CAA 2021 - Impact on PPP

As our valued client, we wanted to provide you with a summary of the main points with respect to the Consolidated Appropriations Act that was signed on 1/2/2021. Please pay special attention to the items in bold as they are changed or new with this Act and will be important for you. This is a summary we are providing based upon the information we have learned, the items below are subject to change at any time.

Funds available through 3/31/21 or until funds exhausted
o   Any small business, self-employed, & independent contractors with <500 employees
o   Must attest that loan is necessary to support ongoing operations
o   Must be in business by 2/15/20
Loan amounts
o   2.5x average monthly payroll costs for 2019
o   2.5x net profit from 2019 Schedule C for self-employed/independent contractor with no employees
§  If you show 0 or less profit you are not eligible for a PPP loan
§  2019 1040 & 2019 1099-MISC must be provided to show proof of self-employment
Second Draw loans
o   Fully spent 1st PPP loan prior to disbursement of 2nd draw
o   <300 employees
o   Demonstrate at least 25% reduction in revenue between corresponding quarters in 2019 and 2020.
o   Max draw is $2 million
o   Can only receive one 2nd draw loan
o   For business in accommodations of food services industries
§  May obtain increased loan amount of 3.5 times the average monthly payroll costs, up to $2 million cap. 
Eligible costs
o   Salaries & wages to employees
o   Health Care & Insurance Benefits
o   Employer paid retirement benefits
o   State or local payroll taxes
o   Rent
o   Utilities
o   Mortgage interest (no principal or prepayments)
o   Covered operations expenditures
o   At least 60% loan must be spent on payroll costs
o   Covered period is choice of 8 or 24 week
o   EIDL advance not excluded
o   1 page forgiveness form for loans <$150,000
o   Deductions will not be prohibited for expenses that qualify for PPP loan forgiveness
Employee Retention Tax Credit
o   Credit is taken as payroll tax offset
o   Credit against employment taxes equal to 50% of qualified wages (up to $10,000 in wages) for each employee ($5,000 maximum per employee)
o   Available with respect to wages paid 3/13/20 to 12/31/20. 
o   An employer is eligible if, during any calendar quarter of 2020, it either has
§  operations fully or partially suspended due to a governmental order related to COVID-19 or
§  a decline in gross receipts of more than 50% compared to the same quarter of the prior year  
o   PPP borrowers may be eligible for the credit to the extent qualifying wages are not paid using forgiven PPP loan proceeds
Economic Injury Disaster Loans (EIDLs)
o   Grants up to $10,000
o   Amount of grant reduced by any EIDL grant previously received
o   Business must be located in a low-income community
o   Business has suffered an economic loss of at least 30%
o   Grants not deducted from PPP loan forgiveness
o   Grants not considered taxable income
Employee Social Security Tax Deferrals
o   Allows employers the option to defer withholding and payment of SStax for employees whose wages <$4,000 biweekly, or equivalent amounts in other pay
o   Repayment period extended to 12/31/21
o   Employers remain liable to collect and pay full amount of the SS taxes deferred

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