PPP Highlights of the New Covid Relief Legislation
After months of negotiations, Congress finally passed the Consolidated Appropriations Act late in the evening last night, and the new legislation includes a little something for everyone. Here are some of the highlights relating to the Payroll Protection Program (PPP):
- The bill provides that gross income does not include any amount that would otherwise arise from the forgiveness of a PPP loan. Also clarified is that deductions are allowed for otherwise deductible expenses paid with the proceeds of a PPP loan that is forgiven, and that the tax basis and other attributes of the borrowerâ€™s assets will not be reduced as a result of the loan forgiveness.
- ï»¿Additional eligible expenses that qualify for forgiveness now include covered operation expenditures, covered property damage costs, covered supplier costs, and covered worker protection expenditures.
- Borrowers may select the end of their covered period to be anytime between 8-24 weeks from receipt of their loan.
- Simplified Loan Forgiveness process for borrowers with less than $150,000 of loans.
- Payroll costs now include employer payments for group life, disability, vision, and dental insurance payments.
- Borrowers can amend their original application to request increased loan amounts due to changes in PPP loan rules if the original loan amount was less than the amount that would have otherwise applied.
- No eligibility for PPP loan if the business was not in operation as of February 15th, 2020.
- Small businesses with less than 300 employees and a 25% or more drop in revenue (gross receipts for non-profits) are eligible for a second round of PPP.
- Borrowers can elect to calculate the second round based on 2.5x the average monthly payroll costs during any one year period prior to the date of the loan or the 2019 calendar year.
- The bill provides clarification of all existing safe harbors and exceptions for reduction in employee headcount (FTEs), and provides that the SBA may modify dates of safe harbors in order to comply with intent of PPP.
- The legislation allows borrowers to reapply even if they have returned their loan amount or if a change in the rules would allow them to receive a larger PPP loan.
- The legislation makes it clear the Schedule F Farmers are eligible for PPP loans based on 2019 Schedule F income.
- Most 501(c)(6) entities are eligible for the receipt of a PPP loan.
- $100,000 salary/wage limitation applies on an annualized basis.
- March 31, 2020 is the new deadline to apply for and receive a PPP Loan.
- $15 Billion set aside for special Shuttered Venue Grants (movie theatres, live theatre venues) for venues that had a 25% reduction in revenue in first, second, or third quarter of 2020 as compared to the same quarter in 2019.
We work with clients who have both large and small Payroll Protection Plan loans, and we are working with their lenders on the new loan necessity requirements for those with loans in excess of $2 million, and on forgiveness compliance. Given the many changes made to the program, employers and businesses would be prudent to pay close attention to the program’s new requirements.
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