Promulgated on December 27, the Consolidated Appropriations Act of 2021 offers a new round of support for small and medium-sized businesses. Below is a summary of the main provisions of the law, highlighting additional funding flows for businesses and the extension of FFCRA tax credits.
Paycheque Protection Program (PPP) Loans – New Lending Opportunities
The $ 900 billion stimulus package includes $ 284 billion for additional loans from the Paycheck Protection Program (P3), the goal of which is to preserve jobs with employers struggling due to the impacts and restrictions commercialization of COVID-19.
First-time PPP borrowers. If your business did not apply for a PPP loan during the first stimulus bill in March, the new stimulus package provides for a new round of funding for additional loans. The qualifications remain the same for the initial loans, which include:
- Businesses must have 500 or fewer employees.
- Qualifying sole proprietors, independent contractors and self-employed individuals can apply.
- Nonprofit organizations, including churches, are eligible.
- Accommodation and food services operations (those with North American Industry Classification System (NAICS) codes beginning with 72) with fewer than 300 employees per physical location may apply.
Non-profit organizations eligible for PPP loans. Section 501 (c) (6) non-profit organizations will now be eligible for PPP loans.
PPP loans – Second round of loans available
Second round of loans for companies that have already received PPP loans. If your business has previously applied for and received a PPP loan, you may be eligible for what is called a “second draw” PPP loan. The details currently known about these loans include:
- The loan limit is $ 2 million.
- Qualification will be based on the average monthly payroll in 2019 and using a multiplier of 2.5. This means that an additional 2.5 months of payroll can be covered by these “second draw” loans.
- Restaurants and food businesses will benefit from a special salary consideration: they can use a multiplier of 3.5 for their 2019 payroll, which means an additional 3.5 months payroll can be covered.
- Other qualifications include:
- A business must have 300 or fewer employees, which was cut to 500 or fewer employees under the first stimulus package.
- A business must have already used, or intend to use, its initial PPP loan financing.
- The proceeds of the PPP loan can be used over a period of 24 weeks.
- The proceeds of the PPP loan can be used for payroll, rent and mortgage expenses. In addition, the bill adds new eligible expenses, including:
- Operating Expenses ;
- Workplace protection costs for protecting employees from exposure to COVID-19; and
- Material damage covered.
- Companies must also be able to certify the following:
- A business must certify that it has suffered a loss of revenue of 25% or more. This is a surprisingly different requirement from the “economic uncertainty” requirement that accompanied the first round of PPP loans.
- This 25% reduction will be calculated by comparing Q1-Q3 2019 revenue for the company, and the company will need to demonstrate that it has experienced a loss of revenue of 25% or more during quarter of 2020, compared to this same quarter in 2019.
- Second forgiveness draw. Second Draw Loans will be forgivable if 60% of loan expenses are used for salary costs.
- Simplified pardon request. For borrowers applying for PPP loans of $ 150,000 or less, there will be a simplified remission request.
PPP Loans – Advantages With Existing Loans
The stimulus package offers benefits to existing PPP loan borrowers. These benefits include:
- Loans will not be taxable upon surrender. Initial PPP loans and second draw PPP loans will not be taxable if canceled. The stimulus package replaces IRS guidelines and provides that business expenses paid with canceled PPP loans are tax deductible.
- More specifically, the bill specifies that “no deduction will be refused, no tax attribute will be reduced and no base increase will be refused, due to the exclusion of gross income provided for by [the preceding paragraph stating that forgiven PPP loans do not count as income]. “
Additional business assistance
The recovery plan also provides for the following support for businesses:
- Economic Disaster Loan Grants (EIDL). The bill authorizes $ 20 billion for EIDL grants to businesses in low-income communities.
- Concert halls, independent cinemas and cultural institutions – New funding opportunities offered. Performance venues, selected theaters and cultural institutions will have access to funding of $ 15 billion. This funding will be administered by the Small Business Administration (SBA).
Tax credits for employers who offer paid sick leave and paid family medical leave under the Families First Coronavirus Response Act (FFCRA)
Mandatory leave under the FFCRA has not been extended, which originally required some employers to pay sick leave or family leave wages to employees who are unable to work or telework due to certain circumstances related to COVID-19.
However, the stimulus package extends, until March 31, 2021, tax credits to employers who voluntarily provide both paid sick leave and paid family and medical leave under the FFCRA. The tax credit can only be used for holidays until March 31, 2021.
As originally detailed in Carlton Fields’ theLife Tax article, “COVID-19: CARES law and FFCRA tax provisions», The payroll tax credit for sick leave and family leave provides that any employer who, under the FFCRA, pays the following may be entitled to a tax credit:
- Sick leave for an employee who is unable to work (including telecommuting) due to coronavirus quarantine or self-quarantine or who exhibits symptoms of coronavirus and seeks a medical diagnosis, up to 10 days (up to 80 hours) at his regular rate of pay (or minimum wage, whichever is higher) up to $ 511 per day, but not more than $ 5,110 in total;
- Sick leave for an employee who is unable to work to care for someone with coronavirus, or to care for a child because the child’s school or place of care is closed, or the paid child care provider not available due to coronavirus, two weeks (up to 80 hours) at two-thirds of employee’s regular rate of pay (or minimum wage, whichever is higher) up to $ 200 per day, but not more than $ 2,000 in total; or
- Family and medical leave to an employee who has been employed for at least 30 days and who is unable to work due to a need to care for a child whose school or place of care is closed or whose childcare provider unavailable due to coronavirus, up to 10 weeks at two-thirds of employee’s regular salary, up to $ 200 per day and $ 10,000 in total.
An employer who meets the above criteria is entitled to a credit for the full amount of sick leave and family leave required, plus health plan expenses and the employer’s share of Medicare tax on the leave. , for the period from April 1, 2020, until March 31, 2021. The refundable credit is applied against certain employment taxes on salaries paid to all employees.
As it is certain that others will emerge on the stimulus plan and access to financing flows and Carlton Fields Coronavirus Resource Center will continue to serve as a resource for ongoing updates.