This week, President Biden signed the $1.9 Trillion American Rescue Plan. This is the third major stimulus package passed by the Federal Government in response to the COVID-19 pandemic. While there has been much discussion about relief to individuals including a new round of $1400 stimulus checks & unemployment benefit extensions as well as increased funding for vaccine purchase & distribution, this blog post will focus on the relief programs impacting businesses including the creation of the Restaurant Revitalization Fund, expansions and changes to the PPP & EIDL loan programs, and expansions and changes to the Employee Retention Tax Credit Program. The full text of the law can be found here.
Restaurant Revitalization Fund
Edit: An updated post specific to the Restaurant Revitalization Fund & how to prepare for an application can be found here.
Restaurants, bars, & other elligible entities will be elligible to apply for a grant equal to 2019 revenue minus 2020 revenue minus PPP loans already received.
Businesses that opened in 2019 will determine their amount of grant eligibility by multiplying their average monthly gross revenue in 2019 by 12.
Businesses that opened in 2020 that experienced operating losses will be elligible for a grant under a similar formula that covers losses incurred.
Businesses that have not yet opened but that have already incurred payroll costs will be elligible for a grant that covers those expenses.
*Note: Formulas for determining grant eligibility for all three above categories may be modified via SBA guidance.
The Paycheck Protection Program has been one of the most visible programs inside the US Government’s response to the pandemic. The overall goal of the program was to get loans to small businesses to help them keep their staff employed as we entered the unknown waters of a pandemic economy. If these small businesses kept their staffs employed, these loans would be forgiven, and the loans would essentially convert into grants. There was recently a change to how much funding a small business would qualify for, and this change will have a dramatic impact on the smallest businesses who were previously either left out of the program or only qualified for a nominal amount of funds.
These changes revolve around people who report their business income using a Schedule C on their tax return. Schedule Cs are typically used for sole proprietors (fancy way of saying people who do business in their personal name with no formal entity like a LLC or corporation), but some LLCs also use Schedule Cs. Up until this point, these businesses would determine the amount of a loan they qualified for by combining the annual payroll costs of any employees with the net profit of the business. These two figures formed the basis of the calculation, and the idea was that these figures would represent the combined compensation paid the employees and the owner.
The unintended consequence of how the program was initially setup is that many of the smallest businesses operate at essentially a breakeven where income is nearly entirely offset by expenses. Due to this, the “owners” portion (net profit) could be very low or $0 which caused their PPP loan amount to go down. With the new changes, the “owner” compensation portion of the calculation has been switched from using the net profit to the gross profit. This change will dramatically impact the amount of PPP funds a small business can qualify for as well as even allowing some businesses with a negative net profit to receive PPP funds when previously they did not qualify at all.
These changes became effective on March 5th, and they will be in place through the end of the program on March 31st. This can have a massive impact on some of the smallest businesses in our community. Businesses that use Schedule Cs range from popup stands at the farmers market to businesses on Front Street. This group of businesses provide much of the vitality that makes Mankato special; so let’s get the word out so these businesses survive!
At Pioneer Bank, we have funded over 1,350 PPP loans for our community with a median loan size of $20,000. Most banks have access to this program, but anyone can feel free to send any questions to Clay Sharkey.
Capacity for private social celebrations & events (including but not limited to weddings, funerals, life milestones, family reunions, religious services, and other similar occassions) occurring at venues involving the consumption of food or alcohol has increased from 10 indoor & 15 outdoor to 50.
Maximum capacity of indoor and outdoor space for restaurants, bars, gyms, & venues providing entertainment expanded from 150 to 250.
Facilities allowing food and beverage consumption are allowed to remain open until 11:00 pm rather than 10:00 pm
The following blog post was contributed by Abdo, Eick & Meyers, LLP to assist businesses in understanding how recent federal legislation has changed criteria related to the Paycheck Protection Program (PPP) and the Employee Retention Credit (ERC).
The COVID Tax Relief Act (COVIDTRA) that was passed late December made drastic changes to the Paycheck Protection Program (PPP) and the Employee Retention Credit (ERC) for both 2020 and 2021. The most critical changes for eligible employers include:
Qualifying expenses paid with PPP funds are now deductible for federal income tax purposes, however, we are still waiting on guidance from most state legislatures regarding state deductibility. This change officially means that PPP loans and their forgiveness will not be subject to federal income tax.
Employers may now be eligible for the Employee Retention Credit (ERC). Previously, organizations which received a PPP loan were ineligible to claim the ERC. That requirement has been removed and the credit has been extended through the first six months of 2021. To employers that are eligible, the ERC may provide up to a $7,000 per employee tax credit per quarter.
The SBA announced they will begin accepting applications for new PPP loans from limited borrowers beginning January 15, 2021. Minority and women-owned businesses will be able to borrow first-time PPP loans initially, followed by minority and women-owned businesses requesting a second-time loan.
The COVIDTRA legislation is good news for many employers. There are several critical planning considerations to discuss with your tax advisor to maximize your credit eligibility and avoid missing out on significant funding. Key decisions that should be discussed include:
Applying for a first-time or second-time PPP loan.
