Pandemic Relief Legislation Passed by Congress

Congress has passed additional legislation in response to the COVID-19 pandemic. The pandemic relief legislation passed by Congress is a total of 5,593 pages and contains relief and regulations covering a broad array of agencies, nations, and sectors. Title III of the legislation is referred to as the Economic Aid to Hard-Hit Small Businesses, Non-profits, and Venues Act and it contains updates and additions to the Paycheck Protection Program, among other things. It is important to note that this legislation does not become law until the President signs it. As of last night (December 22, 2020), President Trump indicated that he wants portions of the legislation amended. Here are the highlights of the legislation in its current form so that you are ready in the event the amendments are limited in scope and do not alter the PPP provisions of the new legislation:

PPP loan funds can now be used for additional allowable expenses (Section 304) They include:

  • covered operations expenditures: payment for any business software or cloud computing service that facilitates business operations, product, or service delivery, the processing, payment or tracking of payroll expenses, human resources, sales and billing functions, or accounting or tracking of supplies, inventory, records, and expenses.
  • covered property damage costs: cost related to property damage and vandalism or looting due to public disturbances that occurred during 2020 that was not covered by insurance or other compensation.
  • covered supplier costs: expenditure made by an entity to a supplier of goods for the supply of goods that are essential to the operations of the entity at the time at which the expenditure is made and is made pursuant to a contract, order or purchase order in effect at any time before the covered period or with respect to perishable goods in effect before or at any time during the covered period.
  • covered worker protection expenditures: an operating or a capital expenditure to facilitate the adaption of business activities to comply with requirements established or guidance issued by the DHHS, the CDC, or the OSHA, or any equivalent requirements established or guidance by a State or local government, during the period beginning on March 1, 2020 and ending the date on which the national emergency related to COVID-19 expires related to the maintenance of standards for sanitation, social distancing or any other worker or customer safety requirement related to COVID-19. Expenditures may include: the purchase, maintenance or renovation of assets that create or expand: a drive-thru window facility; an indoor, outdoor or combined air or air pressure ventilation or filtration system; a physical barrier such as a sneeze guard, an expansion of additional indoor, outdoor, or combined business space; an onsite or offsite health screening capability (do not apply to residential or intangible property). PPE is also included in this additional category.

Loans already forgiven are excluded from applying the above new categories retroactively (Section 304(c)(2)). Also, these new expenses are not payroll costs and only 40% of your loan proceeds can be used for these expenditures to be eligible for complete forgiveness.

The duration of the covered period can now be a period of time between the 8 week or 24 week periods previously available. You can select any length of time for your covered period beginning on your loan disbursement date from between 8 weeks and 24 weeks rather than either an 8 week or 24 week period. (Section 306)

A simplified forgiveness application will now be available for those borrowers who borrowed no more than $150,000.00. (Section 307)

Paycheck Protection Program Second Draw Loans will be available. (Section 311) Here is an overview:

  • You must not employ more than 300 employees.
  • You must show a 25% reduction in 2020 gross receipts compared to that of 2019. This will be looked at on a quarterly basis. More details must be given to clarify this requirement.
  • The maximum loan amount is the lesser of $2 million or 2.5 multiplied by your average monthly payroll costs incurred or paid during the 1 year period before the loan is made OR 2019. Special rules apply for seasonal employers and entities that did not exist during the year preceding February 15, 2020.
  • Payroll, interest, rent, operations expenditures, property damage costs, utility payments, supplier costs and covered worker protection expenditures are all eligible for forgiveness. You still must use 60% of the loan proceeds on payroll costs and no more than 40% on nonpayroll costs.
  • A second loan will only be made to those entities that received a prior PPP loan and, on or before the expected date of disbursement of the second loan, has used or will use the full amount of the first loan received.

Rules and guidance will be issued by the SBA concerning Congress has passed additional legislation in response to the COVID-19 pandemic. The pandemic relief legislation passed by Congress is a total of 5,593 pages and contains relief and regulations covering a broad array of agencies, nations, and sectors. Title III of the legislation is referred to as the Economic Aid to Hard-Hit Small Businesses, Non-profits, and Venues Act and it contains updates and additions to the Paycheck Protection Program, among other things. It is important to note that this legislation does not become law until the President signs it. As of last night (December 22, 2020), President Trump indicated that he wants portions of the legislation amended. Here are the highlights of the legislation in its current form so that you are ready in the event the amendments are limited in scope and do not alter the PPP provisions of the new legislation:PPP loan funds can now be used for additional allowable expenses (Section 304) They include:by those borrowers who have not applied for forgiveness and who returned all or part of their loan proceeds so that they can utilize the new provisions of the program. A borrower may re-apply/request a modification of its application to include the amount of loan funds returned or not accepted. (Section 312)

The lawyers of Chehardy Sherman Williams Law Firm stand ready to assist you and your business in connection with this COVID-19 relief legislation. Contact us if you are in need of guidance.

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