New PPP steering issued by SBA, Treasury

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The U.S. Small Enterprise Administration (SBA) and Treasury issued steering Wednesday night time for the reconstituted Paycheck Safety Program (PPP).

The steering included two interim ultimate guidelines (IFRs).

  • The 82-page IFR “Enterprise Mortgage Program Short-term Modifications; Paycheck Safety Program as Amended” consolidates the foundations for PPP forgivable loans for first-time debtors and descriptions adjustments made by the Financial Help to Onerous-Hit Small Companies, Nonprofits, and Venues Act, P.L. 116-260.
  • The 42-page IFR “Enterprise Mortgage Program Short-term Modifications; Paycheck Safety Program Second Draw Loans” lays out the rules for brand spanking new PPP loans to companies that beforehand acquired a PPP mortgage.

As well as, the SBA launched a three-page “Steering on Accessing Capital for Minority, Underserved, Veteran and Girls-Owned Enterprise Considerations.” That steering features a dedication from the SBA to make no less than the primary two days of the PPP software window open completely to purposes from group monetary establishments that serve minority- and women-owned companies. The SBA didn’t set a date for restarting the PPP, however this system is allowed by means of March 31.

Erik Asgeirsson, CEO of the AICPA’s enterprise subsidiary, CPA.com, mentioned Wednesday afternoon in an AICPA City Corridor that new varieties for PPP are anticipated to be launched this week and that the SBA may begin receiving purposes as early as Monday.

Congress revived the PPP as a part of the $900 billion COVID-19 reduction invoice that was signed into regulation on Dec. 27. The unique PPP offered $525 billion in forgivable loans over 5 months earlier than it stopped accepting purposes in August. The Financial Help Act rebooted the PPP with lots of the identical parameters as the primary program but in addition a number of essential variations from the unique PPP. The brand new PPP is allowed to function by means of March 31. New PPP software varieties haven’t but been launched however are anticipated within the subsequent few days. The SBA has not but introduced when it’ll begin accepting new PPP purposes.

Second-draw PPP loans

One of many largest adjustments with the brand new PPP is that Congress made funding accessible to companies that had beforehand acquired a PPP mortgage. Debtors are eligible for a second-draw PPP mortgage of as much as $2 million, offered they’ve:

  • 300 or fewer staff.
  • Used or will use the total quantity of their first PPP mortgage on or earlier than the anticipated date for the second PPP mortgage to be disbursed to the borrower. The IFR additionally clarifies that the borrower will need to have spent the total quantity of the primary PPP mortgage on eligible bills.
  • Skilled a income discount of 25% or extra in all or a part of 2020 in contrast with all or a part of 2019. That is calculated by evaluating gross receipts in any 2020 quarter with an relevant quarter in 2019, or, in a provision added within the IFR, a borrower that was in operation for all 4 quarters of 2019 can submit copies of its annual tax varieties that present a discount in annual receipts of 25% or higher in 2020 in contrast with 2019.

The Financial Help Act didn’t present a basic definition of gross receipts for figuring out a borrower’s income discount, so the brand new steering makes the definition per the definition of receipts in 13 C.F.R. Part 121.104 of SBA’s dimension laws. Particularly, the IFR defines gross receipts to incorporate all income in no matter type acquired or accrued (in accordance with the entity’s accounting technique) from no matter supply, together with from the gross sales of services or products, curiosity, dividends, rents, royalties, charges, or commissions, lowered by returns and allowances. Forgiven first-draw PPP loans usually are not included within the 2020 gross receipts.

First-draw PPP loans

The Financial Help Act makes first-draw PPP loans accessible to debtors that have been in operation on Feb. 15, 2020, and are available from one of many following teams:

  • Companies with 500 or fewer staff which can be eligible for different SBA 7(a) loans.
  • Sole proprietors, impartial contractors, and eligible self-employed people.
  • Not-for-profits, together with church buildings.
  • Lodging and meals companies operations (these with North American Business Classification System (NAICS) codes beginning with 72) with fewer than 500 staff per bodily location.
  • Sec. 501(c)(6) enterprise leagues, equivalent to chambers of commerce, guests’ bureaus, and many others., and “vacation spot advertising and marketing organizations” which have 300 or fewer staff and don’t obtain greater than 15% of receipts from lobbying. The lobbying actions should comprise not more than 15% of the group’s whole actions and have value not more than $1 million throughout the newest tax yr that ended previous to Feb. 15. 2020. Sports activities leagues usually are not eligible.
  • Information organizations which can be majority-owned or managed by an NAICS code 511110 or 5151 enterprise or not-for-profit public broadcasting entities with a commerce or enterprise underneath NAICS code 511110 or 5151. The scale restrict for this class is not more than 500 staff per location.

In a change from the unique PPP, publicly traded corporations and companies managed, both instantly or not directly, by the president, vp, head of govt departments, and members of Congress (or their spouses as outlined by relevant frequent regulation) usually are not eligible for PPP loans.

PPP candidates should submit documentation enough to ascertain eligibility and to reveal the qualifying payroll quantity, which can embrace, as relevant, payroll information; payroll tax filings; Kind 1099-MISC, Miscellaneous Earnings; Kind 1040, Schedule C, Revenue or Loss From Enterprise, or Schedule F, Revenue or Loss From Farming; earnings and bills from a sole proprietorship; or financial institution information.

PPP mortgage most quantities

Generally, first-time PPP debtors might obtain a mortgage quantity of as much as 2.5 instances their common month-to-month payroll prices (not counting staff who make greater than $100,000 annualized) within the yr previous to the mortgage or the calendar yr. PPP debtors with NAICS codes beginning with 72 (motels and eating places) can obtain as much as 3.5 instances their common month-to-month payroll prices.

