New Stimulus Offers ‘Simplified’ Forgiveness and a ‘Second Draw’ at PPP

A first glance at Congress' New $990 billion stimulus program.

authors Patrick O'Toole | December 22, 2020

The $900 billion stimulus program just passed by Congress includes several items favorable to small businesses according to an analysis circulated online by the National Association of Home Builders.

First, expenses paid by Paycheck Protection Program funds in 2020 that would normally be tax deductable can indeed be deducted on this years’ taxes, reversing an earlier setback for business owners.

Second, the stimulus provides for a simplified online process for achieving forgiveness of PPP loans from 2020. For borrowers of less than $150,000, all that will now be needed is completion of an online certification. For borrowers of between $150,000 and $2 million, all that will be needed is completion of a one-page form—without supplying any supporting documentation. Owners who do this must retain their documents for four years.

‘Second Draw’ PPP Funds

According to NAHB’s analysis, small-businesses who experienced a reduction in revenues of greater than 25 percent in the second and third quarters of 2020 are eligible to apply for additional funds. For applications that come in after Jan. 1, 2021, revenue declines in the fourth quarter may also be considered.

The section below is excerpted from the NAHB analysis.

PPP Second Draw

  • Creates a second loan from the Paycheck Protection Program, called a “PPP second draw” loan for smaller and harder-hit businesses, with a maximum amount of $2 million.
  • In order to receive a PPP loan under this section, eligible entities* must:
    • Employ no more than 300 employees;
    • Have used or will use the full amount of their first PPP; and
    • Demonstrate at least a 25-percent reduction in gross receipts in the first, second or third quarter of 2020 relative to the same 2019 quarter. Provides applicable timelines for businesses that were not in operation in Q1, Q2, Q3 and Q4 of 2019. Applications submitted on or after Jan. 1, 2021 are eligible to utilize the gross receipts from the fourth quarter of 2020.
  • Eligible entities must be businesses, certain non-profit organizations, housing cooperatives, veterans’ organizations, tribal businesses, self-employed individuals, sole proprietors, independent contractors, and small agricultural co-operatives.

Other Notable Provisions

  • The deadline that a borrower has to use their PPP funds is extended through Sept. 30, 2021.
  • Allowable expenditures of PPP funds now cover the purchase of personal protective equipment (PPE) for employees.

Qualified Remodeler will be providing additional news and analysis of the new stimulus package throughout the holiday week. QR

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