Knowledge and Insights

PPP2 is Here – What You Need to Know

On Monday, December 21st, the U.S. Senate and House of Representatives passed a $900 billion COVID-19 relief bill, called the Consolidated Appropriations Act, that provides $600 stimulus payments to individuals, adds $300 to extended weekly unemployment benefits, and provides more than $300 billion in relief funding for small businesses as a supplement to the original funding made available through the CARES Act Paycheck Protection Program (PPP) earlier this year. The bill received executive approval and was made official on Sunday, December 27th.

In addition, the Act guarantees tax deductibility for business expenses paid with forgiven PPP loans, allows Sec. 501(c)(6) not-for-profit organizations to be eligible for loans for the first time during the pandemic, and grants businesses the opportunity to apply for a second loan to combat critical revenue reductions.

Below is a breakdown of how the $900 billion will be allocated:

  • $325 billion in aid for small businesses struggling after nine months of pandemic-induced economic hardships.
  • $166 billion for stimulus payments of $600 for individuals making up to $75,000 per year and $1,200 for married couples making up to $150,000 per year, as well as a $600 payment for each child dependent.
  • $120 billion to give those receiving unemployment benefits a $300 per week supplement from December 26, 2020 until March 14, 2021.
  • $25 billion in emergency rental aid and an extension of the national eviction moratorium through Jan. 31, 2021
  • $45 billion in transportation funding, including $16 billion for airlines, $14 billion for transit systems, $10 billion for state highways, $2 billion each for airports and city buses, and $1 billion for Amtrak Railroads.
  • $82 billion in funding for colleges and schools, including support for HVAC repair and replacement to diminish virus spread.
  • $22 billion for health-related expenses incurred by state, local, tribal, and territorial governments.
  • $13 billion for emergency food assistance, including a 15% increase for six months in Supplemental Nutrition Assistance Program benefits.
  • $10 billion in childcare assistance.
  • $7 billion for broadband internet expansion.

Additionally, the employee retention tax credit and several other tax provisions will be extended. The current 50% business expense deduction for meals will momentarily increase to 100%, on the condition that the expense is for food or beverages provided by a restaurant. This will be effective for such expenses incurred after December 31, 2020 and expire at the end of 2022.

New Eligibility Requirements

The small business loans will be available to first-time qualified borrowers as well as businesses that previously received a loan from the first round of the Paycheck Protection Program. Businesses that received a first round PPP loan are eligible to apply for another loan of up to $2 million, given they:

  • Have 300 or fewer employees
  • Have used or will use the full amount of their first PPP loan
  • Can show a 25% gross revenue decline in any 2020 quarter compared with the same quarter in 2019

Sec. 501(c)(6) business leagues, such as chambers of commerce, visitors’ bureaus, etc., and “destination marketing organizations” (as described in the act), with 300 or fewer employees are eligible to apply for a forgivable loan if their organization does not receive more than 15% of receipts from lobbying. Lobbying activities cannot comprise of more than 15% of the organization’s total activities and cost no more than $1 million during the most recent tax year that ended prior to February 15, 2020.

PPP2 also permits first-time borrowers from the following groups:

  • Businesses with 500 or fewer employees that are eligible for other SBA 7(a) loans.
  • Sole proprietors, independent contractors, and eligible self-employed individuals.
  • Not-for-profits, including churches.
  • Accommodation and food services operations with fewer than 300 employees per physical location.

Borrowers that returned all or part of a previous PPP loan will be allowed to reapply for the maximum loan amount available to them.

Loan Terms

Similar to the first round of PPP loans, the expenses eligible for forgiveness in PPP2 include payroll, rent, covered mortgage interest, and utilities. Borrowers must spend no less than 60% of the funds on payroll costs over a covered period of either 8 or 24 weeks to qualify for full loan forgiveness. PPE expenses, outdoor dining costs and supplier costs have been added as eligible expenses for forgiveness as well.

Borrowers may receive a loan amount of up to 2.5 times their average monthly payroll costs in the year prior to the loan or the calendar year, however, the maximum loan amount has been cut to $2 million in the second round as opposed to the $10 million maximum in the first round. Restaurants and hospitality businesses can receive a larger loan amount of 3.5 times average monthly payroll.

Additional Provisions

The Consolidated Appropriations Act also:

  • Creates a simplified forgiveness application process for loans of $150,000 or less.
  • Repeals the requirement that PPP borrowers deduct the amount of any EIDL advance from their PPP forgiveness amount.
  • Includes set-aside amounts to support first- and second-time PPP borrowers with 10 or fewer employees, first-time PPP borrowers that have recently been made eligible, and for loans made by community lenders.

Tax Deductions & Extensions

The bill also includes the COVID-Related Tax Relief Act of 2020 (COVIDTRA), which contains numerous tax-related provisions as well as the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (TCDTR), which allows extensions of numerous expiring tax provisions.  Check out our article Tax Impacts of the New COVID Relief Bill to read our summary of the tax-related provisions.

Since the beginning of the COVID-19 pandemic, Mercadien’s COVID Consulting Team has assisted numerous clients with their PPP loan and forgiveness applications and calculations. We stand ready to serve as a resource to guide your organization through the process of securing a loan through this new round of funding and are prepared to answer any questions you may have relating to PPP1 or PPP2. Additionally, we offer other services to help your organization manage through the pandemic, including cash flow projections and analysis, cost allocation plan development, budget review and implementation, along with other business advisory services. Contact me at or 609-689-2360 to discuss how we can help your organization.

DISCLAIMER: This advisory resource is for general information purposes only. It does not constitute business or tax advice and may not be used and relied upon as a substitute for business or tax advice regarding a specific issue or problem. Advice should be obtained from a qualified accountant, tax practitioner or attorney licensed to practice in the jurisdiction where that advice is sought.