series is coming to CBS All Access
—Snowpiercer showrunner, production designer: We didn’t want a “carbon copy” of the movie


fortune--2020-05-20--Apple, Google’s COVID-19 tracing tool is one big step closer to being put to use

Apple and Google released their COVID-19 exposure-notification tools on Wednesday, along with changes that will help public health authorities gather more information on who has the virus.
The system — called Exposure Notification — helps the authorities develop apps that notify users if they have come into contact with a person who has tested positive for the novel coronavirus. Users who’ve downloaded the app for their region will be able to update their status if they test positive. The iOS and Android system will then anonymously notify other users who have come into contact with that person.
“User adoption is key to success and we believe that these strong privacy protections are also the best way to encourage use of these apps,” Apple and Google said in a statement. “Over the last several weeks, our two companies have worked together, reaching out to public health officials scientists, privacy groups and government leaders all over the world to get their input and guidance.”
Some governments have criticized the system because it doesn’t let authorities store data on who has the virus and track where it is spreading. Instead, it just notifies individuals if they have been exposed. This has also highlighted the privacy shortcomings of other approaches that user location data and store it on government servers.
Still, Apple and Google listed several changes to the system on Wednesday that they made after getting feedback from the U.S. Centers for Disease Control and Prevention, local health authorities and dozens of other experts.
One change lets public health authorities contact exposed users based on “a combination of the API and data that users voluntarily chose to input into the app,” the companies said. The API is the Application Programming Interface, the set of software tools that lets these new exposure-notification apps communicate with Apple and Google’s operating systems.
Public health apps want to get additional information from users who have been exposed and reach out to them. So Apple and Google are allowing the optional collection of additional data by these apps, including ZIP codes and user phone numbers. These will only be shared if users give permission.
Each public health authority will be able to set parameters for what counts as an exposure, such as how long someone spent near another user, or how close they got. The software uses Bluetooth technology to let phones detect one another.
The system is designed to work with one app per region, such as a country or state, to avoid fragmentation. The companies said multiple U.S. states and 22 countries have requested and received access to the system. Alabama and North Dakota both said they will be using it.
The tools have been released via the iOS 13.5 update for iPhones released in the last four years, while Android phone users running Android 6.0 or later are receiving the system via a Google Play download.
Apple’s update also includes other features designed for the pandemic, including quicker Face ID unlocking for users wearing masks and enhancements to multi-person FaceTime video calls.


