Paycheck protection program to reopen under second stimulus package

DOWNERS GROVE, ILLINOIS (January 5, 2021) -The National Sporting Goods Association (NSGA) is pleased to see Congress vote to approve an agreement on a second financial stimulus package which will reopen the Paycheck Protection Program (PPP) for small business owners who have been most impacted by the COVID-19 pandemic.

The second-largest federal stimulus package after the March 2020 CARES Act was signed by President Trump on December 27, 2020. The $900 billion bill allows for small businesses hit hardest by the pandemic to apply for a second PPP loan.

Enactment of the legislation is January 6, 2021 and the Small Business Administration (SBA) has 10 working days after enactment to make any changes. Below are the highlights of the legislation to aid in the economic crisis caused by COVID-19:

Small Businesses

The Paycheck Protection Program: Congress has refreshed this popular forgivable loan program with an additional $284 billion. Businesses that already received a PPP loan will be eligible to get a second one under the new terms. There is $12 billion earmarked for minority-owned and very small businesses, including loan simplification for those borrowing $150,000 or less.

PPP Highlights include:

1. Additional eligible expenses - makes the following allowable and forgivable uses for PPP funds:

  • Covered operations expenditures: Payment for any software, cloud computing and any other human resources and accounting needs.
  • Covered property damage costs: Costs related to property damage due to public disturbances that occurred during 2020 that are not covered by insurance.
  • Covered supplier costs: Expenditure to a supplier pursuant to a contract, purchase order, or order for goods in effect prior to taking out the loan that are essential to the recipient’s operations at the time the expenditure was made. Supplier costs of perishable goods can be made before or after the life of the loan.
  • Covered worker protection expenditure: Personal Protective Equipment (PPE) and adaptive investments to help a loan recipient comply with federal health and safety guidelines or any equivalent state and local guidance related to COVID-19 during the period between March 1, 2020 and the end of the national emergency declaration.

2. Selection of Covered Period for Forgiveness: Allows the borrower to elect a covered period ending at the point of the borrower’s choosing between 8 and 24 weeks after origination.

3. Specific Group Insurance Payments as Payroll Costs: Clarifies that other employer-provided group insurance is included in payroll costs. This includes group, life, disability, dental or vision insurance. This applies to loans made before, on, or after the date of enactment, including forgiveness of the loan.

4. PPP Second Draw Loans: Creates a second loan from the PPP, called a “PPP second draw” for smaller and harder-hit businesses, with a maximum amount of $2 million. In order for a business to be eligible for a PPP loan under this section, entities must: not employ more than 300 employees, have used or will use the full amount of their first PPP loan, and demonstrate at least 25% reduction in gross receipts in the first, second, or third quarter of 2020 relative to the same 2019 quarter. 

5. Loan terms: In general, borrowers may receive a loan amount of up to 2.5 times the average monthly payroll costs in the one year prior to the loan or the calendar year. No loan can be greater than $2 million.

6. Loan forgiveness: Borrowers of a "PPP second draw" loan would be eligible for loan forgiveness equal to the sum of their payroll costs, as well as covered mortgage, rent and utility payments, covered operations expenditures, covered property damage costs, covered supplier costs and covered worker protection expenditures incurred during the covered period. The 60/40 cost allocation between payroll and non-payroll costs in order to receive full forgiveness will continue to apply.

7. Increased ability for PPP borrowers to request an increase in loan amount due to updated regulations: Allows borrowers who returned all or part of their PPP loan to reapply for the maximum amount applicable so long that they have not received forgiveness.

8. Exclusion of publicly traded companies: Publicly traded companies are excluded from participation in the program.

9. Covered period for new PPP loans: Extends the covered period for all first-draw PPP loans through March 31, 2021. Applies to loans made before, on, or after the date of enactment, including forgiveness of such loan.

Small Business Administration EIDL Program: The bill also provides $20 billion in Economic Injury Disaster Loans (EIDL) grants for smaller businesses.

Tax Deductibility Issues: The bill clarifies that gross income for tax purposes does not include any amount that would otherwise arise from the forgiveness of a PPP loan. It also clarifies that deductions are allowed for otherwise deductible expenses paid with the proceeds of a PPP loan that is forgiven, and that the tax basis and other attributes of the borrower's assets will not be reduced because of the loan forgiveness. Borrowers are afforded the same treatment for Second Draw PPP loans, effective for tax years ending after the date of enactment of the provision. Similarly, the law treats loans received from the SBA's other programs, like the Emergency Injury Disaster Loan (EIDL), in the same manner.

Direct Economic Relief

Second round of direct payments to Americans: As with the first round, the payments will only be sent to qualifying adults and their dependent children below a certain income level. Those eligible will receive up to $600 per adult and child. Payments to qualified children will be $600 per child, which is $100 more than Congress gave families in the first round of relief in the spring of 2020.

Unemployment Benefits: Congress will add $300 to all weekly unemployment benefits, which is half the amount of this supplemental benefit from mid-July.

11-week extension for two expiring CARES Act programs: The Pandemic Unemployment Assistance program expands jobless benefits to gig workers, freelancers, independent contractors, the self-employed and certain people affected by the coronavirus. The Pandemic Emergency Unemployment Compensation program provides an additional 13 weeks of payments to those who exhaust their regular state benefits. Both programs will close to new applicants in mid-March and then phase out in early April for existing claimants.

Tax Provisions

There are a number of tax provisions in the legislation to benefit both individuals and businesses. For example, taxpayers may use 2019 income for purposes of claiming the earned income tax credit and child tax credit, two credits that benefit low- and middle-income households. This will allow people who lost jobs or income in 2020 to be eligible for credits or receive larger credits as the credit amounts are dependent upon income.

Employee Retention Tax Credit:  The employee retention tax credit, a payroll tax credit aimed at encouraging businesses to hold on to their workers, has been extended. 

The relief legislation also advances the tax deductibility of business meals for two years. 

COVID Testing and Vaccine Provision

The agreement includes $20 billion for the purchase of vaccines, $8 billion for vaccine distribution, $20 billion for states to conduct testing and $20 billion federal relief for health-care providers. 

Federal Reserve

The legislation contains new language to close four Fed lending facilities: the Primary Market Corporate Credit Facility, the Secondary Market Corporate Credit Facility, the Main Street Lending Program and the Municipal Credit Facility. Remaining funds from those programs under the CARES Act will be repurposed.

Housing and Rent

Housing assistance: The bill extends the eviction moratorium that is set to expire at the end of the year through the end of January 2021.

The legislation includes $25 billion for rental assistance for families facing eviction who lost their income during the pandemic. Eligible renters would be able to receive assistance with rent and utility payments by applying with state and local grantees administering the program.


The bill provides several provisions relating to elementary, high schools, and higher education, including $82 billion for schools and colleges to facilitate the reopening of classrooms and prevent virus transmission.