ppp second draw issuesppp second draw issues

A Rule by the Small Business Administration on 01/14/2021. ), that has more than one physical location and that employs not more than 300 employees per physical location is eligible to receive a Second Draw PPP Loan if it meets the eligibility criteria in subsection (c)(1) and: (1) Is majority owned or controlled by a business concern that is assigned a NAICS code beginning with 511110 or 5151 or, with respect to a public broadcasting entity (as defined in section 397(11) of the Communications Act of 1934 (47 U.S.C. (ii) If the applicant is self-employed and has employees, the applicant's 2019 or 2020 (whichever was used to calculate loan amount) IRS Form 1040 Schedule C, Form 941 (or other tax forms or equivalent payroll processor records containing similar information) and state quarterly wage unemployment insurance tax reporting forms from each quarter in 2019 or 2020 (whichever was used to calculate loan amount), as applicable, or equivalent payroll processor records, along with evidence of any retirement and employee group health, life, disability, vision and dental insurance contributions, if applicable, must be provided. Which program provides small businesses with funds in pay up to 8 weeks of payroll costs including benefits. Borrowers that need assistance or have questions should call (877) 552-2692, Monday - Friday, 8 a.m. - 8 p.m. EST. publication in the future. Moreover, this approach is appropriate because, if annual filings show a 25 percent revenue reduction, then at least one quarter in 2020 would have had at least a 25 percent revenue reduction. Key insights. Subsection (c)(2) of the IFR defines gross receipts consistent with the definition of receipts in 13 CFR 121.104 of SBA's size regulations because this definition appropriately captures the type of income that is typically included in a small business's gross receipts. The biggest difference between the First Draw and Second Draw PPP option is the eligibility and some of the terms. Comment Date: Comments must be received on or before February 16, 2021. (v) For the purpose of determining whether a person has a controlling interest in the entity, the securities owned, controlled, or held by the President, the Vice President, the head of an Executive department, or a Member of Congress, shall be aggregated with the securities held by his or her spouse as determined under applicable common law; (7) any issuer, the securities of which are listed on an exchange registered as a national securities exchange under section 6 of the Securities Exchange Act of 1934 (15 U.S.C. Fund can plus be used to pay interest on mortgages, rent, press utilities . In terms of lender compliance, the Economic Aid Act again permits lenders to rely on borrower certifications for initial or second draw PPP loans and in evaluating forgiveness applications. Like means that borrowers receiving PPP loans in the initial tranched for early- to mid-April 2020 leave got due dates beginning in July 2021. The Administrator, in consultation with the Secretary, has determined that this methodology is necessary to provide small businesses in the accommodation and food services sector the full amount of relief provided in the Economic Aid Act while allowing these borrowers to calculate their average monthly payroll costs accurately. Unlike First Draw PPP Loans, the Economic Aid Act provides that the relevant time period for calculating a borrower's payroll costs for a Second Draw PPP Loan is either the twelve-month period prior to when the loan is made or calendar year 2019. a person or entity that receives a grant for shuttered venue operators under section 324 of the Economic Aid Act; entities in which the President, the Vice President, the head of an Executive department, or a Member of Congress, or the spouse of such person owns, controls, or holds at least 20 percent of any class of equity; a publicly traded company, defined as an issuer, the securities of which are listed on an exchange registered as a national securities exchange under section 6 of the Securities Exchange Act of 1934 (. See . documents in the last year, 10 Paragraph 7(a)(36)(D)(iv) of the Small Business Act. More information and documentation can be found in our 636(a)(36); Coronavirus Aid, Relief, and Economic Security Act, Pub. [28] 681); and (4)(a) any business concern (including any station which broadcasts pursuant to a license granted by the Federal Communications Commission under title III of the Communications Act of 1934 (47 U.S.C. All other comments must be submitted through the Federal eRulemaking Portal described above. See paragraph 7(a)(37)(I)(i) of the Small Business Act. (iii) If the applicant is self-employed and does not have employees, the applicant must provide (a) its 2019 or 2020 (whichever was used to calculate loan amount) Form 1040 Schedule C, (b) a 2019 or 2020 (whichever was used to calculate loan amount) IRS Form 1099-MISC detailing nonemployee compensation received (box 7), invoice, bank statement, or book of record that establishes that the applicant is self-employed; and (c) a 2020 invoice, bank statement, or book of record to establish that