President Trump signed into law a second round of Covid-19 relief on Sunday, December 27. While the details are being reviewed, the bill contains the following provisions regarding a second round of Payment Protection Program (PPP) loans. The new round is known as PPP 2.0 and has the following provisions (which are likely to evolve as the rules are interpreted):
- The loan forgiveness process is simplified for borrowers with PPP 1.0 and 2.0 loans of $150,000 or less.
- PPP borrowers do not reduce their forgiveness amount by any EIDL advances received.
- Expenses paid with PPP 1.0 and 2.0 funds are fully deductible and PPP funds received are tax-exempt income.
- PPP 2.0 includes a “second draw” option for PPP borrowers who have sustained a 25% revenue loss in any quarter of 2020 compared with 2019.
- SBA loan payments that were made on behalf of borrowers for six months in 2019 are tax-exempt income.
- SBA loan payments will be made on behalf of borrowers for the three months beginning February 1, 2021; this will be tax exempt income.
Banks will begin accepting PPP 2.0 “second draw” applications in the beginning of January. To qualify for PPP 2.0, the business
- must have been in operation as of February 15, 2020;
- must have fewer than 300 employees; and
- must have reported a 25% reduction in quarterly income in any quarter of 2020 compared with 2019.
How much money will be available? The calculation for PPP 2.0 loans will be based on
- 2.5x the average monthly payroll for the 2019 calendar year (January 1, 2019 to December 31, 2019) OR 2.5x the average monthly payroll for the preceding 12-month period prior to the date of application. Restaurants and hospitality will receive a 3.5x multiplier instead of 2.5x.