*Please note that this situation is evolving rapidly and that the information below is to the best of our understanding and is subject to change. We will update this information as we know more.
**The information below should not be taken or misconstrued as financial or legal advice. We strongly encourage you to speak with an accountant or attorney before making any decisions that may have a financial impact on your business.
Coronavirus Response and Relief Supplemental Appropriations Act of 2021
On December 27th, the President signed into law a $900 billion COVID-19 stimulus package that includes a new round of PPP forgivable loan assistance for small businesses along with a number of other relief provisions including changes to the Economic Injury Disaster Loan (EIDL) program, the Employee Retention Tax Credit, a "Live Venue" Grant program, and other SBA loan programs.
A summary of the key provisions of the bill and other resources can be found below.
- U.S. Chamber's Guide to the New Pandemic Relief Package
- SBA Webinar Recording - Changes to the PPP/EIDL (1/13/21)
- Employee Retention Tax Credit (ERTC) Guide - courtesy of our partners at The Hoffman-Eells Group
- For Information on the CARES Act (March 2020) - including information on the current PPP Loan Forgiveness Process and Other Small Business Assistance Options
Paycheck Protection Program (PPP)
January 13th, 2021 Update: The U.S. Small Business Administration will re-open the Paycheck Protection Program (PPP) loan portal to PPP-eligible lenders with $1 billion or less in assets for First and Second Draw applications on Friday, January 15, 2021 at 9 a.m. EST. The portal will fully open on Tuesday, January 19, 2021 to all participating PPP lenders to submit First and Second Draw loan applications to SBA.
January 8th, 2021 Update: The U.S. Small Business Administration has announced that, per the Economic Aid Act, interested parties will be able to submit a First Draw (first time) PPP loan application with qualified Community Financial Institutions (CFIs) beginning Monday, January 11th. Second draw (second-time) loan applications will be accepted at CFIs beginning Wednesday, January 13th.
As per the law, Community Financial Institutions (CFIs) are definited as:
- Community Financial Development Institutions (CDFIs)
- Minority Depository Institutions (MDIs)
- SBA Certified Development Companies (CDCs)
- SBA Microloan Intermediary Lenders
The CARES Act created the Paycheck Protection Program (PPP), which provided small businesses, private 501c3 nonprofits, veteran organizations, self-employed individuals, independent contractors, and more with the funds necessary to sustain their operations and keep their workers employed. In general, borrows could receive a loan amount of up to 2.5X the average monthly payroll costs in the one year prior to the loan or the calendar year. In August 2020, the PPP was closed as it exhausted all available funding.
This new COVID relief bill allocates over $284 billion for another round of Paycheck Protection Program loans. It also makes additional changes including expanded eligibility and tax implications.
Changes and updates to the program include:
Maximum Loan Amount
- The maximum loan amount (for first or second-draw loans) is now $2 million - this was previously set at $10 million.
Reopens the PPP for both first and second-draw applications
- Businesses who did not receive a PPP loan in the first round, will still be able to apply for a first-draw loan.
Allows businesses who already received and exhausted a PPP loan to access a second-draw PPP loan if:
- They have less than 300 employees,
- Have used or will use the full amunt of their first PPP, and
- Can show a 25% or greater reduction in gross receipts from a single quarter (Q1, Q2, Q3, or Q4) in 2020 compared to the same quarter in 2019.
The necessity (revenue reduction) test will not be applied for first-draw PPP loan applicants.
Entities with significant ties to China are ineligible for a second-draw loan.
Small businesses, certain non-profits, housing cooperatives, veterans' organizations, tribal businesses, self-employed individuals, sole proprietors, and independent contractors will all be eligible to apply for second-draw loans granted they meet the above criteria.
Destination marking organizations, 501(c)(6) nonprofits such as chambers of commerce, and local newspapers, TV stations, and radio broadcasters, may be eligible to apply as long as:
- The organization does not receive more than 15% of its receipts from lobbying activities;
- The cost of lobbying activities of the organization did not exceed $1 million during the most recent tax year that ended prior to February 15, 2020;
- The lobbying activities of the organization do not comprise more than 15% of the total activities of the organization; and
The organization has 300 or fewer employees or 500 or fewer employees per physical location for newspapers, TV stations, and radio broadcasters
- For news organizations, they must certify that the loan will support locally focused or emergency information.
- For destination marketing organizations, they must be registered as a 501(c) organization, a quasi-government entity, or a political subdivision of a state or local government.
Expansion of Maximum PPP Loan Size for Accomodation and Food Service Industry
For businesses in the accomodation and food service industry (must be assigned a NAICS code beginning with 72), the maximum PPP loan size is increased from 2.5x payroll to 3.5x payroll
- Eligible expenses for this industry are also expanded to include supplier costs, perishable goods, PPE, and outdoor seating.
