Article Posted on 12/22/2020
We have a new stimulus deal! The House of Representatives has come to an agreement for the latest round of Stimulus. The vote passed the House and the Senate on Monday. It is now headed to the President for signature. It is expected to be enacted.
Here is what is in the bill regarding PPP Loans:
Expenses paid with PPP Loans Deductibility – This is what we have been waiting for. Your expenses paid with PPP fund are fully deductible!!! Over the weekend, there was lots of speculation as to what was happening in Washington DC. The deductibility of the PPP expenses was originally in the bill, then it was out, then it was in with stipulations. GREAT NEWS! The final version of the bill includes full deductibility of expenses paid using PPP loan proceeds with no limitations!
As a reminder, we know that the forgiveness of the PPP loan is not taxable income. Therefore, borrowers are getting the best of both worlds, nontaxable income, and deductible expenses.
Changes to Round One PPP Loans - (For those who have not already applied for forgiveness):
- There are now a few new expenses that are eligible for use and forgiveness. These include:
- Payments for business software or cloud computing service needed for business operations
- Cost for property damage due to vandalism or looting
- Costs to a supplier of goods
- Costs to comply with HHS/CDC/OSHA guidance to protect workers
- You now have more flexibility for choosing your covered period. You can use 8 weeks, or 24 weeks, or any period lasting between 8 and 24 weeks.
- For PPP Loans under $150,000, you will only need to submit a one-page form to apply for forgiveness. No other documentation will be needed.
PPP Round Two – PPP2 will be available very soon. If borrows had a PPP1 loan, they can apply for PPP2 if they fully used their PPP1 proceeds.
- The amount is calculated by multiplying 2.5 times the 2019 average monthly payroll. The loan amount is limited to $2 million.
- Businesses in the hospitality industry (bars, restaurants, hotels) will be able to use 3.5 times their 2019 average monthly payroll. The loan limit is $2 million.
- To qualify, there are new requirements for borrowers:
- Must have fewer than 300 employees (down from 500 for PPP1)
- Must prove a drop in gross receipts of 25% or more during at least one quarter of 2020 compared to that same quarter of 2019 (more guidance on this will most likely be coming)
- Employers can claim the Employee Retention Credit in combination with a PPP2 loan. However, the same wages cannot be used for both PPP2 and ERC.
- No change to the requirement that at least 60% of the PPP2 loan must be used for payroll and payroll costs.
- The PPP2 forgiveness will NOT be reduced by EIDL grants.
This is what we know about PPP loans as of now. The full bill is 5,593 pages and contains lots of other stuff. We wanted to get the PPP information out quickly. More to come on the rest next week.