This blog post will provide information regarding the Consolidated Appropriations Act that was enacted into law. More specifically, we address the provisions which affect the Payroll Protection Program, grants which are now available to certain venue operators, and the expansion of the tax deductibility of meal expenses.
Payroll Protection Act
For any entity that has received a loan less than $150,000.00 as part of the Payroll Protection Program (“PPP”), Congress has made it easier to obtain forgiveness of that loan. Specifically, the borrower need only complete a one page application certifying the number of employees retained as a result of the loan, the total loan amount and the amount of the loan spent on payroll. Once completed the borrower is responsible for retaining relevant records related to employment for four years and all other records for three years as the Small Business Administration reserves the right to audit these loans. In addition, Congress enacted a PPP Second Draw Loan, with a maximum amount of $2 Million. In order to qualify, a business must meet the following criteria:
- Demonstrate at least a 25% reduction in gross receipts during either the 1st, 2nd, or 3rd quarter of 2020 relative to the same period in 2019. Applicants may use the 4th quarter of 2020 against the 4th quarter of 2019 if they apply for a PPP Second Draw Loan after January 1, 2021
- Utilize or demonstrate that it has utilized the full amount of the original PPP loan
- Employ fewer than 300 individuals
As part of the Second Draw Loan, businesses may receive 2.5 times the average monthly payroll costs in the one year prior to receiving the loan. Restaurants and all other entities that fall under NAICS Code 72 may apply for 3.5 times their average monthly payroll in the year prior to receiving the loan.
Importantly, the law provides that forgiveness of a PPP loan shall not be treated as income, and that all eligible expenses incurred in respect of a PPP loan may be deducted from gross income. The new law also qualifies software, cloud computing, Personal Protective Equipment (PPE) and non-insured damage due to civil unrest as allowable expenses.
As a reminder, in order to be forgiven, 60% of a PPP loan must be spent on payroll costs and 40% on all other eligible expenses.
Grants for Venue Operators
In addition to expanding the PPP, Congress also authorized $15 Billion for live venue operators, museums, movie theaters and live performing art operators, $2 Billion of which is specifically set aside for entities with fewer than 50 full time employees. The initial grant limit is $10 Million and may only be used for expenses akin to PPP expenses. In the first two weeks, grants will only be awarded to entities who demonstrate a loss of revenue greater than 90% between April 1, 2020 and December 31, 2020 when compared to the same period in 2019. In the successive two weeks, grants will only be awarded to entities who have faced a 70% or greater revenue loss during the same comparison period. Thereafter, grants will be available to all eligible entities.
Increased Tax Deductibility of Meal Expenses
For businesses, it is also important to note that the law now provides that 100% of meals may be tax deductible. In order to qualify for a full tax deduction, food or beverages must be provided by a restaurant and paid or invoiced between January 1, 2021 and December 31, 2022.
If you would like to discuss your specific circumstances and how they may be impacted by the foregoing, please feel free to contact us HERE or by calling us at (212) 625-8505.