PPP and PPP2 Consolidated Appropriations Act of 2021: COVID-19 stimulus review
Written By Donovan Thiessen
I
n response to the COVID-19 related quarantines and subsequent economic disaster, Congress approved the Payment Protection Program (PPP) in March 2020. Designed to cover small businesses’ payroll, rent and other costs, the program’s initial funding of $349 billion was distributed within the first two weeks of the program. Another $310 billion was approved by Congress in April 2020 and funding continued until August of 2020. Generally, if you receive(d) and used the funds for the designated expense types, you could apply for loan forgiveness and the loan would be treated as a grant; the loan would not have to be repaid. Now 9 months into this program, many people have been anxiously waiting to apply for loan forgiveness, hoping that Congress might make rumored changes to the forgiveness rules. At last, the Consolidated Appropriations Act of 2021 was signed into law on December 27, 2020 and provides crucial changes to the forgiveness rules, and a new round of PPP funding to businesses. This article will discuss important aspects of the PPP loans, including forgiveness and deductibility of the expenses.
The Consolidated Appropriations Act (CAA) provides $284 billion for first and second time PPP borrowers. In order the qualify for PPP2, the business must have 300 or fewer employees, have used or will use the full amount of the initial PPP loan and most important, must show a 25% gross revenue reduction in any single quarter during 2020, compared to the same quarter in 2019. PPP2 applications are expected to launch on January 15, 2021. Businesses can apply for the PPP2 even if they did not apply for the initial PPP. Considered first-time borrowers, the program will allow for businesses with 500 or fewer employees that are eligible for other SBA 7(a) loans, independent contractors, sole proprietors, nonprofits, and churches. Food service businesses with less than 300 employees per physical location can also apply. There are restrictions on how you can use these funds. In the first round, the funds must have been used at least 60% towards payroll, and the rest could be used towards rent, mortgage interest