fortune--2020-05-20--This $350 cocktail machine wants to bring the bar to you

The Bartesian, a $350 Keurig-like machine that makes cocktails on demand, was not made for me.
I’m a 30-year-old woman living in a small apartment in Brooklyn who avoids sugary mixed drinks and prefers wine anyway. And yet, I can’t stop seeing the thing. The Instagram ads clog my feed, and every time I open Amazon, it’s suggested to me. At one point, I saw a friend screenshot and post the ad to his own Instagram story, making fun of it. “Juicero walked so Bartesian could run, basically,” he wrote. But when I asked him about it, he admitted that he “secretly wanted to try it.”
So when I got an email from a representative for the brand asking if I wanted to review the Bartesian and interview CEO and founder Ryan Close, I thought I might as well. I’ve been stuck inside my apartment for three months at this point, and my Ikea kitchen island is the closest I’ll be getting to a bar anytime soon.
The machine that spits out Cosmopolitans and Long Island Iced Teas in a few seconds would be a fun novelty, I thought. Something to distract me from endless and often pointless COVID-19-adjacent chatter, which causes me to oscillate between feelings of panic and boredom.
Is Bartesian the Keurig or the Juicero of cocktails? Bartesian
There’s certainly an element of escapism that comes along with the machine. Instead of someone self-isolating in a railroad unit with no AC at the global epicenter of a pandemic, I could be transported into the ranks of suburbanites who fire up their turbo grills each night in their lush backyards. Sounds nice right about now.
“Our core customers are relatively young couples with small children in a lot of homes in California by the pool, typically well-to-do families who want premium cocktails,” Close told me from his driveway on a Saturday morning phone call. “Our focus is a Monica-from-Friends type, the hostess with the mostess, who wants to have everything perfect for guests who come over.”
But guests can’t come over. And in a moment when most facets of life are categorized into essential and nonessential, this fits squarely into the latter category. Is this really the time to be keeping up with the Joneses?
Apparently so!
According to Close, sales of the Bartesian have increased significantly. While the private company doesn’t reveal specific numbers, he said he’s seen more than a 150% month-over-month increase in sales. The product has sold out on Amazon.
“An uptick would be conservative; I would call it meteoric,” Close said. “It could have gone either way for us. People maybe were just going to stock up on beer. We didn’t know.” After seeing a report that liquor sales were surging, he said his company made internal adjustments to prepare for a potential increase in sales. “This isn’t going to end anytime soon, and even when it does, it’s not like people are going to fill up bars and restaurants.”
But it’s not just the Monica-from-Friends-types who are promoting the brand. There’s another element to it: the college crowd. There’s a certain novelty to a machine that can spit out margaritas on demand that appeals to toga-wearing frat bros, and Close doesn’t deny that.
A recent TikTok video made by someone who had received the device for her 21st birthday received nearly 1.5 million views, and according to Bartesian led to nearly 500% month-over-month growth within one weekend. “I recall when I was in college I’d spend $80 to $100 a night, no problem, at the bar,” said Close. “So I think if I’m a student and putting a few hundred bucks aside or even splitting the machine, it makes sense financially.”
But he stressed that this isn’t his core customer. While he certainly doesn’t shun the Gen Z crowd, he seemed more excited about being listed as one of Oprah’s favorite things in 2019. “We got an email saying Oprah has been trying it, and Gayle [King] and the whole team are in love with it,” he told me.
Oprah, in her review, wrote that while her house manager Eddie often fixes fresh cocktails for her, “this mechanical bartender is a great backup.”
I don’t have an Eddie in my life, but I do see where Oprah is coming from. There’s a certain feeling that comes from muddling your own mint or shaking your own drink that mechanics can’t replicate, but this is a good backup.
When the package and capsules finally arrived at my house, I found them very intuitive and easy to set up. You do have to supply your own booze, and the pods that service the machine retail at around $20 for a six-pack. Even if you buy the cheapest vodka, gin, rum, tequila, and whiskey (that’s what the machine suggests you have), that’s another $100.
All in all, grabbing a bottle of Tito’s Handmade Vodka and a bottle of seltzer water is much, much cheaper.
But this was fun, and the drinks were very, very tasty.
I tried the margarita, the Old-Fashioned, and the Cosmopolitan (over the course of a few days), and they were all bar-quality—if not better. Not too sweet, not too tart. Really, just right. You can also customize the drink strengths from mocktail to light to regular to strong. Close tells me that in his research, 80% of people go for something other than “regular.”
There were some issues. The machine tended to spray a bit, emitting a sticky substance that I needed to clean up afterward. It doesn’t make ice, and in my no-AC apartment, the drinks came out very warm. It’s a big machine. It took up all of my counter space, but I’m working with a New York City kitchen here.
Some drinks, like the Cosmopolitan, came with instructions to shake afterward. Why am I paying $350 for a machine that makes cocktails only to have to remake the cocktail afterward?
Close explained it to me. The drinks his machine makes, he said, “require muddled cilantro and white peach. You’re not going to have pineapple juice and coconut and some of the bitters or Aperol or liquors from Italy; you’re not going to have those ingredients. We make cocktails people love, and they’re likely not going to have the ingredients or want to buy a $40 bottle for a few drops and then maybe screw up the drink anyway.”
Good point. My bar cart has years-old bottles of sweet vermouth and chartreuse that I’ll likely never use again. This machine certainly prevents the grandma-liquor-cabinet situation with dusty, sticky bottles of peach schnapps that probably predate the Cold War.
Still, the whole time I couldn’t help but think that this would make more sense in a WeWork or hotel lounge than in a home. I’m not the only one. Close told me that investors initially wanted to market the machine as a commercial product, but that he pushed back. “I didn’t disagree with them, but we were obsessed with customer feedback. We tracked 2,000 customers and they all wanted it in their house,” he explained.
Close’s company has deals with American Airlines, Hyatt Hotels, Wrigley Field in Chicago, and roughly 10 more stadiums around the country. “But, obviously, those all went on hold for the last three months,” he said. “Thankfully, we have the individual consumer.”
It certainly was fun to escape the mundanity of my life for a few evenings, but every great escape has to come to an end at some point. Practicality sets in. I’ll probably just stick to my Tito’s sodas and Sancerre.


