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A CFO's Perspective of the COVID-19 Relief Bill

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As you probably know, Congress passed, and President Trump signed a new $900 billion COVID-19 relief bill into law. I wanted to provide a quick recap of what this means for your business from a CFO's perspective. 

Improvements from PPP1

The CARES act that launched the Paycheck Protection Program (PPP1) had some areas that were not clear that this new act has resolved. These are very good improvements.

  • Not only is the PPP Forgiveness not taxable, but you can deduct the applicable business expenses. These changes make life much easier on tax planning, estimated taxes, and cash flow. I had been recommending to my clients to set aside 30-40% in taxes. What a huge windfall for businesses. 
  • You can now get an EIDL advance forgiven. Businesses that applied for an EIDL received $1,000 to $10,000 advance were going to have to pay this back with interest. 


The second Paycheck Protection Program (PPP2) has some differences. Here is a quick recap. 

  • Have 300 or fewer employees.
  • Have used or will use the full amount of their first PPP.
  • Can show a 25% gross revenue decline in any 2020 quarter compared with the same quarter in 2019. This change is a significant difference and will mean that you will want up-to-date accounting to support this decrease. 
  • If you did not receive a loan in the first round, you are eligible this time with similar rules as before.
  • Can obtain a loan of up to 2.5 times their average monthly payroll in the year prior to the loan or calendar year. Hotels and restaurants can get 3.5 times payroll. 
  • The maximum loan received is $2 million.
  • The loan's forgiveness is similar in that costs must be used for payroll, rent, mortgage interest, and utilities. You can now also include protective equipment, essential expenditures to suppliers, software, cloud computing services, and accounting. 
  • For loans less than $150,000, there is a simplified one-page forgiveness application. 

Revenue Decrease Provision

The revenue decrease provision is an interesting addition. This provision could be extra challenging for businesses on an accrual basis if you are close to 25% down for one quarter. Be very consistent in how you accrue revenue and be able to support it. 

For those businesses that are cash basis, there might be a desire to push off depositing cash in the 4th quarter to make it look worse. If you can only show a decrease for one quarter and the 1st quarter of 2021 is very good or an increase, this could be construed as fraud. I suggest being as consistent as you can and not manipulate your numbers. It does not help you run your business better anyway and may be questioned. 

Overall Thoughts

I am glad they passed this legislation as it will help businesses that are struggling and make life much easier for those who already received forgiveness. They have made some improvements by learning from the holes in the first round. There will be more scrutiny for those businesses getting another round of funding, especially for larger amounts. It will be essential that businesses have current, consistent, and accurate accounting to support their need for forgiveness.  If you want to know more, check out this article from the Journal of Accountancy