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Last night, Congress passed an expansion of the CARES Act. The bill now goes to President Trump’s desk for signature. The bill, which includes federal government appropriations for the next year, runs nearly 5,600 pages. This message aims to highlight some of its key provisions for businesses.
Reopening and Expansion of The Paycheck Protection Program

The Paycheck Protection Program will be reopened through March 31, or whenever $248 billion in new funding runs out. It is unclear at this point when financial institutions will start accepting applications – but businesses are advised to connect with their lender and prepare their application now, so that they are ready to go when applications open.
Key changes/provisions:

  • Businesses still may apply for up to 2 ½ times their monthly payroll, except that businesses in Accommodations and Food Services sector may apply for up to 3 ½ times their monthly payroll. The maximum loan value is reduced to $2,000,000.
  • At least 60% of the forgiven amount must be for payroll.
  • Other eligible expenses for PPP loan forgiveness have been expanded to include operations expenses, supplier costs, worker protection expenses, and covered property damage costs. These categories have specific definitions in the law.
  • The period in which PPP loan recipients can incur expenses to apply for forgiveness can range from eight to 24 weeks, beginning with the loan receipt date. Recipients can choose the length of their loan forgiveness period.
  • The law makes it clear that business expenses used to claim PPP forgiveness will be tax deductible; this provision overrides a previous IRS determination.
  • The PPP loan forgiveness application will be simplified for loans of less than $150,000.

The legislation expands the types of organizations that are eligible for a PPP loan:

  • Nonprofit associations organized under section 501(c)6 of the Internal Revenue Code are now eligible for PPP loans, provided that they have fewer than 300 employees, and that lobbying accounts for less than 15% of their revenue and the lesser of 15% of their operations or $1,000,000.
  • Churches and other faith-based organizations are eligible for PPP loans.
  • Of total funding, $35 billion is set aside for first-time borrowers, and $15 billion is set aside for employers with 10 employees or fewer, or for entities in low-income neighborhoods taking out loans of less than $250,000.

Congress also added a “Second Draw” for businesses that received a PPP loan in the spring.

  • To be eligible for a second draw loan, businesses must have fewer than 300 employees and demonstrate that they had a 25% decline in revenue during a quarter of 2020 compared with the same quarter in 2019.
  • Second draw loans amounts are also limited 2 ½ times monthly payroll (3 ½ times for Accommodations and Food Services) and the maximum amount is also $2,000,000.

EIDL Grant and Employee Retention Tax Credit

An additional $20 billion was appropriated for the EIDL Advance Grant program:

  • The amount that businesses receive under the EIDL Advance is no longer deducted from their PPP forgiveness eligibility.
  • Priority for new EIDL Advance Grants will be given to small businesses with fewer than 300 employees located in low-income neighborhoods that have had a 30% reduction in gross receipts during any eight-week period between March 2 and December 31, 2020.

The Employee Retention Tax Credit is also expanded and extended to June 30, 2021:

  • It will cover 70% of eligible payroll expenses, up from 50%.
  • The per-employee limit is raised from $10,000 per year to $10,000 per quarter.
  • Businesses must show a 20% reduction in gross receipts for a quarter of 2020 compared with the same quarter of 2019 to qualify, down from a 50% drop previously.
  • Employers with fewer than 500 employees may now claim the credit for wages paid to all employees, regardless of whether those employees are idle or not (previously, the limit was 100).
  • It is possible to look back to claim the up to $5,000/employee credit for 2020.
  • It is now possible to claim both the ERTC and PPP, but the funds must be applied to different uses for the PPP loan to be forgiven.
Support for Arts & Entertainment Venues

The bill includes $15 billion for grants to arts and entertainment venues, a provision that has been called “Save Our Stages.” These grants are separate from the PPP, and venues may only claim one of this grant or the PPP, not both. Key provisions:

  • Live venue operators or promoters, theatrical producers, live performing arts organization operations, relevant museum operators, motion picture theater operations, and talent representatives are eligible if they meet the other eligibility criteria.
  • Eligible venues are those that were in operation on February 29, 2020, can demonstrate a 25% decline in revenue during a quarter of 2020 compared with the same quarter of 2019, are open or intend to reopen, and meet other employment and performance requirements.
  • Grant amounts are up to 45% of gross earned revenue during 2019, up to $10,000,000.
  • Funds must be used for payroll, rent, utilities, mortgages, debt service, worker protection, payments to independent contractors, and other ordinary and necessary business expenses through the end of 2021.

It is anticipated that these grants will be claimed fairly quickly once the federal government opens the application process. We do not yet know when applications will open.
Other Provisions

  • The federal government will resume making principal and interest payments on the SBA’s traditional small business loan programs: 7(a), 504, and Microloan.
  • The bill includes $25 billion in rental assistance payments to landlords, and extends the federal eviction moratorium until January 31.
  • Pandemic unemployment benefits of up to $300 per week are extended starting next week and continuing at least through March 14.
  • Congress appropriated $45 billion for transportation, including $14 billion for transit services, and $16 billion in payroll support for airline employees and contractors.
  • Congress appropriated $88 billion for K-12 and higher education, which will be disbursed through the states. They also provided $10 billion for childcare assistance, and $7 billion for broadband.
  • Individuals will receive a second round of direct stimulus payments of as much as $600 for those who earned less than $75,000 in 2019.
For additional details, the US Chamber of Commerce has created a Guide to Small Business COVID-19 Emergency Loans with the changes from the bill in question. As always, we recommend speaking with an attorney or accountant, as appropriate, about the circumstances of your business. The Chamber will continue to monitor developments and will share news and details about how to apply for these programs as we receive them.

Best wishes for a happy holiday season.