New Stimulus Extends PPP and Provides Second Loans for Some Borrowers

January 7, 2021

By: Eric N. Fischer, Rod Kubat

On December 27, 2020, the President signed into law, the Consolidated Appropriations Act – 2021, (the “Act”). Among other terms, the Act makes changes to the Paycheck Protection Program (“PPP”) and adds $284 billion for new PPP Loans. PPP Loan borrowers may submit applications for new PPP Loans until March 31, 2021.

PPP Loans will be available to first-time borrowers and certain specified second-time borrowers. The Act adds the following to the list of eligible borrowers for an initial PPP Loan:

  • Trade associations and other organizations exempt from tax under Section 501(c)(6) of the Internal Revenue Code are eligible borrowers, provided they (a) do not receive more than 15% of receipts from lobbying activities, (b) have less than 15% of their total activities as lobbying activities, (c) did not exceed $1,000,000 in lobbying activities during the most recent tax year, and (d) do not employ more than 300 employees
  • Businesses that had previously taken the Employee Retention Tax Credit
  • Any news station with a license from the Federal Communications Commission that either (a) has less than 500 employees, or (b) is a nonprofit operating as a “public broadcasting company”
  • Any business concern that is majority owned or controlled by a business with NAICS code 511110 (newspaper publishers) or 5151 (radio networks, radio stations, and television broadcasters), that makes a good faith certification that the proceeds of the loan will be used to support the component business that produces or distributes locally focused or emergency information
  • Borrowers that have previously returned PPP Loans
  • Borrowers in bankruptcy


Borrowers that received an initial PPP Loan are eligible to receive a second PPP Loan if they meet the following criteria:

  • Have 300 or fewer employees or have not more than 300 employees per physical location and is assigned a North American Industry Classification System code beginning with 72 (Accommodation and Food Service)
  • Have or will use the full of amount of the first PPP Loan
  • Have experienced a 25% decline in gross receipts during one quarter in 2020 when compared to the same quarter in 2019


While most borrowers remain eligible to borrow up to a maximum of 2.5 times average monthly payroll costs (specify for what period), (capped at $2 million), hotel and food service operators that fall within NAICS code 72 are now eligible to borrow up to 3.5 times monthly payroll costs (specify for what period) (capped at $2 million). The Act permits farmers and ranchers to use their 2019 Schedule F gross income (up to $100,000) when calculating their PPP loan, rather than their 2019 net income.


The Act expands the qualifying expenses for which PPP Loan proceeds can be used. In addition to payroll costs, mortgage interest, rent and utility costs, the following expenditures are now allowed:

  • Covered Operations Expenditures: payments for business software or cloud computing service that facilitates business operations, product or service delivery, the processing, payment or tracking of payroll expenses, HR and billing functions, or account or tracking of supplies, inventory, records and expenses
  • Covered Property Damage Costs: costs related to property damaged and vandalism or looting due to public disturbances that occurred during 2020 that was not covered by insurance or other compensation
  • Covered Supplier Costs: expenditures to a supplier of goods that are essential to the operations of the entity at the time at which the expenditure was made and made pursuant to a contract or order in effect at any time before the Covered Period or, with respect to perishable goods, in effect at any time during the Covered Period
  • Covered Worker Protection Expenditures: operating or capital expenditures that allow a business to comply with requirements or guidance issued by the CDC, HHS, OSHA or any state or local government during the period beginning March 1, 2020 and ending on the date which the national emergency declared by the President expires related to the maintenance of standards for sanitation, social distancing or any other worker or customer safety requirement related to COVID-19. These expenses appear to include PPE, physical barriers that were put in place, expansion of indoor/outdoor space, ventilation or filtration systems and drive-through windows, and onsite or offsite health screening capability.


In November, the Treasury Department issued guidance disallowing deductions for covered expenses funded by PPP loan proceeds. The Act, reversing that guidance, made clear that expenses paid with PPP Loan proceeds are tax deductible. Additionally, the Act allows a basis step-up in ownership interests for tax exempt income from a forgiven PPP Loan, providing relief to borrowers of flow-through entities. The Act also affirms that the forgiven amount of a PPP Loan is not included in gross income as forgiveness of indebtedness income.

Additionally, the Act makes other miscellaneous changes to the PPP Loan program including:

  • Requiring that SBA simplify the PPP Loan forgiveness application process for all PPP Loan borrowers with loan balances of less than $150,000, requiring only certain certifications, the number of employees retained and the estimated amount spent on payroll
  • Permits borrowers to choose a Covered Period of any time period between eight and twenty four weeks from the date the loan is originated in which to spend PPP Loan proceeds on qualified expenses
  • Provides clarity for PPP Loan borrowers that payroll costs includes group life, disability, vision and dental insurance rather than only health insurance
  • Requiring SBA to deliver within 45-days from the effective date of the Act an audit plan that details policies and procedures for conducting forgiveness reviews and audits of covered loans and metrics used to determine who will be audited
  • Prohibiting publicly traded companies and those affiliated with China or Hong Kong from receiving PPP Loans
  • Requiring SBA and the Department of the Treasury to issue regulations related to the next round of the Paycheck Protection Program within ten (10) days of the passage of the Act.


In the event you have follow up questions about PPP Loans or the PPP Loan Forgiveness Application or have other questions about the Paycheck Protection Program or other COVID-19 related relief, please contact your Nyemaster Goode attorney.

Visit Nyemaster Goode's Paycheck Protection Program Resource Center