the applicant was in operation on or around February 15, 2020. All terms in this subsection have the same definitions as in sections 7(a)(36) and (37) of the Small Business Act and the Consolidated First Draw PPP IFR, as applicable. L. 116-136, section 1114; and Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, Pub. Let's try checking if QuickBooks is up-to-date with our latest payroll release to run the PPP Forgiveness Payroll report for the second draw loans. On March 30, 2021, the President signed the PPP Extension Act of 2021 (the "Extension Act"), which extended the PPP deadline to May 31, 2021 and also gives the SBA an additional 30 days beyond May 31 to process those loans. Under section 317 of the Economic Aid Act, the same standard applies to certain news organizations. The Administrator of OIRA has determined that this is a major rule for purposes of the Congressional Review Act (5 U.S.C. documents in the last year, 82 Second-time PPP borrowers will generally be eligible to borrow an amount equal to 2.5 times their average monthly payroll costs. documents in the last year, by the International Trade Commission 28. (E) Follow applicable BSA requirements (listed in subsection (C)(3)(d) of the Consolidated First Draw PPP IFR); and. No collateral will be required. This IFR clarifies that the same general calculation for farmers and ranchers applicable to First Draw PPP Loans applies to Second Draw PPP Loans, with adjustments that (i) eliminate the provision for refinancing of an Economic Injury Disaster Loan (EIDL), which does not apply to Second Draw PPP Loans, and (ii) apply the choice of time period for calculating a farmer's or rancher's payroll costs for Second Draw PPP Loans, consistent with other Second Draw PPP Loans. The amount of a PPP loan is approximately equal to 2.5 times the applicant's average monthly payroll costs. Global challenges and issues, such as armed conflicts, terrorism, inequality and injustice, migration, religious and cultural . This IFR also specifies that, in calculating a farmer's or rancher's maximum loan amount, any employee payroll costs should be subtracted from the farmer's or rancher's gross income to avoid double-counting amounts that represent pay to the employees of the farmer or rancher. Handbook on Battery Energy Storage System - Asian Development Bank 2018-12-01 . SBA has determined that this rule will not have substantial direct effects on the States, on the relationship between the National Government and the States, or on the distribution of power and responsibilities among the various layers of government. Paragraph 7(a)(37)(D) of the Small Business Act. Per the SBA's Jan. 14, 2021 Interim Final Ruling (IFR) Protection Program (PPP) Second Draw Loans, if a first draw PPP loan has an unresolved issue, which may be due to hold codes or compliance . Paragraph 7(a)(37)(N) of the Small Business Act. Uses of your new Second Draw PPP Loan: The SBA has expanded the uses for a Second Draw PPP Loan, beyond the simple payment of your monthly "owner profit." However, at least 60% of the new Second Draw PPP Loan must be used to pay your owner profit each month and cannot be more than $8,333/month or $100,000/year. The Administrator, in consultation with the Secretary of the Treasury (Secretary), has determined that this is necessary to improve administrability of Second Draw PPP Loans by providing borrowers an additional verifiable method for substantiating their revenue reduction. by the Internal Revenue Service These subsections also provide that, for a borrower with a NAICS code beginning with 72 that would fall into more than one category listed in subsection (f) (for example, a business with a NAICS code beginning with 72 that is also a seasonal business or is also a new entity without 12 months of payroll costs), the borrower may calculate its average monthly payroll costs based on the methodology that applies to the entity but may use the 3.5 multiplier Start Printed Page 3716applicable to businesses with a NAICS code beginning with 72. Paragraph 7(a)(37)(A)(iv)(III)(bb) of the Small Business Act. (Emphasis added). documents in the last year, 296 Second Draw PPP Loans are generally subject to the same terms, conditions and requirements as First Draw PPP Loans. The Economic Aid Act also prohibits several additional categories of borrowers from receiving a Second Draw PPP Loan under section 7(a)(37) of the Small Business Act. [14] (2) The affiliation rules under 13 CFR 121.301(f) are waived with respect to eligibility for a Second Draw PPP Loan for: (i) Any business concern with not more than 300 employees that, as of the date on which the covered loan is disbursed, is assigned a NAICS code beginning with 72; and, (ii) (A) any business concern (including any station which broadcasts pursuant to a license granted by the Federal Communications Commission under title III of the Communications Act of 1934 (47 U.S.C. 7. These can be useful Consistent with the Economic Aid Act, subsections (f)(3) and (f)(4) of the IFR include tailored calculation methodologies for seasonal businesses, new entities that did not exist for the full twelve-month period preceding the Second Draw PPP Loan, and borrowers assigned a NAICS code beginning with 72 at the time of disbursement. Subsection (e)(9) also prohibits an entity that has permanently closed from receiving a Second Draw PPP Loan because paragraph 7(a)(37)(A)(iv) of the Small Business Act is best understood to describe existing businesses. Learn more here. 3. 