fortune--2020-05-20--The new PPP loan forgiveness application is causing lots of confusion. Here’s what to know so far

Small businesses have waited—and waited.
On Friday, the Small Business Administration and the Treasury finally released the PPP forgiveness application, an 11-page document with details that answered, and stirred, questions for small businesses and the CPAs and lawyers advising them. “We at least have a worksheet, if you will, to start the process,” notes Eric Holland, a partner at law firm Reed Smith.
Guidelines for how to get small-business loans forgiven (the main draw for the loans—which could be up to $10 million, under the Paycheck Protection Program) were long overdue. In fact, guidance for the forgiveness portion was due at the end of April, per the CARES Act. The loans can be used over an eight-week period, and 75% of the loans must be used for payroll, while the remaining 25% can be used on things like mortgage interest and other expenses (a stipulation put in by the SBA, not the act itself).
Yet businesses are still awaiting clear guidance on how the forgiveness will actually work. The SBA said it will “soon issue regulations and guidance to further assist borrowers” with the applications.
Those like William McDevitt, a CPA based in the New York area, were expecting regulatory guidance, not a form. “Everything has been bleeding out, trickling out, coming out later than you’d like. People who are advising clients like myself are used to dealing in the gray zone, but this has just been unbelievable,” he says. “It did answer and clarify quite a number of questions, but there’s just as many questions that are still open.”
Many businesses are banking on getting that crucial forgiveness for their loans. Otherwise, they’ll have a 1% loan to pay back over two years.
Those like Wade Foley, who owns a social media marketing company based in Charlotte, N.C., are now turning their attention to forgiveness. Foley was approved for a $10,000 PPP loan on May 8. He doesn’t think getting his loan forgiven will be too challenging, but he’s planning to parse it out with his accountant: “I think the main thing for me is just exactly how much of that $10,000 will be able to be forgiven,” he says.
Big questions answered
A few key questions were answered in the application, CPAs and lawyers say: One of the big provisions in the new forgiveness application gives flexibility for businesses who received the loan in the middle of a pay period. Businesses are now able to use an “alternative payroll covered period” for those with a biweekly (or weekly) payroll schedule over the eight-week period, and can elect to calculate “eligible payroll costs” using the first pay period after they got the PPP funds, per the application.
Another notable clarification was aimed at concerns that only expenses borrowers paid during the time they had the loan could be covered for forgiveness. Now, borrowers can include payroll and eligible non-payroll expenses that were incurred (not only paid) during the eight-week period after receiving the loan, so long as they’re paid on or before the following regular payroll date. “Paying an expense is certainly different than incurring an expense, [so] that was good to see,” notes Ken Logsdon, a partner at law firm Dorsey & Whitney.
Plus, the application contains a new exemption from the loan forgiveness reduction for borrowers if they have made “a good-faith, written offer to rehire workers that was declined”—calming some businesses’ fears about trying (and failing) to rehire employees in time to receive full forgiveness for the loan. The application also includes some clarity on how to calculate “full-time equivalents” for employees, which is key for the forgiveness side of the loans, among several other measures detailed on the Treasury’s site.
What’s unclear?
Yet some advisers note there is still “too much ambiguity” to give their clients the full picture, says McDevitt.
