Editor’s note: Regulations and guidance from the SBA and the U.S. Department of Treasury on the PPP are evolving rapidly. Please refer to the latest guidance from SBA and Treasury to confirm current program rules and how they apply to your particular situation.
The Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Economic Aid Act or the Act) was signed into law on December 27, 2020. The Act resurrects the Paycheck Protection Program (PPP) for first- and second-time borrowers, adds additional funding, provides greater loan flexibility, and eases the loan forgiveness application process for certain borrowers.
In January 2021, the Small Business Administration (SBA) posted new guidance concerning the rules for PPP lending and forgiveness, as well as revised application forms for new loans and loan forgiveness.
Additionally, the Economic Aid Act includes a few highly anticipated benefits for small businesses, including (but not limited to):
- Extending the Employee Retention Tax Credit through June 30, 2021, increasing the amount of the tax credit from 50% to 70% of qualified wages paid to an employee (up to $100,000 per calendar quarter), and reducing the threshold to qualify from a 50% decline in gross receipts to 20%.
- Extending payroll tax deferral periods to December 31, 2021.
- Reversing the IRS’s prior guidance concerning the tax deductions and PPP loans. The Act provides that no deduction for business expenses funded with the proceeds of a forgiven PPP loan may be denied by reason of the exclusion of the loan forgiveness from gross income. In other words, PPP borrowers can now deduct from their taxes any expenses paid using PPP loan proceeds.
The Act also appropriates additional funding to small business relief programs like the Economic Injury Disaster Loan advance program, the Section 7(a) debt relief program, and other SBA lending enhancements.