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Additional Expense Categories Eligible For PPP Forgiveness

January 25, 2021 | Category: Asset Protection, Corporate and Taxation, Estate Planning and Probate, News

The Economic Aid Act (“Act”), enacted last month, as part of the stimulus legislation, which, among other things, provided for a second round of PPP loans, expands the list of expenses eligible for PPP forgiveness to now include the following:

Covered operations expenditures defined as “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.”

Covered property damage cost defined as “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.”

Covered supplier cost defined as “an expenditure made by an entity to a supplier of goods for the supply of goods that (1) are essential to the operations of the entity at the time at which the expenditure is made; and (2) is made pursuant to a contract, order, or purchase order in effect at any time before the covered period with respect to the applicable covered loan, or with respect to perishable goods in effect before or at any time during the covered period with respect to the applicable covered loan.”

Covered worker protection expenditure defined as means an operating or a capital expenditure to facilitate the adaptation of the business activities of an entity to comply with requirements established or guidance issued by the Department of Health and Human Services, the Centers for Disease Control, or the Occupational Safety and Health Administration, or any equivalent requirements established or guidance issued by a State or local government, during the period beginning on March 1, 2020 and ending the date on which the national emergency declared by the President under the National Emergencies Act (50 U.S.C. 1601 et seq.) with respect to the Coronavirus Disease 2019 (COVID–19) expires related to the maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID–19.

The Act includes specific examples of what may be included as a Covered Worker Protection Expenditure as well as examples of items that do not qualify for such expense.

These expense categories will be forgivable as part of the “40%” expenses, or non-payroll costs, which are not included in the “60% rule” that requires that 60% of the loan proceeds be spent on “payroll costs”.

Expanded Definition of Payroll Costs

The Act adds additional expense items included in the definition of “payroll costs”. In order to gain full forgiveness, a borrower must expend at least 60% of their PPP loan proceeds on eligible payroll costs which, under the CARES Act, included the following: wages, payroll taxes, paid leave, healthcare payments, and retirement plan contributions.

The Act adds the following categories of forgivable payroll costs: Group life insurance, group disability insurance, group vision insurance, and group dental insurance.

These new expenses applies retroactively to any PPP loans. As a result,  some borrowers may be eligible to amend their original PPP loan application in order to receive a larger loan.


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