More PPP funding and program adjustments highlight the changes along with other important measures.
Many of the headlines surrounding the stimulus bill, passed on Monday evening by Congress, highlight the stimulus checks that will go to millions of Americans. While important, business owners may be asking if anything in the bill applies to them. If this is the first you are reading about the business provisions, I’m happy to report there are several important measures that may be applicable to you. Included in the bill are updates to the Paycheck Protection Program (PPP). The bill adds approximately $284 billion in additional funds to the Program. Other updates and changes include:
- Expenses paid with PPP funds are now tax deductible and forgiveness of the loan is still not taxable income. This applies to all participants even if a forgiveness application has already been submitted. States will still have to decide if they will conform to this change. If they do not, expenses will be non-deductible at the state level only.
- There will be streamlined forgiveness for loans less than $150,000. This will be a one-page form that the SBA will create within 24 days of the bill’s enactment (only for participants that haven’t yet applied for forgiveness).
- For those participants that received both PPP loans and Economic Injury Disaster Loan (EIDL) grants, PPP forgiveness is no longer reduced by the EIDL grants.
- The Covered Period for using the PPP funds (which ultimately determines forgiveness eligibility) can now be any amount of time between 8 and 24 weeks after the loan was disbursed. This is instead of choosing either 8 or 24 weeks (only for participants that haven’t yet applied for forgiveness).
- The definition of expenses that are eligible for use and forgiveness is expanded (only for participants that haven’t yet applied for forgiveness). These expenses primarily relate to adapting business to operating in a pandemic, but also include repairing property damage from vandalism or looting due to public disturbances that were not covered by insurance or other remuneration.
Borrowers that took loans in the first round of the PPP are now eligible to take a second loan, although the eligibility criteria is more stringent. Second loans are limited to businesses that have used all of their initial loan, less than 300 employees and experienced at least a 25% drop in gross receipts in a 2020 quarter when compared to that same quarter in 2019. The maximum loan size is now $2 million. In addition to the PPP changes, the bill:
- Increases the deduction for business meals to 100% for tax years 2021 and 2022 (the meals must still have a business purpose and not be lavish);
- Authorizes funds for SBA grants to eligible live venue operators;
- Extends the Families First Coronavirus Response Act credit to March 31 (a credit for small employers that paid qualified family leave or sick leave); and
- Extends the Employee Retention Credit (a credit for employers to help offset payroll tax liabilities) and expands eligibility.
While we have only outlined the major provisions in this article, we are here to help you navigate the best path forward for your business and how this bill, among others, fits along that path.