On December 21, 2020 the House and the Senate passed a $900 billion pandemic relief package. The bill combines coronavirus-fighting funds with financial relief for individuals and businesses and was signed into law by President Donald Trump over the weekend.
Key bill provisions include:
- Allocation of an additional $325 billion in aid for small businesses including a new round of Payroll Protection Program (PPP) funding for businesses enduring pandemic-induced economic hardships.
- Economic impact payments of $600 for individuals making up to $75,000 per year and $1,200 for married couples making up to $150,000 per year, as well as a $600 payment for each child dependent.
- A $300 per week supplement for workers receiving unemployment benefits from Dec. 26 until March 14, 2021. This bill also extends the Pandemic Unemployment Assistance (PUA) program and the Pandemic Emergency Unemployment Compensation (PEUC) program.
- An extension of the national eviction moratorium through January 31, 2021, as well as $25 billion in emergency rental aid.
- Extension of the employee retention tax credit, several expiring tax provisions and temporarily allows a 100% business expense deduction for meals provided by a restaurant (rather than the current 50%) incurred after December 31, 2020 and expires at the end of 2022.
PPP 2 Eligibility and Loan terms
The new package provides additional funding for those businesses that did not receive PPP money in the first round. In addition, it allows businesses a second chance at PPP money if they have fewer than 300 employees and can show a 25% gross revenue decline in any 2020 quarter compared with the same quarter in 2019.
Please make note that the bill allows borrowers that returned all or part of a previous PPP loan to reapply for the maximum amount available to them.
PPP loans are capped at 2.5 times the average monthly payroll costs in the year prior to the loan or the calendar year, with a maximum loan amount of $2 million. Hotel and food services businesses (NAICS code 72) are eligible for up to 3.5 times their average monthly payroll costs, again cannot exceed the $2 million maximum.
The covered period for new loans runs through March 31, 2021
To be eligible for full loan forgiveness, PPP borrowers will have to spend no less than 60% of the funds on payroll over a covered period of either eight or 24 weeks.
Costs eligible for loan forgiveness include payroll, rent, covered mortgage interest, and utilities. The following additional categories have been added as potentially forgivable:
- Covered Operations Expenditures
- Covered Property Damage
- Covered Supplier Costs
- Covered Worker Protection Equipment
Tax deductibility for PPP expenses
The new legislation also provides that business expenses paid for with the PPP loan proceeds will be considered tax deductible. This provision officially reverses multiple IRS revenue rulings made earlier in the year denying the tax deductibility of these expenses.
As with most topics related to COVID-19, changes are being made rapidly. Please note that this information is current as of the date of publication. We will continue to provide additional in-depth updates around this matter.
To learn more about PPP loan eligibility, application/forgiveness or tax credits , please CONTACT US or connect with your R+R advisor to discuss your organization’s questions, concerns, and priorities.
About Reynolds + Rowella
Reynolds + Rowella is a regional accounting and consulting firm known for a team approach to financial problem solving. As Certified Public Accountants, our partners foster a personal touch with our clients. As members of DFK International/USA, an association of accountants and advisors, our professional network is international, yet many of our clients have known us for years through the local communities we serve.
Our mission is to operate as a financial services firm of outstanding quality. Our efforts are directed at serving our clients in the most efficient and responsive manner possible, delivering services that exceed the expectations of those we serve. The firm has offices at 90 Grove St., Ridgefield, Conn., and 51 Locust Ave., New Canaan, Conn. For more information, please contact Elizabeth Bresnan at 203.438.0161 or email.