The U.S. Congress passed a $892 billion COVID-19 relief act December 21, 2020, the Consolidated Appropriations Act, 2021.  President Trump reluctantly signed the bill into law Sunday, December 27, 2020, demanding Congress increase stimulus payments from $600 to $2,000 per individual.  The House passed the  stimulus increase to $2,000 per individual.  The bill heads to the Senate today.  President Trump also asked Congress to reduce spending and look at voter fraud measures.  Key provision in the bill aimed at employers are below.

The bill provides for individuals and families:

  • $600 stimulus payment to individuals who earn up to $75,000 per year (UPDATE:  $2,000 stimulus per individual passed the House Monday.  The bill heads to the Senate Tuesday.)
  • $1,200 stimulus payments to couples who earn up to $150,000 per year
  • $600 stimulus payment per each dependent child

The bill extends and supplements unemployment benefits:

  • $300 supplement to weekly unemployment benefits December 26, 2020 to March 14, 2021
  • Extends Pandemic Unemployment Assistance (PUA) program, with expanded coverage to the self-employed, gig workers, and others in nontraditional employment.
  • Extends Pandemic Emergency Unemployment Compensation (PEUC) program, which provides additional weeks of federally funded unemployment benefits to individuals who exhaust their regular state benefits.

The bill provides Payroll Protection Program (PPP2) loans for businesses:

Previous recipients may apply for a second loan up to $2 million provided they:

  • Have 300 or fewer employees
  • Have exhausted or will exhaust the full amount of the previous PPP loan
  • Experienced 25% gross revenue decline in any quarter of 2020 compared with the same quarter in 2019
  • Borrowers who returned all or part of the previous PPP loan may reapply for the maximum amount available to them.

First-time borrowers are permitted from the following groups:

  • 501(c)(6) not-for-profit organizations such as chambers of commerce, visitors bureaus, and destination marketing organizations provided:
    • they have 300 or fewer employees
    • they do not receive more than 15% of receipts from lobbying
    • lobbying must not comprise more than 15% of the organization’s total activities, and cost less than $1 million during the previous tax year.
  • Businesses with 500 or fewer employees that are eligible for other SBA 7(a) loans
  • Sole proprietors, independent contractors, and eligible self-employed individuals
  • Not-for-profits, including churches
  • Hotels and restaurants (those with NAICS codes starting with 72) with fewer than 300 employees per physical location.

Cost eligible for PPP2 loan forgiveness include:

  • Payroll, rent, covered mortgage interest, and utilities, as covered in the first PPP loan
  • Covered worker protection and facility modification expenditures, including personal protective equipment, to comply with COVID-19 federal health and safety guidelines.
  • Expenditures to suppliers that are essential at the time of purchase to the recipient’s current operations.
  • Covered operating costs such as software and cloud computing services and accounting needs
  • For full loan forgiveness, borrowers must spend 60% or more of the funds on payroll over a covered period of 8 to 24 weeks, as in the first PPP loan.

Eligible PPP2 loan amounts:  

  • Up to 2.5 times their average monthly payroll costs in the year prior to the loan or the calendar year, as with the first PPP loan
  • Maximum loan amount has been reduced from $10 million in the first round, to $2 million
  • Hotels and restaurants (those with NAICS codes starting with 72) may receive up to 3.5 times their average monthly payroll cost, up to $2 million.

PPP2 loan application simplified and other provisions:

  • Loans of $150,000 or less have a more simplified, one-page forgiveness loan application:
    • Certifying the number of employees the borrower was able to retain because of the loan
    • Estimated total amount spent on payroll costs
    • Total amount of the loan
  • Repeals the provision that PPP borrowers must deduct any EIDL advance from the PPP forgiveness amount
  • Includes set-asides for first- and second-time PPP borrowers with 10 or fewer employees, PPP borrowers who were recently made eligible, and loans made by community lenders.
  • Small Business Administration (SBA) has 24 days

PPP2 tax implications:

  • Specifies that business expenses paid with forgiven PPP loans are tax-deductible
  • Applies to loans under the original and the subsequent PPP2 loans
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