2021 Relief Funds Explained
While information is continuing to be release, I will share with you what we know at this point.
Paycheck Protection Program Funds 2.0
A second round of Paycheck Protection Program Funds is now available to businesses that received a first round. Businesses with 300 or fewer employees, including sole proprietors, independent contractors and self-employed, that have used or will use their first PPP (don’t need to have applied for forgiveness yet) AND can show a 25% gross revenue decline in any 2020 quarter compared with the same quarter in 2019. Businesses must have been in operation on or before February 15, 2020.
We are being told that the SBA has not released everything to the banks yet so they can start to administer the funds. Regulations specify that at least 60% must be used for payroll expenses. Applicants can choose a coverage period up to 24 weeks. The other 40% of the forgivable portion of the loan can be used for additional expenses this round. Expenses: Utilities (gas, electricity, water, telephone, internet), Rent (real and personal property), Mortgage Interest, Operations expenditures, Property damage costs, Supplier costs, and Worker protection expenditures.
Organizations like the Chamber, which are 501(c)6 non-profit organizations, qualify for this new round of funding. If you did not already receive a PPP loan, you can receive an initial loan under the new guidelines.
PPP 2.0 – Forgivable Payroll Expenses
➢ Employees’ cash compensation (only employees whose principal place of residence is the United States) in the form of salary, wages, commissions, or similar compensation; cash tips or the equivalent (based on employer records of past tips or, in the absence of such records, a reasonable, good-faith employer estimate of such tips);
➢ payment for vacation, parental, family, medical, or sick leave;
➢ allowance for separation or dismissal;
➢ payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums, and retirement; and
➢ payment of state and local taxes assessed on compensation of employees.
PPP 2.0 - Forgivable Non-Payroll Expenses (Expanded!)
➢ Worker protection expenditures (PPE) covers worker protection and facility modification expenditures, including personal protective equipment, sanitizer, plexiglass, and other expenses incurred to comply with COVID-19 health and safety guidelines.
➢ Property damage costs due to public disturbances that occurred during 2020 that are not covered by insurance.
➢ Supplier costs pursuant to a contract, 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. Supplier costs of perishable goods can be made before or during the life of the loan.
➢ Operations expenditures for software, cloud computing, and other human resources and accounting needs.
The application deadline March 31, 2021 (or until $284 billion funding runs out).
Tax Deductibility: It has been determined that business that receive the PPP or EIDL (Economic Injury Disaster Loan) can deduct business expenses, that they are normally able to deduct, that are paid with these loans. This is a change to what was previously in place.
PPP Forgiveness of EIDL Grant: The recovery legislation repealed the requirement that an EIDL emergency grant (advance) be deducted from the PPP forgiveness amount. The SBA Administrator is required within 15 days of when this legislation is enacted (12/27/20) to “ensure equal treatment” for borrowers whose loans have already been forgiven and who had their grants subtracted from the forgiven amount.
Forgiveness Application: A new one-page forgiveness application for loans of $150,000 or less is to be released by the SBA.
Changes to the Employee Retention Tax Credit Program
The Employee Retention Tax Credit has been extended to July 1, 2021 and Increases the fully refundable portion of qualified wages from 50% to 70%. Employers may now take a tax credit of up to $14,000 per employee, $7,000 for each of the first two quarters of 2021. Employers able to take the Employee Retention Tax Credit and participate in the PPP, but cannot use them for the exact same expenses.
Economic Injury Disaster Loan Advance Change:
(Important if you have fewer than 10 employees)
A change to the Economic Injury Disaster Loan Advance now allows those that received less than $10,000 and that are in low-income communities to receive the full $10,000. It looks like much of Huntingdon County qualifies. Here is the best mapping tool that I found. https://connect.bakertilly.com/nmtc-lihtc-mapping-tool
I have not been able to find the process to apply for this additional amount, but will let you know when it is made available.
Optional FFCRA Leave Tax Credits Extended to 3/31/21
➢ Families First Coronavirus Response Act (FFCRA), effective 4/1/20, required employers with fewer than 500 employees to provide paid sick and family leave to employees for COVID-19 related reasons. FFCRA provides private employers with a refundable dollar-for-dollar payroll tax credit for the mandated leave. The tax credits and mandated leave requirements were originally set to expire on 12/31/20.
➢ Mandated FFCRA Leave Expired 12/31 - The recovery legislation does not extend the FFCRA’s requirement that covered employers must provide leave benefits. So as of 12/31/20, FFCRA-covered employers may dispense of the FFCRA leave scheme entirely.
➢ Voluntary FFCRA Participation Allows Tax Credits Until 3/31/21 - FFCRA-covered employers that elect to extend FFCRA-like benefits voluntarily may continue to reap the tax benefits associated with the program through 3/31/21. Self-employed individuals may use their average daily self-employment income from 2019, rather than 2020, for purposes of computing these credits. What other aid is available for small businesses?
➢ Pandemic unemployment benefits for the self-employed and independent contractors is extended.
➢ Payment relief for eligible SBA loans will be extended. That means the SBA will cover the payment on eligible SBA loans—including interest, for up to a total of $9000 per payment—for the next 3-8 months, depending on the borrower’s industry code and the type of loan.
➢ Live venues, independent movie theaters, and cultural institutions may be eligible for $15 billion in dedicated grants. (Note that these organizations will have to choose between these grants and the new PPP loans – they can’t get both.)
➢ Landlords may benefit from the rental assistance program.
➢ Childcare businesses may be eligible for part of the $10 billion allocated.
to watch a recording of the NFIB webinar about the changes mentioned above
to watch a recording of the U.S. Chamber webinar on PPP Loans and Employee Retention Tax Credits. The slides can be found here.
Click here to view the U.S. Chamber's new Guide to Small Business COVID-19 Emergency Loans with the latest information and answers to FAQs about the changes that have been made to the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loans (EIDL) Program as part of the end-of-year pandemic relief package Congress has passed.
Click here for the recording of the “COVID-19 Relief Bill: What PA Businesses Need to Know About the Latest Round of PPP” webinar hosted by the PA Chamber.