American Rescue Plan Act

After passing through the Senate on Saturday, March 6, and the House on Wednesday, March 10, the American Rescue Plan Act (ARPA) was signed into law by President Biden on Thursday, March 11, and includes $1.9 trillion in relief. Read on for details on the provisions included in the ARPA.

Individual Stimulus Checks
Estimated portion of the stimulus package: $422 billion
The ARPA includes another round of economic impact payments for people who meet certain income eligibility requirements. Single taxpayers who earn less than $75,000 will receive $1,400 and married taxpayers filing jointly who earn less than $150,000 will receive $2,800. The payments phase out at an adjusted gross income of $80,000 for single filers and $160,000 for joint filers. The bill also includes a $1,400 payment per dependent. Payment amounts will be determined using 2020 tax returns if already processed by the IRS or 2019 returns.

Federal Unemployment Assistance
Estimated portion of the stimulus package: $242 billion
The bill renews federal unemployment benefits at a lower level—$300 per month—through September 6, 2021. Additionally, it makes the first $10,200 of unemployment insurance benefits for households with incomes at or below $150,000 non-taxable.

Aid to Businesses
Estimated portion of the stimulus package: $47.25 billion
The ARPA includes funding for various industries hard hit by the pandemic, as well as a financial boost for the Paycheck Protection Program. The funds are broken down as follows:

  • $15 billion for airlines and eligible contractors (must refrain from furloughing workers or cutting pay through September 2021)
  • $25 billion for restaurants and bars (includes grants of up to $10 million per entity to be used for covering payroll, rent, utilities, and other operating expenses)
  • $7.25 billion for the PPP

Child Tax Credit
The ARPA makes a number of changes to the existing child tax credit, including:

  • Making the credit fully refundable for 2021
  • Including 17-year-olds in the definition of qualifying children
  • Increasing the amount of the credit for children over seven to $3,000
  • Increasing the amount of the credit for children 0-6 to $3,600
  • Directing the IRS to estimate each taxpayers‚Äô child tax credit and pay it in advance monthly from July through December 2021

The increased credit amounts faze out at certain income levels ($75,000 for singles, $150,000 for married couples filing jointly, and $112,500 for heads of household).

In order to distribute the monthly estimated child tax credit payments, the IRS will create an online portal where taxpayers can both opt out of advance payments and provide information that modifies the amount of their payments.

Additional Tax Credits
The ARPA includes a number of additional tax credits:

  • COBRA continuation coverage – On top of the extended unemployment benefits, the ARPA includes a 100% subsidy of COBRA health insurance premiums. This means that laid-off workers can maintain health insurance through their former employer‚Äôs plan at no cost. The subsidy covers the period from April 1, 2021, through September 30, 2021.
  • Earned income tax credit – For 2021, the ARPA expands the EITC by making it available to taxpayers without children.
  • Child and dependent care credit – The bill makes this credit refundable for 2021 and increases the exclusion for employer-provided dependent care assistance for 2021 to $10,500.
  • Employee retention credit – The bill extends this credit, which was established by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, through the end of 2021.
  • Family and sick leave credits – The ARPA extends these credits, which were established by the Families First Coronavirus Response Act (FFCRA), through September 30, 2021. Additionally, it increases the limit on the credit for paid family leave, increases the number of leave days a self-employed individual can take, makes leave taken due to a COVID-19 vaccination qualify, creates a reset date for counting paid sick leave (March 31, 2021), and allows 501(c)(1) governmental organizations to participate.
  • Premium tax credit – The ARPA expands the premium tax credit for both 2021 and 2022 and adjusts the definition of an applicable taxpayer to include those who received, or have been approved to receive, unemployment compensation anytime in 2021.

Aid to States and Cities
Estimated portion of the stimulus package: $350 billion
The bill allots $350 billion to assist state, local, tribal, and territory governments in responding to the coronavirus pandemic, broken down as follows:

  • $195.3 billion to states
  • $130.2 billion to cities and counties
  • $20 billion to tribal governments
  • $4.5 billion to U.S. territories

Housing Assistance
Estimated portion of the stimulus package: $45 billion
The ARPA provides aid in the form of emergency rental assistance ($30 billion), funding for preventing COVID-19 outbreaks among the homeless ($5 billion), and mortgage assistance ($10 billion).

