In late December 2020, Congress passed an additional Coronavirus Relief Package as a part of the Consolidated Appropriations Act of 2021. The bill contained guidance on the original Paycheck Protection Program (PPP) that was made available to small businesses in April 2020 as well as announced an additional round of the loan program for certain eligible businesses.
Businesses who received the PPP loan under the first round finally have guidance on the taxability of their forgiven loans. All forgiven loans are still not subject to income tax. Congress also cleared up that any qualified expenses paid by the loan proceeds are still deductible in 2020.
For any businesses that haven’t used their first round of funds, there are new additional expenses that the loans can be used for: operations expenditures (software that assists with the operations of the business), property damage costs (related to vandalism or looting that occurred in 2020), supplier costs (payments to suppliers of essential goods), and worker protection expenditures (costs associated with meeting CDC guidelines such as masks, sneeze guards, etc.).
If a business missed out on the initial round of PPP loans, additional funds have been allocated to the program and applications should hopefully begin to be processed the week of January 11th.
The second round of PPP loans are available to businesses that have already received and spent the first round. Applications should likewise begin to be accepted in mid-January 2021. The caveat with the second round of PPP is the business must have experienced a drop in revenue of more than 25% in any quarter of 2020 compared to that same quarter in 2019. This second round is also only available to businesses with less than 300 employees (down from 500 employees in round one).