The long-awaited new stimulus package was approved by Congress late Monday, December 21, and is expected to be signed into law by President Trump.  Included as part of the Consolidated Appropriations Act, 2021 (Act), this $900 billion stimulus package includes various Paycheck Protection Program (PPP) Loan and Economic Injury Disaster Loan (EIDL) provisions that will impact many of the businesses that participated in the first round of PPP and EIDL funding, and make available a new round of PPP and EIDL funding.

A brief summary of some of the key provisions is provided here:

  • Expenses paid for with forgiven PPP loan funds are deductible for tax purposes. Additionally, borrower tax basis in their assets and other associated attributes are not reduced as a result of loan forgiveness.
  • $284 billion for a second round of PPP Loan Funds. PPP2, with a maximum loan amount of $2 million, will have new requirements and changes, including:
    • 300 or less employees;
    • 25% decline in gross receipts in any 2020 quarter when compared to similar quarter in 2019;
    • Loan amounts will be based on 2½ months of average monthly payroll; however, hotels and restaurants will be eligible for 3½ months of average monthly payroll;
    • Covered period flexibility, allowing borrowers to choose any period between 8-24 weeks after loan origination;
    • Increased covered expenses available for forgiveness in addition to the Payroll Costs and Non-Payroll Costs included in the first round of PPP funding. Note that PPP loans made before, on or after the enactment are eligible to use these additional expense designations, provided that the borrowers have not already received loan forgiveness; and
    • The addition of Internal Revenue Code Sec. 501(c)(6) organizations to the list of eligible borrowers.
  • PPP loans of $150,000 or less are now eligible for automatic forgiveness by filing a new one-page form that is forthcoming.
  • Eliminates the inability for PPP borrowers to claim the Employer Retention Credit.
  • Provides for a new round of EIDL grants.
  • Clarified that EIDL advance payments received will not impact PPP Loan forgiveness.

While we await additional Small Business Administration and Treasury guidance, register for our webinar on Tuesday, December 29th, where we will do an in-depth dive into these new provisions and much, much, more.  Also be on the lookout for our next e-blast on the tax provisions and tax extenders included in the Act.

Sax will continue to update you as further details are made available.  Reach out to your Sax advisor or email [email protected] with questions.  For more and on-going information relative to your state and business, visit Sax’s COVID-19 Resource Center.

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