Aid to Schools
Estimated portion of the stimulus package: $170 billion
K-12 schools will receive $130 billion. The money is to be used to reduce class sizes, modify classrooms to enhance social distancing, install ventilation systems, purchase personal protective equipment, hire nurses and counselors, and provide summer school.

Of the $170 billion, the remaining $40 is earmarked for colleges and universities. The institutions are instructed to use the money to defray pandemic-related expenses and to provide emergency aid to students to cover expenses (e.g., food, housing, and computer equipment).

Funding for Testing and Vaccinations
Estimated portion of the stimulus package: $60 billion
Of the $70 billion allocated in this area, $14 billion is designated for expansion of COVID-19 testing (including enhanced contact tracing, laboratory expansions, and the creation of mobile testing units), and $46 billion is set aside for vaccination distribution and administration.


IRS Announces Individual Tax Deadline Extension

IRS Announces Individual Tax Deadline Extension

For the second year in a row, the federal income tax filing due date for individuals has been postponed. The postponements come as a part of the fallout of the coronavirus pandemic and the legislation that has resulted from it, which has added complexity to tax filings and systemic strain to the U.S. tax bureau.

On Wednesday, March 17, the Internal Revenue Service (IRS), in conjunction with the U.S. Treasury Department, announced an extension of the federal income tax filing due date for individuals. Individual returns for the 2020 tax year are now due on May 17, 2021, rather than the standard date of April 15, 2021.

The IRS stated their intention to issue formal guidance on the extension soon. As of now, here are the details we know, per the IRS news release:

  • In addition to a filing extension, any federal income tax payments owed for 2020 are also automatically extended to the new due date, with no penalties or interest.
  • The filing and tax payment postponements are applicable for self-employed individual filers.
  • Taxpayers who do not pay any amounts owed by May 17 will begin to accrue penalties and interest at that point.
  • There is no need to file for an extension or contact the IRS‚Äîthis extension is automatic.
  • Individuals who need more time than the May 17 due date provided should file Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return to apply for an extension through October 15, 2021. This would result in an extension for filing; any payment due would still need to be paid by May 17 to avoid penalties and interest.
  • The postponement does not apply to the April 15 deadline for estimated tax payments.

Individual taxpayers should be sure to note that this extension only applies to federal income tax filings. While it is possible that states will follow suit with a due date extension, individual taxpayers need to refer to their state tax bureau for guidance on state income tax filings.

As your tax advisors, please be aware that we are actively monitoring the situation for updates that impact you, both federally and locally. We will continue to work hard to meet current tax deadlines and operate under the assumption that all other standard deadlines remain in effect unless an announcement is made by tax authorities. We will be sure to reach out again in the event of any further developments. 

Key Changes to the Employee Retention Credit

On December 27, 2020, President Trump signed the Consolidated Appropriations Act, 2021 (CAA) into law. A recent article from JD Supra outlines two key provisions included in the act that make changes to the employee retention credit.

Established by the CARES Act, the employee retention credit was designed to incentivize employers to maintain their staff in the midst of the coronavirus pandemic. For the period from March 13, 2020 to December 31, 2020, eligible employers could claim a 50% retention credit for qualified wages, capping out at $5,000 per employee.

The CAA both extends and expands the employee retention credit, including making retroactive changes to it for 2020. It does so via two provisions:

Section 206 – This provision makes retroactive changes back to March 13, 2020, when the ERC was established. Firstly, the ERC is now eligible for recipients of loans through the Paycheck Protection Program (PPP). Previously, PPP participants were barred from claiming the ERC. Employers should note that they may not claim the ERC on wages paid with forgiven PPP loan funds.

Secondly, Section 206 offers clarification regarding “qualified health plan expenses” and the ERC. It explains that these expenses are, indeed, eligible for the ERC, even when they are attributable to a furloughed employee who is not receiving any other compensation at the time.

