PPP provisions in Consolidated Appropriations Act, 2021

This is a quick summary of the PPP2 provisions and items affecting the PPP1.  Please watch the sba.gov COVID 19 link for more information as they process the bill passed early January 2021.  I am sure will have “tweaks” and changes as the SBA interprets the new law.

PPP provisions in Consolidated Appropriations Act, 2021

Forgiven PPP loans are treated as nontaxable income AND the expenses the money was used for is still deductible for PPP1 and PPP2. Some of the dates and qualifications have been eased.

Aimed at helping the hardest hit borrowers

How does your business qualify for round 2?

  • Generally, 300 or fewer employees
  • 25 percent gross receipts decline in any quarter in 2020 compared to same quarter in 2019
  • Has used or will use full amount of first draw funds
  • Generally, businesses with 500 or fewer employees that are eligible for other SBA 7(a) loan

How is it calculated?

  • Calculated at 2.5x average monthly payroll costs up to $2M; 3.5x for restaurants, hotels, etc. First draw borrowers
  • Sole proprietors, independent contractors, and eligible self-employed individuals same as last time.

Added these entities:

  • Nonprofits, including churches
  • Added 501(c)(6) and news organizations (subject to limitations) 9 $284.5B for PPP funding

Other PPP Provisions:

  • F farmers and ranchers can use gross income instead of net
  • Defines a seasonal employer: (1) operates for no more than seven months in a year, or (2) earned no more than 1/3 of its receipts in any six months in the prior calendar year.
  • Loans can be recalculated if would result in a larger loan
  • Borrowers who returned all or part of their original loans may reapply if they have not received forgiveness

Businesses that are ineligible for PPP

  • Businesses not in operation on February 15, 2020
  • Entities receiving Shuttered Venue Operator Grants
  • Publicly-traded businesses
  • Lobbying organizations EIDL advances will not impact forgiveness Expenses are deductible for federal income tax purposes 10 #AICPATownHall PPP Loan Forgiveness Costs eligible for forgiveness

What is included in the forgiveness calculation?

  • Same as PPP 1: payroll costs (plus group life, disability, vision or dental); Mortgage Interest; Rent; Utility Payments
  • Added this -à worker protection expenditures; supplier costs; operations expenditures; and property damage costs.
  • 60/40 split between payroll and non-payroll is maintained for 1st and 2nd draws

Simplified loan forgiveness for loans $150,000 or less – sign and submit a one-page form with loan amount and # of employees retained, showing the amount spent on payroll and qualifying items, and attest to complying with PPP requirements.