Year-end stimulus legislation provides PPP enhancements, other COVID-19 relief

The Consolidated Appropriations Act, 2021, was a large year-end appropriations bill containing COVID-19-related stimulus and relief provisions in several key areas, including the Paycheck Protection Program (PPP), paid leave tax credits, unemployment benefits, and the Provider Relief Fund (PRF). Here are the key highlights.

PPP provisions

The legislation, which Congress passed and President Donald Trump signed in December 2020, contains several provisions affecting the PPP loan program, which was established in March 2020 under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, including:

Allowing PPP borrowers to deduct expenses paid with PPP funds. The provision reverses the position taken by the IRS earlier in 2020 and allows PPP borrowers to claim a federal income tax deduction for expenses paid with the proceeds of a PPP loan, even if the loan has been (or will be) forgiven. (Expenses must otherwise be deductible under general standards for claiming business expense deductions.)

Providing a second round of PPP loans for businesses hit hardest by COVID-19. Eligibility for the “second draw” loan program is limited to businesses with 300 or fewer employees that sustained a 25% revenue loss in any quarter of 2020 relative to the same quarter in 2019. The maximum loan amount is the lesser of $2 million or 2.5 times average monthly payroll in the previous year.