On December 21, 2020, Congress passed the Consolidated Appropriations Act, 2021 (Act). (Full Bill) (Summary) The Act contains several sections that directly impact the Paycheck Protection Program (PPP) including financial institutions and their customers. President Trump is expected to sign the Act soon.
One of the main areas of the Act is Subtitle B – “COVID-related Tax Relief Act of 2020” that contains several important tax updates in general, with one specific section covering the PPP. However, there are many areas in the Act that impacts financial institutions as an employer and lender and areas that impact financial institution customers. Various sections of the Act impacting financial institutions include, but are not limited to:
- Section 278 – Clarification of Tax Treatment of Certain Loan Forgiveness and Other Business Financial Assistance Under the Coronavirus Relief Legislation
- Section 305 – Hold Harmless
- Section 310 – Clarification of and Additional Limitations on Eligibility
- Section 312 – Increased Ability for Paycheck Protection Program for Borrowers to Request an Increase in Loan Amount Due to Updated Regulations
- Section 320 – Bankruptcy Provisions
- Section 325 – Extension of the Debt Relief Program
- Section 326 – Modifications to 7(a) Loan Programs
- Section 334 – Flexibility in Deferral of Payments of 7(a) Loans
- Section 338 – Application of Certain Terms through Life of Covered Loan
- Section 339 – Interest Calculation on Covered Loans
Title V – Banking including Current Expected Credit Losses (CECL)
In addition, Title III – “Continuing the Paycheck Protection Program and Other Small Business Support” clarifies or adds several sections relative to the PPP loans.
- Section 304 adds additional allowable expenses under either an existing PPP loan or a PPP second draw loan. These additional allowable expenses include: covered operations expenditures, covered property damage costs, covered supplier costs, and covered worker protection expenditures, as defined in the Act.
- Section 307 adds a simplified forgiveness application process for loans up $150,000. Previously, only loans up to $50,000 had a simplified application process.
- Section 311 allows for PPP second draw loans for entities that qualify. The maximum amount of a PPP second draw loan is 2.5 times monthly payroll costs or $2 million. In addition, Section 311 details the requirements to qualify for a PPP second draw loan.