“The Coronavirus 2.0” bill passed Congress on December 21, 2020, and was signed into law on December 27. The law covers a wide range of topics, including updates and enhancements to the Paycheck Protection Program. Below is a summary of the “PPP” related provisions:
- Program reopens: The PPP program had been closed but this law effectively reopens the program. As a result, businesses who have yet to receive a loan under the original program and are eligible will be able to apply for round one “PPP1” financing.
- PPP2: Those who already received a PPP loan but need additional capital may be eligible to receive a second round of funding. However, the qualification requirements for “PPP2” are more stringent. To qualify for PPP2:
- A business must have already received and spent its first PPP loan.
- PPP2 is limited to businesses with no more than 300 employees (down from 500), except for businesses classified as “Accommodation and Food Services”, who are exempt from the employee limit.
- The business must have experienced a 25% drop in revenue in any quarter of 2020.
- Loan proceeds will not be taxable: The law clarifies the issue of the tax-deductibility of expenses paid for by forgiven PPP funds. The Act states that the amount forgiven is not to be includable in gross income and no deduction shall be denied because it was paid for by PPP loan proceeds which were ultimately forgiven. This applies to PPP1 and PPP2.
- Additional expenses authorized: In addition to the existing authorized expenditures such as payroll expenses, rent, and utilities, the Act authorizes additional expenditures including business operations software, property damage, supplier costs, and expenditures related to complying with CDC COVID-19 guidelines. These expenses are authorized for both PPP1 and PPP2. However, payroll costs still must make up at least 60% of the covered expenses.
- All borrowers can choose the 8-week covered period: In June, the Paycheck Protection Flexibility Act set the Covered Period to 24 weeks for loans funded after June 5, 2020. Only loans funded before that date were eligible to elect the 8 -week period. This Act allows all borrowers to choose either the 8-week or 24-week Covered Period.
- Simplified Forgiveness Application for Loans up to $150,000: The Act provides further simplification in regard to the application for loan forgiveness for loans under $150,000. The SBA will be required to create an application that is no longer than one page, and lenders will be prohibited from requiring supporting documentation. If your loan is under $150,000, you may want to wait on further guidance from your bank before rushing to submit your loan forgiveness application.
We will keep you posted on any new information as it becomes available.