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.
Continue reading “American Rescue Plan – Key Provisions Impacting Businesses”
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.