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Second Relief Package Provides Next Round of PPP Funding

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On December 20, 2020, Congress agreed on a new $900 billion Covid relief package, which includes an additional $284 billion for the Paycheck Protection Program (PPP) for small businesses, created under the original Coronavirus Aid, Relief, and Economic Security Act (or CARES Act) in March.
This new package provides additional funding for those businesses that did not receive PPP money in the first round. In addition, it allows businesses a second chance at PPP money if they can show losses of 25% or higher in 2020 over their 2019 revenue. The details of the package are as follows:

Paycheck Protection Program (PPP) – Small Business Administration

501(c)6 organizations are eligible to participate, including economic development organizations that are registered as 501(c)6 organizations, if:

• Less than 300 employees
• Not more than 15% of organization activity constitutes lobbying
• Not more than 15% of gross receipts from lobbying activities
• Not a professional sports league or political campaign or activity

Effective date is ‘as if it were included in the CARES Act’, meaning 501(c)6 organizations are effectively retroactively eligible. Program extended until March 31, 2021.

Tax Issues Resolved

• Gross income does not include any forgivable amount of the PPP loan
• Deductions are allowed for deductible expenses paid for by any forgiven amount from PPP loan

Forgiveness Simplified

• Loans less than $150,000 require simple certification in the form of a one-page letter from the borrower to the lender stipulating basic criteria and providing simple, high-level details

Eligible Uses Formally Expanded

• Covered operations (software, tech, human resources, etc.), covered property damage (associated with ‘disturbances’ happening during 2020), covered supplier costs (supplies, inventory, etc.), covered health and safety expenses (PPE, testing, etc.) were further clarified as eligible uses of PPP loans and eligible for forgiveness
• Benefits such as life insurance, disability insurance, vision and dental were also clarified to be eligible covered expenses
• Borrower may select their covered period end date, between 8 and 24 weeks after origination
• $284.45 billion appropriated in latest round of PPP (program total authorization rises to $806.5 billion lifetime) and includes a number of carve-outs:
  • $35 billion set aside for first-time borrowers
  • $25 billion is set aside for smaller organizations with 10 employees or less or loans less than $250,000 in low-income areas
  • $15 billion in guarantees for CDFI’s and MDI’s to participate in the program

Establishes Second Draw Criteria

• Max loan amount of $2 million
• For organizations with less than 300 employees
• Must have used or will use the full amount of first PPP loan
• Must show at least a 25% reduction in revenue in the first, second, or third quarter of 2020 as compared to the same period in 2019; applications submitted on or after January 1, 2021, may use a fourth quarter 2020/2019 comparison
• 60/40 cost allocation between payroll and non-payroll costs to receive full forgiveness remains the same for second draw

Emergency Capital Investment Program – Treasury

A new program serving minority depository institutions (MDIs) and community development finance institutions (CDFIs) that are depository institutions.

• $9 billion in appropriations; $4 billion set aside for institutions with less than $2 billion in assets; $2 billion set aside for institutions with less than $500 million in assets
• Long-term, low-cost capital investments for institutions who have a plan to significantly increase lending or investment activity in LMI minority communities

Unemployment Insurance

• Pandemic Unemployment Assistance (PUA) is extended until March 14, 2021, and the maximum number of weeks of eligibility is extended from 39 weeks to 50 weeks
• Pandemic Emergency Unemployment Compensation (PUEC) is extended until March 14, 2021 and the number of weeks of eligibility is extended from 13 weeks to 24 weeks
• Federal Pandemic Unemployment Compensation is reinstated at $300 per week from the week after December 26, 2020 and runs through March 14, 2021

“Stimulus” Payments

$600 to individuals earning $75,000 or less per year and plus an additional $600 for every dependent child; decreasing amounts for those earning $75,001 or more at a rate of -$5 for every $100 over the earning limit

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