Posts

PPP Loans Open January 11th

/0 Comments/in /by

PPP loans re-opening and important California deadlines approaching

We have received many questions regarding new PPP loans and the California grant deadline. Both are addressed below.

PPP loans

The SBA has announced that the Paycheck Protection Program (PPP) will reopen the week of January 11.

When the program reopens, the following new PPP funds will be available to borrowers:

  • New “second draw PPP loans” for smaller businesses who have experienced a 25% decline in gross receipts; and
  • Supplemental funding for:
    • Original PPP loans where the loan amount would have changed due to new rules that have been released; or
    • Businesses that did not originally apply for first draw PPP loans.

Only community financial institutions will be able to accept first draw PPP loan applications on Monday, January 11, and second draw PPP loan applications on Wednesday, January 13. The PPP program will then open to all other participating lenders shortly thereafter.

The SBA also released new interim final rules that implement the new loans and answer some questions, including the following:

  • For the 25% decrease in gross receipts for second draw loans, the Consolidated Appropriations Act of 2021 states that they must show a decrease for a quarter in 2020 compared to a quarter in 2019. However, the interim final rules also say that businesses can compare calendar year 2019 to calendar year 2020 to show the 25% decrease;
  • First draw PPP loans will not be included in the gross receipts calculation for second draw loans;
  • In addition to showing that they have used, or will use, all of their first draw loan, second draw borrowers must have spent the full amount of the first draw loan on eligible expenses under the PPP rules to be eligible for a second draw loan. This means borrowers requesting second draw loans should prepare forgiveness applications for their first draw loans, because they are likely to be requested by the bank;
  • EIDL grants no longer reduce PPP forgiveness. Borrowers who previously had their PPP forgiveness reduced by the amount of the EIDL advance should contact their lender;
  • Borrowers in bankruptcy may not receive additional PPP funds; and
  • Businesses that have temporarily closed may still apply for PPP loans to help them reopen.

The interim final rules on first draw PPP loans can be found here:

www.sba.gov/document/policy-guidance-ifr-paycheck-protection-program-ppp-amended-economic-aid-act

The interim final rules on second draw PPP loans can be found here:

www.sba.gov/document/policy-guidance-ifr-paycheck-protection-program-ppp-second-draw-loans

California deadlines approaching

  • The deadline to apply for a California Relief Grant of up to $25,000 has been extended until Wednesday, January 15, 2021. Details on this program can be found at: https://careliefgrant.com/
  • The deadline to reserve the California Main Street Small Business Credit is Friday, January 15, 2021. Businesses that are currently closed may still apply if they had more full-time equivalent employees in July through November of 2020 than they did during the second quarter of 2020. Details on this program can be found at: https://cdtfa.ca.gov/taxes-and-fees/SB1447-tax-credit.htm

Please reach out with any questions about this article or to talk to one our CPA’s regarding your taxes.

info@mrarrachecpa.com

Get ready to apply for PPP second draw loans

/0 Comments/in /by

Get ready to apply for PPP second draw loans(12-28-20)

The President has signed the Consolidated Appropriations Act of 2021 (H.R. 133), which, among other things, authorizes a new round of Paycheck Protection Program (PPP) loans called second draw loans. This allows some borrowers to request supplemental funding on their original PPP loans.

Second draw loans

Second draw loans are only available to businesses that employ 300 or fewer employees (part-time and seasonal count), and have at least a 25% reduction in gross receipts.

It is unclear whether applicants must have already received a loan under the first round of available PPP loans in order to qualify for the new second draw loans (we are awaiting guidance from the SBA on this). However, it is clear that if they have received a prior PPP loan they must have used, or will use, the first loan prior to the disbursement of a second draw loan.

Supplemental funding

Borrowers can also submit supplemental PPP loan requests in all cases where their original PPP loan amount would have changed due to new rules that have been released. This applies to partnerships where the original loan did not include the self-employment earnings of the partners. But it also applies to borrowers who returned their original loans, or took reduced loans to qualify for other benefits that are no longer limited for PPP recipients, such as the Employee Retention Credit.

