Most people know that the first round was chaotic and the second round, or extension of the program to September 2020, provided relief for businesses to keep employees employed. The recent approval of the Covid-19 Relief Bill provided much-needed relief for small and large businesses that received PPP loans. Additional funds were also available for funding another round. Below are key differences.
EIDL and PPP Funds Now Available
The new bill allows small and large businesses, as well as sole-proprietors, to deduct PPP funds used for employees. They can also request forgiveness without tax consequences. A discharge of debt is generally a taxable event for the party who had the debt cancelled. This is great news, especially for small businesses that are now able to take full advantage of the provisions Congress made since the Covid-19 Pandemic.
Eligibility to “Second Draw” PPP Loans
For the new round PPP loans, which businesses can get, there is currently new guidance and rules. Based on current knowledge:
– The business must employ three-hundred (or less) employees to be below the original five-hundred under the original rules
– The business must show that there has been a 25% drop in revenues in any quarter (depending on the date you apply for the second PPP loan).
Congress also approved special allocations for entertainment venues, restaurants, and other recreational facilities that were more severely affected than any other business. Instead of 2.5 months, they can now receive 3.5 month’s worth of payroll and other business-related expenses. This could help to mitigate.
-Businesses that have less than 10 employees are excluded. Businesses that were established or organized in Hong Kong or China are included. These businesses must conduct significant operations in Hong Kong and China or have Chinese Citizens on their Board. If 20% or more of the business’s assets are from Hong Kong or China.
Most people know that the first round was chaotic and the second round, or extension of the program to September 2020, provided relief for businesses to keep employees employed. For small and large PPP loan recipients, the recently passed Covid-19 Relief Bill was a relief bill that provided much-needed clarity.
This funding will be available between March 31, 2021 and the enactment.
Eligibility Expanded to Receive PPP Loans
The new legislation makes certain borrowers who were previously ineligible more eligible. This includes local chambers and housing cooperatives as well as certain news stations. Congress included language that confirmed that churches and religious organisations are eligible borrowers.
Expanded Uses for PPP Loan Proceeds
Payroll costs, interest payments on mortgage obligations (exempting prepayments), rent (including rent under lease agreements) and interest on other debt obligations that were incurred prior to the “covered period”, i.e. the period in which PPP loan proceeds could be forgiven. Here and thier provide background information on the permitted uses, as well as limitations on what eligible uses may be eligible for loan forgiveness.
This article was written by Alla Tenina. Alla is one of the best IRS Tax attorneys in Los Angeles California, and the founder of Tenina law. She has experience in bankruptcies, real estate planning, and complex tax matters. The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information. This website contains links to other third-party websites. Such links are only for the convenience of the reader, user or browser; the ABA and its members do not recommend or endorse the contents of the third-party sites.