The 2021 Consolidated Appropriations Act (CAA 2021) included several updates regarding the forgiveness of PPP loans. Most of these changes seek to simplify the process and allow greater flexibility to businesses. Key points to remember when thinking about PPP loan forgiveness include:
- Changes to forgiveness forms and procedures – New or updated forms for applying for PPP forgiveness were released on January 19, 2021. For PPP loans under $150,000 a new, one-page form will allow “automatic” forgiveness for borrowers – PPP Loan Forgiveness Form 3508S. Businesses that had PPP loans of over $150,000 will continue to use the modified Form 3508 or 3508EZ, depending on the details of their situation.
- Forgiveness for First Draw PPP Loans must be applied for before or simultaneous to Second Draw PPP Loan Forgiveness if a borrower is applying for forgiveness of a Second Draw that is more than $150,000.
- Flexibility on the chosen covered period – borrowers now can choose any period between 8 and 24 weeks in length, starting from when they received their PPP funds, to use for calculating their PPP forgiveness. Besides cutting down on paperwork or information gathering, this can also allow ‘unused’ payroll expenses to then be used for other COVID related tax benefits, such as the Employee Retention Credit. The longer covered periods also make it easier for most borrowers to meet the criteria for full forgiveness.
- Expansion of costs eligible for forgiveness – Previously, only wages and compensation, mortgage interest, rent, and utilities could count towards a businesses’ PPP loan for forgiveness purposes. The CAA 2021 has expanded this covered allowable costs list to include operating expenses, supplier costs, property damage or expenditures related to sanitation and health requirement compliance. For full forgiveness, at least 60% of the loan proceeds must still be used towards payroll costs, but the expanded flexibility in a borrower’s chosen covered period should make this easier to meet.
New information regarding PPP loans, their forgiveness, and other COVID-related programs and legislature is being released regularly. Be sure to check out our COVID-19 resource page for the most up to date information, and do not hesitate to contact us with any questions or if your business needs assistance in applying for PPP forgiveness or even a PPP Second Draw.
Written by: Allison Swanberg
Allison Swanberg is a Tax Senior with Thompson Greenspon and joined the firm in 2020. Prior to joining the firm, she worked for a smaller local firm which specialized in individual tax planning and small business accounting. Allison provides and accounting services for individuals, fiduciary entities, and small to mid-size partnerships and S-Corporations, as well as planning strategies such as cost segregation studies.
Allison has a Bachelors degree from Virginia Tech and is currently pursuing her CPA Certification. She is a member of the Accounting and Finance Women’s Alliance (DC Chapter) and served as a committee member from 2019 to 2020. She is also a member of the American Institute of Certified Public Accountants and the Virginia Society of Certified Public Accountants.
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