• Derek Carter

Continuing Small Business Recovery and Paycheck Protection Program Act

On July 27th, a bipartisan bill was introduced by Senators Rubio and Collins. The proposed bill is called the Continuing Small Business Recovery and Paycheck Protection Program Act. This 92 page proposed bill would have a significant impact on small businesses.


Second PPP Loan


Borrowers would be allowed to take a second PPP loan if they meet certain criteria. The main hurdle would be demonstrating that the business had a 50% reduction in gross receipts in either the first quarter or second quarter of 2020 compared to the same quarter in 2019. There are special rules for businesses that were not operating in the first or second quarters of 2019.


There are size requirements in the proposed bill as well (employee count). Not considering special sizing standards, the requirement is less than 300 employees.


The second PPP loan amount is expected to be almost identical to the first loan amount. Additionally, borrowers that would have received larger loans after considering the changes to the PPP program (mainly via interim final rules) would be allowed to request an increase to their loan amounts.


PPP Forgiveness


Borrowers with loans under $150,000 would not be required to submit previously issued forgiveness applications. They will instead be required to attest to a good faith effort to comply with PPP loan requirements.


Surprisingly, the proposed bill allows those with loans between $150,000 and $2,000,000 to not submit the required lender documentation (payroll reports, leases, cancelled checks, invoices, etc). Instead the borrower will certify the required lender documentation is on hand and the borrower will retain it for 3 years.


Covered Period


The proposed bill calls for the borrower to select their covered period. Borrowers would be able to select any period of time (8 to 24 weeks) from the day the borrower receives PPP monies through December 31.


Approved Uses


The proposed bill maintains the 60% payroll spend rule, but expands approved non-payroll related expenses. These include software, cloud computing, human resources, accounting, property damage, supplier costs, and personal protective equipment.


Forgivable Expenses


Unfortunately, the proposed bill does not address the IRS notice that states expenses forgiven under the PPP program will not be deductible for tax purposes. Borrowers should be prepared to see a larger tax liability in 2020.


Like all proposed bills, there will be negotiation and changes. Overall, this proposed bill is a win for small businesses.


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