January 4, 2021 – Details of 2nd stimulus bill

Happy New Year!  We hope everyone had a safe and healthy holiday season. 

As you may know, last week President Trump signed into law a second COVID stimulus bill to provide additional support for individuals and businesses impacted by the pandemic.  Outlined below are highlights of the bill that may impact your business.

Payroll Protection Program

  • Program extended through March 31.
  • Clarifies that businesses expenses paid for with forgiven PPP funds remain deductible.
  • Loan forgiveness process is simplified for borrowers with PPP loans of $150,000 or less. 
  • Forgivable expenses are expanded to include supplier costs and investments in facility modifications and personal protective equipment to operate safely.
  • Enhances borrower flexibility by allowing borrowers to select their loan forgiveness covered period between 8 weeks and 24 weeks.
  • Allows forgiveness for PPP loans and EIDL emergency advance grants, preventing small business owners being left with unexpected PPP loan balances.
  • Second round of PPP for businesses with 300 or fewer employees and a 25% revenue loss.
    • Maximum loan of 2.5X average monthly payroll up to $2 million.
    • Accommodations and Food Services (NAICS codes beginning with 72) may receive a loan up to 3.5X average monthly payroll.
  • Set asides
    • $15 billion for PPP loans (initial and second draw) issued by community financial institutions, including community development financial institutions (CDFIs) and minority depository intuitions (MDIs);
    • $15 billion for PPP loans (initial and second draw) issued by certain small depository institutions.
    • $35 billion for first-time borrowers, $15 billion of which is for borrowers with 10 or fewer employees, or loans less than $250,000 in low-income areas;
    • $25 billion for second draw PPP loans for borrowers with 10 or fewer employees, or loans less than $250,000 in low-income areas.

Economic Injury Disaster Loans: Additional $20 billion for the SBA’s EIDL advance program

Grants for Shuttered Venue Operators

The program will be administered by the Small Business Administration. Once the necessary infrastructure is in place, the SBA will make grants to;

  • live venue operators or promoters,
  • theatrical producers,
  • live performing arts organization operators,
  • museum operators,
  • motion picture theatre operators, or
  • talent representatives

To be eligible, the entity must have been fully operational on February 29, 2020, and must demonstrate a 25% reduction in gross revenue. During the initial 14-day period of implementation of the program, grants shall only be awarded to eligible entities that have faced 90% or greater revenue loss. In the next 14-day period, grants shall only be awarded to eligible entities that have faced 70% or greater revenue loss. After these two periods, grants shall be awarded to all other eligible entities.

The SBA may make an initial grant of 45% of the entity’s gross earned revenue during 2019. Entities may be eligible for a supplemental grant that is equal to 50% of the initial grant, with on overall cap on both grants combined of $10 million.

The grant money must be spent on specific expenses:

  • payroll costs,
  • rent,
  • utilities,
  • mortgage,
  • debt payments,
  • worker protection expenses,
  • payments made to independent contractors, and
  • other ordinary and necessary business expenses (such as maintenance expenses).

Employee Retention Tax Credit extended through June 30, 2021

  • Refundable and advanceable payroll tax credit to cover a portion of wages paid to employees to qualify a business must have faced a full or partial suspension of business due to a COVID-19 government order or suffered a significant decline in gross receipts
  • The credit rate has been increased from 50% to 70% of qualified wages, and the limit on per-employee creditable wages is increased from $10,000 per year to $10,000 per quarter.
  • Definition of “significant decline in gross receipts” has been reduced from 50% to 20%.
  • To further assist with liquidity, businesses with 500 or fewer employees may advance the credit at any point during the quarter based on wages paid in the same quarter in a previous year.
  • Provides that employers who receive PPP loans may still qualify for the ERTC with respect to wages that are not paid for with forgiven PPP proceeds.

Paid Leave Tax Credits extended through March 31, 2021

  • Businesses with fewer than 500 employees may receive a refundable tax credit in order to provide employees with paid sick and family and medical leave for reasons related to COVID-19.
  • Workers may receive up to 80 hours of paid sick leave for their own health needs or to care for others and up to an additional ten weeks of paid family leave to care for a child whose school or place of care is closed or child care provider is closed or unavailable due to COVID-19 precautions.