December 22, 2020

Congress Approves New Changes to the PPP Loan Program

UPDATE: On December 27th, 2020, President Trump signed the stimulus legislation into law. 

Late last night Congress approved a long-awaited second COVID-19 economic stimulus package that provides over $900B in needed relief to individuals and support for businesses. While the most reported aspect is the $600 stimulus checks for individual taxpayers, it is important not to overlook the expansion and changes to the popular Paycheck Protection Program (PPP). Many Atlanta businesses that received a loan have been eagerly awaiting an update. The good news is Congress delivered outlining significant updates and changes in the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (the Act). A number of long-awaited topics are addressed including expanded eligibility criteria, opportunity to take a second loan, and even additional covered forgiveness expenses. To help clients, prospects, and others, Wilson Lewis has provided a summary of the key details below.

Expanded Eligibility & Second Loans

A second PPP loan with a maximum amount of $2M may be taken if the following conditions have been met:

• The borrower has less than 300 employees.
• Demonstrate a 25% or more decrease in gross receipts in any 2020 quarter when compared against the same time period in 2019.
• Has used or will use the proceeds from the first PPP loan.

It is important to note that borrowers can receive full forgiveness if they spend at least 60% of the second loan on payroll costs over the selected 8 or 24 week covered period.

The Act also expanded the list of eligible first-time borrowers to include businesses with 500 or fewer employees eligible for other SBA loans, nonprofits (including churches), sole proprietors, independent contractors, and certain self-employed individuals. Finally, accommodation and food service businesses with fewer than 300 employees per location.

Additional Covered Forgiveness Expenses

There were also changes made to the expenses eligible for loan forgiveness. The initial requirement that only qualifying payroll, mortgage interest, utilities, and rent remain, however, four additional expense categories have been added.

• Covered Operations Expenses – This includes payment for any business software or cloud computing service that facilitates operations, product or service delivery, processing, payment, or tracking of payroll expenses, human resources, sales and billing functions, or accounting and tracking of supplies, inventory, records, and expenses.
• Covered Property Damage Costs – These include costs related to property damage due to vandalism or looting from public disturbances that occurred during 2020 and not covered by insurance.
• Covered Supplier Costs – Any expense that is essential to operations at the time incurred including those made pursuant to a contract or purchase order.
• Covered Worker Protections – This includes expenses incurred to adapt business activities to comply with federal, state, or local government orders issued between March 1, 2020, and the date the COVID-19 national emergency expires. Specifically, this includes the purchase, modification, or addition of protective measures such as enhanced HVAC systems, physical barriers with sneeze guards, expansion of indoor/outdoor space, and on or offsite health screening capabilities.

Simplified Forgiveness Loans Less than $150k

The Act also calls for the implementation of a simplified forgiveness application for loans of $150,000 or less. A one-page certification requires the borrower to provide a description of the number of employees the business was able to retain because of the loan, the estimated amount spent on payroll, and the total amount of the loan. There will also be a section where demographic information can be provided, if elected, by the borrower.  Borrowers are also required to retain relevant employment records for 4 years and other documents (proof of expenses incurred) for 3 years. Finally, the Small Business Administration has been directed to create the new application and related instructions within 24 days after the date of enactment.

Deductibility of Forgiven PPP Expenses

In another rebuke of recently issued IRS guidelines which prohibit businesses from deducting forgiven PPP loan expenses, the Act explicitly states deductions for these expenses are not to be limited or denied.

Contact Us

The updates to the Paycheck Protection Program will make it easier for businesses in need to access funding while making the forgiveness process easier for existing borrowers. For now, potential applicants and borrowers need to wait until the changes outlined can be implemented. In the meantime, if you have questions about the information outlined above or need assistance with a tax or accounting issue, Wilson Lewis can help. For additional information call us at 770-476-1004 or click here to contact us. We look forward to speaking with you soon.