Expanded Eligible Expenses
Makes the following expenses allowable and forgivable uses for PPP funds:
- Operation Expenses, defined as, payment for any software, cloud computing, and other human resources and accounting needs
- Property Damage Costs, defined as, related to property damage due to public disturbances that occurred during 2020 that are not covered by insurance
- Supplier Costs, defined as, expenditure to a supplier pursuant to a contact, purchase order, or order for goods in effect prior to taking out the loan that are essential to the recipient’s operations at the time at which the expenditure was made.
- Worker Protection Expenses, defined as, PPE and adaptive investments to help loan recipients comply with federal and state health and safety guidelines.
Creates a simplified application process for loans under $150,000
Businesses or organizations that were not in operation by February 15, 2020 shall not be eligible for an initial or second-draw PPP loan.
Tax Treatment of PPP Loans and EIDL Grants
- Forgiven Paycheck Protection Program loans will not be included in taxable income.
Regular, eligible business expenses paid for with PPP loan proceeds shall now be deductible for tax purposes - this applied to both past and future loans.
This same tax treatment also applies to EIDL grants, grants for shuttered venues, and certain other loan repayment assistance.
- More details are forthcoming – check IRS website frequently for more information.
- This same tax treatment also applies to EIDL grants, grants for shuttered venues, and certain other loan repayment assistance.
PPP loans can only be accessed through SBA approved lending institutions – not through the SBA itself. While SBA approved lenders are not yet accepting new or second-draw applications, a list of approved lenders can be found here.
For more information on the Paycheck Protection Program, click here.
Shuttered Venue Operators (SVO) Grant -
A Grant Program for Live Venues, Independent Movie Theaters, Museums, and Other Cultural Institutions
The Shuttered Venue Operators (SVO) grant program will provide eligible applicants with grants equal to 45% of their gross earned revnue, capped at $10 million. $2 billion in this program is reserved for eligible applicants with 50 or fewer full-time employees.
Who Can Apply?
- Live venue operators or promoters
- Theatrical producers
- Live performing arts organization operator
- Relevant museum operators, zoos, and aqauariums who meet specific criteria
- Motion picture theater operators
- Talent representatives, and
- Each business entity owned by an eligible entity that also meets the eligibility requirements
Must have been in operations as of February 29, 2020, and the venue or promoter must not have received a PPP loan on or after December 27, 2020.
Amount of Grant
For an eligible entity that was in operation on or before 1/1/19 - a grant for 45% of their 2019 gross earned revnue or $10 million (whichever is less).
For an eligibile entity who began operation after 1/1/19 - a grant of the average monthly gross revenue for each full month the entity was in operation in 2019 multiplied by 6 or $10 million (whichever is less).
Allowable Use of Funds
Funds may be used for specific expenses which may include:
- Payroll costs
- Rent payments
- Utility payments
- Scheduled mortgage payments (not including prepayment of principal)
- Scheduled debt payments (not including prepayment of principal) on any indebtedness incurred in the ordinary course of business prior to 2/15/20
- Worker protection expenditures
- Payments to independent contractors (not to exceed $100k in annual compensation per contractor)
- Other ordinary and necessary business expenses, including maintenance costs
- Administrative costs (including fees and licensing)
- Operating leases in effect as of 2/15/20
- Insurance payments
- Advertising, production transportation, and capital expenditures related to producng a theatrical or live performing arts production (may not be the primary use of funds).
How to Apply
The SBA is in the process of setting up the grant program and is not yet accepting applications. Small businesses who have suffered the greatest economic loss will be the first applications processed under the following schedule:
Emergency Injury Disaster Loan (EIDL) and EIDL Advance Grants
The EIDL program is designed to provide economic relief via low-interest loans to small businesses, agricultural businesses, and private nonprofits that are experiencing a loss in revenue due to coronavirus.
The CARES Act also allowed for eligible entities to request an advance in the form of an emergency grant of up to $1,000 per employee to a maximum of $10,000 for the purpose of maintaining payroll and to service other debt obligations. The $10,000 did not need to be repaid, even if the applicant was denied, or chose to decline, the EIDL loan. The EIDL advance was closed in July after exhausting funds.
This bill makes a few updates to the EIDL program including:
Allocates $20 Billion for Targeted EIDL Advance Grants
- Priority for the full amount of the EIDL grant will be given to small businesses with less than 300 employees, located in low-income neighborhods, who have experienced a 30% reduction in gross receipts during any 8-week period between March 2 and December 31, 2020 compared to the same 8-week period before March 2nd.
