Notifications and updates
The American Rescue Plan Act of 2021, which includes additional funding and changes to the Paycheck Protection Program.
On March 11, 2021, President Joe Biden signed the American Rescue Plan Act of 2021, which, among other things, provides additional funding and changes to the Paycheck Protection Program (PPP) as required by the Coronavirus Aid, Relief, and Economic Security Act (CARES- Law) and subsequent laws as well as regulations and guidelines of the executive branch.
The American Rescue Plan Act allocates funding to existing and new small business aid programs, including:
- $ 7.25 billion in additional funding for the PPP loan program;
- $ 15 billion in targeted Economic Injury Disaster Loan (EIDL) funding;
- $ 25 billion for restaurants and other similar businesses under the Restaurant Revitalization Fund (RRF) program;
- $ 1.25 billion for the Shuttered Venue Operator Grant (SVOG) program; and
- $ 175 million for the Community Navigator program to promote and publish business aid programs provided by federal, state, and local governments during the COVID-19 pandemic.
In general, the American Rescue Plan continues the PPP loan program administered by the Small Business Administration (SBA), although fewer funds are used for the PPP program compared to previous legislation. Among other things, the American rescue plan changes:
- Keeps the March 31, 2021 deadline for businesses to apply for PPP loans;
- Allows certain nonprofits and online news organizations to apply for PPP loans;
- Provides a program for restaurants, bars, and similar businesses to receive grants in lieu of loans under the RRF program; and
- Provides opportunities for companies that have previously applied for EIDL grants but have not received them to receive additional funding as well as funding for “severely affected” and “severely affected” companies under the Targeted EIDL Advance Grant program.
We expect the SBA to issue further rules and guidelines after the US rescue plan is passed.
Restaurant revitalization fund
In addition to PPP loans and other assistance provided in the past, the American Rescue Plan includes targeted assistance to restaurants, bars, and similar businesses through the RRF program.
Companies eligible for RRF funding include restaurants, food stalls and trucks, bars and taverns, or any other business “where the general public or guests gather for the primary purpose of being served food or drink”. However, this does not apply to companies that (i) are operated by state or local governments, (ii) own or operate more than 20 locations, (iii) have applied for or received an SVOG (as in our previous ones alarm) or (iv) is a publicly traded company.
Companies wishing to receive RRF funding must submit an application to the SBA, including attestations that the uncertainty of current economic conditions requires the company to apply for an RRF grant and that the company does not apply for a grant under the or has received SVOG program. Borrowers should read the previously published Needs Certification Guidelines FAQs, which have been updated to reflect the Second Draw PPP Loans implemented in the December 2020 COVID Aid Act, as summarized in our previous roundup alarm.
As of the publication of this alarm, the SBA has not yet approved any applications for the RRF program. However, the application process for RRF funds is likely to be similar to the application process for the SVOG program (which is also not yet established at this point in time alarm).
Terms and Conditions
In contrast to the PPP, the RRF funds are distributed as grants that companies do not have to repay. The RRF program grants are less than $ 10 million and are capped at $ 5 million per Eligible Company location.
The exact amount of an RRF grant corresponds to the company’s loss of revenue due to the pandemic. The “pandemic loss of income” is generally calculated by subtracting the company’s 2020 gross income from its 2019 gross income, the difference being the amount of the RRF grant.
Similar to PPP loans, companies receiving RRF grants will have to use the funds for certain items that arose “as a direct result of or during” the COVID-19 pandemic, such as: Mortgage payments; Rent payments; Utilities; Maintenance costs; Consumables (including personal protective equipment); Food and beverage expenses that are in line with normal Company business practice compared to prior to February 15, 2020; Supplier costs; Operating cost; Paid sick leave; and all other expenses set by the SBA.
Companies that receive an RRF grant but do not use it in full must return any leftover funds. Companies that permanently cease operations must also return RRF funds.
