Payroll Protection Program 2 Updates – December 2020

The Coronavirus Response and Relief Supplemental Appropriations Act (the Act) was signed into law on December 27, 2020. The following information summarizes the major provisions of the Act regarding the Paycheck Protection Program (PPP):

Second Round Funding (PPP2)

The Act provides an additional $267.5 billion in new PPP funding for small businesses. This funding is available to first-time borrowers.

A second round of funding is  available to borrowers who have used up the PPP funding they received under the CARES Act. There are some significant changes as to who may apply. Borrowers must:

  • Have fewer than 300 employees (down from 500)
  • Be able to show a 25% drop in gross receipts over the same quarter in 2019. For purposes of this rule, “gross receipts” (1) includes all revenues from the normal operation of the business before subtraction of expenses but (2) does not include amounts received for PPP loans.
  • Loans will be equal to 2.5 multiplied by average 2019 monthly payroll costs, except for the hospitality industry which will use a multiple of 3.5.

In addition, the maximum amount of Round 2 loans is $2 million, which is significantly lower than the prior CARES Act maximum of $10 million.

PPP Forgiveness

EIDL grants

  • Businesses that did not receive the full $10,000 advance under the CARES Act may reapply for the difference.
  • The advance is not taxable, and expenses paid with the funds are tax deductible.

PPP

  • PPP forgiveness amounts will no longer be reduced by any EIDL grant received.
  • Expenses paid with forgiven PPP funds are now tax-deductible for all borrowers.
  • Borrowers who have not yet received forgiveness can deduct four additional types of expenses: (1) certain operations costs such as software or cloud computing services, (2) public disturbance related property damage/vandalism/looting costs not covered by insurance, (3) covered supplier costs, and (4) covered worker protection costs.
  • New grants are available for theaters and other cultural venues closed by the pandemic.

Now Is the Time to Assess How You and Your Business Will Be Impacted

  • This outlines some of the major changes to PPP, but not all.
  • Details and guidance for exact qualifications are expected in the coming week(s). We will keep you updated, but now is the time to review how the Act will impact you and your business.
  • If you think you may qualify, contact your bank to see if they are participating in PPP2.

Please contact us if you have any additional questions on 973-298-8500.

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