PPP2: What to expect from round two of the Paycheck Protection Program

Updated 12/31/20

With a second round of Paycheck Protection Program loans officially on its way – this renewed PPP2 program is part of a $900 billion pandemic relief provision signed into law by President Trump on Dec. 27 – businesses and organizations are eager to know if, when, and how this assistance could help their operations.

While further guidance and clarification is expected in the coming days – the U.S. Small Business Administration must provide these regulations within 10 days of the enactment of the legislation – PPP2 is potentially great news for those organizations hardest hit by COVID. The renewed program gives small businesses a second chance at PPP loans and expands the program to additional types of organizations, among other provisions. Here’s what we know now, about these latest coronavirus relief measures and specifically PPP2, and what it could mean for your organization.

Latest pandemic relief: Consolidated Appropriations Act, 2021 (CAA)

On Dec. 21, 2020, Congress passed the Consolidated Appropriations Act, 2021 (CAA) which included multiple tax law changes and the Coronavirus Response and Relief Supplemental Appropriations Act, a $900 billion pandemic relief provision. President Trump signed the CAA into law on Dec. 27.

In passing this latest round of coronavirus relief measures, Congress aimed to expand programs first introduced in the Coronavirus Aid, Relief, and Economic Security (CARES) Act and the Families First Coronavirus Response Act (FFCRA). For example, CAA adds $300 to extended weekly unemployment benefits and provides more than $300 billion in aid for small businesses. It also ensures tax deductibility for business expenses paid with forgiven PPP loans. The CAA also features several non-COVID-19-related tax provisions that had been set to expire at the end of 2020.

PPP2

The second round of PPP loans is similar to the first, with several important differences. Highlights include:

  • A total of $284 billion is available to first- and second-time eligible borrowers, through March 21, 2021.
  • Eligible first-time borrowers include: businesses with 500 or fewer employees that are eligible for other U.S. Small Business Administration (SBA) 7(a) loans; sole proprietors, independent contractors, and eligible self-employed individuals; not-for-profits, including churches; accommodation and food services operations with fewer than 300 employees per physical location.
  • Loan amounts: 2.5 times monthly payroll costs (3.5 times for accommodation and food service employers classified in North American Industry Classification System Code 72), with a maximum amount of $2 million.
  • Payroll costs include group life, disability, vision, and dental insurance costs.
  • Organizations drawing a second PPP loan must have fewer than 300 employees (or less than 500 for accommodation and food service employers classified in NAICS Code 72), must have used or will use the full amount of their first PPP loan, and have experienced a 25% decrease in gross revenue in any 2020 quarter compared to the same quarter in 2019.
  • The loan coverage period is flexible – recipients may choose any timeframe between 8 and 24 weeks.
  • Forgivable costs have expanded to include certain operating expenses, property damages from public disturbances, supplier costs, and worker protection (PPE).
  • Shuttered Venue Operator Grants, totaling $15 billion, are available to live venues, independent movie theaters, and cultural institutions. These funds, however, can’t be used in conjunction with PPP funding.
  • Economic Injury Disaster (EIDL) loan advances are no longer deducted from PPP loan forgiveness. In addition, $20 million is allocated for EIDL advances through Dec. 31, 2021.\
  • Business expenses paid with forgiven PPP loans are tax-deductible, superseding disputed IRS guidance that such expenses could not be deducted.
  • Forgiveness applications for loans under $150,000 will be simplified to a one-page certification, similar to the EZ forgiveness application previously provided.

While it’s unclear when exactly banks will begin accepting PPP2 loan applications, it’s expected to start in early February after the SBA releases guidance to banks. In the meantime, it’s a good idea to talk with your financial advisor, assess your financial situation to determine whether applying for a first or second PPP loan is the right choice, and prepare the necessary documentation if you’re going that route.

ON DEMAND WEBINAR

A discussion on PPP2 was part of our on demand webinar and Q&A session held Tuesday, Jan. 5. A panel of Rehmann advisors addressed the greatest tax impacts and other relief aid provisions affecting both businesses and individuals. Tune in here.

 

Published in COVID-19

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