We will continue to update you as more information becomes available.
IMPORTANT NEWS ON THE LATEST COVID-19 LEGISLATION PASSED BY CONGRESS
Congress just passed a $900 billion COVID-19 relief bill as part of the Consolidated Appropriations Act, 2021. The bill has not been signed into law yet, but we wanted to provide you with some of the key highlights as known today. Do not be surprised if this heads back to Congress for further refinement. There are many items included in the bill, so we’ll continue to work to get the details out to you.
PPP Second Round Highlights:
- $284 billion of PPP funds will be available for first time and second time borrowers. For second time borrowers, additional rules apply (see below for further details). The overall rules are consistent with the first round of funding, whereas 60% of the funding needs to be used for payroll expenses, and the covered period for forgiveness calculation can either be eight or 24 weeks.
- PPP covered expenses (payroll, rent, mortgage interest, etc.) used for loan forgiveness are fully deductible expenses again. PPP forgiveness is fully tax free again as originally intended by the CARES Act. The bill effectively renders the recent IRS rulings as null and void.
- A simplified forgiveness process will now be available for loans under $150,000. Prior to the new bill, the simplified process only applied to loans under $50,000.
- A special provision is available to sole-proprietor farmers and ranchers who file a Schedule F, with no employees, that allows them to compute their eligible PPP loan based on average monthly gross receipts, as opposed to their net income.
- The requirement to reduce the loan forgiveness by any EIDL advance has been repealed. This repeal is retroactive, so if a PPP loan has been forgiven and reduced by the EIDL advance, the SBA has been instructed to make those borrowers “whole” in the coming weeks.
- PPP funding is now available to 501(c)(6) nonprofit organizations.
- The SBA is instructed to release detailed guidance on the new program changes within 10 business days.
Additional Second Round Stimulus Highlights:
- Individual stimulus payments will be provided again, however at different amounts than the first time. As of today, the payment will be $600 per individual, as well as $600 per each dependent. The income phaseout will be similar to the first round. Individuals making up to $75,000 and married couples making up to $150,000 per year in adjusted gross income will qualify. For example, a married couple earning $90,000 with one dependent will receive $1,800.
- $300 per week supplemental unemployment benefits will be available from December 26, 2020 until March 14, 2021. The Pandemic Unemployment Assistance (PAU) program for self-employed workers has also been extended.
- Payroll tax credits for paid sick leave and emergency medical leave (FMLA) will be extended through March 31, 2021 (previously set to expire December 31, 2020).
- The employee retention tax credit has been extended and expanded.
- Business meals for tax years 2021 and 2022 will be 100% deductible. To be eligible, the food and beverage must be purchased from a restaurant. Normally, these expenses are only 50% deductible.
PPP Loan Details: To be eligible for a second PPP loan, businesses must have fewer than 300 employees and incur a 25% decline in gross revenue in any 2020 calendar quarter, compared to that same quarter in 2019. The loan amount is determined by calculating the lesser of 2.5 times the average monthly payroll, or $2 million. For those in the accommodation and food service industries, they can use 3.5 times the average monthly payroll. If the business started late in 2019 or early 2020, special rules apply which allows those businesses to compare applicable 2020 quarters to the either Quarter 4 2019 or Quarter 1 2020.
A special provision for farmers and ranchers who file a Schedule F, with no employees, can calculate their eligibility using 2.5 times their monthly 2019 gross income with a monthly maximum gross income of $100,000. Therefore, the maximum loan amount in this case would be $20,833 ($100,000 x 2.5 / 12).Other guidance on this second round of PPP loans is set to be released in the next 10 days by the SBA.
Payroll Tax Credits Details: Payroll tax credits for paid sick leave and emergency medical leave (FMLA), which were included in the Families First Coronavirus Response Act, are now extended through March 31, 2021.
This legislation both expands and extends the applicability of the employee retention credits. They are now extended through June 30, 2021. To be an eligible business, your calendar-quarter gross receipts must be less than 80% of the same calendar quarter for 2019. These businesses can participate in both the PPP and employee retention credit programs, but they cannot double dip on the same expenses. The refundable credit is now calculated to be 70% of wages up to $10,000 per employee for any calendar quarter. Previously, the calculation was 50% of wages.
For any questions that you may have about this new legislation and how it might affect you, please contact us.