New Stimulus Package to Include Second Draw of PPP Loans
Update: December 29, 2020
The Consolidated Appropriations Act of 2021 has been signed into law by the President. The following summarizes the Paycheck Protection Program (PPP) #2 provisions of the new stimulus law. The Small Business Administration (SBA) has 10 days to issue guidance on the application process.
Please be sure to check back for updates.
PPP#2 offers second draw loans for hardest hit borrowers
- Generally 300 or fewer employees
- 25% reduction in quarterly gross receipts 2020 vs. 2019
- Economic Injury Disaster Loans (EIDL) and PPP aren’t included in 2020 gross receipts
- Have or will have used PPP#1 funds
Loan amount: Maximum = $2 million
- Calculated at 2.5x average monthly payroll costs
- Restaurants, hotels, etc. (NAICS Code 72) use 3.5x average monthly payroll costs
Covered period (Spending period)
- Optional covered period that is between 8 and 24 weeks
- Covered period for PPP#1 loans extended to March 31, 2021
Eligible costs for loan forgiveness (60% Payroll cost mandate applies)
- PPP #1 eligible costs plus
- PPE and costs to comply with COVID-19 guidelines
- Supplier costs essential to current operations
- Must be under contract when PPP funds received
- Perishable goods contracts OK within covered period
- Business software costs, cloud computing, inventory, etc.
- Uninsured costs related to 2020 public disturbances
- For PPP#1 and PPP#2 loans (unless forgiveness completed)
Simplified loan forgiveness for loans $150,000 or less
- SBA has 24 days to prepare a one-page form
- Attest to complying with PPP requirements
- Estimate of loan amount spent on payroll
- Records retention (four years for payroll; three years for other)
- May be required to document loss of revenue
Taxability & EIDL Advances
- Expenses paid with PPP funds ARE DEDUCTIBLE
- Taxable income does not include PPP#1 funds, PPP#2 funds, or EIDL advances
- Forgiven loans will not be reduced by $10,000 EIDL advances
Source: AICPA PPP2 Update - Read More
December 22, 2020
As part of an end-of-year pandemic relief package, Congress has passed several changes to the Paycheck Protection Program (PPP) and created a “Second Draw” PPP for small businesses that have exhausted their initial loan. Other changes include Economic Injury Disaster Loans, unemployment compensation, and stimulus checks for individuals.
The stimulus package was passed by Congress in the past 24 hours. It is awaiting signature by the President. Some of the major provisions are outlined below:
Important note: these are subject to change as more information is released. Check back for updates.
Paycheck Protection Program
- PPP program will reopen through March 31, 2021
- First-time applications for PPP are open to businesses harmed by the pandemic and have been expanded to include businesses up to 300 employees.
- Previous PPP recipients can reapply for PPP if revenues are impacted 25% or greater by the pandemic.
- Taxation on 2020 PPP grants - this ruling has been overturned and PPP grant income will not be taxed. Expenses paid for by PPP funds are now deductible. This applies to PPP grants that are forgivable.
- Restaurants, hotels, and accommodation - maximum loan amount is 3.5 times the average monthly payroll (other industries are the same as before, using a calculation of 2.5 times the monthly payroll cost up to $10 million, whichever is lower).
Economic Injury Disaster Loans
- EIDL Advance (grants up to $10,000) will reopen.
- Previous EIDL recipients - those who applied and received less than the full $10,000 are allowed to reapply for the difference between what was received and the full $10,000.
- Loan forgiveness deduction - 2020 EIDL Advance (grants) no longer need to be deducted from PPP grants.
Additional provisions of the new bill include:
- Unemployment Compensation
- Extends two CARES Act programs that support the self-employed, freelance, gig workers, and long-term unemployed by 11 weeks.
- Beginning December 26, provides an additional $300/week federal enhancement to state-based unemployment benefits.
- Employee Retention Tax Credit
- The refundable tax credit is now 70% of up to $10,000 in wages paid by an eligible employer whose business has been financially impacted by COVID-19.
- Stimulus Checks for Individuals
- $600 for individuals earning up to $75,000 and couples earning up to $150,000.
- Taxpayers will also receive an additional $600 for each child under age 17.
Source: U.S. Chamber of Commerce - Read More