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Importantly, any First Draw PPP loan that’s forgiven in 2020 is not included in 2020 gross receipts. The term also excludes capital gains and losses, receipts from affiliates, and items generally construed as deposits held for others. Gross revenue isn’t reduced by cost of sales but is reduced by returns and allowances.

Gross receipts include all revenue in whatever form received or accrued in accordance with the borrower’s method of accounting.

As an alternative to the quarterly comparison rule, if a PPP 2 Loan borrower was in business for all four quarters in 2019 and experienced a 25 percent or greater reduction in annual receipts in 2020 compared to 2019, the borrower may submit copies of income tax returns for both years to support the 25 percent or more decline.

The 300-employee limit is based on average headcount per pay period for the most recent calendar year, so this will now be based on 2020 average headcount (includes both full- and part-time employees) for each 2020 payroll period.

For example, a company that operates multiple restaurants each in a separate legal entity and employs fewer than 300 employees at each location would be eligible for a PPP 2 Loan for each legal entity, assuming other requirements are met.

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The NAICS code 72 (generally hotels and restaurants) and SBIC financing carveouts apply just as they did with First Draw PPP loans with the exception that the 500-employee limit per physical location is a 300-employee limit for PPP 2 Loans.

If a borrower received a First Draw PPP loan but was later determined to not be eligible to receive a loan, the borrower isn’t eligible for a PPP 2 Loan.

The borrower must make this certification on the PPP 2 Loan application. The guidance doesn’t specifically state that First Draw funds must be spent within the covered period of the PPP 1 loan, only that they be spent on eligible expenditures prior to the receipt of the PPP 2 Loan proceeds.

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The borrower must have received a First Draw PPP loan and have used or will use the full amount of the First Draw PPP loan on authorized uses to be eligible for a PPP 2 Loan.The PPP 2 IFR made additional clarifications around the eligibility requirements, including: In general, a borrower is eligible for a PPP 2 Loan if it has 300 or fewer employees and experienced a revenue reduction of 25 percent or greater in 2020 relative to 2019, calculated by comparing the borrower’s quarterly gross receipts for one quarter in 2020 with the borrower’s gross receipts for the corresponding quarter in 2019. The SBA also released an IFR on First Draw PPP loans, an updated version of the Form 2483 PPP borrower application form, and the new Form 2483-SD, which is the application form for PPP 2 Loans.

After the CFI preference period expires, all approved lenders will be allowed to make First Draw and PPP 2 Loans. PPP 2 Loans will begin to be accepted on Wednesday, January 13, but again, only CFIs will be accepting applications for the first two days. On January 8, 2021, the SBA issued a press release stating applications for First Draw PPP loans will begin to be accepted on Monday, January 11, but only by community financial institutions (CFI). The PPP 2 IFR provided initial guidance surrounding eligibility, amount, forgiveness, and the application process for the PPP 2 Loans.

You also can listen in to this recent “Simply Tax” podcast episode to learn more about the PPP changes. However, see this previous BKD Thoughtware ® article and webinar for guidance on other changes made for First Draw PPP loans and the PPP loan forgiveness rules. Department of the Treasury on Janu(PPP 2 IFR).

Small Business Administration (SBA) and U.S. This article will focus specifically on the PPP 2 Loans and the interim final rule (IFR) issued by the U.S. The CAA included $284 billion in funding to reopen the Paycheck Protection Program (PPP) to new qualifying borrowers of “First Draw” PPP loans, provide opportunities for certain borrowers of existing PPP loans to increase their First Draw loan, and create an opportunity for certain businesses to obtain a “Second Draw” PPP loan (PPP 2 Loan). The bipartisan legislation includes another round of COVID-19 stimulus funding and further relief for taxpayers affected by the pandemic. The 2021 Consolidated Appropriations Act (CAA) was signed into law on December 27, 2020.