11. The Economic Aid Act includes terms and conditions, including but not limited to terms relating to eligibility and a borrower's maximum loan amount, that apply only to Second Draw PPP Loans and do not apply to First Draw PPP Loans, regardless of when the First Draw PPP Loan is made. Small Business Administration's Office of Advocacy guide: How to Comply with the Regulatory Flexibility Ac. 35. Preserving funds for such businesses is necessary because only businesses that are still in operation will retain employees, which is a primary purpose of the PPP. As with First Draw PPP Loans, in most cases, a borrower is considered together with its affiliates to determine eligibility for the PPP. documents in the last year, 492 The documentation required to substantiate an applicant's payroll cost calculations is generally the same as documentation required for First Draw PPP Loans. However, we lack data to estimate the effects of this rule. By Adam Sweet, J.D., LL.M. (g) How do I submit an application for a Second Draw PPP Loan and what documentation must I provide to demonstrate eligibility? A borrower that did not experience a 25 percent annual decline in revenues, or that was not in operation in all four quarters of 2019, may still meet the revenue reduction requirement under one of the quarterly measurements described above. on FederalRegister.gov On April 6, 2021, the FAQs were further updated. Since most borrowers will use 2019 or 2020 the rule text refers only to 2019 or 2020 for simplicity and readability. Undersecretary of Works in Bahrain with primary focus on major infrastructure ,PPP/ affordable housing . Cooper called the budget situation "the worst in Metro's history.". $15 billion and $25 billion for first-draw and second-draw PPP loans for borrowers with 10 employees or fewer, or for loans of less than $250,000 to borrowers in low-or moderate-income neighborhoods (B) 3 percent of the balance of the financing outstanding at the time of disbursement of the loan for a loan above $350,000. Despite earlier moves to streamline . developer tools pages. For second draw loans, the bill appears to exclude from eligibility borrowers that previously qualified as a "small business concern" under the "alternative size standard" or the borrower's. For loans greater than $150,000, Applicant has provided documentation to the lender substantiating the decline in gross receipts. 636) in section 304(b) of the Economic Aid Act. [8] SBA has requested emergency approval for the IC required to implement the Second Draw PPP Program described above. 5 U.S.C. edition of the Federal Register. Edited by Akintoye & Beck 978 14051 7791 7 Strategic Issues in Public-Private Partnerships, 2nd Edition Dewulf, Blanken & Bult-Spiering 978 0 470 65635 8 THE NONPROFIT RISK BOOK - Jesse . the material on FederalRegister.gov is accurately displayed, consistent with before SBA issues a loan number for the loan, the Applicant is ineligible for the loan and acceptance of any loan proceeds will be considered an unauthorized use; (2) the President, the Vice President, the head of an Executive department, or a . Register (ACFR) issues a regulation granting it official legal status. SBA will be revising the FAQs to conform to the Economic Aid Act as quickly as feasible. (B) An applicant that was in operation in all four quarters of 2019 is deemed to have experienced the revenue reduction in subsection (c)(1)(iv)(A)(1) if it experienced a reduction in annual receipts of 25 percent or greater in 2020 compared to 2019 and the borrower submits copies of its annual tax forms substantiating the revenue decline. (The revenue reduction requirement is addressed in subsection (c)(1)(iv) of this IFR.) Subsection (e)(1) ensures that a borrower that received a First Draw PPP Loan despite being ineligible to receive the loan is not eligible to receive a Second Draw PPP Loan. (4) A lender must submit SBA Form 2484-SD (Paycheck Protection Program Lender's ApplicationSecond Draw Loan Guaranty) electronically in accordance with program requirements and maintain the forms and supporting documentation in its files. implementing updates to the PPP. documents in the last year, by the Centers for Medicare & Medicaid Services Different eligibility requirements apply to Second Draw PPP Loans. (4) The maximum amount of a Second Draw PPP Loan to a borrower that did not exist during the 1-year period preceding February 15, 2020, but was in operation on February 15, 2020 (new entity), is calculated as the lesser of: (1) The sum of the total monthly payments by the borrower for payroll costs paid or incurred by the borrower as of the date on which the borrower applies for the Second Draw PPP Loan; by, (2) the number of months in which those payroll costs were paid or incurred; by. Finally, subsection (f)(9) provides that businesses that are part of a single corporate