On December 27th, President Trump signed the Consolidated Appropriations Act, 2021 (CAA) into law. One of the larger provisions of this Act made some adjustments to the Paycheck Protection Program (PPP) and created another round of PPP loans for taxpayers who have not already received a loan (First Draw), as well as taxpayers who previously received a PPP loan in 2020 (Second Draw)
Under the CAA, the specifics of the program eligibility requirements for applicants who did not previously receive a PPP loan (First Draw Borrowers) are similar to the requirements for applicants who received a loan in 2020. The applicant must only certify that they were in operation on February 15, 2020 and also attest that “Current Economic Uncertainty makes the loan request necessary to support ongoing operations.” First Draw Borrowers are eligible to receive a loan equal to 2.5 times their average monthly payroll costs. The average monthly payroll costs can be based off the actual annual payroll for 2019 or 2020. First Draw borrowers may apply to have their loan forgiven if they use the loan proceeds to pay eligible payroll costs or other qualified non-payroll expenses during the 8-24 weeks following the disbursement of the loan proceeds.
For borrowers who previously received a PPP loan (Second Draw Borrowers), the eligibility requirements are more restrictive. In order for a Second Draw Borrower to qualify for an additional loan, they must have experienced a reduction in gross revenue (sales) of at least 25% for any one quarter of 2020 compared to the corresponding quarter of 2019. In addition, they will again need to attest that “Current Economic Uncertainty makes the loan request necessary to support ongoing operations.” If a Second Draw Borrower meets these requirement and used or will use the full amount of the original PPP Loan, they are eligible to receive an additional loan. For most taxpayers, this additional loan is again calculated based on 2.5 times the average monthly payroll related costs for 2019 or 2020. Similar to the First Draw Loan, the borrower can apply for forgiveness of the loan if they use the loan proceeds to pay eligible payroll costs or other qualified non-payroll expenses during the 8-24 weeks following the disbursement of the loan proceeds.
If you have further questions or need additional information on this subject, please give us a call in our Celina or Coldwater offices.