The long awaited second COVID stimulus bill is here, and there’s a lot to unpack.  Here’s a quick overview of the highlights, we’ll be sharing more details on specific programs as more information becomes available.

Stimulus Payments

  • $600 for individuals and $1,200 for married couples filing jointly, plus $600 for each dependent child under 17
  • Payments phase out once adjusted gross income exceeds $75,000 for a single taxpayer and $150,000 for a married couple (based on 2019 filing information)

Unemployment Insurance

  • Bill provides an additional $300 per week for all workers receiving unemployment benefits through March 14th, 2021
  • Bill increases the maximum number of weeks an individual may claim benefits to 50 weeks

PPP Loans

  • Expenses paid with PPP funds are deductible
    • This rule applies to all borrowers, even those who have already applied for forgiveness
    • Forgiveness amount will no longer be reduced by any EIDL grant received
  • Streamlined forgiveness for borrowers under $150,000
    • Borrowers will only be required to submit a one-page online or paper form, and will only be subject to audit if they commit fraud or use the proceeds for improper purposes
    • It appears small borrowers will not be subjected to the required reductions in forgiveness amounts generally caused by reducing salaries or headcount
  • Changes to existing PPP program, applicable to borrowers who have NOT yet applied for forgiveness:
    • New expenses eligible for use/forgiveness
      • Covered operations expenditures
      • Covered property damage costs
      • Covered supplier cost
      • Covered worker protection
      • *reminder: the sum of all non-payroll costs cannot exceed 40% of the total costs for forgiveness
    • New options for covered periods
      • Previous options for covered period: 8 or 24 weeks
      • Borrower no longer locked into an 8 or 24 week period; instead, they can choose any period beginning on the date the funds were received and lasting between 8 and 24 weeks
    • For those of you that have reached out to request our assistance, we will begin processing the forgiveness applications for the original PPP loans once the new simplified forgiveness form is release
  • Second Round PPP Loans
    • Second round of PPP loans available for businesses that have already borrowed and fully spent their original PPP funds
    • Loan is generally determined by multiplying 2.5 by the average monthly payroll for 2019, limited to $2 million
    • Hard hit businesses in the hospitality industry will be permitted to borrow 3.5 times average monthly payroll, limited to $2 million
    • Eligibility is more stringent than previous program. Borrowers must:
      • Have fewer than 300 employees
      • Be able to establish that they have experienced a 25% drop in gross receipts during any one individual quarter in 2020 relative to the same quarter in 2019
        • Please let us know if you believe you may meet the 25% revenue drop in any one individual quarter
        • The bill indicates the SBA has 10 days after the bill passes to release the rules on this program, which would likely mean the applications would be available the 1st or 2nd week of January
        • We do anticipate the available funds for this program to go very quickly so it’s important if you believe you qualify to reach out to us ASAP so you can be ready to apply as soon as the program opens
    • Loan funds can be used on payroll costs, rent, utilities, mortgage principal interest, and the four new eligible expense categories listed above
      • *reminder: the sum of all non-payroll costs cannot exceed 40% of the total costs for forgiveness
    • Because PPP borrowers may now also claim the Employee Retention Credit (see below), any wages for which a credit is computed will not be treated as forgivable payroll costs for the purposes of PPP

Employee Retention Tax Credit

  • The Employee Retention Credit is now extended through July 1st, 2021, and is expanded for the first two quarters of 2021
    • Credit percentage is increased from 50% to 70% of qualified wages
    • Qualified wages are increased from $10,000 in total per employee to $10,000 per quarter per employee
    • 20% drop in quarter-over-quarter receipts are required to make a quarter an “eligible quarter,” reduced from the 50% initially required by the CARES act
  • Taxpayers can now claim the ERC and take out a PPP loan, they are no longer mutually exclusive. However, any wages upon which an ERC is computed would not be forgivable costs under the PPP program.

Additional Programs

  • FFCRA payroll tax credits extended through March 31st, 2021
  • Employee Payroll Tax Deferral – due date for deferral extended from April 30th to December 31st, 2021
  • Full business meals deduction permitted in 2021 and 2022
  • Special “lookback” for EITC and CTC
    • Lower income individuals can use their earned income from tax year 2019 to determine the EITC and the refundable portion of the CTC in the 2020 tax year.
    • This will help workers who experienced lower wages this year due to the pandemic get a larger refund that is more consistent with their earnings from prior filing seasons.
  • $15 billion is now available for the SBA to make grants to eligible live venue operators or promoters, theatrical producers, live performing arts organizations, museum operators, movie theatre operators, or talent representatives who demonstrate a 25% reduction in revenues quarter-over-quarter 2019 to 2020. The taxpayer had to be fully operational as of February 29th, 2020.

As always, if you have questions about how these changes and programs apply to you, please reach out to your primary point of contact at DHA.