New COVID-19 Relief Bill and its effects on the Paycheck Protection Program (PPP)
On December 27, 2020, the president signed into law the new COVID-19 relief bill passed by congress on Dec 21st. A Below is a brief overview of the bill as it relates to the PPP.
New Round of PPP funds – Along with being available to more groups and organizations, Taxpayers will be able to request a second round of funding as long as they meet the following requirements:
- 300 or Less employees
- Used all or will use all of previously received PPP funds
- Can show a 25% gross revenue decline in any 2020 quarter compared with the same quarter in 2019
PPP Covered Expenses – On top of payroll, rent, covered mortgage interest, and utilities the new PPP loan (PPP2) also includes the following as eligible PPP loan expenses:
- Covered worker protection and facility modification expenditures, including PPE, to comply with federal health and safety guidelines
- Costs for supplies that are essential at the time of the purchase to the recipient’s current operations
- Covered operating costs such as software, cloud computing services, and accounting.
To be eligible for full forgiveness, PPP borrowers will have to spend no less then 60% of the funds on payroll over a covered period using the same parameters as the original PPP loan.
The maximum loan limit has been lowered to $2 million.
Simplified application and Terms for PPP – A simplified forgiveness application is forthcoming for loans of $150,000 or less. The SBA will be creating the new form and will have it available within a couple of weeks.
EIDL Advance – The EIDL advance does not need to be removed from the PPP forgiveness amount and has specific funds set-aside for smaller borrowers and first-time borrowers.
PPP Forgiveness Taxability – This Bill specifically states that business expenses paid with forgiven PPP loans are tax-deductible. This supersedes the IRS guidance that came out in November of 2020. This revision includes the original PPP loan and any new PPP loans.