PPP – Second Draw Loans

January 7, 2021
At the end of 2020, Congress passed, and President Trump signed, a new law that provides for additional relief related to the coronavirus pandemic. This law, the Consolidated Appropriations Act, 2021 (CAA, 2021), includes a second draw of Paycheck Protection Program loans available to certain smaller businesses who received an Original PPP loan and experienced a 25% reduction in gross receipts. It also allows businesses to deduct ordinary and necessary expenses paid from the proceeds of PPP loans.
In March 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act was enacted. The CARES Act authorizes the Small Business Administration to make loans to qualified businesses under certain circumstances. The provision established the PPP, which provided up to 24 weeks of cash-flow assistance through 100% federally guaranteed loans to eligible recipients. Taxpayers could apply to have the loans forgiven to the extent their proceeds were used to maintain payroll during the COVID-19 pandemic and to cover certain other expenses.
As of this newsletter, the SBA has just released new interim final rules to update and consolidate existing loan forgiveness here. The interim final rule on PPP2 Second Draw loans is available here. We will summarize and distribute this information to you shortly. The following is a summary of the information available from the CCA.
Paycheck Protection Program Second Draw Loans
Eligible entities
The CAA, 2021 permits certain smaller businesses who received a PPP loan and experienced a 25% reduction in gross receipts to take a PPP Second Draw Loan of up to $2 million.
In order to qualify for a PPP Second Draw Loan, a taxpayer must have taken out an Original PPP Loan. In addition, prior PPP borrowers must meet the following conditions to be eligible for the PPP Second Draw Loans:
  • Employ no more than 300 employees per physical location;
  • Have used or will use the full amount of their first PPP loan; and
  • Demonstrate at least a 25% reduction in gross receipts in the first, second, or third quarter of 2020 relative to the same 2019 quarter. Applications submitted on or after Jan. 1, 2021 are eligible to utilize the gross receipts from the fourth quarter of 2020.
Eligible entities include for-profit businesses, certain non-profit organizations, housing cooperatives, veterans’ organizations, tribal businesses, self-employed individuals, sole proprietors, independent contractors, and small agricultural co-operatives.
Loan terms. Borrowers may receive a PPP Second Draw Loan of up to 2.5 times the average monthly payroll costs in the one year prior to the loan or in calendar year 2019. However, borrowers in the hospitality or food services industries (NAICS code 72) may receive PPP Second Draw Loans of up to 3.5 times average monthly payroll costs. Only a single PPP Second Draw Loan is permitted to an eligible entity.
Gross receipts and simplified certification of revenue test
Taxpayers who borrow PPP Second Draw Loans of no more than $150,000 may submit a certification, on or before the date the loan forgiveness application is submitted, attesting that the eligible entity meets the applicable revenue (gross receipts) loss requirement.
Loan forgiveness
Like the Original PPP loans, PPP Second Draw Loans may be forgiven for payroll costs of up to 60% (with some exceptions) and nonpayroll costs such as such as rent, mortgage interest and utilities of 40%. The Second Draw Loans vastly expands other eligible expenses to include operations expenses, property damage costs and supplier costs among others. Forgiveness of the loans is not included in income as cancellation of indebtedness income.
Deductibility of expenses paid by PPP loans
The CARES Act was silent on whether expenses paid with the proceeds of PPP loans could be deducted although it was intended to be tax free. IRS took the position that these expenses were non-deductible thus creating a potential ‘backdoor’ tax liability from loan forgiveness. The CAA, 2021 provides that the forgiveness of the loans be non-taxable and the expenses paid both from the proceeds of loans under Original PPP and PPP Second Draw Loans are deductible.
As with the first round of PPP, new information was released and updated practically daily. We will keep you informed of these relevant changes.
We are available to discuss this newly released information. Please call us at 203-852-7088 or email if you have questions.

PPP Revised Forgiveness Application & New IFR

June 19, 2020

The SBA released new forgiveness applications (yes, plural) to incorporate the most recent legislation from the Paycheck Protection Program Flexibility Act of 2020 which became law on June 5th.  The following was summarized by our friends at the Journal of Accountancy published by the AICPA.

Keep in mind that the deadline to apply for PPP loans remains June 30.  After that date, no new PPP loan applications will be accepted.

