Business & Tech
PPP And Other Stimulus Virtual Program – Jan 28, 2021: Zoom Virtual Presentation With Notes And Links To Frequently Asked Questions
A special virtual briefing was held via ZOOM on the Paycheck Protection Plan (PPP) Jan. 28, by Dale Gillmore and Ron Niekro.
Published Friday, January 29, 2021 by Bill Russell
Special Briefing: PPP and Other Stimulus Virtual Program – Jan 28, 2021
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A special virtual briefing was held via ZOOM on the Paycheck Protection Plan (PPP) Jan 28th. Presented by Dale Gillmore and Ron Niekro of QUEST. It included updates on forgiveness and tax implications status and eligibility of 2nd Draw Loans, availability and changes to employee retention tax credits and highlights of other federal stimulus
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Other useful links
Link to get ERC benefit calculation in 60 seconds: https://www.GMG.me/332024
PPP round 2
Shuttered venue grant
Employee retention credit guidelines, link to IRS forms to process, and calculator provided
https://www.irs.gov/coronavirus/employee-retention-credit
Qualification for 2nd Draw Loans:
Companies that received a PPP loan and that want to apply for the 2nd Draw Loans must:
o Employ 300 or fewer employees
o Attest it has used or will use on or before the expected date of the disbursement of the 2nd Draw Loan the full amount of the first PPP loan, and
o Have at least at 25% reduction in gross receipts comparing 1st, 2nd, 3rd or 4th quarter of 2020 to same quarter in 2019
The amount of the 2nd Draw Loans will be the greater of:
o 2.5 times average monthly payroll costs, or
o $2,000,000
The average monthly payroll costs can be based on 2019 payroll or the 1 year period before the date the loan is made. Expectation for most is that 2019 will be the greater number. And if you operate a business in the industry with a sic code beginning with 72 (accommodation and food services) then you can get 3.5 times the average monthly payroll costs, still subject to $2 million cap.
Qualifying Expenses for Forgiveness:
The main change to prior rules here is that the following additional nonpayroll costs are eligible:
o Covered operations expenditures
o Covered property damage cost
o Covered supplier cost
o Covered worker protection expenditure
Details can be provided for the above, but the above costs plus the previous payroll costs (gross wages up to a cap, health insurance, retirement, etc and state unemployment taxes) and non-payroll costs (rent, utilities and interest).
Summary of Employee Retention Credit:
CARES Act
Consolidated Appropriations Act, 2021
Time Period Credit is Available
Qualified wages paid after March 12, 2020, and before January 1, 2021.
Qualified wages paid after March 12, 2020, and before July 1, 2021 (now available in the first two quarters of 2021).
Eligibility Requirements
Businesses with operations that were either fully or partially suspended by a COVID-19 governmental order and only during the period the order is in force; or
Gross receipts were less than 50% of gross receipts for the same quarter in 2019 until such quarter as gross receipts are 80% of same quarter in 2019.
Businesses that were not in existence in 2019 could use a comparison to 2020 for purposes of the credit.
Beginning January 1, 2021, the credit will be available to businesses with operations that are either fully or partially suspended by a COVID-19 governmental order and only during the period the order is in force; or
Gross receipts are less than 80% of gross receipts for the same quarter in 2019.
Businesses that were not in existence in 2019 may use a comparison to 2020 for purposes of the credit.
Percentage of Wages
The credit was 50% of the qualified wages paid to an employee, plus the cost to continue providing health benefits to the employee.
Beginning January 1, 2021, the credit is 70% of qualified wages, plus the cost to continue providing health benefits to the employee.
Maximum Credit Amount
Annual cap of $5,000 per employee ($10,000 in qualified wages x 50%).
Beginning January 1, 2021, the cap is increased to $7,000 per employee for each of the first two quarters of 2021 ($10,000 in qualified wages x 70%) for a possible $14,000 credit per employee.
The 2021 credit is available even if the employer received the $5,000 maximum credit for wages paid to such employee in 2020.
Employer Size for Whether an Employee is Working or Not:
A company with more than 100 employees could not take the credit for wages paid to an employee performing services for the employer (either teleworking, or working at the workplace, even though at reduced capacity due to reduction in business).
A company with 100 or fewer employees was eligible for the credit, even if the employee was working.
Beginning January 1, 2021, the threshold increases to 500.
An employer with 500 or fewer employees will be eligible for the credit, even if employees are working.
When calculating the 500-employee threshold, the employees of all affiliated companies sharing more the 50% common ownership are aggregated.
PPP Loan Interplay
REPEALED – A company that received a Paycheck Protection Program (PPP) loan was ineligible to claim the employee retention credit.
This disallowance rule extended to all affiliated companies that shared common ownership, so that if one company received a PPP loan, any other company with more than 50% common ownership was ineligible to claim the credit.
This change is retroactive to the effective date under the original law for wages paid after March 12, 2020.
A company that received or receives a PPP loan is no longer prohibited from claiming the employee retention tax credit.
The credit, however, may not be claimed for wages paid with the proceeds of a PPP loan that have been forgiven.
A company that received a PPP loan in 2020 and paid qualified wages in excess of the amount of the forgiven PPP loan used to pay wages, and is otherwise eligible to claim the credit, can claim the credit retroactively. The IRS is expected to issue guidance on how to claim the credit retroactively.
Companies related to a PPP borrower that did not claim the credit because of the affiliation rules should be able to claim the credit retroactively, if they are otherwise eligible for the credit.
Advance Payments
In 2020, there was no provision to receive the credit before qualified wages were paid.
The IRS is expected to draft guidance to allow an advance payment of the credit for companies with 500 or fewer employees, based on 70% of average quarterly payroll for the same quarter in 2019.
If the amount of the actual credit determined at the end of the quarter is less than the amount of the advance payment, the company will need to repay the excess.
Limitation on Hazard Pay
No credit for pay rate increases.
Under the new law, the credit is allowed for hazardous duty pay increases.
Disallowance of Credit for Governmental Entities
The employee retention credit was not available to any federal, state, or local governments, or any agency or instrumentality thereof.
Effective January 1, 2021, the following entities are eligible for the credit:
·Public colleges or universities
·Organizations whose principal purpose is providing medical or hospital care
·Certain Federal instrumentalities, such as federal credit unions
Definition of Gross Receipts for Tax Exempt Entities
No definition of gross receipts as applicable to tax exempt entities was included.
The new law defines gross receipts for tax exempt entities by reference to Section 6033 of the Internal Revenue Code.
Gross receipts include the following: contributions, gifts, grants, dues or assessments, sales or receipts from unrelated business activities, sale of assets, and investment income (e.g., interest, dividends, rents, and royalties).
Gross receipts are not reduced for any associated costs or expenses.
This press release was produced by the Lake Norman Chamber of Commerce. The views expressed are the author's own.