More PPP Money for Small Businesses under the CARES Act

On December 20, 2020, Congress approved an additional $284 billion for the Paycheck Protection Program ("PPP") for small businesses.  [FN 1]. According to Marcum LLP, "eligible businesses are those with 300 or fewer employees (per location for NAICS codes starting with 72), that have exhausted their first PPP loan (or did not previously receive a PPP loan) and can show a 25% or greater decline in gross revenue in any quarter of 2020 as compared to the same quarter in 2019."  [FN 2].  

As with the first round of the PPP, loan amounts will again be based on 2.5 months of payroll costs. However, with this second round, business borrowers with NAICS codes starting with 72, such as hotels and restaurants, may receive up to 3.5 months of payroll costs. The maximum loan amount will be $2 million, and the 60%/40% allocation between payroll and non-payroll costs will be required for full forgiveness.  [FN 2].  

Congress clarified whether a business that received PPP funds in the first round could deduct rent and payroll expenses, for example, that it paid with PPP funds.  In fact, the expense-deductibility issue was one of the last issues to be resolved.  Treasury Secretary Steven Mnuchin argued that deductibility would amount to double-dipping because PPP loan forgiveness isn’t considered taxable income.  [FN 3].  In the end, however, according to the Wall Street Journal, lawmakers decided that businesses that received PPP loans would be able to take tax deductions for the expenses covered by forgiven loans, overcoming objections from Mr. Mnuchin.  [FN 4]

Finally, Wall Street Journal announced that "there will be a tax credit for struggling employers who keep workers on the payroll, and it would let recipients of certain tax credits qualify based on their 2019 incomes; in some cases, lower 2020 incomes could reduce their eligibility."  [FN 4]

Footnotes:

1. See https://www.forbes.com/sites/allbusiness/2020/12/21/new-relief-package-provides-new-ppp-funding-for-small-businesses/?sh=481ae3623092
2. See https://www.marcumllp.com/insights/covid-19-relief-consolidated-appropriations-act-2021-small-business-support?utm_campaign=Tax%20Flash&utm_medium=email&_hsmi=104176007&_hsenc=p2ANqtz-_-l5iRLybEMVBOgJ2i8oOwBSSE51rRR66xSdKdPRqgWBhiur2PyUzQhBBoA83AEFnWN91HX4JySlW2y3AEj3NHEDfRnLdQknfymtGMKX60hUwAJQg&utm_content=104176007&utm_source=hs_email
3. See https://thehill.com/policy/finance/531086-whats-in-the-900billion-coronavirus-relief-bill
4. See https://www.wsj.com/articles/what-is-in-the-900-billion-covid-19-aid-bill-11608557531

Smith Shapourian Mignano PC is available to answer any questions or concerns you may have regarding the PPP.

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