After several months of the Republicans and Democrats not being able to agree on additional COVID-related tax relief and other matters, as 2020 was coming to an end, horses were traded, and deals were made so that Congress could put together the much-needed legislation. The result is a nearly 5,600-page omnibus bill, the Consolidated Appropriations Act, 2021, Included in that legislation are the “COVID-Related Tax Relief Act of 2020” (COVIDTRA) and the “Taxpayer Certainty and Disaster Tax Relief Act of 2020”. The bill was signed by the President on December 27.
The legislation includes over $300 billion for first and second forgivable PPP loans. Unlike the prior loan program, this round will truly be limited to small businesses that incurred a loss of revenue. Eligibility is limited to:
- Businesses with 300 or fewer employees that have sustained a 25% revenue loss in any quarter of 2020 as compared with the same period in 2019.
- Small 501(c)(6) organizations that are not lobbying organizations and that have 150 employees or fewer, such as local chambers of commerce, economic development organizations, and tourism offices.
- Certain 501(c)(6) nonprofits and Destination Marketing Organizations with 300 or fewer employees that do not receive more than 15 percent of their revenue from lobbying.
- Local newspapers and T.V. and radio stations previously made ineligible by their affiliation with other stations.
Forgivable Expenses – will be expanded to include covered (COVIDTRA Sec 304):
- Payroll costs – Including additional group insurance payments, including vision, dental, disability and life insurance.
- Operational Costs
- Property Damage Costs
- Supplier costs on existing contracts and purchase orders, including the cost for perishable goods at any time.
- Investments in facility modifications and personal protective equipment needed to operate safely and technology operations expenditures.
Loan Size - Establishes a maximum loan size of 2.5 times the average monthly payroll costs, up to $2 million.
- Allows small businesses assigned to the industry NAICS code 72 (Accommodation and Food Services) to receive PPP second draw loans equal to 3.5 times their average monthly payroll costs in order to help these businesses combat onerous State and local restrictions.
- Maintains existing expansions in eligibility for businesses assigned to the industry NAICS code 72 (Accommodation and Food Services).
Loan Forgiveness – Full loan forgiveness is available if the borrower spends at least 60% of the second draw on payroll costs over either an 8-week or 24-week period selected by the borrower.
Simplified Loan Forgiveness - The loan forgiveness process is simplified for borrowers with PPP loans of $150,000 or less. (This means another version of the SBA’s loan forgiveness application form will be forthcoming.)
Churches and Religious Organizations – Are eligible for loans and prevents future administrations from making them ineligible.
Planned Parenthood – Is ineligible
Set-Asides - $41 billion is set aside to ensure that smaller borrowers and under-served communities get the help they need, such as:
- Small businesses with 10 or fewer employees,
- Small community lenders,
- Independent live venue operators, including eligible independent movie theaters and museums, affected by COVID-19 stay-at-home orders.
Please contact us to discuss how this legislation applies in your situation.
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