Applying for 1st round PPP loan forgiveness if your organization experienced a partial or complete operational shutdown or a significant reduction in 2020 gross receipts.
Electing to take the Employee Retention Credit for 2020 or 2021.
There are still many unanswered questions about the PPP and ERC that we expect to receive further guidance on from the IRS in the coming weeks. Additionally, are a few strategies to consider when determining if PPP, ERC or both are right for your specific situation. Be sure to contact your tax advisor to discuss your organization’s relief options and ensure that you don’t miss significant tax credits and funding opportunities.
About Abdo, Eick & Meyers, LLP
Abdo, Eick & Meyers is a progressive CPA firm that leverages its “People + Process” by partnering with businesses to increase value, helping government audit clients operate more efficiently, and providing the very best in tax planning and preparation services. Established in 1963 in Mankato, Minnesota, the firm has evolved into a mid-sized leader in the regional accounting industry through a combination of steady organic growth and key mergers and acquisitions. Since its earliest days, the firm has carefully listened to its clients and then developed new areas of expertise and service lines to meet their needs. Learn more at www.aemcpas.com.
The Minnesota Legislature and Governor have passed legislation authorizing funding to Minnesota counties for relief grants to local businesses and nonprofits impacted by an executive order related to the COVID-19 pandemic.
Small businesses and nonprofits in Nicollet County impacted by COVID-19 can apply to receive grants to help with expenses incurred during the pandemic.
Grant awards will be provided to eligible businesses and nonprofits that have been adversely impacted by a Minnesota Governor executive order related to the COVID-19 pandemic.
Applicants must also have experienced a financial hardship as a result of the public health emergency. Grant awards will be up to $10,000 based on eligibility.
Grant applications and IRS Form W9 must be emailed to email@example.com or left in the Nicollet County Government Center drop box located on Mulberry St. in St. Peter by 4:30 p.m. on February 5, 2021.
Effective Friday, December 18, 2020 at 11:59 pm, through Sunday, January 10, 2021 at 11:59 pm, the Governor has extended the provisions of Executive Order 20-99, with some modifications published in executive order 20-103. The order calls for the following changes or extension of measures related to businesses, educational institutions and social gatherings:
Social Gatheringswill be limited to a maximum of 10 people (two households) while indoors with masks worn at-all-times. Indoor gatherings are discouraged. Outdoor social gatherings are limited to three families and 15 people outside.
Indoor entertainment, restaurants, bars and establishments will remain closed through January 11, 2021.
Outdoor entertainment will be allowed at 25% capacity, up to 100 people at a time. If food and drink are served, people must be seated.
Gyms and fitness studios will re-open at 25% capacity with no group fitness classes, pool activity or use of showers. Masks must be worn at-all-times with social distancing of 12 feet at gyms.
Youth sports will resume practices on January 4.
Elementary schools (K-5) can conditionally open to in-person learning starting on January 18, 2021. It is the Governor’s goal to get back to in-person learning and the state will purchase PPE for schools, teachers, etc.
Outdoor dining allowed at 50% capacity, up to 100 people, seated only, only 4 per party/table. 50% of the walls must remain open for airflow. Food trucks fine but people must sit down to eat.
The Minnesota legislature has passed a business assistance package in response to COVID-19 impacts which includes approximately $217 million to the General Fund in FY21 and about $25 million in FY22. Its provisions include three business relief components:
Greater Mankato Growth has partnered with the Minnesota Ready Coalition lead by the Minnesota Chamber of Commerce to call on Governor Tim Walz to provide immediate support to those businesses and their employees most impacted by the issuance ofExecutive Order 20-99. Greater Mankato Growth joined 90 partner chambers and associations across the state in sending theGovernor a letterthis weekregarding the urgency in supporting these businesses/organizations. Our organization continues to follow and educate members on proposed relief plans and take action to support local businesses through a variety of initiatives.Continue reading “Greater Mankato Growth Signs on to Minnesota Ready Coalition Letter”→
Update: Details of the final relief bill have not yet been announced. A special session is expected to take place on December 14, 2020 and state leaders are optimistic that legislators will be able to work out an agreement by that time.
MN State Government leaders announced two proposed relief packages for businesses and individuals who have been impacted by the recent shutdown and COVID-19 in general. Legislators are still working through the details of both packages with a final relief package expected to be released on December 1. Greater Mankato Growth will share additional information as soon as it becomes available.
Here’s what we know about the Governor’s proposed package:
Direct relief through the Minnesota Department of Revenue is planned for all 14,000 businesses affected by the shutdown.
Details on this are not specific, but Governor Walz referenced direct payments to businesses and waiver of regulatory fees. Governor Walz also called for a moratorium on eviction for small businesses.
Extension of unemployment benefits by 13 weeks to individuals who have been on long-term unemployment.
Direct payments of $500 to families receiving MFIP or DWP benefits.
A one time grant is being proposed for restaurants to supply healthcare workers, homeless shelters, and long-term care facilities.
Proposed tax credit for businesses that donate food that would otherwise spoil or be thrown away.