New stimulus bill overview for small businesses
Happy New Year! If you are like me, you held your breath over the last two weeks of 2020 waiting to see what would happen with the new stimulus bill.
Here’s just a quick overview and I will include a link to the U.S. Chamber’s summary at the end that helps to outline everything.
First, from the Chamber’s perspective, we are elated that 501c6 organizations (which is the tax status for chambers of commerce and fellow trade associations and membership organizations) are now eligible to apply for the Paycheck Protection Program that so many of our members were able to take advantage of in the first stimulus package.
Second, the Paycheck Protection Program is opening again with additional funding.
What if you never received a PPP loan in the first round? For new applicants, the loan process will largely remain the same as previous, with a few changes. The max loan amount is now $2 million, you cannot be a publicly traded company, and the timeframe to use the proceeds begins when the loan originates and ends at least eight weeks out but before 24 weeks. There are also set asides for businesses with less than 10 employees.
Third, there is a second draw PPP for businesses who took the original PPP. You are eligible for a second draw PPP if you have less than 300 employees, have exhausted your first PPP loan (note: exhausted does not mean you’ve applied for forgiveness, just that you used all the proceeds. Forgiveness does not exclude you from the second round.) AND most importantly, you have to have experienced a 25 percent reduction in gross receipts in a quarter of 2020 compared to the same quarter in 2019. I know you’re now going to ask what documentation is required to show this reduction? We are waiting on guidance/the actual application from the SBA to clarify that requirement. Second draw loans may not exceed $2 million.
Fourth, for those with existing PPP loans the new act also overturns the IRS ruling and allows the expenses to be deductible. There are no tax consequences from receiving the PPP. The list of eligible expenses has also expanded, but at least 60 percent of the proceeds still have to be used for payroll expenses to be forgiven.
Fifth, the EIDL $10,000 loan grant program also reopens. Check out the U.S. Chamber link for more details on how this will work.
Sixth, the law also created a new grant program for live venue operators. Grants are the lesser of $10 million or 45 percent of gross revenue earned in 2019. You’ll have to demonstrate a 25 percent reduction in revenue to qualify. This program will be administered directly by the SBA.
Lastly, there were clarifications added in the bill to the Employee Retention Tax Credit. This is a refundable, advanceable tax credit of up to $14,000 per employee for the first 2 quarters of 2021. Please contact your accountant for details on how you can qualify and coordinate this credit.
The most important things to know is that nothing has been launched yet (as of Wednesday, Jan. 6, 2021.) You’ll go directly to the SBA to process the EIDL of Live Venue Grants, but they have not yet opened the portal to process these. For the first time or second draw PPP, you’ll go to your local bank or credit union — that also relies on the SBA to open the portal to start accepting applications. We have talked to a few of our member banks and credit unions who processed the first round of PPP loans and most indicate they will participate in the program again. Please let us know if you have any questions or need any additional information and we will do our best to get the answers for you.
As always, thank you so much for your support of the MOV Chamber.
Visit this space every other Saturday for more Chamber news. We also invite you to call us at 304-422-3588 or email us at firstname.lastname@example.org. The Chamber office is open by appointment only at this time (501 Avery Street, 9th Floor in Parkersburg.)
The Jill Parsons is the President/CEO of the Chamber of Commerce of the Mid-Ohio Valley.