Hi There!
Congress passed a new, highly anticipated second stimulus package last night that includes a second round of PPP loan funding (PPP2) as well as clarifications and updates on the first round (PPP1). Here is a summary:
PPP Loan Program (PPP1)
The loan itself remains excludable from income. However, in addition, the expenses used to compute the forgiveness amount are now fully deductible and are includable in operating expenses. This reverses the IRS announcement two weeks ago and is great news for business.
Loans of $150k or less will have another avenue for forgiveness using a newly-created, simplified application. Details of the new form are still emerging, but it’s worth noting that there are now four choices of forms to use when applying for forgiveness. [We can assist in choosing the right form if your lending institution is unable to do so.] PLEASE NOTE: Even though the process will be further simplified, the SBA retains the right to audit every business that received a PPP loan for up to 10 years after the loan date. This includes loans under $150k, so be diligent and keep all related records and computations.
PPP Loan Program (PPP2)
A new PPP program (PPP2) has been established, including specific eligibility requirements. Businesses are eligible if they have under 300 employees and can demonstrate a 25% decline in gross receipts from any quarter in 2020 against the corresponding quarter in 2019. Hotels and restaurants will be eligible for a greater amount than other businesses; 3.5x employee salaries as opposed to the 2.5x.
All businesses will have more flexibility on how they spend the money, including using funds for certain supplier and operating costs. Similar to PPP1, the streamlined $150k or less forgiveness process noted above carries over to PPP2, as well as the deductibility of all expenses. More details on all elements of this new loan program are expected within weeks.
Stimulus Checks
There is a second round of stimulus checks, although smaller this time. These direct payments include $600 per individual earning $75,000 a year or less in adjusted gross income. Couples who make $150,000 or less in total would be eligible for $1,200 in direct payments. Individuals and couples with children who qualify for the stimulus checks would also receive an additional $600 per child. Payments will be incrementally reduced for people who make more in annual income, much like they were earlier this year.
Unemployment Insurance (UI)
The plan includes an additional $300 in weekly federal UI payments through March 14, 2021.This supplemental payment is set to bolster the weekly payment that recipients would get from their state unemployment programs, much like a prior provision did in the CARES Act. The bill would also extend the pandemic unemployment insurance programs that are expiring at the end of December.
Rental Assistance and Eviction Moratorium
$25 billion in rental assistance is included as well as the establishment of a federal eviction moratorium to help renters and landlords. We have no details on this program yet.
Business Meals Deduction
Business meals are now 100% deductible for the next two years. Entertainment is still not deductible at all.
Connecticut Paid Leave Act
Just to reiterate from yesterday's email, every business that has one or more employees needs to register for this. Go to www.ctpaidleave.org for all the details.
**These are the basics. We now have more details than a couple days ago, but still not the details needed to know what to do, where to go and when to do it. As soon as we know, you will know.**
Thank you and be well!
Rich Pavano, CPA
203.933.1679