The third change—another clarification—is in regard to the “gross receipts” test for tax-exempt organizations. In determining their eligibility for the ERC, tax-exempt organizations must account for all gross receipts, not just those from unrelated trade or business activities.

Lastly, Section 206 offers employers a means for catching up on unclaimed ERC for 2020. Employers should claim the additional ERC on their fourth quarter Form 941, which is due by January 31, 2021. Further guidance in this area is expected this month.

Section 207 – This second provision includes an extension of the ERC for the period from January 1, 2021 to June 30, 2021. Additionally, it expands the ERC in the following ways:

  • Increases the credit from 50% to 70%, for the portion of 2021 that the ERC covers.
  • Adjusts the per-employee cap on the ERC to $7,000 per quarter.
  • Decreases the eligibility threshold from a 50% decline in gross receipts to a 20% decline.
  • Expands eligibility for the ERC from employers with up to 100 employees to employers with up to 500 employees.
  • Eliminates the qualified wages cap for employee pay increases.
  • Eliminates the option to receive advance payment of the ERC via IRS Form 7200 and/or IRS Form 941 for employers with more than 500 employees.
  • Expands the availability of advance payments of the ERC for employers with 500 or fewer employees.
  • Creates a process for repaying advance payments of the ERC, in the event of excess payments.
  • Makes some governmental employers eligible for the ERC in 2021.
  • Maintains the non-eligibility of the ERC for wages accounted for under IRC Section 45S and expands the non-eligibility to also cover wages accounted for under IRC Section 41, IRC Section 45A, IRC Section 45P, IRC Section 51, and IRC Section 1396.
  • Requires the U.S. Small Business Administration and the IRS to coordinate in a public awareness campaign targeting employers eligible for the ERC.

For further details, click here to read the article in full at JD Supra.

New Paycheck Protection Program Guidance Released

On Wednesday, January 6, the U.S. Small Business Administration (SBA) and the Treasury issued joint guidance regarding the latest updates to the Paycheck Protection Program (PPP), as amended by the recent COVID-19 relief bill. A recent article from the Journal of Accountancy offers an overview of the guidance, which includes the following items:

  1. An interim final rule titled, “Business Loan Program Temporary Changes; Paycheck Protection Program as Amended” – This document includes a consolidation of PPP rules for borrowers using the program for the first time. It also gives an explanation of program changes made by the recent COVID-19 relief legislation. Click here to read the document in full. 
  2. An interim final rule titled, “Business Loan Program Temporary Changes; Paycheck Protection Program Second Draw Loans” – This document covers the various regulations for businesses that received PPP loans through the initial program and now want to pursue a second-draw loan. Click here to read the document in full. 
  3. Additional guidance titled, “Guidance on Accessing Capital for Minority, Underserved, Veteran and Women-Owned Business Concerns” – This document gives details on the SBA’s commitment to opening the second PPP application window exclusively to minority- and women-owned businesses for the first two days. Click here to read the document in full.

The article offers a helpful overview of a number of PPP details that have changed with this second round of loan funding, including the following:

  • Second-draw PPP loans of up to $2 million are available for eligible businesses that received first-round funding. Eligibility requirements include having 300 or fewer employees; having used the entirety of the first-round funding on eligible expenses prior to receiving second-draw funding; having experienced a reduction in revenue of 25% or more, comparing an eligible time period in 2020 with one in 2019.¬†
  • Businesses that did not receive PPP funding in the first round may be eligible for second-round PPP funding if they meet the following criteria: having 500 or fewer employees and being eligible for other SBA 7(1) loans; being a sole proprietor, independent contractor, or eligible self-employed individual; being a non-profit; being an operation in the accommodation and food services sector with fewer than 500 employees at a single physical location; being a Section 501(c)(6) business league with 300 or fewer employees; certain qualifying news organizations.
  • The maximum allowable amount for both first- and second-draw PPP loans is 2.5 times the organization‚Äôs average monthly payroll, though some eligible businesses can receive up to 3.5 times their average monthly payroll. For first-draw PPP loans, the maximum tops out at $10 million.¬†
  • In addition to the original definition of ‚Äúeligible costs‚Äù for the purpose of PPP loan usage, PPP loans from the second round of funding can be used to cover PPE and facility modification, property damage related to public disturbances not covered by insurance, expenditures for purchases essential to current operations, and certain covered operating expenditures.
  • The latest COVID-19 relief bill included specific provisions for PPP applicants that are minority, underserved, veteran, and women-owned businesses. This includes certain amounts of PPP loans set aside for these groups and other commitments by the SBA to ensure that businesses in these categories are served through the PPP program.¬†

