COVID Relief Act For Businesses

Now that the President has signed the Combined COVID-19 Relief and Omnibus Spending Bill, below are some of the highlights affecting local businesses:

The Act allocates $325 billion of relief to businesses and nonprofits, including $284 billion for another round of Paycheck Protection Program (PPP) loans.

Eligibility requirements for the “Second Draw” PPP for both first-time and repeat PPP borrowers include:

• A company must have fewer than 300 eligible employees, or fewer than 500 eligible employees for businesses with multiple locations.
• Company revenue must have decreased by at least 25% during one of the first three quarters of 2020, or during Q4 2020, the application is submitted after January 1, 2021. The decrease will be calculated by comparing gross receipts in a quarter in 2019 to the same quarter in 2020.

This time the following entities are excluded from eligibility:  public companies (except news organizations), lobbying entities, entities with China-based ownership, and entertainment venue businesses who receive aid under a separate part of the Act.

Eligibility is expanded for non-profits and local newspapers, TV stations and radio stations, as well as trade and professional associations that operate as 501(c)(6) non-profits, with the following 501(c)(6) entities still excluded:

• professional sports leagues;

•   organizations established for the purpose of promoting or participating in a political campaign – to be eligible to receive a covered loan if certain requirements are met.

There is also $20 billion included in the Act for targeted EIDL grants.

The maximum loan amount an eligible company can receive is the lesser of $2 million or 2.5 times the monthly payroll costs incurred during the one-year period before the loan is made, or during calendar year 2019.  There is a small exception for  (3.5 times the monthly payroll for the hotel and restaurant industries). The Bill still has the 60% payroll/40% non-payroll expense split that was in last year’s PPP law.

The new Act includes additional provisions to assist small and medium size businesses, which can also be applied retroactively to all PPP loans, including those taken under the March statute:

• Tax deductibility of all qualified expenses paid with PPP funds is allowed.
• PPP allowable and forgivable expenses are expanded to include operating expenses, property damage costs caused by acts of civil unrest, supplier costs and worker protection costs (both operating and capital costs).
• A company can choose any 8- to 24-week period as their loan forgiveness covered period.
• Economic Injury Disaster Loan (EIDL) grants will no longer reduce PPP forgiveness.
• A simplified forgiveness application for PPP loans of less than $150,000 will be limited to borrower certifications.
• Forgiven PPP loan funds will be considered tax-exempt income and will increase owners’ basis in pass-through entities.

In addition to the PPP updates, the Act also modifies or extends employee retention tax credit, business meal deductions, and retirement plan distribution relief.

The Act also modifies the paid sick and family leave sections of the Families First Coronavirus Relief Act (“FFCRA”).  The FFCRA required that employers with fewer than 500 employees provide mandatory paid sick and family leave to employees, and it also granted tax credits for employers who provided the paid leave, subject to certain income limits and caps. The paid leave provisions of the FFCRA were originally scheduled to expire on December 31, 2020. The Act states that  eligible employers may, but are no longer required to, continue to provide paid sick and family leave, and continue to receive the associated tax credits, through March 31, 2021. In addition, the FFCRA’s paid leave provisions have been expanded to cover self-employed workers.

The Act also reinstates a $300 per week unemployment for anyone out of work because of the COVID as well as direct payments up to $600 per adult and child and extends the eligibility period through March 14, 2021.  Claimants receiving benefits as of March 14, 2021 would continue to receive them through April 5, 2021 if they have not reached the weekly benefits maximum. In addition, the period of unemployment insurance benefits during for eligible claimants would increase from 39 weeks to 50 weeks.

Other provisions of the Act:

• $25 billion in rental assistance and an extension of the eviction moratorium,
• A tax credit to support employers offering paid sick leave based on the Families First framework,
• An extension and improvement of the Employee Retention Tax Credit to help keep workers in their jobs during coronavirus closures
• $13 billion in increased Supplemental Nutrition Assistance Program (SNAP) and child nutrition benefits
• $7 billion to increase access to broadband, including a new Emergency Broadband Benefit to help students, families and unemployed workers afford access, and $1 billion in Tribal broadband grants for chronically underserved Native American communities.