With the new $900 billion COVID-19 relief package signed into law at the end of December, businesses are beginning to look deeper into the aid and resources available to them. Jade West, chief government relations officer for the National Association of Wholesaler-Distributors, has developed a summary of key provisions in the bill, although the implementation of some pieces of the package will depend on the Small Business Administration regulations that are expected to be issued in early January. In the meantime, the following information will help FEDA members prepare their applications for aid and better understand the restrictions and requirements of the new relief bill.
- Extension of the Paycheck Protection Program (PPP) with full deductibility of covered expenses
- Expansion of PPP allowable expenses (see detailed list at end of document)
- Repeal of the law requiring an Economic Injury Disaster Loan (EIDL) grant to be deducted from the forgivable amount of a PPP loan
- Removal of the barrier between PPP and the Employee Retention Tax Credit (ERTC), now allowing a business to obtain a PPP loan and take the ERTC as long as the funds aren’t used for to pay for the same salaries/expenses
- Extension of ERTC to second quarter of 2021, and an increase in the credit (more below)
- Extension of the tax credit for providing emergency paid sick or Family Medical leave but NOT the mandate that leave be provided
PPP Information and Eligibility Requirements
- $284 billion in additional funding for the PPP
- The business must have 300 or fewer employees
- The business must have experienced at least a 25 percent reduction in revenues in at least one quarter in 2020 when compared to the same quarter in 2019
- The maximum amount available for a second-draw PPP loan is 2.5 times the business’ monthly payroll costs up to $2 million
- Borrowers are required to spend at least 60 percent of funds on payroll to qualify for full forgiveness
- Full deductibility of allowed expenses was restored
- Salaries are capped at $100,000 for computing loan amounts
- Payroll includes Group life, disability, vision and dental insurance
- Payroll does NOT include 1099 workers or contractors, just W2 employees
- The amount of an EIDL advance no longer has to be deducted from loan forgiveness amount
- PPP borrowers are now eligible for the ERTC provided the funds aren’t used to cover the same costs/payroll
Newly Covered Expenses for PPP Borrowers
- Covered operations expenditures: These are payments for any business software or cloud computing service that facilitates business operations, product or service delivery, the processing of 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: These are costs related to property damage and vandalism or looting due to public disturbances that occurred during 2020 that were not covered by insurance or other compensation.
- Covered supplier costs: These expenditures were made to a supplier and were a) essential to the operations of the entity at the time the expenditures was made and b) made pursuant to a contract or purchase order in effect any time before the covered period or, for perishable goods, any time during the covered period.
- Increases the credit rate from 50 percent to 70 percent of qualified wages
- Expands eligibility for the credit by reducing the required year-over-year gross receipts decline from 50 to 20 percent and provides a safe harbor allowing employees to use prior quarter gross receipts to determine eligibility
- Increases limit on per-employee wages from $10K for the year to $10k per quarter
- Increases 100-employee delineation for determining qualified wage base to employers with 500 or fewer employees
- Retroactive to effective date included in Section 2301 of the CARES Act
- Clarifies determination of gross receipts for certain tax-exempt orgs
- Clarifies that group health plan expenses can be considered qualified wages even when no other wages are paid to the employee