On December 27, 2020, President Trump signed the long-anticipated $900 billion COVID-19 relief bill into law.  This law provides extended federal unemployment assistance at $300 per week, provides qualifying Americans with a $600 stimulus check, and delivers an additional $284 billion in Paycheck Protection Program (“PPP”) funding to small businesses.  This article will focus on the additional PPP funding for businesses that have been operating for at least two years because there are more specific rules governing newer entities and eligibility that will not be addressed here.  


An eligible entity means any business, nonprofit, self-employed individual, sole proprietor, or independent contractor that:

  1. employs 300 employees or less; and
  2. had gross receipts during the first, second, third, or fourth quarter in 2020 that demonstrate at least a 25% reduction from the gross receipts of the entity during the same quarter in 2019. 

This means that the entity must have at least one quarter in 2020 that, when compared to the same quarter in 2019, had at least a 25% reduction in gross receipts. 

Importantly, there are a few major exceptions to this general eligibility rule.  Publicly traded companies, companies created in China or having significant operations in China, and entities primarily engaged in political or lobbying activities are ineligible. 

Loan Amount

An eligible entity may receive the lesser of:

  1. the average total monthly payment for payroll costs incurred or paid during the one-year period before the date on which the loan is made or calendar year 2019 multiplied by 2.5; or
  2. $2,000,000.

The loan can be up to 3.5 times the monthly payroll costs for entities in the accommodation and food service industry assigned to NAICS code 72, but in both cases no loan can exceed $2,000,000.

Payroll costs are calculated the same under this second draw as before.  The covered period in which a loan may be forgiven extends for the 24 weeks after the loan originates.  

Loan Forgiveness

Similar to the first round of PPP, eligible entities are also able to receive complete forgiveness on any covered loan made toward:

  • Payroll costs;
  • interest on any covered mortgage obligation;
  • any covered operations expenditures;
    • This means a payment for any business software or cloud computing service that facilitates business operations, product or service delivery, the processing, payment or tracking of payroll expenses, human resources, sales and billing functions, or accounting or tracking of supplies, inventory, records and expenses.
  • any covered property damage cost;
    • This means a cost related to property damage and vandalism or looting due to public disturbances that occurred during 2020 that was not covered by insurance or other compensation.
  • any payment on any covered rent obligation;
  • any covered utility payment;
  • any covered supplier cost; and
    • This means any expenditure made by an eligible entity to a supplier of goods for the supply of goods that
      • are essential to the operations of the eligible entity and pursuant to a contract or purchase order in effect before the covered period began. 
  • any covered worker protection expenditure.
    • This means any operating or capital expenditure to facilitate the adaption of the business activities of an entity to comply with requirements established or guidance issued by HHS, the CDC, OSHA or any equivalent requirements established or guidance issued by a state or local government during the period beginning March 1, 2020, and ending the date on which the COVID-19 national emergency declaration expires.  This may include expenditures for personal protective equipment, physical barriers such as sneeze guards, and an indoor, outdoor, or combined air or air pressure ventilation or filtration system.

The Paycheck Protection Program Flexibility Act (“PPPFA”) requires eligible entities to use at least 60% of the covered loan on payroll costs to qualify for complete forgiveness.  The PPPFA does not change the rule reducing PPP loan forgiveness if the eligible entity has reduced the number of employees or reduced employee salaries in excess of 25% during the covered period.


Under the original CARES Act, it was unclear whether expenses associated with a forgiven PPP loan could be deducted.  Under the PPPFA, Congress has made clear that if there is forgiveness of a PPP loan, the expenses associated with the forgiven loan can be deducted or capitalized.  The PPP loan forgiveness is still treated as tax exempt income. 

Moving Forward

There will undoubtedly be additional guidance from the IRS and the SBA in the coming weeks, so it is best to work closely with your lenders, CPAs, and attorneys on the logistics of loan acquisition and forgiveness.