Some lingering questions CPAs and attorneys have are more nuanced or complicated, like how benefits for health care, 401(k)s, and the like will be covered in the forgiveness period if a business moved up those payments or disbursements to fall within the eight-week period (it “still remains unclear in the application,” says Logsdon). Other questions are far simpler: “When’s the form due?” asks McDevitt. “Something as simple as that, there’s no clarity on that.” (Lawyers and CPAs are confused by the expiration date, Oct. 31, 2020, at the top of the application, which they say doesn’t have a clear explanation.)
Others like Reed Smith’s Holland suggest although more clarity was given around the timing of payroll costs, “there are questions about, if you paid the amount during the covered period but the underlying expenses or payroll costs were for a period preceding the covered period, is that eligible for forgiveness? These are things that all of these borrowers are considering in connection with the application for forgiveness,” he notes of his clients.
Despite concern about the rule that businesses have to spend 75% of their loan on payroll costs (and the other 25% on mortgage interest payments and other expenses), the new guidelines don’t amend the ratio. “There’s legislation contemplating changing that, but so far that’s how all these borrowers should be doing those numbers,” notes Logsdon.
With much of the application being a math- and calculations-based form, those without the funds to hire someone to help might be in a tough spot: “A mom-and-pop shop needs to be able to fill out this application, and if lawyers are struggling to interpret some of these provisions and how to calculate things, how do you expect Mr. and Mrs. Smith to do it?” asks Holland.
And while many hoped the time limit to spend funds would be extended, the new PPP forgiveness application does not do away with the eight-week time frame to spend the money. For many of McDevitt’s clients, including hotels, restaurants, and health care companies, the length of the shutdowns prompts new questions into the eight-week period: “It’s not structured correctly to really protect them,” he says. They need a “longer runway, longer than eight weeks.”
Changes ahead?
Lawmakers and officials are expected to make changes to address some of these problems following calls to ease the eight-week time limit to spend funds. Treasury Secretary Steven Mnuchin said in a televised interview last week that they would make “technical fixes” to address lingering issues, while President Trump said on Monday that extending the time frame from eight to 24 weeks to use funds “should be easy.”
For many businesses, the 75% payroll limit and the eight-week period have become unhelpful as many are unable to open or rehire employees.
“When we conceived the program, we thought businesses would be able to get up and running after eight weeks, but we know now that’s not the case,” Democratic Sen. Ben Cardin of Maryland, who is on the small-business panel, said in a statement.
Virtually everyone agrees now that we need to change #PPP to give #SmallBusiness longer than 8 weeks to hire back workers. The only question is will getting it done be blocked by demands we make other changes to PPP that don’t have the same level of support. pic.twitter.com/hLCBLFpbBG — Marco Rubio (@marcorubio) May 20, 2020
Sen. Marco Rubio said in a video on his Twitter, “For those asking about whether the time is going to be extended, we have the votes to do that.”
But, you guessed it, it’s unclear exactly when, or how, these changes will take form.
More must-read finance coverage from Fortune:
—Saving lives vs. saving the economy is a false tradeoff, economists say
—Real unemployment rate soars past 24.9%—and the U.S. has now lost 33.5 million jobs
—17% of unemployed workers aren’t looking for work—and that’s warping the official unemployment rate
—Does Apple’s stock buyback strategy make sense in this market?
—Goldman Sachs doubts there will be a Round 3 of PPP loans for small businesses
—Listen to Leadership Next, a Fortune podcast examining the evolving role of CEO
—WATCH: Why the banks were ready for the financial impact of coronavirus
Subscribe to How To Reopen, Fortune’s weekly newsletter on what it takes to reboot business in the midst of a pandemic


