Economic Aid to Hard-Hit Small Businesses, Nonprofit and Venues Act
January 21, 2021
By Robert J. Waine, Esquire
On December 27, 2020, the President signed into law the Consolidated Appropriations Act, 2021, which included the Economic Aid to Hard-Hit Small Businesses, Nonprofit and Venues Act (the “Economic Aid Act”). Among other things, the Economic Aid Act authorized $284.5 billion in additional funding for the Payroll Protection Program (“PPP”), established Second Draw PPP loans for entities that received “First Draw” PPP loans, amended the uses to which loan funds can be applied and still be eligible for loan forgiveness, and clarifies the deductibility for tax purposes business expenses that were paid for with PPP loan proceeds.
Under the Economic Aid Act, eligible small businesses can still apply for a First Draw PPP loan until March 31, 2021. In addition, existing PPP borrowers that did not receive loan forgiveness by December 27, 2020, may reapply for a First Draw PPP loan if they previously returned some or all of their First Draw PPP loan funds, or under certain circumstances, request to modify their First Draw PPP loan amount if they did not accept the full amount for which they were eligible. Circumstances that could give rise to being eligible for increased loan amounts include changes in the guidance regarding PPP loans issued by the government.
Now, certain borrowers who received Fist Draw PPP loans can apply for Second Draw PPP loan until March 31, 2021. To be eligible for a Second Draw PPP loan, you must have received a First Draw PPP loan and used the proceeds only for authorized uses, have no more than 300 employees, and can demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020. Second Draw PPP loans have a maximum loan amount of $2 million.
The Economic Aid Act also makes several changes to the PPP that are applicable to both First Draw and Second Draw loans. The eligible costs for which a borrower can seek loan forgiveness now include worker protection costs related to COVID-19, uninsured property damage caused by looting or vandalism during 2020, and certain supplier costs and expenses for operations. The borrower can also select the covered period for loan forgiveness, choosing between 8 and 24 weeks after loan origination. In addition, the Economic Aid Act clarifies that employer-provided group insurance benefits are included in payroll costs, and that business expenses paid with the proceeds of a PPP loan that is forgiven are deductible, overriding previous IRS guidance.
The above is just a brief synopsis of the Economic Aid Act. The Economic Aid Act has made additional changes to the PPP and other COVID-19 aid related programs. Whether you are considering applying for a First Draw PPP loan, considering applying for a Second Draw PPP loan, need help understanding your options under the program, or need help determining what other help is available, the attorneys at Rothman Gordon P.C. are ready to assist. Please contact us online or call (412) 338-1169.