Hotels and restaurants to obtain larger PPP loans
The second round of Paycheck Protection Program (PPP) loans promulgated in law just after Christmas will provide higher amounts to companies in the accommodation and food industries – one of many business-friendly changes to the program, analysts said in a report. Accounting Podcast Today.
Much of the attention on PPP-2, as the new cycle is called, is on the deductibility of business expenses paid using the proceeds of the loan program. The new stimulus law clarified that, even for the canceled amounts, you can deduct your business expenses paid in PPP from your federal taxes. The clarification was needed because the IRS last year ruled the deduction would have constituted a double tax advantage and would have refused it.
The federal government created PPP-2 as part of the $ 900 billion stimulus bill enacted on December 27. The $ 228 billion program allows businesses that received a first-round loan to make a second draw if they can show their gross revenues have fallen 25% or more, year-over-year, for at at least one quarter in 2020.
In the key change, companies operating in the hard-hit accommodation and food industries, as defined in section 72 of the North American Industry Classification System code (NAICS), can apply for a loan up to 3.5 times their monthly salary costs. In last year’s version, they could only claim up to 2.5 times their costs. The maximum loan amount is capped at $ 2 million and businesses are limited to 300 employees or less.
“This is great news for those who were eligible and were able to get loans in the first round of the program,” said Lisa Simpson, director of business services for the American Institute of CPA.
Simpson also said these companies can apply for funds to offset any amount that was reduced to them under the old, more restrictive rules.
“You can correct your loan amount if your loan amount was underfunded and you could have gotten a bigger loan because of the change in leadership,” she said.
Other types of businesses can apply for a second round of PPP-2 funds if they can show the same 25% drop in gross revenue, but they are limited to the payday loan amount of 2.5 times. .
The $ 284 billion earmarked for PPP-2 includes several exclusions, including $ 35 billion for companies that did not apply in the first round and $ 15 billion for companies with 10 or fewer employees.
To help more organizations this time around, the program is expanding eligibility to 501 (c) (6) nonprofits – typically trade associations and chambers of commerce as opposed to charities – and charities. hurry.
As before, at least 60% of the proceeds must be used to cover salary costs and the remaining 40% for rent or mortgage payments and utilities.
PPP-2 expands these additional eligible expenses to include cloud computing and other operational costs, supplies that the organization considers essential to its operation, and employee PPE.
Businesses damaged or vandalized as a result of civil unrest may also cover their uninsured repair costs.
The Small Business Administration (SBA), which administers the program, is expected to have guidance on his website starting this week and application forms available by the end of next week, said Erik Asgeirsson, president and CEO of CPA.com, AICPA’s interactive web portal, during the webcast.
“It will be a busy start to 2021,” he said.
The funding cycle ends on March 31, so applicants wishing to leverage PPP-2 only have the first quarter to submit their form. But the process should be smoother than last year.
“If we look back to April 2020, there was a huge lack of understanding of the PPP program, and there were all kinds of system issues to activate the platforms,” Asgeirsson said. “Eight months later, we actually have a pretty good understanding of what the PPP framework is.”