group shall in no event receive more than $4,000,000 of Second Draw PPP Loans in the aggregate. FAQ #63 and subsection (c) of the interim final rule for Second Draw PPP Loans. Summary of Key Terms of PPP Second Draw Loans, 3. Business Concerns With More Than One Physical Location, E. Second Draw PPP Loan Application and Documentation Requirements, G. Loans to Borrowers With Unresolved First Draw PPP Loans, IV. [11] SBA will resolve issues related to unresolved borrowers expeditiously. For a loan of $150,000 or less where the borrower does not provide documentation of revenue reduction with its application, the lender shall perform this review when the borrower provides such documentation. Generally, receipts are considered total income (or in the case of a sole proprietorship, independent contractor, or self-employed individual gross income) plus cost of goods sold, and excludes net capital gains or losses as these terms are defined and reported on IRS tax return forms. 25. The end of PPP Millions of other borrowers are in the same position after the $292 billion allocated to the second round of PPP ran out weeks ahead of the May 31 deadline. Given the short duration of this program, and the urgent need to issue loans quickly, the Administrator in consultation with the Secretary has determined that it is impractical and not in the public interest to provide a 30-day delayed effective date. Section 342 of the Economic Aid Act. The OFR/GPO partnership is committed to presenting accurate and reliable 636(a)(37)). (ii) Gross receipts of affiliates are calculated as follows: (A) Gross receipts of a borrower with affiliates is calculated by adding the gross receipts of the business concern with the gross receipts of each affiliate. (A) Operates as a sole proprietorship or as an independent contractor, or is an eligible self-employed individual; (B) reports farm income or expenses on a Schedule F (IRS Form 1040); and. The Small Business Administration ("SBA") and the Department of the Treasury have begun releasing guidance for the reopened Paycheck Protection Program ("PPP") for "First Draw" PPP loans and for the new "Second Draw" PPP loans, both provided for under the recently enacted COVID 19 relief package (the "Act").This alert summarizes the SBA's top-line overview of the First and . This provision will allow a borrower to provide annual tax return forms to substantiate its revenue reduction. 13. For borrowers assigned a NAICS code beginning with 72 at the time of disbursement, the Economic Aid Act provides that the maximum loan amount is equal to three-and-a-half (3.5) months of payroll costs rather than two-and-a-half (2.5) months. Subsection (B)(11) of the Consolidated First Draw PPP IFR specifies that the proceeds of a PPP loan may be spent only on certain eligible expenses. (7) The maximum amount of a Second Draw PPP Loan to a borrower that has income from self-employment and files a Form 1040, Schedule C, is calculated as follows, depending on whether the borrower has employees: (i) For a borrower that has income from self-employment and does not have any employees, the maximum loan amount is the lesser of: (1) The net profit of the borrower in 2019 or 2020, as reported on IRS Form 1040 Schedule C, that is not more than $100,000, divided by 12; and. This rule's designation under Executive Order 13771 will be informed by public comment. (2) What do lenders have to do in terms of loan underwriting? (1) In general, the maximum loan amount for a Second Draw PPP Loan is equal to the lesser of two and half months of the borrower's average monthly payroll costs or $2 million, except as otherwise specified in this subsection (e). This information collection (IC) consists of SBA Form 2483-SD (Paycheck Protection Program Second Draw Application Form) and SBA Form 2484-SD (Paycheck Protection Program Lender's ApplicationSecond Draw Loan Guaranty. 804(2)). documents in the last year, 28 on Eligible second-draw borrowers include businesses that have already exhausted their first PPP. A payroll statement or similar documentation from the pay period that covered February 15, 2020 must be provided to establish the applicant was in operation on February 15, 2020. maturity of five years (D) All terms in this subsection shall have the meaning attributed to them by the IRS. A borrower that has temporarily closed or temporarily suspended its business remains eligible for a Second Draw PPP Loan. The Act also provided tailored methodologies for certain categories of borrowers. Although this IFR is effective immediately, comments are solicited from interested members of the public on all aspects of the interim final rule. As discussed elsewhere in this interim final rule, the last day to apply for and receive a PPP loan is March 31, 2021. Such documentation may include relevant tax forms, including annual tax forms, or, if relevant tax forms are not available, a copy of the applicant's quarterly income statements or bank statements. An unresolved hold issue does not prohibit a borrower from receiving a second draw loan, but it may affect the timing of a second draw funding. In some cases, an applicant may receive a second draw typically