Borrowers must request this additional funding before forgiveness is granted on their original PPP loan.

Deductions allowed

H.R. 133 also clarifies that borrowers who have loans forgiven may claim deductions for expenses even if expense were paid with loan amounts that were forgiven. This applies to all PPP loans.

California does not conform to this federal law, which is amended as part of the stimulus package. Taxpayers will still be required to reduce their deductions on the California return because California enacted AB 1577 (Ch. 20-39), which specifically prohibits taxpayers from claiming any deductions or credits for expenses that are paid with forgiven PPP loan amounts.

Email if you have questions about this article or your business.

Info@mrarrachecpa.com

News on Good Faith Loans, PPP Audits & Other Questions

/0 Comments/in /by

Good news for PPP loan recipients(05-14-20)

The Treasury Department has announced the following news regarding the Paycheck Protection Program (PPP):

  • A new “current economic uncertainty” safe harbor applies for PPP loans of less than $2 million. These loan recipients will automatically be deemed to have made the required certification concerning the necessity of the loan request in good faith (FAQ #46);
  • For loans of $2 million or more, the deadline to return PPP loans to avoid an audit concerning the good faith certification has been extended from May 14, 2020, to May 18, 2020. If a borrower returns the funds by May 18, the Treasury will not pursue administrative enforcement or make referrals to other agencies (FAQ #47);
  • The Treasury also won’t pursue administrative enforcement or make referrals to other agencies against a borrower with a loan of $2 million or more who didn’t repay the loan by May 18, if the borrower returns the loan after notification by the SBA that it found on audit that the borrower lacked an adequate basis for required certification concerning the necessity of the loan request (FAQ #47);
  • All borrowers who return PPP funds by May 18, 2020, are eligible to claim an Employee Retention Credit (FAQ #45);
  • Partnerships and seasonal employers may be eligible for increased loan amounts resulting from changes in the rules as to how their loans were originally calculated. Lenders may automatically request the SBA increase the loan amount for:
    • Partnerships that received a loan based on payroll costs that did not include compensation paid to partners in their payroll costs. An interim final rule issued on April 14, 2020, now allows self-employment income of general active partners as allowed under the interim final rule posted on April 14, 2020; and
    • Seasonal employers who received a loan based on payroll costs for one of the lookback periods specified in the CARES Act (the 12-week period beginning February 15, 2019, or March 1, 2019, to June 30, 2019) rather than the alternative lookback period adopted by the Treasury Department. Under the alternative rule, seasonal employers may use any consecutive 12-week period between May 1, 2019, and September 15, 2019.

No increased loan amount is available if the lender has already listed the loan on Form SBA 1502 filed with the SBA.

Partnerships and seasonal employers who might be eligible for these increased loan amounts should contact their lenders immediately to ensure they are applying for these increased loan amounts.

The Treasury Department FAQs are available at:

https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Frequently-Asked-Questions.pdf

The interim final rule allowing for increased loans for partnerships and seasonal employers is available at:

https://home.treasury.gov/system/files/136/Interim-Final-Rule-on-Loan-Increases.pdf

Feel free to reach out to discuss this article further or if you have other questions for you or your business. (949) 877-3143 (local) or (800)425-0570 (toll-free) email info@mrarrachecpa.com

More Recovery Disaster Funds Could be here soon for Businesses

/0 Comments/in /by

Additional round of funding could be available this week for Businesses impacted by Covid-19.

Among the items being voted on, there appears to be emergency funding for businesses and front line healthcare responding to the pandemic:

  • $300B – Payment Protection Program
  • $50B – EIDL Economic Injury Disaster Loan
  • $25B – Testing
  • $75B – Hospitals

Congress and the President are expected to finalize the deal this week and funds should be available shortly thereafter.

Speak with your SBA banking advisor soon to start the application process and make sure to take advantage of planning opportunities for the Payment Protection Program (loan forgiveness) and Economic Injury Disaster Loan ($10k grant). Visit the following links for additional information.

-Michael Arrache, CPA, EA