fortune--2020-05-20--The Coronavirus Economy: Meet the vocal coach keeping busy while opera stages are all dark

Just like a top-ranked tennis star or an Olympic marathoner, an opera singer needs a coach. Rachelle Jonck, a New York–based vocal coach, works with opera singers bound for the art form’s biggest stages, including the Metropolitan Opera, Covent Garden in London, and Chicago’s Lyric Opera, helping them with everything from Italian diction while singing to help taking on Germanic opera if that is not the artist’s forte.
But since the COVID-19 lockdowns started in mid-March in the United States, one opera house after the other has gone dark, leaving Jonck’s clients idle and unable to make a living: The Metropolitan Opera canceled the last two months of its season, the Lyric Opera in Chicago had to drop its ambitious Wagner Ring Cycle, and the prestigious Santa Fe Opera last week said there would be no 2020 summer season.
Jonck is keeping busy, still working with just a few singers. (She is not, however, a fan of performances or lessons on Zoom, preferring in person collaborations, but says artists should do what works for them in this environment.) And just as the lockdown started in March, she launched a large group on Facebook—the Vaccai Project 2020 (named for the 19th-century Italian composer)—where her singers can share scores and tips on things like breathing exercises, as well as sing for one another and offer mental support as they wait for their art form to return. She likens it to barre classes for singers.
But the South Africa native, who moved to New York in 1998, is also in the early stages of a project that aims to use the Internet to cultivate new audiences and create more ways to provide instruction and training: In pursuit of this goal, Jonck has just launched BelCantoBootCamp.com. For now, there’s no cost to participate in the upcoming class offered on the site, but she is mulling whether down the line she might request payment, to supplement her coaching income. As distraught as Jonck is over the opera world’s current problems, she sees an opportunity for the art form to reinvent itself.
Fortune spoke with Jonck for a new series, The Coronavirus Economy, to ask about how the outbreak has affected her work as well as her thoughts on the future of her business and her beloved art form.
The following interview has been lightly edited and condensed for clarity.
Vocal coach Rachelle Jonck at the Rose Theater in New York, July 18, 2019. Steven Pisano
Fortune: What does an opera vocal coach do?
Jonck: We are the main way in which a singer prepares to sing a role onstage, from a language perspective, from a musical perspective, for the first day of rehearsals. Opera singers have to show up on the first day of rehearsals fully prepared. (On Broadway, it’s typically done during rehearsals as an ensemble.) For younger singers preparing for auditions, it entails preparing arias like a package so they are ready to present their wares.
How can your service vary from client to client?
Some singers do a lot of work before walking into the studio, other singers prefer to do so in earlier stages with me. It depends on the singer’s innate ability to deconstruct the material he or she is dealing with. It can be, “Oh, I’ve been singing a lot of opera, but I haven’t sung a Verdi role in a while. It’s very much about getting that person to sing in that style again.”
Different styles of music require different skills in things like score-reading. Singers are required to sing in a wide variety of styles and languages, and no one can be a master of all of them. For example, if someone has to sing coloratura (an elaborate style with lots of embellishments), they might say, “I just haven’t had to sing fast notes in so long.”
How do you help a singer develop his or her own style?
The singers live in a world where a lot of opinions come at them. They build the roles for themselves, then they arrive and they have a director and a conductor with opinions, or a costume that might be hard to wear, or a production concept that might be unusual. In the modern world, people tend to want singers to be a blank slate because there are so many people with opinions; I work the other way. I like singers to bring their own knowledge and ideas. That is what makes a powerful singer onstage.
What about singing in foreign languages?
You can teach someone how to make sounds with their mouth but that doesn’t mean it’s coming out with conviction if that language doesn’t flow from them naturally. A lot of our work is on making that language feel idiomatic and comfortable.
How did you fall into this profession?
I trained as a pianist and musicologist. I did instinctively know that I didn’t like being on my own all the time. I knew I wasn’t good enough to be Martha Argerich. But I always loved drama and language. I’m an introvert, but when I talk about music, it all comes out. One day, my school got a call from Cape Town Opera saying that if anyone had shown any aptitude working with singers, they had a position. I really knew nothing of opera. I grew up in a musical household, so I went to the audition, had no idea how to follow a conductor, but then they offered me the job.
Any upside for your singers in this involuntary pause?
All of my singers are in this pause, and when does that ever happen? We’re always just pushing ahead, trying to get ready for the next gig. Then, all of sudden, everything stops. This could be—if you get over the horror of what’s happening—like a moment when a tennis player breaks down their serve to work on it.
Jonck and Derrick Goff leading a discussion on their Facebook group for opera singers. Rachelle Jonck
What do you think of all the free content being put on the web to keep audiences engaged with classical music and opera while stages are dark?
I am wary of free music-making from your living room because the opera world, the performing arts world, already had issues before COVID-19. People were already not coming to the theatre, people not donating at the same levels. Opera was already in a crisis. While singers need to keep their brand alive and stay in front of people, I am not sure that just putting out free content sends the right message. We want to send a positive message, but it hurts the value people put on music.
Since the invention of reproduced sound, we’ve been continuously fighting this battle, arguing why people must come to the opera house rather than watch YouTube clips. Another challenge: attention span. Opera is longer than a YouTube clip.
So what do you think online engagement of opera and classical music audiences should look like?
What if we can build audience participation online? What if we created courses on how to listen to certain things to a much larger audience? After all, sports and ballet fans are into the technical know-how of things. There is no such thing as a tennis fan who doesn’t have an opinion about why someone’s serve is off. What would it be like if opera had live commentary? The opera world has always thought that if singers are these mystical beings doing things that no one understands, that people would love that; that is not true. What if it’s fun for an opera fan to follow along a basic training program for singers and see singers talk about how a particular skill is difficult, with a video Maria Callas executing that skill in a video?
How are you and your singers coping?
Singers are in cocoons now and want to come out. They are devastated that they can’t be on a stage. Yet no other generation has had the opportunity to reimagine itself in this same way, especially during the technological age. We shouldn’t be pausing, we should be activating. But it would be easier to be optimistic if people weren’t facing such devastating financial hardship. No one is getting any money coming in. Artists are tough; you have to be tough in this business—you have to have a thick skin. But you have to be able to pay your rent and to eat.


