U.S. Stimulus Bill Delivers Support For Businesses, Individuals
As PPAI continues to closely monitor developments in Washington, D.C., PPAI’s public affairs manager, Maurice Norris, along with the Association’s general counsel and D.C.-based lobbyist, are tracking the recent U.S. legislation aimed at providing relief to businesses and individuals affected by the ongoing public health crisis. Look for further updates to follow in the days ahead.
Over the weekend, President Trump signed into law the Consolidated Appropriations Act for fiscal year 2021, the U.S. government’s annual funding legislation, combined with numerous coronavirus relief measures that had been under negotiation for several months. The relief package includes direct assistance for individuals, families and companies, and tax breaks for companies affected by the ongoing economic impacts of the COVID-19 pandemic. Here’s a breakdown of what the package includes.
Aid for Small Businesses
Paycheck Protection Program
The Paycheck Protection Program (PPP), which was one of the CARES Act’s featured provisions, was renewed with more than $284 billion in funding for small-business loans. Just like the last round of PPP loans, borrowers may elect a covered period that consists of either eight weeks or 24 weeks. The application for loans under $150,000 has also been simplified to a one-page process, consisting of certification regarding the number of employees the loan would enable the borrower to retain, an estimation of the total amount of the loan that would be spent on payroll costs, and the total loan amount.
This new allocation increases the program’s lending authority to $806.5 billion. The legislation sets aside $35 billion for first-time PPP loans to entities that have not previously received a loan. The new relief bill also extends the PPP application period, and authorizes companies to take second PPP loans, provided those companies meet all the new eligibility rules for the second draw:
- Employ no more than 300 people (the previous threshold was 500 employees)
- Demonstrate a minimum of a 25-percent reduction in gross revenues in any quarter of 2020 compared to the same quarter in 2019
- Will or have used all the first PPP loan amount
Most eligible borrowers could receive second loans for as much as $2 million or 2.5 times of their average monthly payroll costs, whichever is less.
The legislation also ensures some of the loan funding is available for smaller lenders, by providing at least $15 billion for community financial institutions, and $15 billion for loans issued by credit unions and other institutions with less than $10 billion in assets. The legislation also sets aside at least $15 billion for first loans issued to entities with 10 or fewer employees, and for first loans of $250,000 or less issued to entities in low- or moderate-income areas. The bill also directs $25 billion for second loans to entities that meet those criteria.
The relief bill also expands eligibility rules for first-time borrowers. Certain 501 (c)(6) organizations, as well as convention and visitors’ bureaus, would be eligible for PPP loans if they have fewer than 300 employees and receive less than 15 percent of their revenues from lobbying activities.
The relief legislation also changed the rules for the forgiveness of PPP loans by expanding the list of uses for loan funds that would qualify for forgiveness and allowing simplified applications for loans less than $150,000.
The measure clarifies that borrowers could deduct eligible expenses paid for with forgiven PPP loans. Those eligible expenses, which were also expanded under the new legislation, include covered operations expenditures, covered property damage costs, covered supplier costs and covered worker protection expenses.
Economic Injury Disaster Loans (EIDL)
The new legislation would double the authorization for advance funds to $40 billion and extend it through December 31, 2021. The bill also provides funds for certain organizations to receive the difference between $10,000 and the advance funds they previously received under the CARES Act. Eligible recipients for this provision include:
- Entities with 300 or fewer employees
- Entities located in low-income communities
- Entities must demonstrate economic losses of at least 30 percent over eight weeks compared with a similar period before the pandemic
The new legislation also repeals a provision from the CARES Act that requires PPP forgiveness amounts to be reduced based on EIDL advances.
Aid for Individuals
Pandemic Unemployment Assistance
The new measure partially restores the Federal Pandemic Unemployment Compensation (FPUC) created under the CARES Act. The extra payments, consisting of $300 instead of the $600 provided by the CARES Act, would apply to weeks of unemployment after December 26 and through March 14, 2021.
The bill also extends other CARES Act provisions through March 14, 2021, which are currently scheduled to expire on December 31, 2020:
- The duration of Pandemic Unemployment Assistance benefits is increased to as much as 50 weeks for individuals who are not eligible for regular compensation or extended benefits under state or federal law or pandemic emergency unemployment compensation under the CARES Act.
- Benefits for those who have exhausted regular benefits under the Pandemic Emergency Unemployment Compensation program are extended to 24 weeks. Authority would rest with the states to establish a new benefit year to determine regular or emergency benefits.
The new legislation provides another round of direct payments, consisting of $600 for eligible individuals, $1,200 for eligible joint filers and $600 for each qualifying child. The measure applies the same income limits and phase-out criteria as the CARES Act, which means the payments would be reduced by five percent for individuals with an adjusted gross income of more than $75,000. Workers with incomes over $87,000 would not be eligible for the payments.
Workers who had their payroll taxes deferred since September would be given until December 31, 2021, to pay the taxes. This provision extends the deadline beyond April 30, 2021, which was outlined by prior Treasury Department guidance.
The relief bill also provides modifications to the employee retention tax credit (ERTC), by extending the timeframe and widening the criteria for the benefit. From January 1, 2021, through June 30, 2021, the ERTC increases the creditable rate to 70 percent of eligible wages. Among several other tax-related benefits, the new legislation also expands the eligibility rules for the ERTC by reducing the required gross receipts decline from 50 percent to 20 percent, and increasing the limit on creditable wages for each employee to $10,000 per quarter, up from the current limit of $10,000 annually.
Looking ahead, PPAI will continue to monitor stimulus legislation and its execution, and the Association expects further developments in the weeks and months ahead. Follow PPB Newslink for updates.
This summary report of recent laws is not, and should not be construed as, legal or tax advice, and the summary report should not be relied upon as such. Each reviewer is encouraged to consult independent legal and tax counsel before making any decisions concerning the matters in this communication.