The Paycheck Protection Program (PPP) reopened the week of Jan. 11 for new borrowers and certain existing PPP borrowers. Initially only community financial institutions will be able to make First Draw PPP Loans on Jan. 11, and Second Draw PPP Loans on Jan. 13, according to the U.S. Small Business Administration (SBA) and the Treasury Department,. The PPP will open to all participating lenders shortly thereafter. Updated PPP guidance outlining program improvements and changes was released Jan. 6 in accordance with the Economic Aid to Hard-Hit Small Businesses, Non-Profits, and Venues Act.

This round of the PPP helps small businesses and their employees by authorizing up to $284 billion toward job retention and certain other expenses through March 31, and by allowing certain existing PPP borrowers to apply for a Second Draw PPP Loan.

“The historically successful Paycheck Protection Program served as an economic lifeline to millions of small businesses and their employees when they needed it most,” Jovita Carranza, administrator of the Small Business Association, said in an announcement. “Today’s guidance builds on the success of the program and adapts to the changing needs of small business owners by providing targeted relief and a simpler forgiveness process to ensure their path to recovery.”

“The Paycheck Protection Program has successfully provided 5.2 million loans worth $525 billion to America’s small businesses, supporting more than 51 million jobs,” Treasury Secretary Steven T. Mnuchin said in an announcement. “This updated guidance enhances the PPP’s targeted relief to small businesses most impacted by COVID-19. We are committed to implementing this round of PPP quickly to continue supporting American small businesses and their workers.”

Key PPP updates include:

• PPP borrowers can set their PPP loan’s covered period to be any length between 8 and 24 weeks to best meet their business needs

• PPP loans will cover additional expenses, including operations expenditures, property damage costs, supplier costs, and worker protection expenditures

• The program’s eligibility is expanded to include 501(c)(6)s, housing cooperatives, direct marketing organizations, among other types of organizations

• The PPP provides greater flexibility for seasonal employees

• Certain existing PPP borrowers can request to modify their First Draw PPP Loan amount

• Certain existing PPP borrowers are now eligible to apply for a Second Draw PPP Loan

A borrower is generally eligible for a Second Draw PPP Loan if the borrower:

• Previously received a First Draw PPP Loan and will or has used the full amount only for authorized uses

• Has no more than 300 employees

• Can demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020

The new guidance released includes:

• PPP guidance from SBA Administrator Carranza on accessing capital for minority, underserved, veteran, and women-owned business concerns

• Interim final rule on Paycheck Protection Program as amended by Economic Aid Act

• Interim final rule on Second Draw PPP Loans

For more information on SBA’s assistance to small businesses, visit sba.gov/ppp or treasury.gov/cares.

PPP loan expenses deductible

Among the changes to the PPP, the Treasury Department and the Internal Revenue Service issued guidance Jan. 6 allowing deductions for the payments of eligible expenses when such payments would result in the forgiveness of a loan under the Paycheck Protection Program (PPP).

The new guidance, Revenue Ruling 2021-02, reflects changes to law contained in the COVID-related Tax Relief Act of 2020, which was signed into law Dec. 27.

The COVID-related Tax Relief Act of 2020 amended the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) to say that no deduction is denied, no tax attribute is reduced, and no basis increase is denied by reason of the exclusion from gross income of the forgiveness of an eligible recipient’s covered loan. This change applies for taxable years ending after March 27, 2020.

Revenue Ruling 2021-02 obsoletes prior guidance that disallowed deductions for expenses related to the forgiveness of a covered loan.

For more information about this, the COVID-related Tax Relief Act of 2020, and other tax changes, visit IRS.gov.

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