fortune--2020-05-20--The case for negative interest rates has ‘strengthened,’ says Goldman—but the Fed remains opposed

During a pandemic is it best to go negative, or stay positive?
If you ask the Fed chair Jerome Powell and the Federal Open Market Committee (FOMC), the unanimous answer to the prospect of negative interest rates is, well, negative. But while that opposition makes it “unlikely” that negative rates will be implemented in the U.S. in the near future, economists at Goldman Sachs wrote Tuesday that, “despite the steady message, the substantive argument for negative rates has strengthened.”
The Fed confirmed it will keep interest rates near zero in its April 28-29 meeting minutes released Wednesday.
Negative interest rates have long drawn skepticism from analysts (especially when looking at Europe) as a means to stimulate demand for credit and help the economy, but even while the Fed points to concern that negative rates harm banks and hurt lending, “most research finds that rate cuts below zero do ease financial conditions,” economists at Goldman write, thereby stimulating the economy.
In fact, the firm notes, “under our expectations for the economy, the Fed’s standard monetary policy rules would call for quite negative rates.” Those expectations for the economy now include a massive 39% drop in GDP in the second quarter, while the firm estimates unemployment will hit 25%, up from 15%.
All told, Goldman says, it’s “skeptical that forward guidance and asset purchases can fill the gap, barring a dramatic foray into risky assets for which the Treasury (and ultimately Congress) would need to provide a lot more equity capital.” Put bluntly: “While the Fed’s attitude has not changed, circumstances have,” the economists write.
Indeed, with the Fed having taken an everything-and-the-kitchen-sink approach to the economy and markets (or, as Randy Frederick, the vice president of trading and derivatives at Charles Schwab, recently dubbed it, a “blank-check Fed” approach), some say the markets have already been pricing in low or negative rates into next year.
“While we agree that the Fed is unlikely to push U.S. interest rates into negative territory, what is clear is that rates are set to stay lower for longer,” Mark Haefele, chief investment officer of Global Wealth Management at UBS AG, wrote in a note this week.
Despite pressure from President Trump via a tweet on May 12 that negative rates might be a “gift,” the Fed has thus far remained unmoved: “This is not something we’re looking at,” Powell said in a video conference with the Peterson Institute for International Economics last week.
Goldman suggests that for the Fed to consider reversing its policy and cutting rates negative, a few things need to happen: The recession would have to hit a point where weak demand—not the virus—is the “main economic problem”; the hefty fiscal response would have to “fizzle” while unemployment remains high; and any escalation in asset purchases would have to “lose appeal for one reason or another,” the firm notes.
In the meantime, amid the current backdrop, “investors will need to consider strategies to improve the yield in their portfolios,” notes UBS’s Haefele.
Those strategies may include riskier credit like U.S. high-yield bonds (where spreads of 778 basis points over Treasuries “more than compensate” for default risks, UBS notes), or U.S. investment-grade and emerging-market USD sovereign bonds, the firm points out.
Update, May 20, 2020: This article has been updated with the Federal Reserve’s Open Market Committee meeting minutes on April 28–29.
More must-read finance coverage from Fortune:
—Saving lives vs. saving the economy is a false tradeoff, economists say
—Real unemployment rate soars past 24.9%—and the U.S. has now lost 33.5 million jobs
—17% of unemployed workers aren’t looking for work—and that’s warping the official unemployment rate
—Does Apple’s stock buyback strategy make sense in this market?
—Goldman Sachs doubts there will be a Round 3 of PPP loans for small businesses
—Listen to Leadership Next, a Fortune podcast examining the evolving role of CEOs
—WATCH: Why the banks were ready for the financial impact of the coronavirus
Subscribe to How to Reopen, Fortune’s weekly newsletter on what it takes to reboot business in the midst of a pandemic.


