Round 2 – Paycheck Protection Program

The Emergency COVID Relief Act of 2020 provides an additional $900B to stimulate the economy

by Alan Greenwell

On Dec. 27, 2020, President Donald Trump signed the Emergency COVID Relief Act of 2020, which was subsequently attached to the Consolidated Appropriations Act 2021 (“The Act”). The Act, which will provide an additional $900 billion of funds to stimulate the economy, includes significant changes to the original CARES ACT Paycheck Protection Program (PPP).

A summary of these items is as follows:

Who is eligible to apply?

PPP2 loans will be available to first-time qualified borrowers and, for the first time, to businesses that previously received a PPP loan. Specifically, previous PPP recipients may apply for another loan of up to $2 million, provided they:

  • Have 300 or fewer employees;
  • Have used or will use the full amount of their first PPP loan;
  • Can show a 25% gross revenue decline in any 2020 quarter compared with the same quarter in 2019.

PPP2 also makes the forgivable loans available to Sec. 501(c)(6) business leagues, such as chambers of commerce, visitors’ bureaus, etc., and “destination marketing organizations” (as defined in the act), provided they have 300 or fewer employees and do not receive more than 15% of receipts from lobbying.

PPP2 will also permit first-time borrowers from the following groups:

  • Businesses with 500 or fewer employees that are eligible for other SBA 7(a) loans;
  • Sole proprietors, independent contractors, and eligible self-employed individuals;
  • Not-for-profits, including churches;
  • Accommodation and food services operations (those with North American Industry Classification System (NAICS) codes starting with 72) with fewer than 300 employees per physical location.

The bill allows borrowers that returned all or part of a previous PPP loan to reapply for the maximum amount available to them.

PPP loan terms

As with PPP1, the costs eligible for loan forgiveness in PPP2 include payroll, rent, covered mortgage interest, and utilities. PPP2 also makes the following potentially forgivable: 

  • Covered worker protection and facility modification expenditures, including personal protective equipment, to comply with COVID-19 federal health and safety guidelines;
  • Expenditures to suppliers that are essential at the time of purchase to the recipient’s current operations;
  • Covered operating costs such as software and cloud computing services and accounting needs.

To be eligible for full loan forgiveness, PPP borrowers will have to spend no less than 60% of the funds on payroll over a covered period of either eight or 24 weeks — the same parameters PPP1 had when it stopped accepting applications in August.

PPP borrowers may receive a loan amount of up to 2.5 times their average monthly payroll costs in the year prior to the loan or the calendar year, the same as with PPP1, but the maximum loan amount has been cut from $10 million in the first round to the previously mentioned $2 million maximum. PPP borrowers with NAICS codes starting with 72 (hotels and restaurants) can get up to 3.5 times their average monthly payroll costs, again subject to a $2 million maximum.

Simplified application and other terms of note

The new COVID-19 relief bill also:

  • Creates a simplified forgiveness application process for loans of $150,000 or less. Specifically, a borrower shall receive forgiveness if a borrower signs and submits to the lender a certification that is not more than one page in length, includes a description of the number of employees the borrower was able to retain because of the loan, the estimated total amount of the loan spent on payroll costs, and the total loan amount. The SBA must create the simplified application form within 24 days of the bill’s enactment and may not require additional materials unless necessary to substantiate revenue loss requirements or satisfy relevant statutory or regulatory requirements. Borrowers are required to retain relevant records related to employment for four years and other records for three years, as the SBA may review and audit these loans to check for fraud.
  • Repeals the requirement that PPP borrowers deduct the amount of any EIDL advance from their PPP forgiveness amount.

Alan Greenwell, CPA is a shareholder of Brixey & Meyer, a tax consulting, accounting and business strategy company, who who loves to help companies grow. Alan can be reached at 513-965-3089 or alan.greenwell@brixeyandmeyer.com

Brixey & Meyer is a Goering Center Corporate Partner, and the Goering Center is sharing this content as part of its monthly newsletter, which features articles from Goering Center members.

About the Goering Center for Family & Private Business
Established in 1989, the Goering Center serves more than 400 member companies, making it North America’s largest university-based educational non-profit center for family and private businesses. The Center’s mission is to nurture and educate family and private businesses to drive a vibrant economy. Affiliation with the Carl H. Lindner College of Business at the University of Cincinnati provides access to a vast resource of business programing and expertise. Goering Center members receive real-world insights that enlighten, strengthen and prolong family and private business success. For more information on the Center, participation and membership visit goering.uc.edu.