- Creates a process for existing EIDL Advance grantees that received less than $10,000 dollars to receive the difference between what they originally received and the maximum EIDL Advance Grant of $10,000 dollars
- EIDL advances will no longer be deducted from PPP loan forgiveness amounts.
The EIDL program is still currently appecting applications for the loan component of the program. Applications are completed online and submitted directly to the U.S. Small Business Administration (SBA). For more information or to apply, click here.
Employee Retention Tax Credit (ERTC)
This bill significantly expands, and extends, the Employee Retention Tax Credit (ERTC) program beginning on January 1, 2021. The credit now expires on June 30, 2021. The expanded credit now allows employers to claim up to 70% (up from 50%) of up to $10,000 in wages, paid by an eligible employer, per quarter.
The new law also expands which employers are eligible. Prior to the law, the ERTC only applied to employers who experienced a decline in gross receipts of more than 50% in a quarter compared to that same quarter in 2019. Eligibility is now expanded to include employers who experienced a decline of more than 20%.
In addition, employers with 500 or fewer employees (up from 100 or fewer) can now claim the credit for wages to paid employees irrespective of whether the employee is providing services or not.
Additionally, employers can now receive both an ERTC and a PPP loan granted that the ERTC and PPP do not cover the same payroll expenses.
More information is forthcoming, check the ERTC page on the IRS website frequently.
In the meantime, check out our guide on the ERTC for more info.
Extended SBA Debt Relief Payments
This bill provides $3.5 billion to resume debt relief payments of principal and interest on small business loans guaranteed by the SBA under the 7(a), 504, and microloan programs. All borrowers with qualifying loans approved by the SBA prior to the CARES Act will receive an additional three months of P&I payments, starting in February 2021. Moving forward, these payments will be capped at $9,000 per borrower per month.
After the three-month period, borrowers considered underserved (the smallest and/or hardest-hit by the pandemic) will receive an additional five months of P&I payments also capped at $9,000 per borrower per month.
SBA payments of P&I on the first 6 months of newly approved loans will resume for all loans approved between February 1 and Septemnber 30, 2021, also capped at $9,000 per month.
For more information, click here.
Provides Full Federal Financing of State Work Share Programs
This bill provides full federal financing of state work share programs, allowing employers to avoid layoffs during the downturn by connecting their employees who are working reduced hours with partial unemployment compensation, through March 14, 2021.
For more information on the NYS Shared Work program, click here.
Extension of the Families Fist Coronavirus Response Act (FFCRA) Refundable Payroll Tax Credits
This bill extends the refundable payroll tax credits for paid sick and family leave, enacted in the FFCRA, through the end of March 2021. This is not an extension of FFCRA's sick and family leave provisions, only the refundable tax credits.
So, as a result, beginning on January 1, 2021, employers are no longer required to provide FFCRA leave however, covered employers can voluntarily offer such leave and still utilize payroll tax credits to cover the cost of benefits paid to employeers through the end of March.
Extension of CARES Act Unemployment Provisions
Extends the Federal Pandemic Unemployment Compensation (FPUC) program
Restores the additional $300 per week in unemployment benefits; starts after December 26th and ends March 14th, 2021.
- Restores the additional $300 per week in unemployment benefits; starts after December 26th and ends March 14th, 2021.
Extends the Pandemic Emergency Unemployment Compensation (PEUC) program
The PEUC program provides additional weeks of federally-funded benefits to workers who have exhausted their regular state unemployment benefits.
Increases the number of weeks of PEUC benefits an invidiual may claim from 13 to 14.
- Increases the number of weeks of PEUC benefits an invidiual may claim from 13 to 14.
- The PEUC program provides additional weeks of federally-funded benefits to workers who have exhausted their regular state unemployment benefits.
Extends the Pandemic Unemployment Assistance (PUA)
This program provides unemployment assistance to the self-employed, freelancers, gig workers, part-time workers, and other individuals in non-tranditional employment.
- Extended to March 14, 2021 and allows individuals receiving benefits as of March 14, 2021 to continue through April 5, 2021, as long as the individual has not reached the maximum number of benefit weeks.
- Increases the number of weeks of benefits an individual may claim from 39 to 50.
- This program provides unemployment assistance to the self-employed, freelancers, gig workers, part-time workers, and other individuals in non-tranditional employment.
For more information on unemployment insurance in NYS, or to apply, click here.
This COVID relief bill provides for an additional round of Economic Impact Payments of $600 per individual making up to $75,000 per year and $1,200 for couples making up to $150,00 per year, as well as $600 payment for each child dependent.
These payments would be based on income from 2019. To help calculate your estimated direct payment, use Forbes 2nd Stimulus Check Calculator.
For information on the first round of direct payments, click here.
More information is forthcoming, check the IRS website frequently.