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As you may already know, Congress revived the PPP loan program in the Covid Relief Bill signed into law on December 27, as well as additional changes to existing pandemic relief provisions. Here is an overview:

Second Draw PPP (“PPP2”) Loans

• Businesses that received a First Draw PPP (“PPP1”) loan may apply for a PPP2 loan if their PPP1 loan has been or will be forgiven, has less than 300 employees, and had a reduction in revenue of at least 25% in any 2020 quarter compared to the same quarter in 2019.
• The amount of the PPP2 loan is 2.5 months of payroll based on average monthly payroll in 2019, 2020, or any trailing 12-month period.
• Restaurants and Hotels (any business with a NAICS code starting with “72”) may use 3.5 months of payroll.
• Sole proprietor farmers may use gross income instead of net income to determine their compensation eligible for a PPP loan, but must also meet the revenue reduction criteria.
• Deadline to apply is March 31, 2021.

PPP1 Loans

• Businesses that did not originally apply for a PPP1 loan may still apply based on 2019 or 2020 payroll costs, and do not need to meet the revenue reduction eligibility criteria required for a PPP2 loan.
• Businesses that returned all or part of their PPP1 loan or didn’t accept the entire loan amount they were eligible for may request an increase in their loan amount if their orginal loan has not already be forgiven.
• Sole proprietor farmers that used net income to determine the amount of their PPP1 loan, may request an increase in their loam amount if using gross income would result in a larger loan and their loan has not already been forgiven.
• Sole proprietor farmers that showed a net loss in 2019 and were not originally eligible for a PPP1 loan may now apply for a PPP1 loan using their 2019 or 2020 gross income.
• Deadline to apply is March 31, 2021.

Employer Retention Credit

• This credit may now be claimed in addition to receiving a PPP loan.
• Credit of up to $5,000/employee/year possible for 2020 if a business had at least a 50% reduction in gross receipts in any 2020 quarter compared to the same quarter in 2019.
• Credit of up to $7,000/employee/quarter possible for 2021 if a business had at least a 20% reduction in gross receipts in either the first or second quarter of 2021 compared to the same quarter in 2019.

Other Provisions

• PPP1 and PPP2 loan proceeds are not taxable and the expenses used to allow forgiveness are deductible, making the loans completely tax-free.
• Economic Injury Disaster Loan (EIDL) advance grants are not taxable.
• EIDL grants no longer reduce the maximum amount of a PPP1 loan. Businesses should contact their PPP lender if they also received an EIDL grant to see if an increase in their PPP1 loan is possible.
• Additional $300/week of federal unemployment available for those receiving unemployment benefits December 26, 2020 through March 14, 2021.
• Eleven week extension of PUA (unemployment benefits for self-employed individuals and part-time workers) and PEUC (additional benefits for individuals whose regular unemployment benefits have expired).

The SBA has released application forms for PPP2 loans, but not all lenders are allowed to submit applications to the SBA at this time. Contact your lender for when they will be ready to accept PPP2 loan applications, or if you think you are eligible for an increase in your PPP1 loan.

Please contact us if you have any questions related to these items or any other provisions in the Covid Relief Bill.

Van Bruggen & Vande Vegte, PC