On December 27, 2020, the President signed into law a $900 billion Coronavirus stimulus package. Included in this bill is a second round of Paycheck Protection Program (PPP) funding, as well as several updates to the first round of PPP funding released with the CARES Act last spring.
This law provides for $267.5 billion in a second round of PPP funding with $25 billion designated specifically for businesses with 10 employees or less as of Feb. 15, 2020. Several differences exist in this package as compared with the first round established in the CARES Act.
- Eligibility has changed – PPP borrowers with up to 300 employees may apply for loans in this round (down from 500 employees), provided that their businesses experienced a gross receipt decline by at least 25% for any quarter of 2020 compared to the same quarter in 2019. Also, first time PPP borrowers are eligible based on the program’s original eligibility rules (500 employees or less).
- Loan amount calculations have changed – The loan amount is limited to 2 ½ months’ worth of the average payroll for the last 12 months through date of application or 2019 and capped at a $2 million loan borrowing amount. For businesses with multiple locations, the aggregated total is limited to $2 million, and loans for affiliated borrowers are limited to $10 million. Restaurants and food service businesses can receive PPP borrowings based on 3 ½ months’ worth of average payroll.
- 501(c)(6) entities now qualify – These organizations must have 150 employees or fewer, gross receipts from lobbying activities must total less than 10%, and lobbying activities cannot comprise more than 10% of total activities.
The bill also includes changes to the original PPP package including:
- Eligible expenses list is expanded – Covered operations expenditures, property damage costs, supplier costs, and worker protection expenditures would be eligible for forgiveness.
- Expenses will be tax-deductible – The law allows all PPP expenses to be tax-deductible with the forgiven income to be tax exempt. This law reverses the an IRS ruling that denied the tax deductibility of those expenses. This provides a huge benefit for small businesses.
- Loans under $2 million get a simplified forgiveness application – A simplified forgiveness application process and documentation would be available for loans from $150,000 to $2 million, and loans up to $150,000 would get one-page online or paper form with borrower certifications.
- Audit plans will be clarified for large loans – Borrowers and their affiliates who had loans over $2 million will get clear policies and procedures for audits and reviews, and metrics will be established for which loans will be audited.
- Borrowers who incorrectly calculated their loan amount in round one would be able to request an increase to their original loan.