The timeline for the second PPP application window is as follows:

  • January 11, 2021 ‚Äì Applications for first-draw PPP loans can be submitted by community financial institutions.
  • January 13, 2021 ‚Äì Applications for second-draw PPP loans can be submitted by community financial institutions.
  • To be announced ‚Äì Applications for first- and second-draw PPP loans can be submitted by all participating lenders.
  • March 31, 2021 ‚Äì The second PPP application window closes.¬†

For more details on the second application window for PPP loans, check out this article from the Journal of Accountancy. 

To apply for PPP funds in this second round of funding, first-time borrowers should use Form 2483 – Paycheck Protection Program Borrower Application Form and borrower seeking second-draw loans should use Form 2483-SD – PPP Second Draw Borrower Application Form. For more details on these forms and the procedures that accompany them, click here for a helpful article from the Journal of Accountancy.

Congress Enacts Additional Stimulus Legislation

On December 22, 2020, Congress passed the Consolidated Appropriations Act, 2021 (CAA2021), which includes $892 billion in coronavirus stimulus spending. This long-awaited and highly contested piece of legislation ties coronavirus relief funding into a $1.4 trillion resolution for funding the federal government through September of next year. The nearly $900 billion in stimulus funds comprises a variety of measures, including a renewal of enhanced unemployment benefits, an extension of the Paycheck Protection Program, and another round of individual stimulus payments. Read on for a breakdown of the various COVID-19 stimulus measures included in CAA2021.  

On Sunday, December 27, 2020, President Trump signed the CAA2021.

Paycheck Protection Program Extension (PPP2)
Portion of the stimulus package: $284 billion
CAA2021 provides an additional round of funding for the PPP and expands eligibility to include nonprofits (Sec. 501(c)(6)), local newspapers, TV stations, and radio stations.  
Additionally, it ensures the tax deductibility of business expenses paid with loan funds that are forgiven, a measure that has been widely called for by loan recipients and the American Institute of Certified Public Accountants (AICPA). For further details on PPP2, click here to read a helpful summary from the Journal of Accountancy.

Support for Entertainment Venues
Portion of the stimulus package: $15 billion
Funds for struggling live venues, independent movie theaters, and cultural institutions.  
Support for Business in Low-income Communities
Portion of the stimulus package: $12 billion
Funds earmarked for businesses in low-income and minority communities.
Economic Injury Disaster Loan Grants
Portion of the stimulus package: $20 billion
Additional funds to be administered through the Economic Injury Disaster Loan (EIDL) program that are dedicated to businesses in low-income communities.  

Support for Child Care Centers
Portion of the stimulus package: $10 billion
Aid money to help childcare centers safely reopen and to support families with child care costs. The money is to be administered via the Child Care Development Block Grant.  

Aid to Transportation Sector
Portion of the stimulus package: $45 billion
A variety of transportation-related assistance that includes $16 billion for airlines (for paying the salaries of workers and contractors), $14 billion for mass transit agencies, $10 billion for highways, and $1 billion for Amtrak.  
Unemployment Benefits
Portion of the stimulus package: $120 billion
An extension of federal unemployment supplemental benefits through March 14, 2021 at a rate of $300 per week. Additionally, it legislates an extension of two pandemic unemployment programs set to expire at the end of December, the Pandemic Unemployment Assistance program, which has been expanded to provide aid to self-employed, temporary, and gig workers, and the Pandemic Emergency Unemployment Compensation Program, which provides an additional 13 weeks of benefits beyond the typical 26 weeks that states provide to jobless workers.  