Two new forgiveness applications were released

The revised PPP Loan Forgiveness Application and instructions include a number of notable items. Among them are:

  • Health insurance costs for S corporation owners cannot be included when calculating payroll costs; however, retirement costs for S corporation owners are eligible costs.
  • Safe harbors for excluding salary and hourly wage reductions and reductions in the number of employees (full-time equivalents) from loan forgiveness reductions can be applied as of the date the loan forgiveness application is submitted. Borrowers don’t have to wait until Dec. 31 to apply for forgiveness to use the safe harbors.
  • Borrowers that received loans before June 5 can choose between using the original eight-week covered period or the new 24-week covered period.

Click the links to access the revised PPP forgiveness application (link) and instructions (link)

The EZ PPP Loan Forgiveness Application requires fewer calculations and less documentation than the full application. The EZ application can be used by borrowers that:

  • Are self-employed and have no employees;
  • Did not reduce the salaries or wages of their employees by more than 25% and did not reduce the number or hours of their employees; or
  • Experienced reductions in business activity as a result of health directives related to COVID-19 and did not reduce the salaries or wages of their employees by more than 25%.

Click the links to access the EZ PPP forgiveness application (link) and instructions (link)

New Interim Final Rule (IFR)

The SBA issued rules (link) Tuesday night for determining payroll costs and owner compensation in calculating PPP loan forgiveness under the new 24-week covered period.

  • The PPP allows loan forgiveness for payroll costs — including salary, wages, and tips — for up to $100,000 annualized per employee, or $15,385 per individual over the eight-week period. The new interim final rule establishes the 24-week maximum for full loan forgiveness at $46,154 per individual.
  • While the employee compensation limit for the 24-week period is three times the eight-week limit, the interim final rule does not do the same with the owner compensation replacement for businesses that file Schedule C, Profit or Loss From Business, or Schedule F, Profit or Loss From Farming, tax returns. For those businesses, forgiveness for the owner compensation replacement is calculated for the eight-week period as 8 ÷ 52 × 2019 net profit, up to a maximum of $15,385. For the 24-week period, the forgiveness calculation is limited to 2.5 months’ worth (2.5 ÷ 12) of 2019 net profit, up to $20,833.

The interim final rule also modifies earlier guidance to account for changes included in the Payroll Protection Flexibility Act.

  • The minimum term for PPP loans is raised to five years for all loans made on or after June 5. For loans made before June 5, the two-year minimum maturity remains in effect unless both the borrower and the lender agree to extend it to five years.
  • The proportion of PPP funding that must be used on payroll costs to qualify for full forgiveness drops to 60% from 75%.
  • The application deadline for PPP loans remains June 30.

We are available to discuss this newly released information. Please call us at 203-852-7088 or email if you have questions.

This PPP loan guidance and information continues to change on a daily basis and as it does, we will keep you up to date.


PPP – Senate Passed New Forgiveness Extensions & Relief

After hours on Wednesday, June 3 the Senate unanimously passed the Paycheck Protection Flexibility Act (link) which grants extension and relief measures for those who received PPP loans. This is expected to be signed into law by the President shortly.

The following is a summary of the legislation’s main points compiled by the AICPA:

  • PPP borrowers can choose to extend the eight-week period to 24 weeks, or they can keep the original eight-week period. This flexibility is designed to make it easier for more borrowers to reach full, or almost full, forgiveness.
  • The payroll expenditure requirement drops to 60% from 75%.but is now a cliff, meaning that borrowers must spend at least 60% on payroll or none of the loan will be forgiven. Currently, a borrower is required to reduce the amount eligible for forgiveness if less than 75% of eligible funds are used for payroll costs, but forgiveness isn’t eliminated if the 75% threshold isn’t met.
  • Borrowers can use the 24-week period to restore their workforce levels and wages to the pre-pandemic levels required for full forgiveness. This must be done by Dec. 31, a change from the previous deadline of June 30.
  • The legislation includes two new exceptions allowing borrowers to achieve full PPP loan forgiveness even if they don’t fully restore their workforce. Previous guidance already allowed borrowers to exclude from those calculations employees who turned down good faith offers to be rehired at the same hours and wages as before the pandemic. The new bill allows borrowers to adjust because they could not find qualified employees or were unable to restore business operations to Feb. 15, 2020, levels due to COVID-19 related operating restrictions.
  • Borrowers now have five years to repay the loan instead of two. The interest rate remains at 1%.
  • The bill allows businesses that took a PPP loan to also delay payment of their payroll taxes, which was prohibited under the CARES Act.


You can access the PPP Loan Forgiveness Application, instructions and worksheets here (link).

