*Information updated, as of January 4, 2020*
Congress recently passed a new stimulus package which includes many provisions relating to small businesses and the self-employed. Below are details of the new stimulus package that directly highlights the needs of small businesses.
This is a long, detailed newsletter, as we hope to answer many of your questions. This is based on legislation, not the regulations that will follow to clarify some of these issues.
Stay connected to the SBDC—via this blog post, social media and your consulting team. We will continue to update information as made available.
- New tax treatment of PPP expenses
- New round of PPP, program updates and changes
- Grants for EIDL advances and other changes
- Extended SBA Debt Relief and Programing
- Extension and Expansion of the Employee Retention Tax Credit (ERTC)
- Unemployment Assistance
Tax Treatment of PPP Expenses
- Forgiven PPP loans will not be included in taxable income.
- Deductions are allowed for expenses paid with proceeds of a forgiven PPP loan, effective as of the date of enactment of the CARES Act and applicable to subsequent PPP loans.
- This same tax treatment also applies to EIDL grants and certain loans and loan repayment assistance.
PPP Updates and other changes – $284 Billion
- Provides a second PPP forgivable loan for the hardest-hit small businesses and nonprofits with 300 or fewer employees and that can demonstrate a loss of 25% of gross receipts in any quarter during 2020 when compared to the same quarter in 2019.
- $15 billion set-aside for lending through community financial institutions, including Community Development Financial Institutions and Minority Depository Institutions to increase access for minority-owned and other underserved small businesses and nonprofits.
- Funds set-aside for small businesses with 10 or fewer employees and for businesses located in distressed areas.
- PPP eligibility expanded for more critical access hospitals, local newspapers, TV and radio broadcasters, housing cooperatives, and 501(c)(6) nonprofits, including tourism promotion organizations and local chambers of commerce.
- Allows for small businesses in the restaurant and hospitality industries to receive larger awards of 3.5 times average total monthly payroll, rather than 2.5 times.
- Adds PPE expenses, costs associated with outdoor dining, and supplier costs as eligible and forgivable expenses.
- Simplified forgiveness process for loans of $150,000 or less.
Grants for EIDL Advances and other changes – $20 Billion
- Any small businesses and nonprofits in low-income communities that previously received an EIDL Advance are also eligible to receive the full $10,000 if their award was less in the first round of grants.
- Repeals the requirement of deducting an EIDL Advance from the PPP forgiveness amount.
- EIDL application extended Dec. 31, 2021.
Extended SBA Debt Relief Payments – $3.5 Billion
- All borrowers with qualifying loans approved by the SBA prior to the CARES Act will receive an additional three months of P&I, starting in February 2021.
- Going forward, those payments will be capped at $9,000 per borrower per month. After the three-month period described above, borrowers considered to be underserved will receive an additional five months of P&I payments, also capped at $9,000 per borrower per month.
- SBA payments of P&I on the first 6 months of newly approved loans will resume for all loans approved between February 1 and September 30, 2021, also capped at $9,000 per month.
Enhancements of SBA Lending Programs – $2 Billion
- $2 billion to enhance SBA’s core programs, including 7(a), Community Advantage, 504, and the Microloan program, by making them more affordable and useful to small businesses.
- $57 million for the SBA Microloan Program to provide technical assistance and leverage about $64 million in microloans for minority-owned and other underserved small businesses.
Extension and Expansion of the Employee Retention Tax Credit (ERTC):
- Increases the credit rate, from 50% to 70%.
- Raises the limit on per-employee creditable wages from $10,000 for the year, to $10,000 for each quarter.
- Expands eligibility for the credit by reducing the required year-over-year decline in gross receipts from 50% to 20%.
- Modifies the threshold for treatment as a ‘large employer’ by increasing the 100-employee delineation for determining the relevant qualified wage base to employers with 500 or fewer employees.
- Provides $300 per week in supplemental federal unemployment beginning as soon as Dec 27th and lasting through March 14th.
- Pandemic Unemployment Assistance (PUA) program extended to 50 weeks
- Continued assistance to self-employed, freelancers, gig workers, part-time workers and other individuals in non-traditional employment.
- Pandemic Emergency Unemployment Compensation (PEUC) program extended to 24 weeks.
- Benefits to workers who have exhausted their regular state unemployment benefits.
- Full federal financing of state Shared Work programs, allowing employers to avoid layoffs during the downturn by connecting their employees who are working reduced hours with partial unemployment compensation.
Read the full bill language and appropriations here.