fortune--2020-05-20--Can I write off my rent? What you need to know about tax write-offs while working from home during t

Can I write off my rent? What you need to know about tax write-offs while working from home during the coronavirus

It’s a weird tax year.
The filing deadline for 2019 is in mid-July, many workers have been eking out a professional existence from their kitchen tables for months, and school and childcare seem like distant memories.
It’s also led to a lot of tax questions: Can I write off my rent or mortgage if I’m working from home? What about that ergonomically correct chair I just bought to save my back?
We consulted Nathan Rigney, lead tax research analyst at H&R Block’s Tax Institute, to get to the bottom of some queries that have come up during this very odd year.
Can I write off my rent?
The short answer? If you are a W-2 employee, then no. And it’s confusing, notes Rigney, because prior to 2017 if wide swaths of America were working from home, we would have been able to write off such expenses. But the Tax Cuts and Jobs Act of 2017 specified that employees would no longer be able to write off unreimbursable expenses. “It’s really unfortunate,” says Rigney. “Had this happened a few years ago we would all be deducting our home office and utilities and lots of other expenses.”
Can independent contractors or small-business owners write off expenses?
That said, if you are an independent contractor paid via a 1099 or a small-business owner, you may be in luck. You’ll need to show that you use your workspace “exclusively and regularly” for work alone, but Rigney says that doesn’t need to be a separate room. It could be a corner or a desk, for example. It must also be your “principal” place of business: If you are prevented from working in your office because of stay-at-home orders, that will qualify. “A lot of folks are meeting that test now,” says Rigney.
If you meet the standards, you’ll be able to write off all your direct expenses (office furniture, equipment, computers, etc.) and a proportion of your indirect expenses (rent, mortgage interest, utilities, homeowners insurance, etc.) Let’s say you calculate your workspace represents 5% of your house, then you’ll be able to write off 5% of those indirect expenses.
That’s a good deal of record keeping, so Rigney also suggests some taxpayers may prefer to take advantage of the “simplified method,” which allows you to take a deduction of $5 per square foot on up to 300 feet of office space.
Will I get audited if I write off working from home expenses?
There’s long been a fear that trying to write off a home workspace in any form will trigger an audit. But Rigney suggests that may have had more to do with the pre-2017 standard and the unreimbursed employee expenses worksheet. Now, he says, “I won’t be surprised if audit rates go down a bit in this area.” But like all tax professionals he urges people claiming this deduction to keep meticulous records.
But I’m a W-2 employee and I really need a new chair, monitor, or standing desk to work from home. Isn’t there any deduction I can take?
You can’t take the deduction, but there could be a solution. “A business owner can deduct items purchased for employees if those items are ‘ordinary and necessary’ for business operations,” says Rigney. That includes equipment to kit out your home office, bigger monitors, better chairs, or anything else that helps employees work comfortably from home. So talk to your employer to see whether it might be willing to reimburse you for the item you need.
What if I live in one state and pay taxes in another?
One final bit of weirdness this year, says Rigney, is that there are lots of people like himself who work in one state, but live in another (he does a Kansas–Missouri commute normally). So you’ll need to check to see if your state(s) have altered any rules or created “safe harbor” provisions for taxpayers who normally commute but have been working from home lately. He points to Georgia as one state that has done this recently.
All in all, says Rigney, it’s just “going to add a little bit of complexity”—something anyone working from home should be pretty used to by now.