equal to the first. (j) Are Second Draw PPP Loans eligible for loan forgiveness? provide legal notice to the public or judicial notice to the courts. The bill, signed into law on Dec. 27, includes a total of $284.5 billion for PPP loans. (iv) The amount of any forgiven First Draw PPP Loan shall not be included toward any borrower's gross receipts. In addition, the SBA has addressed some issues in their guidance. See paragraph 7(a)(37)(I)(ii) of the Small Business Act. All loans will be processed by all lenders under delegated authority and lenders will be permitted to rely on certifications of the borrower to determine the borrower's eligibility and use of loan proceeds. For an eligible nonprofit organization, a veterans organization, an eligible nonprofit news organization, eligible 501(c) organization, or eligible destination marketing organization, gross receipts has the meaning in section 6033 of the Internal Revenue Code of 1986. The loan amounts received by borrowers for First Draw PPP Loans and Second Draw PPP Loans will not be aggregated. 04/17/2023, 863 Second Draw PPP Loans are generally subject to the same terms, conditions and requirements as First Draw PPP Loans, including but not limited to: 100 percent guaranteed by the SBA no collateral no personal guarantees 1 percent interest rate (calculated on a noncompounding, nonadjustable basis). 10. Open for Comment, Economic Sanctions & Foreign Assets Control, Tool Chests and Cabinets From China and Vietnam, Experimental Permits for Reusable Suborbital Rockets, Animal and Plant Health Inspection Service, Medicaid and Children's Health Insurance Program, Prohibition on Use by the United States Government of Commercial Spyware That Poses Risks to National Security, II. This furthers the purpose of the second draw loan provisions, which is to deliver additional aid to small businesses that previously received a First Draw PPP Loan. (8) The maximum amount of a Second Draw PPP Loan to a borrower that files taxes as a partnership is calculated as the lesser of: (A) The sum of (1) net earnings from self-employment of individual general partners in 2019 or 2020 (at the election of the borrower), as reported on IRS Form 1065 K-1, reduced by section 179 expense deduction claimed, unreimbursed partnership expenses claimed, and depletion claimed on oil and gas properties, multiplied by 0.9235,[37] The $284 billion includes funding for businesses that already received a PPP loan under the Coronavirus Aid, Relief and Economic Security (CARES) Act (referred to as "second draw loans") and . Payroll costs has the same meaning as in subsections (B)(4)(g) and (B)(4)(h) of the Consolidated First Draw PPP IFR and is calculated in the same manner. These procedures are designed to promote compliance with the eligibility requirements for Second Draw PPP Loans by preventing additional loans from being made to borrowers that were not eligible for a First Draw PPP Loan or received an impermissible loan amount. In place to avoid making superfluous PPP loan payments, loan must submit loan forgiveness applications to their lenders within 10 months free the end of their respective covered periods. Effective Date: This interim final rule is effective January 12, 2021. Subject to subsection (e) of this section, below, the following applicants are eligible for Second Draw PPP Loans: (1) An applicant is eligible for a Second Draw PPP Loan if it is a business concern, independent contractor, eligible self-employed individual, sole proprietor, nonprofit organization eligible for a First Draw PPP Loan, veterans organization, Tribal business concern, housing cooperative, small agricultural cooperative, eligible 501(c)(6) organization or destination marketing organization, or an eligible nonprofit news organization[33] If you wish to submit confidential business information (CBI) as defined in the User Notice at www.regulations.gov,, please send an email to ppp-ifr@sba.gov. the official SGML-based PDF version on govinfo.gov, those relying on it for 4 . 605(b). Under section 7(a)(37) of the Small Business Act (15 U.S.C. Paragraph 7(a)(37)(A)(iv)(III)(dd) of the Small Business Act. Since this rule is exempt from notice and comment, SBA is not required to conduct a regulatory flexibility analysis. 801 et seq.) 31. All other items, such as subcontractor costs, reimbursements for purchases a contractor makes at a customer's request, investment income, and employee-based costs such as payroll taxes, may not be excluded from gross receipts. Subsection (i) of the IFR establishes procedures relating to the handling of a Second Draw PPP Loan application by a borrower whose First Draw PPP Loan is under review by SBA (unresolved borrower). Shall not be included toward any borrower 's gross receipts effects of this IFR. law. The Act also provided tailored methodologies for certain categories of borrowers and subsection c. The amount of any forgiven First Draw PPP Loans ) in section 304 ( b of... This is a major rule for purposes of the terms for Medicare Medicaid. The revenue reduction faq # 63 and subsection ( c ) of the ppp second draw issues Aid Act, Pub, a! 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