Monday night, Congress provided additional assistance to small businesses with a $900 billion COVID stimulus package called the Consolidated Appropriations Act, 2021. Of the $900 billion, $284 billion has been allocated to support the CARES Act Paycheck Protection Program (PPP). The new bill will also expand the eligibility for the PPP to include 501(c)(6) not-for-profits (business leagues, chambers of commerce, real estate boards, boards of trade, and professional football leagues), incorporating destination marketing organizations, and local newspapers, television, and radio broadcasters. $20 billion is included for new Economic Injury Disaster Loan (EIDL) Grants for businesses in low-income communities, $3.5 billion for continued SBA debt relief payments, and $2 billion for enhancements to SBA lending. An additional $15 billion has been dedicated to funding for live venues, independent movie theaters, and cultural institutions.
Borrowers are generally eligible for PPP loan forgiveness if they use at least 60% of the funds for payroll expenses. If the PPP loan is not forgiven, then the loan must be repaid at an interest rate of 1% with a maturity of 5 years. Borrowers who have received a PPP loan may be eligible to receive an additional PPP loan if they have fewer than 300 employees and can prove that their revenue has decreased by 25%. The maximum amount of the second loan is $2 million. Additionally, publicly-traded entities with more than 20% ownership from the People’s Republic of China cannot qualify for a PPP loan.
PPP borrowers that received less than $150,000 in loans will only have to submit a one-page forgiveness application. Borrowers can elect which 8 to 24 week covered period during which the borrower is required to spend PPP funding on qualified expense to receive forgiveness. The covered period begins on the day PPP funding is received and ends on any day the borrower selects if the day is not earlier than 8-weeks from the date the funding was received and no later than 24 weeks after the funding is received.
Further, borrowers that received the EIDL cash advance will not have to deduct the advance from their PPP loan forgiveness amount.
Previously, the IRS did not allow PPP borrowers to claim normal tax deductions for business expenses paid with PPP funding. The IRS claimed that a double tax benefit would be created by allowing the deduction. However, the new bill states that “no deduction shall be reduced or denied, no tax attribute shall be reduced, and no basis increase shall be denied, because of the exclusion from gross income,” thus allowing borrowers to claim normal tax deductions for business expenses paid with PPP funding.
The bill also provides $600 stimulus payments to individuals making up to $75,000 a year and $1,200 for married couples making up to $150,000, with a $600 payment for each child dependent, and includes $300 for weekly federal unemployment benefits to complement state benefits from December 26, 2020, until March 14, 2021.
The bill extends the national eviction moratorium through January 31, 2021, and provides $25 billion in emergency rental aid. Emergency rental aid funding can be used to pay rent, rental arrears, utilities, and home energy costs, utilities and home energy costs arrears, and other expenses related to housing incurred due, directly, or indirectly, to COVID-19. This funding cannot exceed 12 months and an eligible household cannot receive funding for prospective rent payments for more than 3 months. Priority shall be given to households with income that does not exceed 50% of the area median income for the household and 1 or more individuals within the household are unemployed as of the date of the application for assistance and have not been employed for a 90-day period preceding the application date. Landlords are not precluded from applying for funding but must obtain the signature of the tenant on the application, provide the application to the tenant, and the funding received by the landlord must be used for the tenant’s rental obligations.
Eligible borrowers should review the new congressional bill to ascertain PPP funding eligibility. If you have questions concerning the PPP, Timothy Lambrecht can assist you. He may be reached at (315) 445-1700 or by e-mailing TLambrecht@WladisLawFirm.com. Please do not hesitate to contact the Wladis Law Firm. We will do our best to provide you with updates and will be available to answer questions as circumstances change.