Law

Updated Stimulus Bill Promises Good Things for Small Businesses

December 30, 2020

The updated stimulus bill is thoughtfully addressing small business struggles. Here are the good things employers should know about.

Stimulus Bill Cover Image 2 1

Many individuals are familiar with the ongoing tug-of-war over the proposed stimulus package, and are reluctant spectators in the arena.  In fact, the $900 billion stimulus bill has caused quite a stir, with the sides disagreeing over how much is enough for individual payments.  On the other hand, there are certain improvements to the original bill, including what’s coming down the pike for small businesses.  So, here is an overview of the most noteworthy updates to the benefits approved for small businesses through the updated stimulus bill.

All Things PPP in the Bill

Now, let’s start by taking a look at the myriad of changes the Paycheck Protection Program (PPP) will see.

Renewed PPP Program

First, the updated stimulus bill renewed the PPP program.  Businesses with fewer than 300 employees in each physical location are eligible, as long as they are not one of the following:

  • think tanks, political or lobbying organizations
  • organizations associated with the People’s Republic of China
  • those registered under the Foreign Agents Registration Act
  • those receiving a Shuttered Venue Operator grant
  • publicly held companies

Besides these exclusions, loan applicants will need to prove the following:

  • the pandemic has impacted their business
  • they’ve experienced specific revenue declines
  • they have exhausted the first PPP loan amount received

The type of business and periods of operation determines the loan calculation factors to arrive at a final loan amount, so keep that in mind.

PPP Loan Increase

Second, businesses who already have a PPP loan may be eligible to apply for an increase in the loan amount.

Forgiveness

Third, there are three noteworthy updates regarding PPP loan forgiveness:

  1. There are more expenses that are considered “forgivable.”
  2. The process for forgiving PPP loans is simpler.
  3. Businesses can now deduct their PPP forgiveness expenses.

Grants and the PPP

It used to be that businesses couldn’t double-dip, so to speak, with multiple government programs.  The good news is that now businesses can apply for—and potentially receive—funds from both the Economic Injury Development Loans (EIDL) program and the PPP.

Clarity for Industries in the Bill

There has been a bit of confusion in knowing exactly what goes for certain industries since the onset of the pandemic.  So…

For seasonal employers…

You now have a clearer definition of what determines seasonal employer status, eligibility for PPP loans, and forgiveness.

For the Arts industry…

You may be eligible to receive a grant through the Shuttered Venue Operator Grant Program.

For minority owned businesses…

You could receive funding specifically allocated to businesses with your circumstances.  This also applies to and other businesses located in “Low to Moderate Income Areas.” This is because there are funds set aside from the total stimulus package to serve the purpose of supporting underprivileged areas.

If you fall under any of the aforementioned categories, then you need only reach out to your lending institution to find out eligibility and how to apply.

Related:  Freedom of Speech and Job Safety during Protests

Improved Loans and Tax Breaks in the Bill

As the updated stimulus bill zeroes in on certain industries, the SBA Loans available to them and the tax implications are also being revamped. 

Hence, here are some of the highlights:

  • Microloan forgiveness amounts have increased for hard-hit industries.
  • The Employee Retention Tax Credit is broader than it was before, and available through 2026.
  • Employers can now defer their portion of social security taxes through March 2021. They can also prolong repayment through December of 2022.
  • The increased meal deduction (100% deductible) provides a double-whammy benefit to taxpayers and restaurants.
  • The special $300 charitable donations tax deduction benefits both nonprofit organizations and taxpayers.  Specifically, non-itemizers can take a deduction for their charitable donations up to $300 for individuals. Thus, those filing jointly can take a $600 deduction.  Therefore, this means nonprofits will likely see an increase in donations.

Updated Stimulus Bill Offers Hope

Obviously, the goal of the updated stimulus bill is to help small businesses remain operating through the challenges our country is facing.  Many of these updates are not static—they result in a cascade effect, with one change overflowing into another area, offering benefits to all in its wake.  In fact, we can see evidence of thoughtfulness in the updates to the PPP, clarity for industries, and improved loans and tax breaks.  So, if small businesses have a chance to take a breather, review some of the benefits available to them, and apply for the programs for which they are eligible, this could offer them a hopeful 2021.

Bullet Point Breakdown:

PPP 2nd Round

  • The loan size will be based on 2.5X monthly payroll, except those in NAICS code 72 (Accommodations and Food Service), such as restaurants and hotels. Those industries will be eligible for up to 3.5X monthly payroll wages.
  • If you did not take a PPP loan in 2020, you can apply for one in this 2nd round
    • If you have <500 Employees
  • If you took a PPP loan in the 1st round in can apply for another one in this 2nd round.
    • Regardless if it was forgiven or not
    • If you have <300 Employees
    • If you had a 25% reduction in gross revenue between comparable quarters in 2019 to 2020

FFCRA Changes

  • Expiration: 3/31/21 (was 12/31/20)
  • Eligibility rules have not changed
    • EPSL-Self (sick or self quarantined)
    • EPSL-Other (caring for someone that is sick or self quarantined)
    • EFMLA (sick, caring for someone that is sick, quarantined or home due to closure)
      • <500 Employees
      • No 1099
  • Limits have not changed
    • $200 / Day for 10 days of EPSL-Other and EFMLA
    • $511 / for 10 days for EPSL-Self
    • $200 / day for 10 weeks for EFMLA
  • Limits are not annual, but from 1/1/2020 to 3/31/2021
    • Not a new FFCRA, just an extension of the previous one
  • Required?
    • In 2020 it was required for employers to offer FFCRA pay
    • In 2021 it is NOT required for employers to offer FFCRA Pay
  • 2020 Priors
    • For new clients in 2021
    • We will need EPSL-Self, EPSL-Other and EFMLA wages for 2020 to track 2021 limits correctly
    • We limit wages, not hours so make sure you enter both hours and wages for priors
Related:  Final Annual Overtime Rules

ERC Changes

  • Retroactive Retention Credits
    • If you took PPP money (forgiven or not), you can also take ERC retroactive for 2020
      • This was NOT allowed in 2020
    • For wages not applied to PPP loan forgiveness
    • Processing retroactive starting in February, normal correction fee apply
  • 2020 Rule
    • 50% less gross receipts for same quarter in 2019
    • or gov required full / partial shut down
  • 2021 Rule
    • 20% reduction in gross receipts for same quarter in 2019
    • or gov required full / partial shut down
  • Date Range
    • Was 3/12/2020 to 1/1/2021
    • Now is 3/21/2020 to 7/1/2021
  • Credit Limit
    • Was 50% of the first $10k per year in qualified wages
    • Now is 70% of the first $10k per quarter in qualified wages
  • Large Employer Rule
    • If you are a large employer, you can only claim wages for employees working
      • you cannot claim wages for employees you are paying, that are not working
    • 2020, Large Employer Limit was 100 employees
    • 2021 Large Employer Limit is 500 employees

It is critical to have a trusted CPA, Banker, and Payroll Provider during times like this. If you need a recommendation to a trusted CPA or Banker, please let us know. Our Journey team will work with them to relieve as much pressure off you as possible. We know many great professionals and can pair you up with someone who focuses on your industry and size. As for your payroll, we have your back! More information will be coming out, though please let us know if you have any questions.

Photo of a hand reaching out to a backdrop of a body of water with trees surrounding it.


Subscribe to our newsletter

Get the latest from the world of payroll & HR delivered straight to your inbox!

Thanks for your interest!