Insights

The Business Provisions of the Pending
Emergency COVID Relief Act of 2020 Bill


COVID-19 Business Update

The Emergency Coronavirus Relief Act, which is a recently released proposed bill, includes over $900 billion in relief, and includes funds to support small businesses, including providing new loans from additional Paycheck Protection Program (PPP)and Economic Injury Disaster Loan (EIDL) programs. In addition, the package contains provisions for a simplified forgiveness process for PPP loans of $150,000 or less, and allows additional expenses paid with PPP funds to be deductible. The package is gaining support from congressional Democrats and Republicans, which has renewed hope that a package will be passed before the end of the year.

Below are some of the components that impact business owners:

Changes affecting existing PPP loans

  1. Additional eligible expenses for loan forgiveness include:
    • Covered operations expenditures
    • Covered property damage costs
    • Covered supplier costs
    • Covered worker protection expenditures
  2. Changes to tax implications of PPP funds
    • Confirmation that forgiveness is non-taxable
    • Expenses are deductible
  3. Simplified application process for loans under $2 million
    • Loans up to $150,000 will require completion of a one-page online or paper form with borrower certifications
    • Loans $150,000 to $2 million will have simplified documentation requirements
  4. Audit plan for borrowers who, together with their affiliates, obtained $2 million or more
    • Policies and procedures for conducting audits and reviews
    • Metrics used to determine which loans will be audited

Changes exclusive to the second round of PPP loans

  1. Additional PPP loan funds available
    • $267.5 billion in PPP loan funds available
    • Additional $13.5 billion for Economic Injury Disaster Loan funds
  2. Eligible businesses looking to apply for more funding
    • Size of business is now limited to 300 employees (down from 500 in round one)
    • Business must have experienced gross receipts decline by at least 30% for any quarter in 2020 compared to that same quarter in 2019
  3. Calculating the maximum loan amount
    • Two and a half months’ worth of the average payroll for the last twelve months through date of application or 2019
    • Loan cannot exceed $2 million
    • There will be limitations for businesses with multiple locations (aggregated total not to exceed $2 million)
    • Loans for affiliated borrowers can not exceed $10 million
  4. Set aside for small entities
    • $25 billion of the total allotment is earmarked for businesses with 10 employees or less as of February 15, 2020
  5. Inclusion of 501(c)(6) organizations who were previously ineligible in round one
    • Requests can be made for an increase in round one amount if calculating incorrectly due to updated regulations
  6. Increase in PPP loan round one amounts
    • Organizations must have 150 employees or less
    • Less than 10% of gross receipts may come from lobbying activities
    • Lobbying activities cannot comprise more than 10% of total activities of the organization

The information presented here should not be construed as legal, tax, accounting, or valuation advice. No one should act on such information without appropriate professional advice and after a thorough examination of the particular situation.