Continuation of the Paycheck Protection Program
On December 21, 2020, the House of Representatives released a year-end bill for FY 2021 that includes a $1.4 trillion spending bill and a $900 COVID-19 relief bill. The package also includes various tax proposals, extensions and tax incentives aimed directly at community development and revitalization and small business assistance through an extension of the Paycheck Protection Program.
Additional Eligible Expenses
The Paycheck Protection Program has been extended to March 31, 2021 and has allocated $806.5 billion to the program. The extension applies to loans made before, on or after the date of enactment, including the forgiveness of such loan. The new bill has expanded the allowable uses for funds and the following are now permitted and forgivable uses for PPP funds:
Operations expenditures including payment for software or human resources needs.
Property damage costs not otherwise covered by insurance.
Supplier costs pursuant to a contract, purchase order, or order for goods can now be covered by PPP funds.
Worker protection expenditure including any protective equipment or adaptive investments to help borrowers comply with federal health and safety guidelines related to COVID-19 since March 1, 2020 until the end of the national emergency declaration
Simplified Application Process for Loans under $150,000
For loans under $150,000, in order to receive forgiveness, a borrower must submit a single page certification detailing the number of employees they were able to retain because of the loan, the total amount of the loans spent on payroll costs and the total loan amount. The borrower must attest that they accurately provided the required certification and complied with PPP loan requirements. No other materials are required by the SBA unless necessary to substantiate revenue loss requirements or other regulatory requirements.
Ability for Borrowers to Request an Increase in Loan Amounts
Guidance from the SBA will be released that will allow borrowers who returned all or part of their initial loan to reapply for the maximum amount allowed, as long as they did not receive forgiveness. Additionally, if a borrower’s loan calculations have increased due to changes in updated regulations, they can work with lenders to modify their loan value regardless of whether or not the loan has been fully dispersed.
Section 311: PPP Second Draw Loans
Eligibility. In order to receive a Paycheck Protection Program loan under this section, eligible entities must:
Employ not more than 300 employees;
Demonstrate at least a 25 percent reduction in gross receipts in the first, second, or third quarter of 2020 relative to the same 2019 quarter. Provides applicable timelines for businesses that were not in operation in Q1, Q2, and Q3, and Q4 of 2019. Applications submitted on or after January 1, 2021 are eligible to utilize the gross receipts from the fourth quarter of 2020; and
Must have received an initial PPP loan and either used or will use the full amount of their first PPP. Per 37(O)
Eligible entities must be businesses, certain non-profit organizations, housing cooperatives, veterans’ organizations, tribal businesses, self-employed individuals, sole proprietors, independent contractors, and small agricultural co-operatives.
Per 37(A)(iv)(I)
Ineligible entities include:
Entities listed in 13 C.F.R. 120.110 and subsequent regulations except for entities from that regulation which have otherwise been made eligible by statute or guidance, and except for nonprofits and religious organizations;
Entities primarily engaged [37(A)(iv)(III)(bb)] in political and lobbying activities including entities that are organized for [37(A)(iv)(III)(bb)] engaging in advocacy in areas such as public policy or political strategy or otherwise describes itself as a think tank in any public document;
Entities affiliated with entities in the People’s Republic of China;
Created in or organized under Chinese law, has significant operations in China, or has a Board Director who resides in China
Registrants under the Foreign Agents Registration Act and entities that receive a grant under the Shuttered Venue Operator Grant program.
Loan terms. In general, borrowers may receive a loan amount of up to 2.5X the average monthly payroll costs in the one year prior to the loan or the calendar year. No loan can be greater than $2 million.
Seasonal employers may calculate their maximum loan amount based on a 12-week period beginning February 15, 2019 through February 15, 2020.
New entities may receive loans of up to 2.5X the sum of average monthly payroll costs.
Entities in industries assigned to NAICS code 72 (Accommodation and Food Services) may receive loans of up to 3.5X average monthly payroll costs.
Businesses with multiple locations that are eligible entities under the initial PPP requirements may employ not more than 300 employees per physical location.
Waiver of affiliation rules that applied during initial PPP loans apply to a second loan.
An eligible entity may only receive one PPP second draw loan.
Fees are waived for both borrowers and lenders to encourage participation.
For loans of not more than $150,000, the entity may submit a certification attesting that the entity meets the revenue loss requirements on or before the date the entity submits their loan forgiveness application and non-profit and veterans organizations may utilize gross receipts to calculate their revenue loss standard.
Loan forgiveness. Borrowers of a PPP second draw loan would be eligible for loan forgiveness equal to the sum of their payroll costs(except some qualified wages under the CARES Act and Taxpayer Certainty and Disaster Relief Act of 2020), as well as covered mortgage (not including any prepayment of or payment of or payment of principal on a covered mortgage), rent, and utility payments, covered operations expenditures, covered property damage costs, covered supplier costs, and covered worker protection expenditures incurred during the covered period.
Per 37(J)(iii)
Limitations on Forgiveness. The 60/40 cost allocation between payroll and non-payroll costs in order to receive full forgiveness will continue to apply.
Per 37(J)(iv)
Standard Procedures. Directs the SBA to allow lenders to approve loans made under this paragraph utilizing existing program guidance and standard operating procedure, to the maximum extent possible, as the standard SBA 7(a) program.
Lender Reimbursement for Processing
Lenders will be reimbursed based on a tired reimbursement rate: (1) Loans of less than $50,000 that is equal to the lesser of 50 percent of the loan principal or $2,500; (2) loans of more than $50,000 and not more than $350,000 equal to five percent of the loan principal; (3) loans of more than $350,000 and less than $2,00,000 equal to three percent of the loan principal; and (4) loans of more than $2,000,000 equal to one percent.
Term Specifications for Various Fields
There will be specific loan calculations for the first round of PPP loans for farmers and ranchers operating as sole proprietors and independent contractors.
FCC license holders and newspapers with more than one physical location are now eligible for a loan so long as they have less than 500 employees per location.
501(c)(6) and Destination organizations are now eligible for PPP loans if they do not receive more than 15% receipts from lobbying and lobbying activities do not make up more than 15% of all activities. The organization must have fewer than 300 employees and lobbying activities must not exceed $1,000,000 during the most recent tax year.
Professional sports leagues that promote political campaigns are not eligible under this Section 318.