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Q+A

Yes. On December 27, 2020 President Trump signed the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (the “Act”) which was passed by Congress on December 21.

The Act allows initial and second draw PPP loans to be made through March 31, 2021, subject to availability of funds.

The actual funding will likely start the week of January 18th, this is subject to change.

My office is directly working with PPP lenders.

Second Draw PPP Loans, how do I know if I am eligible?

Businesses must prove 25% or greater reduction in gross receipts in any calendar quarter (Q1=Jan-Mar, Q2= Apr-Jun, Q3=Jul-Sep, Q4=Oct-Dec) in 2020 compared to the same calendar quarter in 2019. Employs not more than 300 employees. Received an initial PPP Loan and used the full amount of its initial PPP loan.

There are certain borrowers excluded from the Second Round: those engaged in lobbying or political activities; those owned by or a director that is a resident of China or with significant operations in China; and those who are recipients of a shuttered venue operator grant under Section 24 of the Act.

Lenders are accepting PPP loan applications under $150,000 without proof of 25% reduction and proof will be required for loan forgiveness.

Your first loan is not required to be forgiven to apply for second round funding.

If you need help determining your eligibility or applying for the second round, please contact my office.

Second Draw PPP Loans, what is the maximum amounts?

The maximum amount of a Second Draw is 2.5 times the average monthly payroll costs or 3.5 times for food service businesses.

You can reach out to us for help determining your specific eligibility amount.

Is the PPP loan taxable?

Originally, they said it would not be taxable, but later on they came back and said the loan isn’t taxable, but you cannot deduct any of the expenses you spent the PPP money on. So essentially, it would be taxable.

Now the IRS is saying the expenses are tax deductible. So, the loan is not tax deductible and you will be able to deduct the full amount of the expenses that were paid using your PPP loan.

Don’t hesitate to contact us with any questions you have regarding your PPP loan.

What do I do for PPP forgiveness?

Wait.

Please note, your first loan is not required to be forgiven to apply for second round funding.

Also we are waiting on clarification on some tax credits that could be impacted by how you apply for your loan forgiveness, so until we get that clarification from the IRS, I recommend waiting to apply for your forgiveness so you don’t cost yourself potentially thousands in tax credits down the road.

Under the Act, PPP loans of up to $150,000 shall be forgiven with a simple 1-page certification. These borrowers are still subject to SBA audits and will still need to maintain required records.

PPP funding was given with expectations of being used to cover payroll, utilities, and rent or mortgage payments. Funds used during the covered period for these expenses would be forgiven.

The new Act provides forgiveness for new categories of eligible costs: operations expenditures, property damage costs, supplier costs and worker protection expenditures, all of these are fully defined in the Act.

The SBA has a forgiveness calculation worksheet (it’s a lot of fun I promise!) that is available on their site. In typical SBA fashion, the current form is the seventh revision since May 2020. The worksheet requests information during the covered period, specifically how many employees, payroll expenses, utilities, mortgage interest, and rent or lease payments.

You can complete the worksheet yourself or reach out to us for assistance with completing the form for your lender.

When is my PPP forgiveness application due?

It’s complicated but you essentially have 16 months from the date you received your loan until you have to start making payments if you don’t submit your loan forgiveness application. For most businesses, that is mid to late 2021.

Per guidelines on the sba.gov website:

Borrowers may submit a loan forgiveness application any time before the maturity date of the loan, which is either two or five years from loan origination. However, if a borrower does not apply for loan forgiveness within 10 months after the last day of the borrower’s loan forgiveness covered period, loan payments are no longer deferred and the borrower must begin making payments on the loan. For example, a borrower whose covered period ends on October 30, 2020 has until August 30, 2021 to apply for forgiveness before loan repayment begins.

Due to the ongoing discussions over PPP funding, we are recommending waiting until 2021 once all laws for 2020 taxes and PPP loans are resolved so we know how best to proceed and can advise you.

The best course of action would be to contact us so we can review your situation at this time and advise you as these issues resolve.

Second Draw PPP Loans, will the forgiveness be different?

We hope not. The language within the Act redefines the term “covered period” for purposes of forgiveness of PPP loans made after but not before the date of the passage of the Act.

Included in the Act is a streamline forgiveness for initial PPP loans that are less than $150,000. We do expect to prove the 25% reduction in gross receipts.

And just to complicate matters, there is an Employee Retention Tax Credit many businesses will be eligible for and payroll used for PPP forgiveness is ineligible for application to this tax credit. How you apply for PPP loan forgiveness may limit your eligibility for this tax credit.

However, PPP can be used for utilities, rent or mortgage, and certain other expenses. Clarification from the IRS will be coming soon.

If you would like help ensuring you receive maximum benefits of tax credits and PPP assistance, please reach out to my office.

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