Congress Expands and Changes Paycheck Protection Program (PPP) – Coronavirus (COVID-19)
United States: Congress Expands and Changes Paycheck Protection Program (P3)
To print this article, simply register or connect to Mondaq.com.
My colleagues at FisherBroyles, LLP, Kevin Gluntz and Paul D. Economon, recently wrote an insightful article on extending and changing the Paycheck Protection Program (PPP), titled Client Alert – PPP Re-Run! The content of the article is presented below.
Client Alert – PPP Re-Run!
A copy of this customer alert can be found HERE.
Congress expands and changes paycheck protection program
After significant and inexplicable delays, Congress approved the Consolidated Appropriations Act, 2021 (HR 133) and President Trump signed the same law yesterday. This bill provides $ 900 billion in stimulus relief for the COVID-19 pandemic in addition to the $ 1.4 trillion omnibus spending bill for fiscal year 2021. This bill includes an appropriation of $ 284 billion for the paycheck protection program that was part of the CARES Law adopted in March 2020. The extension of the paycheck protection program presents an opportunity for our customers to maintain their operations during the economic challenges of the COVID-19 pandemic.
What is the Paycheck Protection Program?
The Paycheque Protection Program (PPP) is a Small Business Administration loan program (SBA). Under PPP, small businesses can borrow funds at a low interest rate for certain uses. The amount of funds is based on the amount that the borrower has paid to their employees during a given base period. After the loan, the borrower may have part or all of their loan canceled if they meet certain criteria. The forgiveness of a PPP loan is not charged to the borrower as income for tax purposes.
Second round of loans
The extension of the PPP allows qualified companies to request another round of PPP financing capped at $ 2 million and which is calculated at 2.5 times the average monthly salary costs, except for entities in industries assigned to NAICS code 72 ( Accommodation and Food Services) which can receive loans up to 3.5 times the average monthly salary costs. Eligibility requirements include not having more than 300 employees, having fully utilized the first drawdown of the PPP and having experienced a reduction of at least 25% in gross receipts during a quarter in which 2020 compared to the same quarter in 2019. The extended PPP also includes set aside for borrowers with 10 or fewer employees, first-time borrowers who were not eligible for the first round of loans, and for returning borrowers .
Borrowers will be entitled to the cancellation of the full amount of this loan if they spend 60% or more of the loan proceeds on staff costs. Other permitted uses of loan proceeds include rent payment, mortgage expenses, utilities, vendor costs on existing contracts and purchase orders, costs for worker protective equipment, and expenses. technological exploitation.
In addition to offering a second round of loans, Congress made several changes to the PPP. He expanded the permitted uses of the loan proceeds to include all of the uses explained above. In addition, the amended PPP provides that business expenses on all PPP loans are fully deductible even if the PPP loan balance has been written off.
How to receive a loan
For clients who have received a PPP loan – and therefore have a PPP lender, which is the financial institution that took out the original loan – we suggest returning to the same lender, as approaching a new lender can slow down the process unnecessarily. of request. For clients who did not get a PPP loan the first time around, we suggest establishing a relationship with a known and approved SBA lender, including community, regional or national banks.
We anticipate that the second raffle process will involve the release of new rules, forms and guidance under the new law by the SBA within 10 days of its enactment – meaning that at the earliest we await guidance. of the SBA in January 2021.
All of the above present an opportunity for our customers to gain additional relief during the COVID-19 pandemic. We are happy to advise our clients in securing these loans and in tax planning as we approach 2020.
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought on your particular situation.
POPULAR POSTS ON: Coronavirus (COVID-19) from the United States