Extension of Eviction Moratorium & Rental Assistance
Portion of the stimulus package: $25 billion
A temporary extension of the federal eviction moratorium through January 31, 2021 and $25 billion in emergency rental assistance.  

Economic Impact Payments
Portion of the stimulus package: $166 billion
Direct payments of $600 for qualifying adults and their child dependents. Individuals earning up to $75,000 annually (or married couples making up to $150,000) qualify for the full payment; individuals earning between $75,000 and $99,000 qualify for a reduced payment; individuals earning more than $99,000 do not qualify.  

Food Aid
Portion of the stimulus package: $13 billion
Additional funding for the Supplemental Nutrition Assistance Program and a benefit increase of 15% to last for six months.  
Support for Education Institutions
Portion of the stimulus package: $82 billion
This money is designated to help schools and universities reopen. The funds are earmarked as follows: $54 billion for public K-12 schools, $23 billion for colleges and universities, $4 billion for the Governors Emergency Education Relief Fund, $2.75 billion for private K-12 education, and nearly $1 billion for Native American schools.  

Funding for Vaccine Distribution and Coronavirus Testing
Portion of the stimulus package: $68 billion
CAA2021 includes money for both supporting the distribution of coronavirus vaccinations and for helping to pay for costs associated with COVID-19 testing. $30 billion is directed for the procurement of vaccines and treatments, the funding of distribution for states, and the creation of a strategic stockpile. $22 billion is earmarked for testing, tracing, and mitigation. Of the remaining funds, $9 billion will go to healthcare providers and $4.5 is earmarked for mental health.  

Increased Broadband Access
Portion of the stimulus package: $7 billion
Funding for broadband initiatives to support better connectivity and infrastructure. $3.2 billion is earmarked for the Emergency Broadband Benefit, which provides low-income families and individuals laid off or furloughed due to the pandemic with a monthly stipend of $50 to pay for internet services. $1.9 billion is dedicated to financing “rip and replace” projects—the removal and replacement of Huawei and ZTE networking equipment. $1 billion will go to Tribal broadband programs and $300 billion is dedicated to rural broadband deployment.  

Farm Aid
Portion of the stimulus package: $13 billion
Funding for farmers and ranchers.
Postal Service
Portion of the stimulus package: $10 billion
CAA2021 includes the forgiveness of a $10 billion loan made to the United States Postal Service earlier this year.  

A number of provisions that were initially included in proposed coronavirus stimulus legislation were, ultimately, left out of the bill. These include protection for businesses against litigation regarding COVID-19 exposure, financial aid to state and local governments, and an extension of federal student loan forbearance. 

SBA and Treasury Release Additional PPP Guidance

On August 24, the Small Business Administration and Treasury made available a new set of guidance regarding Paycheck Protection Program (PPP) forgiveness issues. The new interim final rule covers two areas: owner-employee compensation and the eligibility of non-payroll costs. A recent article from the Journal of Accountancy offers a concise summation of the new regulations.

Owner-employee compensation – For the purposes of calculating loan forgiveness, C-corporation and S-corporation owners who hold less than a 5% stake qualify as exempt from the PPP rule regarding owner-employee compensation. This is because they are deemed to not have a meaningful ability to influence the allocation of PPP loan proceeds.

Eligibility of non-payroll costs – The new interim rule addresses situations where a business owner holds property in a separate entity and where a business owner holds property in the same entity as its business operations. The goal of the guidance is to establish equitable treatment for these situations.

To effect equitable treatment, mortgage interest payments to a related party are not eligible for forgiveness and mortgage interest or rents paid to a third party are eligible only to the extent of such portion that is attributable the space being occupied by the business. Further, eligible rent or lease payments to a related party are limited to the amount of mortgage interest owed on the property that is attributable the space being occupied by the business.

For further details, including a number of hypothetical scenarios illustrating various non-payroll cost situations, click here to read the article in full at the Journal of Accountancy.

