PPP Loan

Article Dean Dorton

For over a year, small and midsize employers have been able to claim refundable payroll tax credits that reimburse them for the cost of providing paid sick and family leave to employees related to COVID-19. The Families First Coronavirus Response Act, enacted in March of 2020, required employers with fewer than 500 employees and most governmental employers to provide employees with paid sick and family leave for various COVID-19 related reasons. The requirement to provide this leave expired December 31, 2020. However, under the American Rescue Plan Act of 2021 (ARP), employers that choose to provide leave to eligible employees can continue to claim tax credits for leave taken through and including September 30, 2021.

Under the ARP, employees may receive up to 80 hours of paid sick leave and up to 12 weeks of paid family leave. Employers are entitled to tax credits if they provide employees with paid leave because the employee is unable to work due to any of the following reasons:

  1. The employee is under a federal, state, or local quarantine or isolation order related to COVID-19.
  2. The employee has been advised by a health care provider to self-quarantine due to COVID-19 concerns.
  3. The employee is:
    • Experiencing symptoms of COVID-19 and seeking a medical diagnosis;
    • Seeking or awaiting the results of a diagnostic test for, or a medical diagnosis of, COVID-19 (and the employee has been exposed to COVID-19 or the employer has requested the test or diagnosis); or
    • Obtaining or recovering from the COVID-19 vaccine.
  4. The employee is caring for an individual subject to an order listed in #1 or who has been advised as described in #2.
  5. The employee is caring for a child whose school or place of care is closed, or childcare provider is unavailable, due to COVID-19 precautions.
  6. The employee is accompanying an immediate family member or someone who regularly resides in the employee’s home to obtain the COVID-19 vaccine or caring for such an individual who is recovering from the COVID-19 vaccine.

The pay to which employees are entitled and the employer’s corresponding tax credit vary depending on the reason for leave. Employers must retain records supporting each employee’s leave to substantiate their claim for tax credits.

Other COVID-19 Relief Programs

Other government COVID-19 relief programs have already expired or will expire soon. The Paycheck Protection Program, Restaurant Revitalization Fund, and Shuttered Venue Operators Grant program are now closed to new applications. The employee retention credit (ERC), a refundable payroll tax credit for employers experiencing economic hardship due to COVID-19, is scheduled to expire at the end of 2021. However, the bipartisan infrastructure bill pending in Congress would end the ERC three months early on October 1, 2021. The ERC is claimed on an employer’s payroll tax return, which generally can be amended within three years from the date the return was filed.

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Article Dean Dorton

Repayment of Paycheck Protection Program (PPP) loans will begin this month for early 2020 borrowers that have not yet applied for forgiveness. By submitting a forgiveness application, required principal and interest payments are forestalled until the Small Business Administration (SBA) decides on forgiveness of the loan. If you have not applied, you are not alone as approximately 71% of total PPP loan borrowers have yet to apply for forgiveness.

The earliest PPP loans were issued on April 3, 2020. If a borrower received its PPP loan funds on that date and chose the twenty-four-week covered period, the borrower’s first payment on the loan is due on or about July 17, 2021. A borrower must apply for forgiveness within ten months of the end of its covered period to avoid having to make principal and interest payments on the loan. In addition, if the SBA determines that the loan is not eligible for forgiveness (in whole or in part), the PPP loan is no longer deferred and the borrower must begin paying principal and interest. If this occurs, the lender must notify the borrower of the date the first payment is due.

However, not all is lost if a borrower cannot submit its forgiveness application before the due date of the first payment. While that payment still must be made, once the forgiveness application is submitted and ruled upon, the SBA will direct the lender to repay payments made by the borrower if the amount of the payments is part of the loan forgiveness.

There are three forgiveness applications: Form 3508S, Form 3508EZ, and Form 3508. Form 3508S is for loans of $150,000 or less. Form 3508EZ is for loans of more than $150,000 where the borrower (1) did not reduce the number of employees, or the average paid hours of employees between January 1, 2020 and the end of the covered period and did not reduce the annual salary or hourly wages of any employee (whose annualized salary was $100,000 or less) by more than 25% during the covered period, compared to the most recent full quarter preceding the covered period; or (2) was unable to operate during the covered period at the same level of business activity as before February 15, 2020 due to compliance with government health and safety requirements or guidance issued during specified timeframes. Borrowers unable to use either Form 3508S or Form 3508EZ must use the “long-form” Form 3508.

The Employee Retention Credit (ERC) and Shuttered Venue Operator Grants (SVOG)

Business owners should evaluate whether their business qualifies for the potentially lucrative employee retention credit (ERC). The ERC is a refundable payroll tax credit for eligible employers, calculated as a percentage of qualified wages paid to employees between March 13, 2020 and December 31, 2021. To be eligible, a business must meet one of two criteria during a calendar quarter:

  1. The operation of the business is fully or partially suspended due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings because of COVID-19; or
  2. The employer experiences a significant decline in gross receipts.

To learn more about the ERC, click the button below to access A Guide to the Employee Retention Credit.

A Guide to the Employee Retention Credit

Former President Trump signed the Consolidated Appropriations Act (Act) in late December 2020. The Act authorized over $16 billion for Shuttered Venue Operator Grants (SVOG). SVOG funds are available to eligible entities including promoters and operators of live venues, talent representatives, museums, zoos, aquariums and motion picture theaters. The SVOG must be used for specified expenses, such as payroll costs, rent, utilities, personal protective equipment, insurance payments, and scheduled debt payments. As of June 28, 2021, it appears that approximately $4 billion in funds remained available. You can read more about SVOG here. Also, the SBA has issued detailed guidance on the program.

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Article Dean Dorton

Earlier today (January 8, 2021), the U.S. Small Business Administration (SBA), in consultation with the Treasury Department, announced the Paycheck Protection Program (PPP) will re-open to eligible borrowers next week.

On Monday, January 11, 2021, eligible borrowers may apply for PPP loans under the original First Draw program. Subsequently, on Wednesday, January 13, 2021, the newly established Second Draw PPP loan program will open to eligible borrowers. In an effort to prioritize and direct funds to underserved communities, for the first several days exclusive access for processing applications has been given to community financial institutions with $1 billion or less in assets. The SBA will release further guidance highlighting when other financial institutions may begin participating in the program. As of the time of this article, new and revised PPP loan application forms have not been released, but we anticipate those will be available shortly.

For more information, refer to the U.S. Department of the Treasury press releases found below.

U.S. Department of the Treasury Press Release

Paycheck Protection Progran (PPP) loan forgiveness application and calculation assistance

Dean Dorton offers Paycheck Protection Program (PPP) loan forgiveness application and calculation assistance to businesses. Our dedicated COVID-19 Solutions Team members, who have kept you abreast of all things PPP loan-related, are ready to help. Follow the link below to learn more.

PPP Loan Assistance