Yesterday, the President signed a third COVID-19 economic relief package into law, allocating a fresh $900 billion to aid programs spanning multiple sectors. Included among the provisions to grant additional stimulus checks and extend additional unemployment benefits, is an additional $284 billion for the Paycheck Protection Program (“PPP”) created by the first Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) earlier this year.
The new bill is expected to provide funding for businesses that did not receive PPP funding earlier this year, as well as those that received a PPP loan previously. It lowers the threshold to qualify from 500 employees or fewer to 300 employees or fewer, and reduces the maximum loan amount from $10 million to $2 million. Businesses that received a PPP loan earlier this year would also be eligible for a second loan, provided that they meet the new reduced employee threshold, and saw 2020 revenues decline by 25% when compared to the equivalent quarters in 2019. Borrowers may still select their preferred pay period (8 or 24 weeks) per the original program and can have loans fully forgiven if 60 percent of their loan is spent on payroll costs. The new bill also sets aside $12 billion to be directed toward Minority Depository Institutions and Community Development Financial Institutions.
The bill also aims to clarify provisions of the existing PPP. Specifically, it simplifies the loan forgiveness process for loans of $150,000 or less. The bill also makes clear that insurance costs can be calculated as part of payroll costs, and it enables borrowers that have already returned all or part of their original loan to reapply for their applicable maximum loan amount. Additionally, Economic Injury Disaster Loan advances no longer need to be deducted from PPP loan forgiveness amounts. The new bill also clarifies that tax deductions are permissible for deductible expenses paid for with PPP funds, and that forgiven PPP loans will not count as income.
The new bill also extends the Pandemic Unemployment Assistance program and the Pandemic Emergency Unemployment Compensation program for up to 11 weeks. Each closes to new applicants on March 14, but continues through April 5 for existing claimants who have not yet reached the maximum number of weeks.
If you have questions regarding how the COVID-19 economic relief package affects your business, please contact our Corporate or Labor & Employment departments.
The content of this post is for informational purposes only and should not be construed as legal advice or legal opinion. You should consult a lawyer concerning your specific situation and any specific legal question you may have.