The most relevant part of the Act for many businesses is going to be the extension and expansion of the Paid Protection Program (“PPP”). The re-tooled PPP provides assistance to employers by extending the forgivable PPP loan program, with a few changes. With the PPP reopened, businesses can apply for the first time, while many companies are also eligible to apply for a “second-draw” PPP loan.
For first-time and “second draw” applicants alike, the loan process remains largely the same with a few major changes:
- The PPP program is now open through March 31, 2021 (or until the new funding is exhausted).
- The maximum loan amount is still 2.5 times an applicant’s average monthly payroll costs (increased to 3.5x for small businesses in accommodation and food services industries – those with NAICS codes starting with 72), but is now capped at $2 million (previously the cap was $10 million).
- Group health insurance payments may be included in payroll costs when determining the maximum requested loan amount.
- Some employers that were previously excluded from eligibility can now receive funds: 501(c)(6) member non-profits, local news media organizations, and housing cooperatives.
(1) have exhausted their first PPP loan;
(2) have less than 300 employees; and
(3) have experienced a greater than 25% reduction in gross receipts during any quarter in 2020 relative to the same quarter in 2019.
PPP Rule Changes: The bill also makes a few important changes to PPP rules.
(1) Deductibility of Expenses: The act clarifies tax treatment of PPP funds. The new law applies to past and future loans and provides that:
- Tax Deductible Expenditures: Regular business expenses paid for with PPP loan proceeds may be deductible for tax purposes. This reverses the IRS ruling that businesses could not deduct expenses paid by PPP funds.
- PPP Loan Funds are Not Taxable Income: Even if forgiven, the funds are not considered income for tax purposes.
- Expansion of Qualifying Expenses: The list of expenses on which a PPP borrower may now spend the other 40% of loan proceeds has been expanded to include certain operations expenses, supplier costs, worker protection expenses (i.e. money spent to comply with public health guidance related to COVID-19), and property damage costs associated with property damage due to civil unrest in 2020 that are not covered by insurance or otherwise.
- EIDL Grant no longer reduces the amount of PPP loan that may be forgiven.
- Extended Loan Forgiveness Period recipients may now elect any period between 8 to 24 weeks after loan origination date in which to use funds on allowable expenses.
- Simplified Application - PPP loans for less than $150,000 may be forgiven by a simplified one-page expedited application process.
For questions on the PPP and more, contact Chris Morgan at 503-228-0500 or firstname.lastname@example.org.
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