COVID-19 Stimulus Package Highlights

December 22, 2020

The following provisions are related to small businesses and access to Paycheck Protection Program (PPP) second draw loans. For additional information on obtaining PPP loans, view OIA’s webinar from March 2020 with Small Business Administration.

Additional expenses are now allowable and forgivable with PPP funds:

  • Covered worker protection expenditure. PPE and adaptive investments to help a loan recipient comply with federal health and safety guidelines or any equivalent state and local guidance related to COVID-19 during the period between March 1, 2020, and the end of the national emergency declaration.
  • Covered property damage costs. Costs related to property damage due to public disturbances that occurred during 2020 that are not covered by insurance.
  • Covered supplier costs. Expenditures to a supplier pursuant to a contract, purchase order, or order for goods in effect prior to taking out the loan that are essential to the recipient’s operations at the time at which the expenditure was made. Supplier costs of perishable goods can be made before or during the life of the loan.
  • Covered operations expenditures. Payment for any software, cloud computing, and other human resources and accounting needs.
  • These forgiven loans will not be counted as taxable income.

Specific Group Insurance Payments as Payroll costs:

  • Clarifies that other employer-provided group insurance benefits are included in payroll costs. This includes group, life, disability vision and dental insurance.
  • This provision applies to loans made before, on, or after 12/22/2020 (enactment date), including forgiveness of the loan.

PPP Second Draw Loans:

  • This “PPP second draw” loan will be for smaller and harder-hit business, with a maximum amount of $2 million.
  • To be eligible to receive a PPP loan, you must:
    • Have fewer than 300 employees
    • Have used (or will use) the full amount of your first PPP loan
    • Demonstrate at least a 25% reduction in gross receipts in the first, second, or 3rd quarter of 2020 relative to the same 2019 quarter.
  • Eligible entities must be a business, certain non-profit organizations, self-employed individuals, sole proprietors, independent contractors and small agricultural co-operatives
  • Loan terms:
    • Seasonal employers may calculate their maximum loan amount based on a 12-week period beginning February 15, 2019 through February 15, 2020
    • New entities may receive loans of up to 2.5x the sum of their average monthly payroll costs
    • Businesses with multiple locations that are eligible entitles under the initial PPP requirements may employ not more than 300 employees per physical location
    • Wavier of affiliation rules that applied during initial PP loans apply to a second loan
    • An eligible entity may only receive one PPP second draw loan
  • Loan forgiveness: borrowers of a PPP second draw loan would be eligible for loan forgiveness equal to the sum of their payroll costs, as well as covered mortgage, rent, and utility payments, covered operations expenditures, covered property damage costs, covered supplier costs, and covered worker protection expenditures inured during the covered period. The 60/40 cost allocation between payroll and non-payroll costs in order to receive full forgiveness will continue to apply.
  • Guidance to prioritize underserved communities: directs the SBA Administrator to issue guidance addressing barriers to access to capital for underserved communities no later than 10 days after enactment
  • Application of Exemption Based on Employee: extends existing safe harbors on restoring full time employees (FTE) and salaries and wages.
    • Specifically, applies the rule of reducing loan forgiveness for the borrower reducing the number of employees retained and reducing employees’ salaries in excess of 25 percent.

Increased Ability for PPP Borrowers to Request an Increase in Loan Amount due to Updated Regulations:

  • Requires SBA to release guidance to lenders withing 17 days of enactment that allows borrowers who returned all or part of their PPP loan to reapply for the maximum amount applicable so long that they have not received forgiveness
  • This section allows borrowers whose loan calculations have increased due to changes in interim final rules to work with lenders to modify their loan value regardless of whether the loan has been fully disbursed, or if Form 1502 has already been submitted

Eligibility of 501(c)(6) and Destination Marketing Organizations for Loans Under PPP:

  • Expands eligibility to receive a PPP loan to include the following organizations –
    • 501(c)(6) if:
      • The organization does not receive more than 15 percent of receipts from lobbying
      • The lobbying activities do not exceed $1 million during the most recent tax year that ended prior to February 15, 2020
      • The organization has fewer than 300 employees
      • Professional sports leagues or organizations with the purpose of promoting or participating in a political campaign or other political activities are not eligible under this section
    • Destination Marketing Operations if:
      • Sections 1-3 above, and
      • The destination marketing organization is registered as a 501(c) organization, a quasi-government entity, or a political subdivision of a state or local government

      Prohibition on use of Loan Proceeds for Lobbying Activities:

      • Proceeds of the covered loan may not be used for lobbying activities, as defined by the Lobbying Disclosure Act, lobbying expenditures related to state or local campaigns, and expenditures to influence the enactment of legislation, appropriations, or regulations

      Limitations on Eligibility:

      • Businesses or organizations that were not in operation on February 15, 2020 are not eligible for a second draw PPP loan
      • This was the case for initial PPP loan
      • Eligible entities that receive a grant under the Shuttered Venue Operator Grants will not be eligible for a PPP second draw loan

      Direct Appropriations:

      • $284.45 billion for PPP, including:
        • $35 billion for first-time borrowers
        • $25 billion for second draw PPP loans
        • $15 billion for PPP loans issued by community financial institutions
        • $15 billion for PPP loans issued by certain small depository institutions
      • $15 million for the Minority Business Development Centers program
      • $50 million for PPP auditing and fraud mitigation
      • $3.5 million for Debt Relief program
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