The U.S. House of Representatives and U.S. Senate passed, and the President has signed, the Coronavirus Response & Relief Supplemental Appropriations Act. The agreement comes after weeks of negotiations and two funding extensions to keep Congress open until a bill was passed with a $1.4 trillion government-wide funding plan. The $900 billion coronavirus relief portion includes another round of Paycheck Protection Program (PPP) funding, extended unemployment benefits, and direct payments to taxpayers. Here’s an overview of the key provisions in the bill.
Updates to the PPP and changes for second round
The Act designates $267.5 billion for this round of PPP funding, and the program specifically sets aside $25 billion for businesses with 10 employees or less as of Feb. 15, 2020. Regulations for this round of PPP funding are required to be released within 10 days of enactment.
Borrowers who received PPP funding in the first round following the CARES Act will receive some additional updates to their existing PPP loans. Borrowers who would like to adjust their requested loan amount based on these updated regulations may do so, provided they have not yet received forgiveness. Here are the key updates:
More expenses are eligible – Covered operations expenditures (including business software and cloud computing services), property damage costs (costs incurred during public disturbances in 2020 not covered by insurance), supplier costs (that are essential to operations), and worker protection expenditures (to comply with HHS, CDC, or OSHA requirements) would be eligible for forgiveness. These amendments would not apply to loans that have already been forgiven.
Tax deductions on related expenses are allowed – The bill reverses an earlier ruling and makes expenses deductible. It also confirms forgiveness is non-taxable. Loans up to $150,000 get a simplified forgiveness application process – Borrowers with loans up to $150,000 will get one-page online or paper form with borrower certifications of the number employees covered by the loan, the estimated amount spent on payroll, and the total amount of the loan. Borrowers must still maintain appropriate documentation.
Borrowers do not have to deduct EIDL advance – Previously, EIDL advances were to be deducted from the PPP forgiveness amount, but that was repealed.
PPP borrowers can also get an Employee Retention Credit – Wages used for ERC will not be eligible for PPP forgiveness.
The second round of funding provided by this Act has a few key differences from the first round in the CARES Act. Key to note is that borrowers can apply for a second PPP loan through this program if they have fully used their first PPP loan and meet the employer size and gross revenue criteria listed below. PPP loans in this round are capped at $2 million. Here are the key differences:
Changes to employer size and gross revenue qualifications – Only businesses with up to 300 employees (down from 500 employees) and a gross revenue decline by at least 25% for any quarter of 2020 compared to the same quarter in 2019 will qualify for this round.
Changes to loan limits – The loan amount is limited to 2.5 times of the average payroll for the last 12 months through date of application or 2019 and is limited to $2 million. Businesses that are part of the NAICS code beginning with 72 – Accommodation and Food Services – are limited to 3.5 times payroll for the 1-year period or 2019, and limited to $2 million.
Changes to eligible nonprofits – 501(c)(6)s now qualify – These organizations must have 150 employees or fewer, gross receipts from lobbying activities must total less than 15% or $1 million, and lobbying activities cannot comprise more than 15% of total activities.
More groups can apply for first-time assistance – Other groups that can apply for first-time assistance through this round of PPP funding include businesses eligible for other SBA 7(a) loans with fewer than 500 employees, sole proprietors, independent contractors, self-employed individuals, and nonprofits (including churches).
As with the first round of PPP loans, 60% of the funds must be spent on payroll over the covered period (8 or 24 weeks). The deadline to apply for the next round of PPP loans is March 31, 2021. Note that not all banks are participating in the next round of PPP loans.
Other provisions affecting businesses
- $13.5 billion for Economic Injury Disaster Loans (EIDLs). The EIDL program’s extended deadline is December 31, 2021.
- $15 billion in grants for theaters and live venues
- Theaters and live venues must have been operational prior to Feb. 29, 2020, have at least a 25% reduction in gross revenue, and they plan to resume operations following closures. Grants can be up to $10 million per eligible business, with preference given to venues with higher revenue losses. Certain characteristics apply for live venue spaces, movie theaters, and museums, so work with your CPA to determine eligibility.
- Employer tax credits for those offering paid sick leave have been extended to March 31, 2021, for employers who voluntarily choose to expand paid emergency leave. Otherwise, the requirements set forth by the Families First Coronavirus Response Act (FFCRA) expire Dec. 31, 2020.
- Extension of time for employers to payback deferred payroll taxes till the end of 2021 instead of April 30, 2021.
- $10 billion for child care assistance – This includes supplemental assistance for child care providers to assist with fixed costs and operating expenses.
Provisions affecting individuals
- Direct stimulus payment of $600 per adult and child with the same phase out thresholds as the CARES Act ($150,000 if married filing a joint return, $112,500 if filing as head of household, or $75,000 for individuals). Payments are expected to start arriving as early as the week of Jan. 4, 2021.
- Changes and extensions to unemployment including:
- $300 in enhanced unemployment benefits for unemployment beginning after Dec. 26, 2020, through March 14, 2021, fully financed by the federal government, instead of split between the states and federal government.
- Extension of the Pandemic Emergency Unemployment Compensation program which protects workers who exhaust state benefits with an additional 13 weeks.
- Extension of the Pandemic Unemployment Assistance program for gig workers, independent contractors, and the self-employed.
- $25 billion for rental assistance.
- An extension of the eviction moratorium through Jan. 31, 2021.
- $13 billion for enhanced Supplemental Nutrition Assistance Program (SNAP) benefits including funding a 15% increase in benefits for 6 months to recipients.
- $81.8 billion allocated to colleges and schools to assist with pandemic-related changes in operations.
- $45 billion for transportation including $2 billion for airports and $15 billion for passenger airline workers.
- $7 billion for increased broadband access to assist with remote business operations and learning.
- $28 billion in funding for vaccine purchase and distribution.
- $22 billion for state, local, tribal, and territorial governments for health-related expenses like testing.
Further guidance and regulations are expected in various components of the bill and are due in periods of 10 to 45 days depending on the issue and reporting agency. Not included in the bill was aid for state and local governments, an agreement on liability protections for businesses, nor a continued freeze on payments and interest for federal student loans set to expire for many in February. Lawmakers have indicated they expect to pass another stimulus bill addressing some of these issues in early 2021.
More guidance and updates are expected on the Coronavirus Response & Relief Supplemental Appropriations Act. Stay tuned for more details in the days and weeks to come.
Please note that information and guidance on the PPP loan program is changing on a daily basis. The information provided in this article is current as of December 27, 2020. It is intended for general informational purposes only. Consult with your financial advisor about your specific situation.
Amber Goering, CPA, CGMA, is an entrepreneurial CPA and small business champion with over 20 years in the profession. Her mission is to foster a firm culture where team members can thrive at work and at home while providing proactive attentiveness to clients. She is passionate about relationships and small business growth and development, offering proactive tax strategies, client accounting services, outsourced CFO services, and tailored advisory services to help entrepreneurs and established small business owners make informed decisions about their business’s future.