Additional Updates on the New Stimulus Bill
The US Chamber has just released some insight into the new 5,593 page Consolidated Appropriations Act 2021 (download the bill here). We will continue to update you as we learn more.
Some Highlights:
Paycheck Protection Program - Will Reopen through March 31, 2021
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First-time applications for PPP - are open to businesses harmed by the pandemic and has expanded for businesses up to 300 employees
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Previous recipients of PPP - can apply for a Second Draw for PPP if gross receipts in any quarter in 2020 are impacted 25% or greater over the previous year corresponding quarter. Previous PPP must be exhausted.
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Maximum Draw for PPP is $2 million whether this is your first or second grant
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Grant request is average monthly payroll x 2.5 (unless you are in the accommodation or food service as defined by NAICS)
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Taxation on 2020 PPP grants - this ruling has been overturned and PPP grant income will not be taxed. Expenses paid for by PPP funds are now deductible. This applies to PPP grants that are forgivable.
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Restaurants, Hotels, Accommodation - PPP loan can be 3.5 times your average monthly payroll (other industries are the same as before using a calculation of 2.5 times monthly payroll cost up to $10 million, whichever is lower)
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Eligible expenses on 2020 and new PPP grants now include all previous uses but also extends to supplier goods providing they are necessary to operate your business and with the caveat that they must be ordered prior to receiving the loan. The exception is restaurants purchasing perishable items. This eligible expense does not include purchasing inventory.
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PPP can be used for retrofitting expenses.
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Loan forgiveness still has the 60/40 rule - 60% or more of the PPP money has to go toward payroll costs to be forgiven.
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To maximize loan forgiveness, the period of expenses begins on the date the loan originates and continues for 8 to 24 weeks.
- You cannot use PPP for dept forgiveness, especially if you have closed your business.
- Applications will be available once the SBA and Treasury update the application.
- There are still limitations that you do not reduce staff but safe harbors regarding staff reductions still apply.
- It is unclear if your previous assistance (PPP or EIDL) should be included in your gross receipts when comparing quarters for qualification. We will update when we know more.
- You can now combine Employee Retention Tax Credit with PPP as long as you do not use the funds for the same payroll expense time period.
EIDL Advance ($10,000 Grant) - $20 Billion in the Program
- EIDL Advance (grants up to $10,000) will reopen.
- Those that applied and received less than the full $10,000, are allowed to reapply to get the difference between what was received and the full $10,000.
- 2020 EIDL Advance (grants) no longer need to be deducted from PPP grants.
Live Venue Grants - $15 Billion Available
- Live venue operators - theaters, movie houses, concert halls, talent representatives, and more) with significant reduction in gross receipts can apply for grants up to $10 million or 45% of gross receipts.
- You cannot apply for both PPP and Live Venue Grants.
- Bars that utilize live talent may qualify if you can prove that the principle source of revenue is ticket sales (compared to food and drink revenue).
Employee Retention Tax Credit
- The Employee Retention Credit under the CARES Act encourages businesses to keep employees on their payroll. The refundable tax credit is now 70% of up to $10,000 in wages paid by an eligible employer whose business has been financially impacted by COVID-19.
- The value could be up to $14,000 per employee for the full time frame.
- You can now combine Employee Retention Tax Credit with PPP as long as you do not use the funds for the same payroll expense time period.
Unemployment Compensation
- The new stimulus bill extends two CARES Act programs that support the self-employed, freelance, gig workers and long-term unemployed by 11 weeks.
- It also provides an additional $300/week federal enhancement to state-based unemployment benefits
- New benefits begin December 26
Extension of Spending State CARES Funds
- State money from CARES funding are now extended until December 2021
Stimulus Checks for Individuals
- $600 for individuals earning up to $75,000 and couples earning $150,000
- Taxpayers will also receive an additional $600 for each child under age 17
More details are coming out and we will be sure to update you as we get them.
