There will be a second wave of PPP loans, and the latest forgiveness rule changes are favorable to borrowers.
A federal bill signed into law on December 27, 2020, injected $284 billion more into the Paycheck Protection Program, providing a second round of PPP loans for qualifying small businesses. These second-draw loans, or “PPP2,”are expected to go live very soon as of this writing.
To qualify for PPP2, a small business must certify that they have had a loss of revenue of 25% or greater. In PPP1, you were only required to state that economic uncertainty made the loan necessary.
The new legislation provides that forgiven PPP loans will not be taxable to the small-business borrower. This applies to all existing PPP1 and forthcoming PPP2 loans.
As you may recall, this past summer, the IRS had said that PPP borrowers could not expense wages and other qualifying costs if PPP funds were used and the loan was forgiven. This position seemed contrary to what Congress intended back in March, but it took the most recent legislation to correct the interpretation.
PPP2 will again be a first-come, first-served scenario. As we wait for updated application forms and guidance on how to apply, prepare now. Start by reaching out to an accounting professional about whether you qualify, what updated documents will be needed, and then make sure everything is ready to go ASAP.
Additional source: New Stimulus Bill Includes Second Round of PPP Loans for Small Business and Forgiveness Rule Changes Favorable to Borrowers