On December 27, 2020, the United States government enacted the Consolidated Appropriations Act, 2021 (the “CAA”). As part of the CAA, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (the “Economic Aid Act”) was enacted. The Economic Aid Act contains many vital provisions that may impact you or your business. The Economic Aid Act continued the Paycheck Protection Program (the “PPP”) and other small business support.
Some key take-aways from the CAA include the following:
Expands Eligible Expenses: The Economic Aid Act expands the definition of “additional eligible expenses” related to allowable uses of PPP loans to include:
- covered operations expenditures;
Examples include: payment for any business software or cloud computing service that facilitates business operations, product or service delivery, the processing, payment, or tracking of payroll expenses;
- covered property damage costs;
Examples include: a cost related to property damage and vandalism or looting due to public disturbances that occurred during 2020 that was not covered by insurance or other compensation;
- covered supplier costs;
Examples include: expenditures made by an entity to a supplier of goods for the supply of goods that are essential to the operations of the entity at the time at which the expenditure is made and is made pursuant to a contract, order, or purchase order;
- covered worker protection expenditures;
Examples include: purchase or maintenance of an indoor, outdoor, or combined air or air pressure ventilation or filtration system, an expansion of additional indoor, outdoor, or combined business space, or onsite or offsite health screening capability.
Creates Simplified Forgiveness Application: The Economic Aid Act establishes a simplified forgiveness application process for covered loans that are $150,000 or less made to eligible recipients. This simplified forgiveness application process requires the eligible recipient to sign and submit a certification to the lender that:
- describes the number of employees that the eligible recipient was able to retain as a result of the loan;
- estimates the amount of the loan spent by the eligible recipient on payroll costs; and
- provides the total loan value.
As part of the simplified forgiveness application, the eligible recipient will not need to provide any application or documentation in addition to the certificate and information required to substantiate the forgiveness.
Provides Opportunity for Second Draw Loans of up to $2,000,000: The Economic Aid Act provides for Paycheck Protection Program Second Draw Loans, which are available through March 31, 2021 (the “Second Draw Loans”). The Second Draw Loans are generally governed by the same requirements as the initial PPP loans, which include, but are not limited to: 1) being 100% guaranteed by the Small Business Administration; 2) do not require any collateral or personal guarantees; and 3) have five-year (5) maturity terms. Except as otherwise provided in the Economic Aid Act, “eligible entities” that may qualify for the Second Draw Loans, include, but are not limited to any business concerns, nonprofit organizations, eligible self-employed individuals, sole proprietors, or independent contractors that:
- have 300 or fewer employees; and
- have a twenty-five percent (25%) revenue reduction in one quarter in 2020 as compared to the same quarter in 2019.
However, certain entities are prohibited from being eligible for Second Draw Loans. These entities include, but are not limited to, entities that:
- are a business concern that primarily engaged in political or lobbying activities;
- are any person required to submit a registration statement under Section 2 of the Foreign Agents Registration Act of 1938;
- are entities that have certain ties to the People’s Republic of China or the Special Administrative Region of Hong Kong; or
- retain a person who is a resident of the People’s Republic of China as a member of the board of directors.
Except as otherwise provided by the Economic Aid Act, the maximum amount of a Second Draw Loan is $2,000,000.
New Grants for Eligible Shuttered Venue Operators: The Economic Aid Act also provides funds for grants for eligible shuttered venue operators that include live venue operators or promoters, theatrical producers, or live performing arts organization operators, relevant museum operators, motion picture theatre operators, or talent representatives, so long as certain requirements are met.
Optional Extension of the Credits for Paid Sick and Family Leave: Under the CAA, covered employers have the option, but are not required, to continue to provide Emergency Paid Sick Leave (“EPSL”) and/or Emergency Family and Medical Leave (“EFML”) until March 31, 2021, consistent with the Families First Coronavirus Response Act. The employer may also choose which employees will receive the EFML and EPSL extended benefits. The CAA does not provide employees with any additional paid leave or reset the amount of leave. Rather, it allows an employee who did not exhaust the allotted EFML and EPSL in 2020 to carry over the unused time the employee was originally entitled to use under the Families First Coronavirus Response Act through March 31, 2021. Employers who voluntarily extend EPSL and EFML are eligible for tax credits under the same terms, and subject to the same proof and record-keeping, as the Families First Coronavirus Response Act originally provided.
Extension and Modification of the Employee Retention Credit: Among other changes to the Employee Retention Credit, the CAA extends the tax credit from January 1, 2021 to June 30, 2021. Additionally, it increases the credit percentage from fifty percent (50%) to seventy percent (70%) and increases the amount of employers who may be eligible.
City of Pittsburgh Requires Employers Provide Additional Leave: In addition to the Economic Aid Act, companies with operations or employees working within the City of Pittsburgh should also be aware that on December 9, 2020, Mayor Peduto signed the “Temporary COVID-19 Paid Sick Leave Ordinance,” which was passed by the Pittsburgh City Council the day before (the “Pittsburgh Ordinance”). The Pittsburgh Ordinance places additional requirements on employers of fifty (50) or more employees whose employees are: 1) working from that employer within Pittsburgh after the effective date of the Pittsburgh Ordinance; 2) normally work for the employer within the City of Pittsburgh but are currently teleworking from any other location as a result of COVID-19; or 3) work for the employer from multiple locations or from mobile locations, provided that 51% or more of such employee’s time is spent within the City of Pittsburgh. Under the Pittsburgh Ordinance, covered employers must provide up to eighty (80) hours of paid “COVID-19 Sick Time.” The Pittsburgh Ordinance lists the qualifying reasons an employee may receive “COVID-19 Sick Time.” However, employers that voluntarily extend the EPSL and EFML under the CAA will have satisfied any additional requirements under the Pittsburgh Ordinance, so long as the leave provided coincides with the leave required by the Pittsburgh Ordinance.
If you have any questions about the impact of the Consolidated Appropriations Act, 2021 or the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act on you or your business, please contact your SGK attorney.