Economic Aid To Hard-hit Small Businesses Nonprofits And Venues Act – ), an omnibus provision that, among other legislation, includes twelve FY 2021 appropriations for the federal government and an economic relief package to help businesses that continue to face challenges due to the COIVD-19 pandemic. Title III of the 2021 Consolidated Appropriations Act, referred to as Economic Assistance for Hard-hit Small Businesses, Nonprofits, and Places (
), enacted under the Coronavirus Relief, Assistance, and Economic Security Act (as amended, supplemented, or otherwise amended prior to enactment, including the Wage Protection Program and the Health Care Improvement Act, Wage Protection Program). Flexibility Act, applicable federal regulations, and interpretive guidance issued by SBA and Treasury (
Economic Aid To Hard-hit Small Businesses Nonprofits And Venues Act
The law revives the PPP program by allocating $284.45 billion. USD, which is a large part of the 325 billion As described below, the law renews applications for businesses seeking VPP funds for the first time (a
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), expanding the permitted use of PPP loan funds and increasing the flexibility of loan waivers. The law also allows eligible business groups that have previously received PPP loans to claim the proceeds of a second PPP loan (a.
The new PPP application deadline is 2021. March 31, and SBA must adopt regulations to implement the provisions of the new revised program no later than 2021. January 6
Applicants for the first tranche of PPP loans must meet the eligibility criteria set forth in the CARES Act. However, PPP borrowers seeking a second PPP loan tranche are subject to different program eligibility criteria. Any business enterprise, nonprofit organization, housing cooperative,  veterans’ organization, tribal business, qualified self-employed individual, sole proprietor, independent contractor, or small agricultural cooperative is eligible for a second tranche PPP loan if such enterprise (i ) employs not more than 300 employee and ii) in 2020. Total revenue decreased by 25% in the first, second or third quarter compared to the same period of 2019. quarter. Importantly, the 300-employee maximum is reduced from the CARES Act’s 500-employee limit, which still applies to Tranche 1 PPP loans.
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The following list of business problems that are expressly prohibited from receiving a Tranche 2 PPP loan should also be considered, which includes several important changes to the list of prohibited applicants for a Tranche 1 PPP loan:
The law allows a company that borrowed part of the first PPP loan to apply for and receive a second PPP loan if i) the company can meet more stringent eligibility criteria for the second PPP loan and ii) receive loan proceeds from the first PPP loan. The tranche will be fully utilized for the second PPP loan on or before the disbursement date of the portion of the loan.
The law also requires that SBA issue interpretive guidelines by January 13, 2021 that allow (i) a PPP applicant who has completed the first tranche of a PPP loan or a PPP borrower who has promptly repaid the entire first tranche of a PPP loan. re-apply for the first tranche of the PPP loan after its disbursement and ii) a PPP borrower who has repaid less than the full amount of the first tranche of the PPP loan upon disbursal, request additional financing for its first tranche. PPP loan. An amount equal to the remaining loan proceeds of the PPP borrower and the maximum first installment of the PPP loan that the PPP borrower can receive.
The Act amends sections 364, 503(b), 1191, 1225, and 1325 of the Bankruptcy Code to allow a debtor or a trustee authorized to conduct the debtor’s business to apply for and borrow against a PPP loan, notwithstanding any contractual restriction to the contrary. 363 of the Bankruptcy Code, the use of cash security or other law that prohibits the debtor from incurring additional debt. The law provides that any PPP loan must be considered a debt unless such loan is forgiven. The PPP loan will be prioritized as administrative expenses and the reorganization plan will be approved if it offers the borrower to repay the PPP loan on time.
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In general, the dependency rules that applied to PPP loan applicants prior to the enactment of the law continue to apply, except that the employee size standard for the second tranche PPP loan is reduced to a maximum of 300 employees (from 500). employees) to determine affiliation. For more information on PPP rules, visit our company articles here and here.
The Act modifies the exemption “covered period” or limited period during which PPP loan proceeds must be spent on permitted uses in order for such funds to be exempt for the loan. The period beginning on the date of disbursement of the applicable PPP loan and ending on a date selected by the PPP borrower that is not less than 8 weeks but not more than 24 weeks from the date of disbursement. Prior to the law, PPP borrowers had to choose between 8 or 24 weeks.
Note that the maximum loan amount of $2 million for the second PPP loan is significantly lower than the $10 million for the first PPP loan.
Although permitted uses of PPP loan proceeds still include payroll, utilities, rent and mortgage interest, and other debt obligations, the law allows the use of both Tranche 1 PPP loan and Tranche 2 PPP loan proceeds for these additional expense categories. (each with certain specified exceptions), which may also be waived:
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Additionally, a company that received a PPP loan before the law was passed was not eligible for the employee retention credit under the CARES Act. The 2021 appropriations bill would revise existing rules to allow PPP borrowers to claim the employment tax credit for such employees. However, such expenses are not exempt—specifically, the Act excludes from the definition of exempt “wage expenses”: (i) Qualified wages as defined in section 2301(c)(3) of the CARES Act. taken into account in determining the tax credit under this section, and (ii) qualified wages taken into account in 2020. Section 303(a) or (d) of the Taxpayer Disclosure and Disaster Relief Act.
As with pre-enactment PPP loans, borrowers must allocate at least 60% of PPP loan proceeds to “salary expenses” as defined in the CARES Act, as amended.
The law simplifies the forgiveness application process for borrowers who have taken out or will take out PPP loans of $150,000 or less. Such PPP loans are fully forgivable if the borrower signs and submits a 1-page certification form to their PPP lender, which must be completed by the SBA no later than 2021. January 20 Above $150,000, the certifications and documents required for loan forgiveness remain the same as those required by the CARES Act.
50 million in law. US dollars are allocated directly to SBA to reduce audits and fraud related to PPPs. The SBA must submit its audit plan and proposed procedures to the Senate and House Small Business and Entrepreneurship Committees by 2021. February 10
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As one of the most significant economic benefits for PPP borrowers, the Act modifies IRS provisions that prohibit the deduction for federal income tax purposes of expenses that are subject to PPP loan proceeds and subsequently forgiven. Like the CARES Act, the Act also makes clear that a PPP borrower will not be subject to a federal tax on debt repayments incurred as a result of repaying any portion of the PPP loan.
According to the law, EIDL 20 billion. Additional USD funding and EIDL grant application deadline extension until 2021. December 31 Small businesses and nonprofit organizations in low-income communities that have experienced a 30% economic loss and have fewer than 300 employees. Can apply for and receive an advance grant of $10,000 or the difference between the previous grant amount of $10,000.
The law allows the SBA 21 days after receiving an EIDL grant application to review the borrower’s eligibility and provide a grant or explanation as to why the borrower is ineligible.
EIDL grants are free,