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SBA Updates PPP Guidance for Changes Made by Recent Legislation

(Parker Tax Publishing April 2021)

The Small Business Administration issued an interim final rule to implement changes to loans made under the Paycheck Protection Program (PPP) as a result of the enactment of the American Rescue Plan Act of 2021 on March 11, 2021. The interim final rule clarifies the eligibility for first draw PPP loans for applicants that are assigned a North American Industry Classification System code beginning with 72 and have more than one physical location, and clarifies certain payroll cost exclusions that were included in the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act and that are used in calculating the amount of loan forgiveness. SBA-2021-0013.

Update: On March 30, President Biden signed the PPP Extension Act of 2021, which extends the time in which individuals and businesses can apply for a Paycheck Protection Program (PPP) loan, to May 31, 2021. The PPP had been scheduled to expire on March 31.


On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) (Pub. L. 116 - 136) was enacted to provide emergency assistance and health care response for individuals, families, and businesses affected by the coronavirus disease 2019 (COVID - 19) pandemic. Section 1102 of the CARES Act temporarily permitted the Small Business Administration (SBA) to guarantee 100 percent of loans under a new program, the Paycheck Protection Program (PPP), pursuant to Section 7(a)(36) of the Small Business Act (15 U.S.C. Sec. 636(a)(36)) (First Draw PPP Loans). Section 1106 of the CARES Act provided for forgiveness of up to the full principal amount of qualifying PPP loans.

On December 27, 2020, the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act (Economic Aid Act) (Pub. L. 116 - 260) was enacted. The Economic Aid Act reauthorized lending under the PPP through March 31, 2021 [subsequently extended to May 31, 2021 by the PPP Extension Act of 2021]. The Economic Aid Act added a new temporary Section 7(a)(37) to the Small Business Act, which authorized the SBA to guarantee additional PPP loans (Second Draw PPP Loans) to eligible borrowers, under generally the same terms and conditions available under Section 7(a)(36) of the Small Business Act. The Economic Aid Act also redesignated Section 1106 of the CARES Act as Section 7A of the Small Business Act, to appear after Section 7 of the Small Business Act.

The SBA initially published an interim final rule implementing the PPP on April 15, 2020, and subsequently issued additional interim final rules. On January 14, 2021, SBA published interim final rules implementing the Economic Aid Act amendments to the PPP (SBA-2021-0001). On February 5, 2021, SBA published an additional interim final rule implementing Economic Aid Act changes related to the forgiveness and review of PPP loans (SBA-2021-0002). Following the publication of these interim final rules, SBA published another interim final rule revising certain loan amount calculation and eligibility provisions of those rules (SBA-2021-0010).


The American Rescue Plan Act of 2021 (ARPA) expanded eligibility for first and second draw PPP loans, revised the exclusions from payroll costs for purposes of loan forgiveness, and provided that a PPP borrower that receives a PPP loan after December 27, 2020, can be approved for a Shuttered Venue Operator Grant (SVOG) under certain conditions. Entities eligible for an SVOG include live venue operators or promoters, theatrical producers, live performing arts organization operators, museum operators, motion picture theatre operators, and talent representatives. Additionally, entities of these types owned by state or local governments (for example, museums or historic homes) are eligible to apply for a grant if the governmentally-owned entity also acts solely as a venue operator, museum, etc. and does not also include other types of entities. For example, a city parks and recreation department that operated a bandstand in a public square along with running various nature parks would not qualify as an eligible entity for an SVOG. Finally, each subsidiary business owned by an eligible entity that also meets the eligibility requirements on its own rights can qualify as an eligible entity.

On March 22, 2021, the SBA issued interim final rule SBA-2021-0013. This interim final rule (1) incorporates the expanded eligibility rules for First Draw and Second Draw PPP Loans and the exclusions from payroll costs that may be forgiven, and (2) confirms that First Draw PPP Loan applicants that are assigned a North American Industry Classification System (NAICS) code beginning with 72 and that employ no more than 500 employees per physical location are eligible for a PPP loan.

SBA-2021-0013 also sets forth general information about loan forgiveness for First Draw and Second Draw PPP Loans. With respect to loan forgiveness requirements, it requires revisions to prior final interim rules to clarify certain forgiveness payroll cost exclusions under the Economic Aid Act, as well as revisions to incorporate the forgiveness payroll cost exclusions required by the ARPA. As a result, SBA-2021-0013 clarifies that "The following payroll costs are not eligible for loan forgiveness: (a) Qualified wages taken into account in determining (i) the Employee Retention Credit under Section 2301 of the CARES Act, as amended by Section 206 of the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Relief Act) (CARES Act Employee Retention Credit), (ii) the Employee Retention Credit under Section 3134 of the Internal Revenue Code of 1986 (ARP Employee Retention Credit), or (iii) the disaster credit under section 303 of the Relief Act (Disaster Credit), and (b) premiums for COBRA continuation coverage taken into account in determining the credit under section 6432 of the Internal Revenue Code of 1986 (COBRA Continuation Coverage)."

For a discussion of the PPP and discharge of indebtedness rules, see Parker Tax ¶72,340.

Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.

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