Johnson Price Sprinkle PA has provided guidance on how the Consolidated Appropriations Act, signed into law on December 27th, would impact PPP and EIDL funding. The CAA includes a variety of tax provisions, extensions and modifications to both the Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL), which are administered by the Small Business Administration (SBA). While more guidance is needed from the Treasury and IRS, which could alter current interpretations of the CAA, this article provides additional information and understanding on the CAA’s effect on PPP and EIDL funds.
For PPP1 loans not forgiven by December 27, 2020, the CAA enactment date, the rules have been modified to make full forgiveness simpler and more likely. In addition, the CAA permits borrowers to borrow more under the PPP1 loan if they either (a) repaid some of the funds or (b) did not accept the maximum funds offered in the loan application.
The CAA also made funds available for additional EIDLs to help businesses dealing with the effects of COVID-19. Under the CARES Act, the receipt of an EIDL grant serves to reduce the amount of the PPP loan forgiveness, resulting in that grant amount having to be repaid. The CAA eliminated this provision. It is unclear if PPP funds already repaid under the CARES Act provision will be returned to borrowers.
New EIDL grant applicants must meet the following criteria:
- Must be located in a low-income community (guidance is needed).
- Must have suffered an economic loss of greater than 30%.
- Must employ 300 or fewer individuals.
- Must have been in operation by January 31, 2020; AND
- Must have been directly affected by COVID-19.
The CAA also provides that taxable income does not include EIDL grants or certain loan repayment assistance. This includes instances in which the SBA made six months of “payments” of principal and interest on existing SBA loans on behalf of borrowers, a provision enacted as part of the CARES Act.
In addition, the CAA gives the Treasury Department authority to waive information filing requirements (e.g., Forms 1099) for any of these amounts excluded from taxable income. Current guidance requires banks and other lenders to report such amounts on Forms 1099, which could lead to confusion as to the correct tax reporting.
