On Sunday evening, President Trump signed the 5,593-page spending bill, which contained the latest round of stimulus checks.
There are a lot of details in the bill, but I will try and hit on the highlights. There are three sections: PPP, EIDL, and additional tax incentives.
PPP - Paycheck Protection Program
1) This is a big one - All PPP related expenses are deductible and the PPP income is not taxable.
2) More expenses can be included -
Covered operations expenditures - business software or services that facilitates business operations including payroll, HR, sales and billing, accounting, inventory, and others.
Covered property damage related to vandalism or looting due to public disturbances in 2020 not covered by insurance.
Covered suppliers costs that are essential to the operations of the business and were made on a contract, order, or PO during the covered period.
Operating or capital expenditures needed to comply with CDC, OSHA, HHS, or government orders related to COVID-19.
3) You can get a second PPP loan if you meet the following requirements:
Less than 300 employees
Has used the 1st PPP loan
Had a gross receipts decline of 25% or more comparing a quarter in 2020 to a quarter in 2019. For example - compare Q1 2020 to Q1 2019, Q2 2020 to Q2 2019, etc. You only need to meet this requirement in 1 quarter and can choose which quarter to compare.
This is key - You must confirm under penalty of perjury that the funds are needed to maintain the ongoing operations of the business.
501c(6) nonprofit organizations (including Chambers) are eligible except for professional sports organizations and lobbying organizations.
4) The PPP loan amount calculation is very similar to the last round - the average monthly payroll costs (which now can include group life, disability, vision, and dental insurance x 2.5. NOTE - If you are a restaurant (NAICS code starts with 72) you can use a 3.5 multiple and get a larger PPP loan.
5) Grants for Shuttered Venue Operators - there are grants available for venue operators defined as a live venue operator or promoter, theatrical producer, or live performing arts organization operator, a relevant museum operator, a motion picture theatre operator, or a talent representative. Any venue operator that receives a shuttered venue grant can NOT receive a PPP loan.
6) The SBA will be issuing guidance (within 17 days of the Act) to provide a process for borrowers who returned all or part of their PPP loan to reapply for the maximum allowable amount so long as they have not requested forgiveness.
EIDL - Economic Injury Disaster Loans
1) This is a big one - The EIDL grant that was received DOES NOT REDUCE PPP FORGIVENESS. Previously, any EIDL grant (up to $10,000) reduced the amount of forgiveness. This is a positive change. If you already received PPP forgiveness please contact your bank on how to receive the forgiveness for the additional grant amount that was deducted.
2) New EIDL loans have been restricted to only the hardest-hit businesses defined as:
Must be located in a low-income community
Has suffered an economic loss greater than 30%
Has less than 300 employees
Tax Incentives - consult with your tax advisor on how these impact your business or personal taxes
1) This is a big one! - Business meals and beverages are 100% tax-deductible if provided by restaurants in the 2021 and 2022 tax years.
If you are a nonprofit - these are good incentives for your donors:
2) $300 charitable deduction for non-itemizers (confirmed $600 for married couples) made in 2020 and 2021.
3) 100% of AGI can be deducted for charitable contributions for both 2020 and 2021 if requirements are satisfied
4) IRS owners over 59 1/2 can transfer unlimited amounts to charities.
5) HSA and Dependent Care FSA plans can carry over unused 2020 benefits into 2021.
I did not clearly call out one of the bigger changes for PPP borrowers with loans less than $150,000 - a streamlined simple one page online or paper form to request forgiveness. The SBA is required to provide this certification form no later than 24 days after the date of enactment (which would be around January 20.)
The form will require the business to provide:
The # of employees the business was able to retain because of the covered loan
The estimated amount spent on payroll costs
The total loan value
The business must then attest that they have:
Accurately provided the required certification
Complied with all the requirements of the PPP as laid out in section 7(a)(36) of the CARES Act
The business must retain records:
Employment records - 4 years following submission of the form
All other records - 3 years following submission of the form
So, while the form is simple and there is not much information to submit, the business must still comply with all of the requirements of the Paycheck Protection Program. The SBA has stated they do not plan to audit loans below $2,000,000 but other governmental agencies may especially if they have reason to believe the loan application was fraudulent. We recommend all businesses still complete the longer PPP form to confirm they meet all the forgiveness requirements and maintain accurate records for the periods listed above.