Consolidated Appropriations Act of 2021
December 23, 2020
Our PPP team has reviewed the Consolidated Appropriations Act for 2021 (the “CAA”) that was signed into law by President Trump, and we’ve identified the following key PPP-related provisions.
For all PPP loans (original and second ones):
- Expenses paid with forgiven PPP loan proceeds are tax deductible without dollar limit (for both existing and future loans).
- A new simplified loan forgiveness application will be available for loans up to $150,000 (this will be the 4th forgiveness form for those counting).
- Random audits of loans of all sizes will be conducted to help ensure integrity of the program.
- EIDL grants no longer reduce PPP loan forgiveness. If a borrower has already submitted their loan forgiveness application with the EIDL reduction (usually $10,000) they can amend their application.
- Payroll costs used to qualify for a PPP loan have been expanded from base pay to include the employer paid group insurance premiums for life, disability, vision and dental. Previously, these costs were allowable for forgiveness but not used in the calculation of the eligible loan. Borrowers can amend their first PPP loan application for these costs (although they will not normally be significant) and also use them in calculating a second PPP loan application.
- The SBA has 17 days to draft rules to implement the legislation.
PPP 2 loans:
- Additional PPP loans up to $2 million will be available through 3/31/2021 for qualifying borrowers. Loans will based on 2.5 times the average monthly payroll of a borrower in 2019 or 2020, except businesses with NAICS Code 72 (hospitality, hospitality and food service) can use 3.5 times the monthly payroll average. Limited to borrowers with 300 or fewer employees. To be eligible borrowers must have a year-over-year decline in gross receipts of 25% or more between any one quarter of 2020 compared to the same quarter of 2019.
- There are now four additional types of expenses than are allowable for PPP loan forgiveness, however, payroll costs will likely remain the most significant allowable cost for borrowers:
- Costs incurred to modify operations for COVID
- Out of pocket (not insured) property damage costs due to riots
- Costs incurred for COVID related employee protections
- Supplier related COVID costs
- The covered period for a second PPP loan can be anywhere between 8 weeks to 24 weeks (recall that the covered period for the first PPP loan was 8 weeks OR 24 weeks but nothing in between).
- Borrowers of new PPP loans must again certify that they have an economic necessity for the loan in order to maintain their current operations (borrowers most likely have greater clarity around this issue than they had in the spring of 2020) and they should carefully consider this certification.
- Federal employer taxes can now be deferred until December 31, 2021 (previously 2020).
- Following is a link to the proposed legislation that may be passed and signed into law this week (this bill is over 3,000 pages long so best to not hit ‘print’).