IRS Publishes New Release Regarding Business Interest Expense Limitations

The Internal Revenue Service (IRS) recently announced finalized guidance regarding business interest expense limitations. In a helpful article from the Journal of Accountancy, author Sally Schreiber offers an overview of the new rules.


The business interest expense limitation was created by the Tax Cuts and Jobs Act (TCJA) of 2017 and subsequently modified by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) of 2020. The TCJA established that for tax years 2018 and beyond, deductions for business interest expenses are limited to the total of three items:

  1. Business interest income
  2. 30% of adjusted taxable income (ATI)
  3. The interest expense of the taxpayer’s floor plan financing

The CARES Act made two changes: it adjusted item number two to 50% for tax years 2019 and 2020 (special rules exist for partnerships for 2019) and made it allowable for taxpayers to calculate their 2020 limit using their 2019 ATI. 

New IRS Regulations

The recently released IRS regulations offer instructions in four areas:

  1. Determining the interest expense limitation
  2. The definition of interest, for the purposes of the limitation
  3. Who is subject to the limitation
  4. How the limitation applies in various special cases

The guidance will go into effect 60 days from the date of its publication in the Federal Register, which has yet to be announced.

Additional Proposed Regulations

In addition to the new final guidance, the IRS published additional proposed regulations regarding business interest expense deduction limitation issues, including how to allocate interest expense for passthrough entities and more. The release of this proposed guidance opens up a 60-day period for written and electronic comment submission, as well as requests for a public hearing regarding the guidance.

For full details on the recent IRS release, click here to read the article at the Journal of Accountancy. 

SBA Releases Updates On PPP Forgiveness

SBA Releases Updates On PPP Forgiveness

This week, the Small Business Administration (SBA) and the U.S. Department of the Treasury released new information for recipients of loans through the Paycheck Protection Program (PPP).

The Revised PPP Loan Forgiveness Application

There are three key items included in the updated application for PPP loan forgiveness:

  1. It makes it clear that S corporation owners may not include health insurance costs in their payroll cost calculation, but they may include retirement costs.
  2. It provides additional guidance regarding the use of safe harbors in conjunction with loan forgiveness.
  3. It provides the option to use either the 8-week or the 24-week coverage period for borrowers that received PPP loans prior to June 5.

Click here to view the revised PPP loan forgiveness application.

Click here to view the instructions for completing the application.

The New EZ PPP Loan Forgiveness Application

The EZ application was created for use by PPP borrowers with relatively straightforward cases (e.g., fewer calculations and less documentation). To be eligible to use the EZ application, borrowers must fit one or more of the following criteria:

  • Be self-employed and have no employees
  • Not have reduced salaries or wages by more than 25% and not have reduced hours or employees
  • Experienced both a reduction in business due to COVID-19 health directives and did not reduce salaries or wages by more than 25%

Click here to view the EZ PPP loan forgiveness application.

Click here to view the instruction for the EZ application.

New Interim Final Rule

Just prior to releasing the revised and new applications for loan forgiveness, the SBA issued a new interim final rule. The rule addresses the fact that the Paycheck Protection Program Flexibility Act (PPPFA) increased the covered period for PPP funds from eight weeks to 24 weeks. The rule increases the cap on salaries and compensation to account for the increase in the covered period. For borrowers using the 8-week period, PPP loan forgiveness is allowed for up to $15,385 for each individual employee ($100,000 annualized to an eight-week period). For borrowers using the 24-week period, PPP loan forgiveness is allowed for up to $46,154 for each individual employee ($100,000 annualized to a 24-week period).

Additionally, the rule addresses owner compensation considering the increase in the covered period for PPP fund from eight weeks to 24 weeks. The calculation for owner compensation is more complex than that for individual employee compensation in order “to prevent owners from reaping PPP windfalls that Congress did not intend.” For borrowers using the eight-week period, PPP loan forgiveness is allowed for up to $15,385 of owner compensation. For borrowers using the 24-week period, PPP loan forgiveness is allowed for up to $20,833 of owner compensation.

