On Monday, December 21, 2020, The U.S. House of Representatives and the Senate passed the Consolidated Appropriations Act, 2021. The legislation provided $900 billion in long-awaited COVID-19 stimulus relief measures, in addition to general appropriations to fund government programs and agencies through September 2021. Key aspects of the latest stimulus include:
- $166 billion for direct, economic impact payments of up to $600 for individuals earning less than $75,000/year and $1,200 for couples earning less than $150,000/year. These payments may include $600 for each dependent child and will be based on 2019 income tax filings.
- $120 billion for $300/week supplemental unemployment benefits. This funding extends unemployment benefits through March 14, 2021.
- $284 billion for a second round of Paycheck Protection Program (PPP) Loan funding. “PPP Round 2” will be available to first-time borrowers and to existing borrowers who received PPP loans through the initial CARES Act. The qualification criteria for first-time borrowers remains similar for those who received loans under the CARES Act. The qualification criteria for existing PPP Borrowers seeking a second loan draw has become more stringent. PPP loan amounts will remain equal to 2.5 months of average payroll costs; unless the business has a primary NAICS code beginning in 72 (hospitality and food service industry), in which case the business can now qualify for 3.5 months of average payroll costs. In all instances, the maximum loan amount has been decreased from $10 million to $2 million. Additionally, 501(c)(6) will now be eligible for PPP loans, assuming they have 300 or fewer employees and do not derive more than 15% of gross receipts from lobbying activities. To receive a second PPP loan, existing borrowers should note the following changes:
- Business size requirements have decreased; from 500 or fewer employees, as was required with the initial round of PPP loans, to 300 or fewer employees; and
- The business must be able to document a decline in gross revenue of at least 25% in any single quarter in 2020, as compared to the same quarter in 2019.
- Business expenses paid with PPP loan funds will now be tax deductible. This important fix reverses the prior IRS position, which many legislators felt was against the original intent of the CARES Act.
- EIDL advance grants are no longer required to be subtracted from PPP loan forgiveness amounts.
- Under the newly issued PPP loans, expenses such as supplier costs, property damage, certain operations costs, and worker protection costs/PPE will now be eligible for forgiveness. Borrowers should keep in mind, however, that the 60/40 ratio of payroll vs. non-payroll costs must still be maintained.
- There will be a simplified forgiveness process for covered loans of $150,000 or less. Qualifying borrowers can expect to submit a more simplified, one-page certification form which should be like the form previously authorized for loans under $50,000. While this measure will reduce the amount of paperwork that qualifying borrowers must submit to their bank, businesses will still need to comply with all existing SBA rules, including those for FTE retention, and retain all appropriate supporting documentation.
Wall, Einhorn, and Chernitzer is continuing to evaluate the text of this nearly 6,000-page piece of legislation. Please bookmark this post and check back for additional updates and clarifications. If you have any questions on these important PPP developments or their impact on your business, please contact Advisory Services Manager, Karl Belka or Advisory Services Shareholder, Joanna Brumsey.