2nd Round of PPP Loans

The House of Representatives and the Senate both passed the Consolidated Appropriations Act of 2021 on December 21, 2020, and the President is expected to sign it into law.  While the main purpose of the Act is funding the federal government through the end of the government’s current fiscal year, it includes many tax-related provisions. 

The Act extends the Payroll Protection Program (PPP), which expired after August 8, 2020.  The new expiration date is March 31, 2021.  The Act allows employers with 300 or fewer employees to apply for PPP loans if such employers have a decline in gross receipts of at least 25% in any quarter in 2020 as compared to the same quarter in 2019.  Such employers are eligible even if they already received a PPP loan under the original program during 2020.

The maximum loan amount is determined using 2½ months multiplied by the average monthly payroll during either the one-year period before the loan occurs or the 2019 tax year, as chosen by the borrower.  (Restaurants and lodging/accommodation entities are allowed to use 3½ months instead of 2½ months when computing the loan amount.)

The Act expands the types of eligible nonpayroll costs that can be eligible for forgiveness to include payments for certain goods that are essential to the operations of the entity, payments for equipment or facility changes needed to protect workers from COVID-19, payments for business software or cloud computing services, and payments for repair of any damages from protests that occurred during 2020 (if such costs were not covered by insurance or other compensation).  Forgiveness of nonpayroll costs remains limited to no more than 40% of the loan proceeds.

The PPP is discussed on pages 23 to 29 of the Tax Year 2020 M+O=CPE Individual Tax Year-End Workshop Reference Book.