The AICPA has provided a thorough and free loan forgiveness Excel calculator which is updated as guidance is released, which can be found here (link)

We are available to discuss this newly released information. Please call us at 203-852-7088 or email if you have questions.

This PPP loan guidance and information continues to change on a daily basis and as it does, we will keep you up to date.

PPP Loan – Forgiveness Instructions & Application

May 18, 2020
On Friday, May 16th the SBA published their Paycheck Protection Program Loan Forgiveness Application along with instructions and worksheets. The Loan Forgiveness Application will need to be submitted to the lender servicing your PPP loan.
You can access the PPP Loan Forgiveness Application, instructions and worksheets here (link).
The AICPA (our professional credential governing body), has been great at disseminating information regarding the PPP, with articles, Excel calculators and prescient insight. As of this email, they are still updating their Excel calculator for forgiveness. Here (link) is an article on forgiveness released by the AICPA last Friday.
The AICPA’s SBA loan information center and resources can be found here (link).
We are available to discuss this newly released information. Please call us at 203-852-7088 or email if you have questions.
This PPP loan guidance and information continues to change on a daily basis and as it does, we will keep you up to date.

PPP Loan – Certification of Need – New Info

The news last week described the PPP certification of need and possible ways to document it with narratives, financial forecasts and cash flow projections to support uncertainty and need at the time you applied for it. The purpose of which was to determine if the loan should be repaid to avoid undue government scrutiny. Today, May 13, the SBA released FAQ #46 which says that any loan request made in an amount less than $2 million is deemed to have been applied for in good faith.
Click here for a link our previous article regarding good faith certification.
Below is the exact text from FAQ #46 and here is a link to all the PPP published frequently asked questions.
“As of May 13, 2020
46. Question: How will SBA review borrowers’ required good-faith certification concerning the necessity of their loan request?
Answer: When submitting a PPP application, all borrowers must certify in good faith that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” SBA, in consultation with the Department of the Treasury, has determined that the following safe harbor will apply to SBA’s review of PPP loans with respect to this issue: Any borrower that, together with its affiliates, received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith.
SBA has determined that this safe harbor is appropriate because borrowers with loans below this threshold are generally less likely to have had access to adequate sources of liquidity in the current economic environment than borrowers that obtained larger loans. This safe harbor will also promote economic certainty as PPP borrowers with more limited resources endeavor to retain and rehire employees. In addition, given the large volume of PPP loans, this approach will enable SBA to conserve its finite audit resources and focus its reviews on larger loans, where the compliance effort may yield higher returns.
Importantly, borrowers with loans greater than $2 million that do not satisfy this safe harbor may still have an adequate basis for making the required good-faith certification, based on their individual circumstances in light of the language of the certification and SBA guidance. SBA has previously stated that all PPP loans in excess of $2 million, and other PPP loans as appropriate, will be subject to review by SBA for compliance with program requirements set forth in the PPP Interim Final Rules and in the Borrower Application Form. If SBA determines in the course of its review that a borrower lacked an adequate basis for the required certification concerning the necessity of the loan request, SBA will seek repayment of the outstanding PPP loan balance and will inform the lender that the borrower is not eligible for loan forgiveness. If the borrower repays the loan after receiving notification from SBA, SBA will not pursue administrative enforcement or referrals to other agencies based on its determination with respect to the certification concerning necessity of the loan request. SBA’s determination concerning the certification regarding the necessity of the loan request will not affect SBA’s loan guarantee.”
This PPP guidance and information continues to change on a daily basis and as it does, we will keep you up to date.

