Year-End Stimulus Legislation Provides PPP Enhancements and Other COVID-19 Relief
Congress has passed, and President Trump is expected to sign, the Consolidated Appropriations Act, 2021, a large year-end appropriations bill that includes COVID-19-related stimulus and relief provisions in several key areas, including the PPP loan program, paid leave tax credits, unemployment benefits, and the Provider Relief Fund. The following summarizes key highlights from the new legislation.
Paycheck Protection Program (PPP)
The legislation contains several provisions impacting the PPP loan program that was established in March 2020 under the CARES Act, including:
Allowing PPP borrowers to deduct expenses paid with PPP funds. This provision reverses the position taken by the IRS earlier this year and allows PPP borrowers to claim a federal income tax deduction for expenses paid with the proceeds of a PPP loan, even if the loan has been (or will be) forgiven. (Expenses must otherwise be deductible under general standards for claiming business expense deductions.)
Providing a second round of PPP loans for businesses that have been hit hardest by COVID-19. Eligibility for the “second draw” loan program is limited to businesses with 300 or fewer employees that have sustained a 25% revenue loss in any quarter of 2020 relative to the same quarter in 2019. The maximum loan amount is the lesser of $2 million or 2.5 times average monthly payroll in the prior year.
Adding eligible organizations to the PPP loan program. 501(c)(6) organizations, such as local chambers of commerce, economic development organizations, and tourism offices, that have 300 or fewer employees and are not lobbying organizations are now eligible to obtain PPP loans. Certain news and broadcast media organizations have been made eligible for PPP loans as well.
Expanding the categories of forgivable expenses for which a PPP loan may be used.Forgivable expenses under the second round loan program are expanded to include covered operation costs (software, cloud computing, and other human resources and accounting needs), property damage costs due to public disturbances that occurred during 2020 but are not covered by insurance, supplier costs, and PPE expenditures for workers. Borrowers must continue to use at least 60% of PPP loan proceeds for payroll costs to be eligible for full forgiveness of the loan.
Simplifying the PPP loan forgiveness process for loans of $150,000 or less. Under this new simplified process, the borrower signs and submits a one-page certification that requires the borrower to list the loan amount, the number of employees retained, and the estimated total amount of the loan spent on payroll costs. The SBA must provide this form within 24 days of enactment.
Eliminating the requirement to deduct an EIDL advance from the PPP loan forgiveness amount. Under the CARES Act, an Economic Injury Disaster Loan (EIDL) advance (up to $10,000) was required to be deducted from the PPP loan forgiveness amount.
