Additional COVID-19 Relief and more PPP funding available

President Donald Trump on Sunday night signed into law the Consolidated Appropriations Act, the $900 billion COVID-19 relief bill passed Dec. 21 by Congress. This legislation comes with important provisions that will affect you and/or your business.

Key provisions for individuals include:

  • Provides economic impact payments of $600 for individuals (with certain income limitations), and
  • Adds $300 to extended weekly unemployment benefits.

Additional provisions include:

  • Additional Paycheck Protection Program (PPP) funding for those who didn’t get a loan in the first round AND those who did receive a loan but are facing severe revenue reductions,
  • Tax deductibility for business expenses paid with forgiven PPP loans,
  • Creates a simplified forgiveness application process for loans of $150,000 or less,
  • Makes Sec. 501(c)(6) not-for-profit organizations eligible for PPP loans for the first time,
  • Extends the employee retention tax credit and several expiring tax provisions, and
  • Temporarily allows a 100% business expense deduction for meals (rather than the current 50%) as long as the expense is for food or beverages provided by a restaurant (from Jan. 1, 2021 – 2022).

If your business is eligible for PPP loan funding, we recommend getting in touch with your banker as soon as possible as the funding will likely be expanded very quickly.

Additionally, if you have received a PPP loan, we recommend waiting until the new application is available and further guidance is issued before finalizing your application for forgiveness.

Have questions? Our staff is here to help! Click here to contact us or call our office at (208) 265-5959.

Breaking down the new provisions

Who is eligible for PPP Round 2?

  • Previous PPP (PPP1) recipients who:
    • Have 300 or fewer employees,
    • Have used or will use the full amount of their first PPP loan, and
    • Have a 25% gross revenue decline in any 2020 quarter compared with the same quarter in 2019.
  • First-time borrowers from the following groups:
    • Businesses with 500 or fewer employees that are eligible for other SBA 7(a) loans.
    • Sole proprietors, independent contractors, and eligible self-employed individuals.
    • Not-for-profits, including churches.
    • Accommodation and food services operations (those with North American Industry Classification System (NAICS) codes starting with 72) with fewer than 300 employees per physical location.
  • 501(c)(6) business leagues, such as chambers of commerce, visitors’ bureaus, etc., and “destination marketing organizations” subject to certain additional provisions.

PPP loan terms

As with PPP1, the costs eligible for loan forgiveness in PPP2 include payroll, rent, covered mortgage interest, and utilities. PPP2 also makes the following potentially forgivable:

  • Covered worker protection and facility modification expenditures, including personal protective equipment, to comply with COVID-19 federal health and safety guidelines.
  • Expenditures to suppliers that are essential at the time of purchase to the recipient’s current operations.
  • Covered operating costs such as software and cloud computing services and accounting needs.

To be eligible for full loan forgiveness, PPP borrowers will have to spend no less than 60% of the funds on payroll over a covered period of either eight or 24 weeks — the same parameters PPP1 had when it stopped accepting applications in August.

PPP borrowers may receive a loan amount of up to 2.5 times their average monthly payroll costs in the year prior to the loan or the calendar year, up to a $2 million maximum. Hotels and restaurants (NAICS codes starting with 72) can get up to 3.5 times their average monthly payroll costs, again subject to a $2 million maximum.

The simplified forgiveness application process

For loans $150,000 or less, a borrower shall receive forgiveness through a certification process that does not have substantiation requirements. This new form will be available within the next month. If you have a PPP1 loan under $150,000, we recommend waiting until this simplified process is available to apply for forgiveness.

Tax deductibility for PPP expenses

Previously, the IRS issued guidance that notes that expenses paid with forgiven PPP loans would not be tax-deductible. The bill specifies that business expenses paid with forgiven PPP loans are tax-deductible. This provision applies to loans under both the original PPP and subsequent PPP loans.

Employee Retention Tax Credit

Before this most recent legislation, if a business took a PPP loan, they were barred from taking advantage of another incentive, the Employee Retention Tax Credit (ERC). The ERTC is a refundable payroll tax credit that was available to taxpayers who EITHER 1) had their business fully or partially suspended during at least one quarter in 2020, or 2) had a precipitous drop in gross receipts for quarters in 2020 relative to the same quarter in 2019. Once a business experienced a quarter in which either 1 or 2 above occurred, they could claim a credit per employee who was paid “qualified wages.”

Now, PPP borrowers are eligible to claim the ERTC, but not for payroll costs paid by the PPP loan. This credit has also been extended through June 30, 2021, and there have been some changes to the limits and other guidance.