PPP Loan – Forgiveness & Certification of Need

Over the last month we have done a significant amount of SBA and PPP loan consulting with our clients. One thing that we have learned is that the guidance regarding these loans is constantly changing. Our emphasis has shifted from calculating PPP loan borrowing amounts to now calculating potential loan forgiveness amounts and demonstrating the good faith certification of need for these loans.
PPP borrowers can qualify to have their loans forgiven if the proceeds are used to pay certain eligible costs within in the 8 week period after the receipt of the loan. However, the amount of loan forgiveness will be reduced if less than 75% of the funds are spent on payroll costs and the remainder on rent, utilities and mortgage interest.
There are rules for retaining full-time equivalent employees, individual employee salary levels and retroactive relief provided to employers who rehire employees by 6/30/20. We can provide guidance and planning opportunities, so please call.
Good Faith Certification
In addition to the mechanical loan forgiveness calculations above, the PPP application required a good faith certification that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant”. The SBA is beginning to provide some clarity to this subjective phrasing and is now warning borrowers that in the absence of a good faith certification borrowers can be assessed penalties and in some cases be subject to criminal charges.  A few frequently asked questions recently released and posted on the SBA website address this certification ( link). Question #31 infers that a public company that has access to public markets and other sources of sufficient liquidity may not be able to make this certification of need in good faith. Another, #37, addresses the need in the same way for a private company, referring the reader back to the answer for #31. Secondly, in FAQ #39, the SBA reminds borrowers of the certification of need on the application and indicates that they will review (audit) all loans in excess of $2 million and other loans as appropriate, in their opinion, to determine economic need. A borrower can fall under the safe harbor provisions to avoid prosecution, penalties and potential criminal liability by repaying the loan before May 14, 2020 (FAQ #43)
Clearly, it would be wise to formally document projected business disruption by preparing cash flow projections and narratives describing what could occur if the shutdown lasts for certain periods of time, how long it will take to return to ‘normal’, how many staff will be laid off if revenues decrease, etc. and compare this information to pre-shutdown figures. If these exercises reveal that you have sufficient liquidity or ability to maintain your workforce at average 2019 levels for the next 6, 9, 12 or 18 months without the PPP loan, it may make sense to repay all or part of the loan before May 14.
We acknowledge there are still many uncertainties embedded in the foregoing. As more guidance is released we will keep you updated.

SBA Forgivable Loan – Paycheck Protection Program (PPP)

There is much news about the Paycheck Protection Program (PPP), which is the forgivable loan backed by the SBA. Below is the relevant information you need in order to apply. All of this information is accessible by going to SBA Website – PPP section

PPP Borrower Guide Information sheet – issued by Dept of Treasury: Click Here

PPP Application: Click Here

Lenders will begin processing applications on April 3, according the SBA

It is our understanding and that of the AICPA that virtually all banks and credit unions will be able to process these applications, but you should check with your local banker and discuss this Lenders Guide to be sure.

We remain available to assist in any way we can. Please feel free to share this information.



Francis S. Infurchia & Company, LLC

Sick & Family Leave Acts – Summary

Greetings from home!

In the last few weeks with all of the tax deadlines extended, what has typically been ‘tax season’ for all of us has quickly morphed into coronavirus response and mitigation.  We have been researching and learning about the new paid leave acts, tax credits, stimulus packages, SBA loans and the no-interest CT bridge loans.  In addition, we have been taking continuing education and attended town-hall conference calls with our state representatives and the SBA in order to pass along pertinent information to you.

This is another one of a many-part series of communications you will receive from us regarding new tax benefits and mitigation opportunities that may be available.  Please share this information with others.

This post will focus solely on the Families First Coronavirus Response Act; specifically, the two parts of this act which provide no-cost to employer paid sick, medical and family leave to employees though tax credits claimed on payroll tax returns.  You can click the below links to see our limited analysis regarding these new acts.

Emergency Paid Sick Leave Act

Emergency Family and Medical Leave Expansion Act

Paid Sick, Emergency Family and Medical Leave for Self-Employed



Tax Deadline Extensions due to Coronavirus

We hope you are staying safe and healthy. Today, we are writing to you regarding the coronavirus as it relates to the upcoming tax deadlines for the IRS and CT. During the last few weeks, we have been contacting our state and federal representatives, senators and lobbyists to request tax filing and payment relief due to the unprecedented disruptions and challenges caused by the spread of this virus. Finally, last night (Sunday 3/15) Connecticut’s Gov. Lamont held a press conference in which he extended CT state tax filing and payment deadlines for the 2019 partnerships and S-corps. Additionally, our governing body, the AICPA, issued a statement saying that they expect the IRS to extend the April 15 personal tax filing deadline by possibly 90 days and waive penalties and interest associated with payments for most taxpayers. CT DRS Press Release

During this time of social distancing, we ask our clients to please make phone or virtual consultation appointments. If you are able to, please send us your tax documents electronically (we can send you a secure upload link) or mail them to us as our office is currently closed to visitors.

We are being faced with a turbulent financial time. The SBA (Small Business Administration) should have liquidity to make loans to Connecticut businesses to pay for expenses incurred as a result of distress caused by the coronavirus. Please read this  for instructions on how to apply for aid.

Below is a chart with the upcoming proposed and extended common filing deadlines. We will update you when we receive more guidance and final filing and payment deadlines from the IRS.