The utmost for a first-draw PPP mortgage is $10 million, the identical as within the unique PPP. Candidates should present a Kind 941, Employer’s Quarterly Federal Tax Return, (or different varieties with related info) and state quarterly wage unemployment insurance coverage tax reporting varieties from every quarter in 2019 or 2020 (whichever is used to calculate the mortgage quantity), or equal payroll processor information, together with proof of any retirement and medical health insurance contributions.

Eligible prices

PPP debtors can have their first- and second-draw loans forgiven if the funds are used on eligible prices. As with the primary spherical of the PPP, the prices eligible for mortgage forgiveness within the revised PPP embrace payroll, lease, coated mortgage curiosity, and utilities. As well as, the next prices are actually eligible:

  • Coated employee safety and facility modification expenditures, together with private protecting gear, to adjust to COVID-19 federal well being and security tips.
  • Coated property harm prices associated to property harm and vandalism or looting as a consequence of public disturbances in 2020 that weren’t coated by insurance coverage or different compensation.
  • Expenditures to suppliers which can be important on the time of buy to the recipient’s present operations.
  • Coated working expenditures, which consult with funds for any enterprise software program or cloud computing service that facilitates enterprise operations; services or products supply; the processing, fee, or monitoring of payroll bills; human assets; gross sales and billing features; or accounting or monitoring of provides, stock, information, and bills.

To be eligible for full mortgage forgiveness, PPP debtors must spend a minimum of 60% of the funds on payroll over a coated interval between eight or 24 weeks.

Simplified forgiveness

Debtors that obtain a PPP mortgage of $150,000 or much less shall obtain forgiveness if the borrower indicators and submits to the lender a certification that’s not multiple web page in size, features a description of the variety of staff the borrower was capable of retain due to the mortgage, the estimated whole quantity of the mortgage spent on payroll prices, and the overall mortgage quantity. The SBA has but to create the simplified software type however should achieve this by Jan. 20. The shape might not require further supplies until essential to substantiate income loss necessities or fulfill related statutory or regulatory necessities. Debtors are required to retain related information associated to employment for 4 years and different information for 3 years, because the SBA might overview and audit these loans to examine for fraud.

Minority, underserved, veteran, and women-owned companies

The Financial Help Act offered set-asides for brand spanking new and smaller debtors, for debtors in low- and moderate-income communities, and for group and smaller lenders. The set-asides embrace:

  • $15 billion throughout first- and second-draw PPP loans for lending by group monetary establishments;
  • $15 billion throughout first- and second-draw PPP loans for lending by insured depository establishments, credit score unions, and Farm Credit score System establishments with consolidated belongings of lower than $10 billion;
  • $35 billion for brand spanking new first-draw PPP debtors; and
  • $15 billion and $25 billion for first-draw and second-draw PPP loans, respectively, for debtors with a most of 10 staff or for loans of lower than $250,000 to debtors in low- or moderate-income neighborhoods. The SBA has decided that no less than 25% of every of these set-asides will go to every one of many teams: loans to debtors with a most of 10 staff and loans of lower than $250,000 to debtors in low- or moderate-income neighborhoods.

The SBA introduced in its three-page steering that it will take a variety of steps to make sure elevated entry to the PPP for minority, underserved, veteran, and women-owned enterprise considerations. Most notably, the SBA mentioned it’ll settle for PPP mortgage purposes solely from group monetary establishments for no less than the primary two days when the PPP mortgage portal reopens. As well as, the SBA mentioned it will:

  • Direct Lender Match borrower inquiries to small lenders that may support historically underserved communities;
  • Match small companies by means of Lender Match with Licensed Growth Corporations (CDCs), Farm Credit score System lenders, microloan intermediaries, and conventional smaller asset dimension lenders;
  • Proceed setting apart devoted hours to course of and help the smallest PPP lenders with their PPP loans;
  • Proceed to strongly encourage group growth monetary establishments and minority-, women-, veteran-, and military-owned lenders to use to develop into PPP lenders. SBA mentioned it will give full and immediate consideration to those purposes to develop into PPP lenders per program tips, together with in circumstances the place the lender doesn’t meet the entire necessities listed on the up to date SBA Kind 3507;
  • Proceed to work with the Board of Governors of the Federal Reserve System on the PPP Liquidity Facility to allow PPP lenders, together with nonbank lenders, to pledge PPP loans to the Federal Reserve as collateral for Federal Reserve borrowings to boost lender liquidity and allow PPP lenders to broaden their lending capability;
  • Promote consciousness of those insurance policies and procedures by way of conventional media strategies, SBA social media accounts, and steering to lenders earlier than the formal opening of the SBA’s mortgage programs;
  • Proceed to work with federal companions. together with the Division of Agriculture, the Federal Reserve, the Federal Deposit Insurance coverage Company, the Workplace of the Comptroller of the Forex, the Farm Credit score Administration, and the Nationwide Credit score Union Administration, to share the steering with PPP lenders, debtors, and the broader public.

AICPA specialists focus on the most recent on the PPP and different small enterprise support packages throughout a biweekly digital city corridor. The webcasts, which give CPE credit score, are free to AICPA members. Go to the AICPA City Corridor Sequence webpage for extra info and to register.

The AICPA’s Paycheck Safety Program Assets web page homes assets and instruments produced by the AICPA to assist tackle the financial influence of the coronavirus.

For extra information and reporting on the coronavirus and the way CPAs can deal with challenges associated to the pandemic, go to the JofA’s coronavirus assets web page or subscribe to our electronic mail alerts for breaking PPP information.

— Jeff Drew ([email protected]) is a JofA senior editor.



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