Below is a summary of the stimulus bill as it passed the House and Senate on December 21, 2020.
Changes to current PPP:
- Expenses paid with PPP funds can now be deducted on your 2020 taxes. This is a complete reversal of the IRS guidance issued last month. It's welcome news for most.
- There is a streamlined forgiveness process for loans of $150,000 or less. You will still need to provide and maintain a ton of documents for forgiveness, and in case of audit by the SBA. You are signing, under significant threat of penalty, that you've been able to retain employees, and how much you spent on payroll. In theory, the SBA has 24 days to release more information on this. Expect another trainwreck.
- Your PPP forgiveness is not reduced by your EIDL advance. This is a $10,000 benefit for many (and less than $10k for many others. I get it).
- Businesses can now claim the Employee Retention Credit and get PPP forgiveness. This is a big win for companies that have continued to operate. The ERC hasn't been covered much, because the PPP was more beneficial for most businesses.
2nd round of PPP
- Must have fewer than 300 employees, and show a revenue decline of 25% or more for any quarter in 2020 compared to the same quarter in 2019. Your bookkeeping should be air tight on this.
- You've used (or will use) all of your first PPP loan
For new borrowers: 500 or fewer employees (with some exceptions), or be an accommodation and food services business with fewer than 300 employees (i.e., your NAICS code starts with 72).
- More expenses can now be included, beyond the original rent, utilities, and payroll. This now includes "facility modification expenditures" to comply with COVID-19 guidelines. It also includes payments to essential suppliers, and some software expenses.
- You must still spend 60% on payroll.
- 8 week or 24 week forgiveness
Employee Retention Credit
- This act changes the CARES Act, which prevented employers from claiming the ERC and getting PPP forgiveness.
- If company can show they were shut down or had revenue reduction, companies can earn the credit.
- The credit amount increased from 50% to 70%
- Revenue reduction of 20% in a quarter, compared to 50% in the prior version
- Applies to businesses with 500 or fewer employees (compared to 100 or fewer)
- Extended through 6/30/21
- $600 per adult and $600 per child. Expect this to look like the checks/payments that went out in the spring. There is an income phaseout again.
- An extra $300 per week in unemployment benefits, extended for 11 weeks. This is not retroactive. Jobless claims have been rising recently, but not everyone will get this extra money. You will also recall the struggles that businesses faced in getting people to come back to work with the robust unemployment payments.
There is a lot of confusion among people who don't follow the political process like this. The bill is huge, but it includes a lot of standard expenditures and items that usually pass without much (enough) publicity. The stimulus bill also includes the items that will keep the government funded through next September. This explains why the bill is so long, and why you see certain expenses in there.
We will continue to monitor this. This will not become the law until the President signs it (or congress over-rides a veto). Stay tuned.