On December 27th, the President signed the “Consolidated Appropriations Act, 2021” (H.R. 133) (the “Act”). In the Act, Congress authorized $284B to be used for the second round of the Paycheck Protection Program (“PPP”) loans (called “PPP2”). Act. Sec. 301.
Requirements if You Already Have a PPP1 Loan
To get a PPP2 loan from an approved SBA Lender, if you already have an existing PPP loan (“PPP1”), you:
How Much Can You Borrow under PPP2?
A multiple of average monthly payroll, as adjusted to the excess compensation for highly compensated employees.
Loan Forgiveness under PPP2
Generally, the PPP1 loan forgiveness rules also apply to PPP2 loan forgiveness requests. Sixty percent of the PPP2 loan must be spent on Payroll costs and the remaining 40% must be spent on approved “Other” costs, all spent during the “covered” forgiveness period. Borrowers can use either an 8-week or a 24-week “covered” forgiveness period. The “covered” forgiveness period starts when the Lender puts the PPP2 money into your account. “Payroll costs” includes compensation of up to $100,000 per employee plus certain group benefits: including life, disability, vision and dental benefits.
The “other” category of expenses includes: rent, mortgage interest and monthly utilities. However, the following new items were added to the “other” category for the PPP2 program:
Simplified Paperwork for PPP1 and PPP2 Loan Forgiveness
For PPP loans of less than $150,000, PPP Borrowers just have to sign a new, one-page form, certifying the number of employees retained, the amount spent on payroll costs, and the total loan amount. SBA should have this new form available by the end of January, 2021. Paper documentation to support the certifications will not have to be supplied to the Lender, but will have to be retained by the Borrower for four years in the event of an SBA audit.
Tax Treatment of PPP2 Loan Forgiveness and Why You Should Consider a PPP2 Loan
See, Tax Treatment of Expenses Paid with PPP Loans and EIDL Advances – Part 3 www.smgglaw.com/blog/tax-treatment-of-expenses-paid-with-ppp-loans-and-eidl-advances-part-3. Because Congress has agreed to fund approved tax deductions with tax-free money under the PPP2 program, any business that needs a PPP2 loan, and meets the tests above, should consider taking out a PPP2 loan.