December 23, 2020

COVID-19 Relief: Consolidated Appropriations Act 2021 – Small Business Support

By Dawn Minotas, Director, Outsourced Managed Services & Michael Maksymiw, Partner, Tax & Business Services

COVID-19 Relief: Consolidated Appropriations Act 2021 – Small Business Support Paycheck Protection Program

On Monday, December 21, 2020, the U.S. Senate and House of Representatives passed a $908 billion COVID economic relief bill which designates $325 billion toward support for small businesses, including $284 billion for additional Paycheck Protection Program (PPP) loans and $20 billion for Economic Injury Disaster Loans (EIDL) and grants. In addition, $15 billion is dedicated to shuttered live venues, independent movie theaters and cultural institutions, and $12 billion will be set aside for businesses in low-income and minority communities. In addition, the bill contains provisions for a simplified forgiveness process for PPP loans of $150,000 or less and allows expenses paid with PPP funds to be deductible for tax purposes.

The $325 billion earmarked for small businesses will be geared toward assisting small companies that can demonstrate economic hardship. Specifically, the new plan contains another round of funding under the Paycheck Protection Program (PPP2) for new borrowers as well as borrowers that have exhausted their first round of funds. This round of funds is also being made available to Sec. 501(c)(6) businesses such as chambers of commerce, visitors’ bureaus and “destination marketing organizations,” with some restrictions. It also expands forgivable expenses to include supplier costs and investments in facility modifications and personal protective equipment to operate safely, expenditures that are essential to the borrower’s current operations, as well as operating costs such as software, cloud computing and accounting services.

Eligible businesses are those with 300 or fewer employees (per location for NAICS codes starting with 72), that have exhausted their first PPP loan (or did not previously receive a PPP loan) and can show a 25% or greater decline in gross revenue in any quarter of 2020 as compared to the same quarter in 2019. In addition, sole proprietors, independent contractors, self-employed individuals, and not-for-profits are eligible for the loans.

The new round of PPP funding will have a framework similar to the first round, and loan amounts will again be based on 2.5 months of payroll costs. However, borrowers with NAICS codes starting with 72 (hotels and restaurants) may receive up to 3.5 months of payroll costs. The maximum loan amount will be $2 million, and the 60%/40% allocation between payroll and non-payroll costs will be required for full forgiveness.

Businesses currently seeking forgiveness for loans of less than $150,000 will receive full forgiveness by submitting to their lender a certification which includes a description of the number of employees they were able to retain with the loan proceeds, the amount spent on payroll costs, and the total loan amount. In addition, the SBA will no longer deduct from the PPP forgiveness amounts any EIDL advances received.

The bill also contains $166 billion for economic stimulus payments for individuals, as well as $120 billion to provide workers receiving unemployment benefits a $300 per week supplement from December 26, 2020, until March 14, 2021, and extends the Pandemic Unemployment Assistance Program.

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