Lastly, the interim final rule also adjusted previous guidance to account for changes made by the PPPFA. For loans made on or after June 5, 2020, the minimum term is five years. For loans made prior to June 5, 2020, the minimum term remains two years, unless the borrower and lender agree upon an extension. Consistent with guidance issued earlier this month, the portion of PPP funds that are required to be used on payroll costs for a borrower to qualify for forgiveness is reduced from 75% to 60%.

Our team is here to offer sound advice and assistance as loan recipients navigate through guidance, gather required documentation, and prepare to apply for loan forgiveness. Contact us today to discuss how we can accommodate your unique situation. 


Senate Passes Paycheck Protection Flexibility Act

On Wednesday night, the Senate voted unanimously in favor of the Paycheck Protection Flexibility Act. This new legislation makes key adjustments to the timeline for spending Paycheck Protection Program (PPP) funds and revises how loan recipients are required to allocate the money.

The President is expected to sign the bill into law.

Here is a brief overview of the key provisions contained in the bill:

  • Loan recipients now have 24 weeks to spend the funds. Previously, they had to use all the money within eight weeks.¬† Eligible recipients who received a loan before the date of enactment may elect to use the shorter 8-week period, if desired.
  • The percentage of the loan money required to be devoted to payroll expenditures has been reduced from 75% to 60%. This item does come with a new catch‚Äîif a borrower fails to spend at least 60% of the loan money on payroll, then the entire loan becomes unforgivable.
  • The minimum term period for PPP loans is extended from two years to five years.
  • PPP loan recipients whose loans are forgiven may delay payroll tax payments (the employer‚Äôs share of FICA payroll taxes) for two years. Half of the taxes are due in 2021 and the other half in 2022.¬† Previously, Section 2302 of the CARES Act excepted any taxpayer who had PPP indebtedness forgiven from being eligible for the payroll tax deferral.
  • The deadline for rehiring employees and restoring wages to pre-pandemic levels is extended from June 30, 2020 to December 31, 2020.
  • Loan recipients may mitigate a reduction to ¬†loan forgiveness due to headcount if they can provide evidence that, despite good faith efforts, they were unable to recall a portion of their workforce and/or that it was not possible to sufficiently reopen their business in a way that complies with safety standards.
    The deferral period for repayment is changed from 6 months to until the date the forgiveness amount is remitted to the lender.  If a recipient does not apply for forgiveness, the deferral period is 10 months.

New SBA Guidance Regarding Paycheck Protection Program – Q&A #46

On May 13, the Small Business Administration (SBA) issued additional guidance regarding the Paycheck Protection Program (PPP). They added a highly anticipated new question and answer to their lengthy FAQ: “How will SBA review borrowers’ required good-faith certification concerning the necessity of their loan request?”

One of the requirements when submitting a PPP loan application is a self-certification by the applicant that the loan is necessary to support their ongoing operations in light of the current economic circumstances. Many borrowers called for further clarification on this point out of fear that they would later be judged as having made a false self-certification and face potentially severe civil or criminal penalties.

The clarification on May 13 describes a safe harbor for borrowers who, when combined with their affiliates, receive PPP loans of $2 million or less. Those who receive PPP loans of $2 million and less will be deemed to meet the required certification concerning the necessity of the loan request in good faith. The SBA clarifies the thinking behind the creation of this safe harbor, explaining that:

  1. Borrowers with loans of this size are unlikely to have access to other sources of liquidity during this difficult economic time.
  2. The creation of the safe harbor will dispel a lot of uncertainty that these smaller businesses had about accepting PPP loans, thereby helping the program to operate more smoothly.
  3. Discounting this set of loans from the review process will allow the SBA to better handle the large workload they have before them and focus their efforts on the subsection of borrowers whose self-certifications may not be genuine.

The SBA clarification also addressed what will happen, if in the course of a review, a borrower who receives more than $2 million lacked an adequate basis for their good-faith certification as required to obtain their PPP loan. If this is the case, the borrower will need to return the full amount of the loan. If they do so, the SBA will not “pursue administrative enforcement or referrals to other agencies.”

It is important to note that this is only a safe harbor for meeting the economic uncertainty certification. Borrowers still must track expenses during the covered period and apply for loan forgiveness with their lender.