Congress Has Passed the PPP Extension Act
By a vote of 92-7, the Senate today passed HR 1799, the PPP Extension Act of 2021. The House had passed this bill on March 16, 2021, by a vote of 415 to 13. This new provision, once signed by President Biden, will extend the time for lenders to submit PPP loan applications to the SBA from March 31, 2021, through May 31, 2021. It will also allow the SBA to process these applications through June 30, 2021. This extension will allow more borrowers to receive a PPP loan, particularly in light of new rules made during the program’s waning days. This does not mean, however, that the money will last through the end of May. In other words, those still seeking a PPP loan should apply immediately.
When the original Paycheck Protection Program closed on August 8, 2020, the SBA had disbursed $525 billion in loans, and $134 billion was left on the table. The Consolidated Appropriations Act, 2021, reauthorized and revised the PPP through March 31, 2021. It allocated $284 billion to the revived program. On March 11, 2021, the American Rescue Plan Act allocated an additional $7.25 billion toward the PPP, but did not change the expiration date. As of March 21, 2021, the SBA had issued $718 billion in PPP small business loans, with $196 billion of those proceeds disbursed in 2021. It has been widely reported that, as of today, approximately $79 billion in PPP funds remain.
New Deadline, New Rules
The deadline extension follows a month of new PPP rules. On March 3, 2021, the SBA issued its interim final rule to allow Schedule C filers, much like Schedule F filers, to use gross income, rather than net income, to calculate their PPP loan amounts. Although this was a welcome new provision, it was met with some frustration since the new rule did not allow borrowers who had already received a loan calculated based upon net income to receive an increase. The PPP Extension Act did not address this issue.
In addition to allocating an additional $7.25 billion toward the PPP, the American Rescue Plan Act also changed several PPP rules:
- Expanded eligibility for PPP loans to now include most tax-exempt organizations described in any paragraph of IRC § 501(c), except for section 501(c)(4) (social welfare organizations). Some size restrictions and a ban on extensive lobbying activities applies.
- Allowed 501(c)(3) groups that employ no more than 500 employees per location to be eligible for loans.
- Expanded eligibility for PPP loans to certain internet publishing organizations.
- Specified that borrowers who receive a PPP and then a Shuttered Venue Operator grant in 2021 will have their SVOG reduced by the amount of the PPP. Those who receive the SVOG first are ineligible for the PPP. Those who only received a PPP in 2020 are eligible for the SVOG, without reduction.
- Excluded new COBRA subsidy payments from payroll costs.
The SBA implemented these changes with a new IFR issued March 18. The agency issued new forms in conjunction with this release:
The forms also implemented SBA guidance issued March 12 that addressed two farm business questions previously unanswered by the SBA.
The first Q & A clarifies that qualified joint ventures and single member LLCs may use gross Schedule F income when applying for a PPP loan. It also reiterates that a partnership may not use Schedule F gross income to calculate its loan amount. Although the Q & A doesn’t address this question, the application states, “For purposes of calculating the loan amount using gross income (Schedule F filers only), use the sum of gross income (Schedule F, line 9) from both spouses.” Neither the application nor the Q & A specifically address whether the $20,833 cap applies separately to each spouse. The application for Schedule C joint ventures appears to limit the total loan amount for joint ventures (without employees) to $20,833.
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