Consolidated Appropriations Act, 2021
Congress approved, and on December 27, 2020, the President signed into law a new stimulus package, the Consolidated Appropriations Act, 2021 (the “Act”). The Act includes the Economic Aid to Hard-Hit Small Businesses, Non-profits, and Venues Act, the COVID-Related Tax Relief Act of 2020, and the Taxpayer Certainty and Disability Relief Act of 2020. The Act reinstated the Paycheck Protection Program (the “PPP”) that expired in 2020 by providing additional funding and furthermore set forth clarification on certain terms and conditions of the PPP. The PPP program will run through March 31, 2021.
Among the most informative and impactful of the clarifications for businesses is confirmation of the tax-free treatment of loan forgiveness for the original round of funding under the CARES Act. All qualifying expense are fully deductible. Equally impactful, $284.45 billion in additional funding was allocated for the PPP in 2021.
A favorable change from the original round of PPP funding is that the Act allocates $12 billion in COVID-19 relief funding for community development financial institutions that predominantly serve minority communities. Approximately one-third of that $12 billion is set aside for smaller financial institutions with less than $2 billion in assets.
Eligibility Criteria for New Loans: Small businesses with less than 300 employees; business must have been in operation on or before February 15, 2020; business must have used or will use all of the first round PPP loan proceeds.
New Eligibility Criteria for New Loans: Qualifying 501(c)6 non-profit organizations are eligible; businesses must have experienced a 25% or more reduction in Gross Receipts in any one quarter of 2020, as compared to the corresponding quarter in 2019. If not in business during the first three quarters of 2019, the business can compare the first three quarters of 2020 to the fourth quarter of 2019.
Changes Related to the Employee Retention Credit: Under the CARES Act, a business that received a PPP loan was not eligible for the employee retention credit that was authorized by the CARES Act. However, under the Act, businesses that previously received a PPP loan can now claim the employee retention credit, so long as the credit is not sought for wages paid with proceeds of the PPP loan that have been forgiven. This change is retroactive to the date of the enactment of the CARES Act – March 27, 2020.
Should you or business have questions or need assistance with the PPP or the Consolidated Appropriations Act, 2021, please contact one of the attorneys in our Business Group at (757) 223-4500.