Return of the Paycheck Protection Program

The Act reopens the Paycheck Protection Program (PPP) with meaningful revisions and clarifications. Businesses that have not yet received a PPP loan will be able to apply for round one financing. Businesses that have already received a loan but need additional capital may be able to obtain a second loan if they meet the new qualification requirements. Here are the basics:

EXPENSES PAID WITH FORGIVEN PPP LOAN FUNDS ARE DEDUCTIBLE — If the PPP loan is forgiven, the loan is not considered taxable income for the business. However, the Internal Revenue Service had maintained that any expenses paid with those funds could not be deducted on the business’ tax return. This Act explicitly authorizes that expenses paid by PPP proceeds can be deducted on tax returns.

ADDITIONAL EXPENSES THAT AN BE PAID WITH PPP FUNDS — Four new categories of expenses can be paid with unused original PPP funds and second PPP loan proceeds:

Covered operations expenditures, including payment for any software, cloud computing, and other human resources and accounting needs.

Covered property damage costs, including expenses related to property damage and vandalism or looting due to public disturbances that occurred during 2020 not covered by insurance or other compensation.

Covered supplier costs, including expenditures pursuant to a contract for goods in effect prior to the PPP loan and essential to the current operations of the entity.

Covered worker protection expenditures, including expenditures for personal protective and other equipment needed to help a borrower comply with federal health and safety guidelines related to the COVID-19 pandemic.

Payroll expenditures must still comprise 60% of used PPP loan funds and 40% can be used for non-payroll expenses, including the four categories above, mortgage, rent, and utility payments.

EXPANSION OF PAYROLL EXPENSES — Group life insurance, group dis-ability, vision, and/or group dental insurance all count toward payroll expenses.

ECONOMIC INJURY DISASTER LOAD (EIDL) ADVANCES — The$10,000 EIDL advance will no longer reduce the amount of PPP loan forgiveness.

SELECTION OF PPP COVERED PERIOD — The covered period for the PPP loan is used in calculating how much of the PPP loan is forgivable. Initially,the covered period was eight weeks, but was extended to 24 weeks for loans funded on or after June 5, 2020. All PPP borrowers will now have the option of choosing a covered period ranging from eight to 24 weeks, but the period must end by September30, 2021.

SIMPLIFIED FORGIVENESS APPLICATION — PPP borrowers of up to$150,000 seeking forgiveness of their loan simply have to fill out a one-page forgiveness certification with minimal information, including number of employees retained due to the PPP loan, estimated amount of PPP funds spent on payroll expenses, and total loan value. While borrowers have to follow all applicable PPP rules, they do not have to submit any proof. Relevant records must be retained for four years for employment records and three years for all other records.

EXPANSION OF ELIGIBLE BUSINESSES — Organizations that now qualify for PPP loans include nonprofit trade associations, veterans’ organizations, tribal businesses, farmers, ranchers, destination marketing organizations, and media organizations such as newspapers, television, and radio stations previously ineligible due to their affiliation with other stations. Certain organizations are not eligible, such as publicly traded businesses, new organizations not in operation on February 15, 2020, certain financial services industries and foreign organizations, and entities that receive grants under the live venues grant program.

PRIOR PROVISIONS — As a reminder, PPP loans are 100% forgivable if used in accordance with program rules. Repayment may be required if certain rules are not met, such as maintaining the number of employees, stable hours, and wage levels. Proportionate repayment may be required if the employer does not maintain the average number of full-time-equivalent employees or if compensation for any individual making less than $100,000 per year is reduced by more than 25%. However, if reductions in the number of employees or in compensation are restored by a safe-harbor date, reductions will not affect loan forgiveness. The safe-harbor date was changed from December 31, 2020 to September 30, 2021 for borrowers that have not already applied for forgiveness.


To obtain a second draw PPP loan, a business must have received and spent its first PPP loan. Businesses that did not obtain a first loan will be able to do so now. The second draw PPP loans operate very similar to the original PPP loans, but the eligibility criteria are different:

Businesses must have no more than 300 employees (down from the original 500 employees),except for accommodation and food services businesses, which can still have up to 500 employees.

The business must have experienced a drop in revenue of more than 25% in any quarter in 2020compared to the same quarter in 2019. Special rules apply for businesses that were in operation by February 15, 2020 but did not exist for all or some portion of 2019.

The loan amount is still equal to 2.5 times average monthly payroll with a second draw limit of $2 million (down from the original $10 million limit). Businesses in the accommodation and food services industries can receive second draw loans up to 3.5 times their average monthly payroll costs. 

If you would like more information or to discuss your financial concerns