We hope that everyone had a relaxing and enjoyable holiday, and we want to wish you a Happy New Year. As you know, throughout the course of the year we have provided various COVID updates as circumstances warranted. It has been some time since our last update as Congress and the Administration went back and forth on various forms of an amendment to the CARES Act. We are pleased to report that yesterday the President signed into law the $900 billion supplemental Covid-19 relief legislation. The official version of the legislation can be found HERE. A comprehensive summary of the legislation released by the National Conference of State legislatures can be found HERE.
Below are some of the key highlights of the legislation.
Additional Paycheck Protection Program Funding
The new Covid-19 relief authorizes an additional $284.45 billion to the SBA’s Paycheck Protection Program (“PPP”) and creates a more simplified and streamlined application process for PPP loans under $150,000. The legislation does allow some smaller and harder-hit businesses to take out a second PPP loan, in a maximum amount of $2 million. Eligibility requirements for a second PPP draw include that a business must:
$15 billion of the additional PPP funding has been allocated to live venues. While no amount of the additional PPP funding has been allocated exclusively to minority business enterprises (“MBE”), the legislation does allocate $15 billion of PPP loans to community and minority lenders for distribution. This was done with the goal of making the additional PPP funds more readily accessible to MBE firms; MBE firm PPP loan accessibility was identified as a major issue with the first round of PPP funding.
Expansion of PPP Eligible Expenses
The legislation also expands PPP eligible expenses. In addition to payroll, rent, mortgage interest, and utility expenses, the new legislation has categorized the following as forgivable expenses under PPP:
Tax Deductibility of PPP Expenses
There had been debate between the Internal Revenue Service and the business community about whether business expenses paid for using PPP loan proceeds should be tax deductible. Under the new legislation, Congress has promulgated that such expenses are tax deductible. In effect, a business can have the PPP loan forgiven and also have business expenses paid for with the PPP loan proceeds deducted from its corporate taxes. We advise any business interested in taking advantage of this aspect of the legislation to further consult with their accountant.
The legislation extends the refundable payroll tax credits for paid sick and family leave, enacted in the Families First Coronavirus Response Act (“FFCRA”), through the end of March 2021. It also modifies the tax credits so that they apply as if the corresponding employer mandates were extended through the end of March 2021. This provision is effective as if included in FFCRA.
The legislation authorizes $2 billion for airports to prevent, prepare for, and respond to coronavirus:
The legislation authorizes $81.80 billion for educational agencies to prevent, prepare for, and respond to coronavirus, domestically or internationally. $22.7 billion of such amount will be made available to colleges and universities; $54.3 billion will be made available to elementary and secondary education.
A local educational agency that receives funds may use the funds for any of the following:
Feel free to contact us if you have any questions.
Gery Chico and Jon Leach