Paycheck Protection Program
March 31st deadline for PPP loan applications
One key point that the American bailout plan did not change was the deadline for corporations, corporations, and individuals to apply for PPP loans. The COVID Aid Act of December 2020 provided for a deadline of March 31, 2021 for companies to apply for PPP funds. The March 31 deadline remains in place under the US bailout plan, while more companies are now eligible to apply for PPP funding. As before, companies and private individuals can apply for PPP loans through lenders and banks, which often have their own online portals and applications based on forms and guidelines from the SBA.
Additional eligibility for certain non-profit organizations
The American Rescue Plan allows other nonprofits to apply for PPP loans. A new category of “Additional Covered Nonprofits” is now eligible to apply for PPP loans, including any nonprofit under Section 501 (c) of the Internal Revenue Code (IRC), such as social associations and pension funds.
In general, 501 (c) companies are eligible for PPP funding as well as second-drawing PPP loans as long as the companies are not primarily lobbying. Such an “additional covered non-profit organization” must also meet the following conditions in order to apply for a PPP loan: (i) the organization has 300 or fewer employees per site; (ii) the company receives no more than 15% of its lobbying income; (iii) lobbying activities do not include more than 15% of all company activities; and (iv) the total cost of the Company’s lobbying activities for the most recent tax year ended February 15, 2020, did not exceed $ 1 million.
In addition, larger non-profit organizations can apply for PPP loans. Non-profit organizations with more than 500 employees working in multiple locations can apply for a PPP loan if no more than 500 employees work in one location. The American Rescue Plan also provides that larger nonprofits are eligible to apply for PPP loans, even if they are members of larger national organizations.
Online News Publishers Appropriate for PPP Loans
The American Rescue Plan allows internet-only publishers (e.g., an online newspaper that does not print physical copies) to apply for PPP loans and second-draw PPP loans as long as the publisher does not have more than 500 employees and issues a certificate that the PPP loan proceeds will be used to support the components of the business that involve local or regional news activities.
Targeted EIDL advance grants
The American Rescue Plan provides increased funding for the Targeted EIDL Advance Grant program and steps for the SBA to fully fund these grants. Targeted EIDL Advance Grants are available to companies that (i) are located in low-income communities, (ii) employ 300 or fewer people, and (iii) have suffered an economic loss greater than 30%. The American Rescue Plan provides $ 15 billion to address funding shortfalls in the Targeted EIDL Advance Grant program in general by establishing the following steps:
Initially, the SBA will reach out to companies that applied for an application but did not receive the full amount that the applicant was entitled to under the original EIDL Advance Grant program (due to a lack of EIDL funding).
Second, the SBA is instructed to provide grants to “severely affected” small businesses. A “hard hit” company is one that (i) has suffered an economic loss greater than 50% and (ii) has 10 or fewer employees. Any Eligible, “Severely Affected” company can apply for a grant of US $ 5,000 under the Targeted EIDL Advance Grant program.
Third, the SBA is instructed to provide grants to “severely affected” companies. A “severely affected” company is one that (i) has suffered an economic loss of between 30% and 50% and (ii) has 10 or fewer employees.
Grants for operators of shuttered venues
The American Rescue Plan Act provides $ 1.25 billion for the SVOG program. In general (and as detailed in our previous one) alarm), SVOG grants provide funding for live venue operators, museums, theater owners, and other such venues negatively impacted by the COVID-19 pandemic and public health measures enacted by federal, state, and local governments.
The American Rescue Plan stipulates that the total SVOG received by a company will be reduced by the amount of each PPP loan such company received on or after December 27, 2020.
Community Navigator program
The American Rescue Plan pledges $ 175 million for the Community Navigator program, which the SBA generally provides funding to certain nonprofit and government entities during the COVID season to “improve access to aid programs and provided resources “Assign or contract with them -19 pandemic.
Certain Tax Consequences of the American Bailout Plan
The American Rescue Plan continues certain tax regulations made under the CARES Act and subsequent statutes. The American Rescue Plan extends the employee retention tax credit through December 31, 2021. In addition, if a company is receiving a Targeted EIDL Advance Grant, the amount of that grant will not be included in gross income for tax purposes.