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Consolidated Appropriations Act

As you may have heard late on Monday, December 21 Congress released the official text language for the 5,593 page Consolidated Appropriations Act, 2021 which was promptly passed by both the House and the Senate. This bill now goes to the President for signature.

The Act provides pandemic relief and funds the government through the end of the fiscal year. Please find some highlights of the Act here:

  • Deductibility Allowed for Expenses Paid for Using PPP Funds and EIDL Grants
    • This overturns the April 2020 IRS regulation that essentially made the PPP loan taxable
       
  • EIDL Loan and PPP Recipients
    • PPP borrowers no longer have to deduct their EIDL Advance from forgiveness amount
       
  • Simplified PPP Forgiveness for Borrowers with Loans Under $150,000
    • SBA has 24 days from enactment to publish a one-page forgiveness form for loans under $150,000
    • Borrower may elect a covered period for any period between 8 and 24 weeks from date of loan origination
    • Form will include:
      • Number of employees retained because of the loan
      • Estimated amount of loan spent on payroll costs
      • Total loan value
      • No additional documentation required, unless to substantiate revenue loss for second draw PPP loan
    • Eligible expenses are now also expanded to include:
      • covered operations (business software or cloud computing service that facilitates business operations, product or service delivery, the processing, payment, or tracking of payroll expenses, human resources, sales and billing functions, or accounting or tracking of supplies, inventory, records and expenses)
      • covered property damage (costs related to property damage and vandalism or looting due to public disturbances that occurred during 2020 that was not covered by insurance or other compensation)
      • covered supplier costs
      • covered worker protection expenditures
         
  • Second Draw Paycheck Protection Program Loan
    • Businesses with 300 or fewer employees that can show a 25% reduction in revenue in any quarter of 2020 vs. the same quarter of 2019 can draw a second loan.
    • Loans are capped at $2 million this time around
    • The calculation is still 2.5 times the average monthly payroll
      • EXCEPTION for hotels, restaurants and other hospitality businesses (NAICS code 72) – 3.5 times monthly payroll
    • 60% of funds still have to be spent on payroll over an 8 to 24 week period
    • SBA has 10 days from enactment to establish regulations
       
  • Stimulus payment
    • $600 per person
      •                                                                  
      • Reduction by 5% of 2019 AGI as exceeds $150,000 joint; $112,500 HOH; $75,000 single
         
  • Deferred Payroll Tax Extension
    • From December 31 to April 30, 2021

 

We will continue to closely monitor SBA activity and will send out more updates as they release more information on the second draw PPP Loans and the one page forgiveness application for loans less than $150,000. The Act does not address application simplification for loans over $150,000 and we will again be monitoring the SBA for guidance on forgiveness for those loans. As always, if you have any questions please feel free to reach out.