The Coronavirus Response and Relief Supplemental Appropriations Act (CRRSA) was enacted on December 27, 2020. The new law, the federal government’s follow-up to the CARES Act, provides for renewing stimulus payments to individuals and businesses and includes important provisions relating to the Paycheque Protection Program (PPP). This customer alert gives an overview of these provisions.
New PPP loans
- CRRSA is allocating around $ 285 billion for a new round of PPP loans. Both first-time borrowers and past PPP borrowers are eligible for this funding, regardless of whether previous PPP loans have been repaid or canceled.
- Loans are available to businesses with 300 or fewer employees, and the maximum loan amount is now $ 2 million.
- The borrower must demonstrate that they have used or will use the full amount of their first PPP loan and that they experienced a 25% drop in their gross income in a quarter of 2020 compared to the same quarter in 2019.
- Loans will be available until March 31, 2021, and borrowers will only be able to get one second drawdown.
- Loans will be based on 2.5 times the sum of the average monthly wage costs, but restaurants and hotels can receive loans up to 3.5 times the average monthly wage costs.
- There are several new categories of borrowers who can get PPP loans, such as professional associations and chambers of commerce, provided they do not receive more than 15% of their income from lobbying and lobbying activities do not. represent no more than 15% of their activities. .
New expenses are eligible for loan cancellation
- For new and old PPP loans, 60% of the loan must be used for salary costs in order to qualify for a discount.
- New eligible expenses include expenses for worker protection and modification of facilities such as personal protective equipment, software or cloud computing services, costs related to material damage due to public unrest in 2020 which do not were not covered by insurance and payments to essential suppliers.
Tax treatment of PPP loans
- CRRSA specifies that gross income for federal tax purposes does not include any amount that would otherwise result from the cancellation of a P3 loan. The new law also overrides previous IRS rulings and clarifies that expenses paid with PPP loans, such as payroll, rent, and utilities, can be deducted as business expenses, even though the loans are canceled.
- Businesses can also get the employee retention tax credit for 2020 and 2021 provided the PPP loan and tax credit do not cover the same payroll costs.
Simplified loan remittance
- CRRSA expands the streamlined PPP loan cancellation process, increasing eligibility from loans under $ 50,000 to loans under $ 150,000. Borrowers will be required to provide a one-page attestation, the form of which will be available later this month.
- This will affect the overwhelming majority of loans made under the P3 program, as 87.4% of loans issued nationally (over 135,000 in New Jersey alone) were less than $ 150,000.
CRRSA is requiring the Small Business Administration (SBA) to publish draft rules and related forms in the coming weeks. We will continue to monitor regulations and guidance documents and provide updates as they arise.