Congress passed another COVID relief bill. What does this mean for the PPP?
Congress passed the Consolidated Appropriations Act of 2021, which aims to help those who have run into financial difficulties due to the COVID-19 pandemic. The bill contains numerous provisions, from funding the government to expanding unemployment benefits to providing additional aid to troubled industries. It is expected to take effect once it reaches the President’s desk.
The law also contains several important provisions related to the SBA and Paycheck Protection Program, better known as PPP. Here is a summary:
- Deductibility of PPP-funded expenses: This provision overrides the IRS’s decision that expenses funded by PPP loans are non-deductible. The effective date is the entry into force of the CARES Act.
- EIDL progress: The $ 10,000 EIDL advance is excluded from income and no expenses related to income exclusion will be declined. In addition, EIDL advances no longer reduce the amount of the PPP loan waiver.
- Income exclusion and expense allowances for payments under Section 7 (a) SBA Loans: Section 1112 of the CARES Act provided that the SBA would pay up to six months in principal and interest on certain SBA loans. Similar to PPP loans, the new law would provide that the principal paid by the SBA would not result in an income waiver and no deductions based on the income waiver would be allowed.
- Extended PPP-covered costs: The law extends the definition of covered costs to include payments for software or cloud computing services, employer’s personal protective equipment and similar costs, the acquisition of essential business goods and supplies based on contracts concluded before the start of the PPP-covered period, and any property damage caused by civil unrest that is not otherwise covered by insurance. The effective date is the enactment of the CARES Act, but PPP loans that have been enacted are not eligible for the extended cost.
- Flexibility in the period covered: All borrowers can choose a covered period that ends between eight and 24 weeks after the PPP loan was granted.
- 501 (c) (6) Organizations Eligible for PPP Loan: Qualified 501 (c) (6) organizations (e.g. chambers of commerce, business leagues) have been added as eligible to apply for PPP loans.
- Simplified waiver for loans up to $ 150,000: Within 24 days of the entry into force of the law, the SBA must prepare an application for waiver of no more than one page, in which the borrower must estimate the number of employees he was able to keep and the amount of the PPP loan issued on the pay slip . No additional information is required to be submitted, but the borrower must keep the relevant employment records for up to four years.
- PPP second drawing: Certain corporate entities that have 300 or fewer employees and that show a gross income decrease of at least 25 percent in the same period last year are eligible for a new PPP loan of up to a) 2.5 times (3.5 times at NAICS .). 72 companies) average monthly payroll over a period of 12 months, or b) $ 2 million. Similar to the original PPP loan, at least 60 percent of the loan must be spent on payroll, and second-drawing loans will be excluded from income and no loan waiver expenses will be declined.
- Subsidies for operators of closed venues: The law allows up to $ 15 billion, of which $ 2 billion is allocated to businesses with fewer than 50 employees, for grants to venue operators – like all live performing arts, museums and cinemas – whose gross quarterly revenue is 25. was percent less than in the same period in 2019. The grants are based on needs-based certification and are to be used for payroll, rents, ancillary costs and protective equipment for employees. During the first 14 days of the program, only grants for companies with a 90 percent reduction in gross income or more will be considered. As with other programs, the grant will not accrue to the recipient and no income exclusion expenses will be recognized.
- Extension of 7 (a) Loan SBA Payments: Borrowers with eligible SBA loans will receive three months of additional funding and interest starting February 2021. Payments are capped at $ 9,000 per month. Certain heavily impacted industries (NAICS starting with 61,71,72,213,232, 315, 448, 451, 481, 485, 487, 511, 512, 515, 532, and 812) are eligible for additional payments for five months after the year end of the three month period . As with other programs, the grant will not accrue to the recipient and no income exclusion expenses will be recognized.
By the morning of December 22nd, this law had not come into effect, but it is expected that the President will do so once it reaches his desk. We will continue to process this massive bill of more than 5,500 pages and issue subsequent warnings with additional details on these PPP provisions and other sections of the law.
Gregory Butler is a partner and directs the Milwaukee tax firm at Wipfli. He has more than 25 years of experience in tax compliance and consulting.