Congress has passed and the President has signed a $900 billion stimulus bill to assist both families and small businesses that have been impacted by Covid-19 crisis.
This new package includes updates to the Paycheck Protection Program (PPP), changes on how the loans are taxed, as well as who can receive grants. The U.S Chamber of Commerce has provided some key takeaways on what can be expected:
Businesses can apply for PPP loans if they didn’t before
The new stimulus bill reopens the PPP program for any business that did not apply before and expands which types of businesses can apply for forgivable PPP loans, including 501(c)(6) non-profits, local news media organizations or housing cooperatives. The new funding for first-time PPP loans is available through March 31, 2021, or until the new funds are exhausted. The maximum loan amount $2 million.
A new ‘second draw’ PPP will offer businesses additional aid
Any business that qualified and received a PPP loan in 2020 will now have the chance to apply for a second PPP loan if they meet certain criteria. The “second draw” program will offer forgivable loans to small businesses, non-profits, sole proprietors and independent contractors if they meet these conditions: 1) the company has less than 300 employees, and (2) the company had a 25% reduction in gross receipts during at least one quarter of 2020 versus the same quarter of 2019. The maximum loan size for a second PPP loan is $2 million. A new application will be released for the second-draw program.
Eligible PPP expenses have changed
To get a PPP loan forgiven, businesses needed to make sure 60% of the loan went toward payroll, and the remaining 40% could go toward expenses such as rent, utilities and interest on mortgages. Bradley notes that under the new loan terms, the 60% amount for payroll remains, but the 40% expenses have been expanded. Eligible non-payroll PPP expenses now include:
- Operations expenses: cloud computing services, business software, human resources and related expenses.
- Supplier costs: payments that go to suppliers who provide essential goods.
- Worker protection expenses: expenses that go toward keeping employees safer during COVID-19, including personal protective equipment (PPE), drive-thru windows, sneeze guards and outside dining enclosures.
- Covered property damage costs: costs related to riots or public disturbances that occurred in 2020 that were not covered by insurance.
Paycheck Protection Program loans are not taxable
The original PPP loan program could ultimately reduce how much a business owner could write off on their business taxes. This has been updated in the new stimulus bill.
Congress first passed the PPP program, they said if the loan is forgiven, it doesn’t count as taxable income. The IRS would not let business expenses be deducted if paid for with PPP funds. Congress fixed this; PPP loans aren’t taxable and the IRS can’t limit your deductions as a result of the PPP loan.
Changes to the employee retention tax credit (ERTC)
Another massive change for companies in the new stimulus bill is that companies will be able to take advantage of both PPP loans and the employee retention tax credit (ERTC). It also greatly expands the ERTC in 2021, with the new ERTC credit offering a maximum of $14,000 per employee through June 30, 2021.
Originally, the CARES Act only allowed businesses to choose PPP or ERTC. If a business used and exhausted a PPP loan early in 2020, they could then use the ERTC to help them with their 2020 taxes.
EIDL grants will reopen
Notably, the new law sets aside $20 billion in order to reopen the $10,000 Economic Injury Disaster Loan (EIDL) grant program. This means more small businesses could apply for an EIDL grant to help them through this challenging time.
“The $10,000 grants do not need to be repaid if businesses have experienced a more than 30% reduction in revenue in an eight-week period or operating in a low-income area.
The new law revises the rules around EIDL grants so businesses can receive a full $10,000 EIDL grant and a PPP loan without the PPP loan forgiveness being reduced.
A new grant program for live venues
The new stimulus bill also sets aside $15 billion in grants specifically for live venues that have been impacted by the pandemic. This includes concert venues, movie theaters, museums and more.
Venues that can demonstrate a significant reduction in revenue as a result of the pandemic can receive a grant for up to $10 million to help you pay for costs that a PPP loan would normally pay for. If you take one of these grants, you can’t also get a PPP loan.
For more information on Small Business loan Resources visit the SBA website here
For information on how to get your PPP loan forgiven please see US Chamber Site here