Update: December 28, 2020
New COVID Relief Package
We are still waiting to see if there will be additional legislation with the current administration so there isn’t a lot new with the Payroll Protection Program (PPP) situation. Many companies are anxious to put the PPP loans in the rear view mirror.
We finally have some additional support from our legislators. Here is a summary of the new bill that was just signed by President Trump on Sunday:
Tax Treatment:
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- Proceeds received from PPP loans that are forgiven is tax exempt
- Expenses paid by those proceeds are tax deductible
- EIDL grants proceeds received are not taxable
Application for a second PPP Loan (maximum amount of $2 million):
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- Less than 300 employees
- Must demonstrate a loss of 25% of gross receipts in any quarter in 2020 compared to same quarter in 2019
- Loan amount up to 2.5 times average monthly payroll from 2019
- NAICS code 72 businesses (restaurants, travel industry, hotels…) – can request up to 3.5 times average monthly payroll from 2019
- 501(c)6 organizations are now eligible to apply
Forgiveness:
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- Simplified application for loans under $150,000 (1st and 2nd loans)
- Additional expenses allowed to use but still need to spend at least 60% on payroll
- Covered period with second PPP is between 8 and 24 weeks
EIDL Grants
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- Applicant criteria
- Less than 300 employees
- Economic loss of 30% or more during an 8 week period between March 2, and December 31, 2020
- Located in a low income community
- Can reapply for EIDL advance from difference from what you previously received up to $10,000 (so if you received an EIDL advance previously for $6,000 you can get an additional $4,000)
- EIDL advance does not have to be deducted from the PPP Loan forgiveness
- Applicant criteria
Grants for Live Venue Operators (up to $10 million) – you can’t apply for both PPP and this Grant. Priority will be given to organizations with the largest reduction of gross receipts.
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- Grant amount up to 45% of 2019 gross receipts
- Must demonstrate a loss of 25% of gross receipts in any quarter in 2020 compared to same quarter in 2019
SBA Loans
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- Additional payments made by SBA for borrower – check with your lender to see if you qualify and the number of payments to be paid
The bill indicates that the SBA has 10 – 15 days to get the new rules and applications available. While the above is a general summary of what is in the bill the SBA is supposed to provide clarification within the application process of the specifics. We’re sure you all remember how that worked in April and we would expect that there will be several rounds of rules released. At this point all we know is the summary information above and not how we need to apply or what documentation will be required.
There are numerous items in this bill and the summary above does not cover everything for every company. Please contact ESG, your Tax Advisor, Attorney or Bank if you have questions about items above or other things that you might believe are covered in the bill.