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COVID Aid Package Includes $50 Billion for Small Business

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Today, House Democrats passed the Senate-amended version of the $1.9 trillion COVID aid package, sending the bill to the President’s desk for signature. The White House announced Biden will sign the bill into law on Friday.

The bill includes $50 billion in aid to small businesses. Read a summary of the small business provisions, courtesy of Bloomberg Government and Madison Services Group:

Paycheck Protection Program

The measure would increase funding and expand eligibility for the Paycheck Protection Program and would allow forgiveness for additional expenses.

Program Funding

The measure would increase the program’s lending authority by $7.25 billion, to $813.7 billion, and appropriate the same amount for the Small Business Administration (SBA) to guarantee additional loans.

Tax-Exempt Groups

The measure would expand the eligibility rules to cover more tax-exempt groups, including 501(c)(5) labor organizations, 501(c)(7) social and recreation clubs, and 501(c)(8) fraternal benefit societies. Religious educational groups that might otherwise be barred under SBA rules would be permitted. 501(c)(4) social welfare groups, such as AARP, the ACLU, Americans for Prosperity, and the National Rifle Association, would still be prohibited.

The additional tax-exempt groups couldn’t employ more than 300 employees per location or spend more than $1 million annually or 15% of their time on lobbying activities.

Larger Nonprofits

Some nonprofits that currently qualify for PPP loans, such as 501(c)(3) groups, can’t have more employees than the SBA’s size standards for the relevant industry and are subject to the agency’s restrictions for affiliated entities.

The measure would replace those rules, allowing 501(c)(3) groups with as many as 500 employees per physical location to participate without further restrictions.

Online News Publishers

Internet-only news publishers that were previously ineligible could receive PPP loans if they have 500 or fewer employees or a size set by the SBA per location. They would have to certify that the funds will be used to support local news.

SBA affiliation rules and a ban on publicly traded companies would be waived for online news outlets seeking loans.

Loan Forgiveness

The measure would expand PPP loan forgiveness to include payments made for premiums on behalf of individuals who qualify for COBRA health insurance continuation coverage.

The change would apply to loan forgiveness applications received following the measure’s enactment.

Restaurant Grants

The measure would provide $25 billion for a Restaurant Revitalization Fund to be administered by the SBA.

Eligible recipients would include restaurants, bars, food trucks, and caterers, including businesses in airport terminals and tribally owned entities.

Disqualified businesses would include those run by state or local governments, companies that manage more than 20 locations including affiliates, live venues seeking grants under the year- end Covid-19 relief package, and publicly traded companies.

For 60 days following the measure’s enactment, $5 billion would be set aside for eligible entities with gross revenue of $500,000 or less in 2019. The SBA would also have to prioritize awards for small businesses owned by women, veterans, and socially or economically disadvantaged individuals during an initial 21-day award period.

Other grant funds would be awarded on a first-come, first-served basis.
Grant amounts would cover the difference between an entity’s revenue in 2020 compared with 2019. Awards would be reduced by amounts received through the Paycheck Protection Program.

Aggregate awards made to an entity and its affiliates couldn’t exceed $10 million and would be limited to $5 million per location.

Eligible expenses generally would include payroll costs, mortgage and rent payments, supplies, normal food and beverage costs, and paid sick leave.
Funds could be used through Dec. 31, or a date set by the SBA that’s no later than two years after the measure’s enactment.

Disaster Loans

The measure would provide $15 billion for additional advance payments to eligible entities under the SBA’s Economic Injury Disaster Loan (EIDL) program.

The SBA would have to allocate $10 billion to covered entities that didn’t receive their full eligible advance payments under the year-end relief package. Those entities include recipients with 300 or fewer employees and economic losses of at least 30% over eight weeks compared with a similar period before the pandemic.

The remaining $5 billion would be set aside to make new supplemental payments of $5,000 to covered entities with 10 or fewer employees that had economic losses of more than 50% during the covered period.

State Initiative

The reconciliation measure would provide $10 billion for the State Small Business Credit Initiative. The Treasury Department would have to set aside:
• $1.5 billion for states to support businesses owned by socially and economically disadvantaged people.
• $1 billion for an incentive program to boost funding tranches for states that show robust support for such businesses.
• $500 million to support small businesses with fewer than 10 employees.

The department could set aside an additional $500 million for states to provide legal, accounting, and financial advisory services. It could also transfer the funds to the Commerce.

Department’s Minority Business Development Agency to provide similar technical assistance. States that receive funding through the initiative would have to submit plans to increase participation by minority and community financial institutions and to help small businesses recover from the Covid-19 pandemic.

The department would have to complete all disbursements by Sept. 30, 2030. Any remaining amounts would be rescinded.

Other SBA Funding

The measure also would provide:
• $1.25 billion in additional funding for SBA grants to live venues and other cultural institutions under a program in the year-end relief package. Grant amounts would be reduced by any loans received through the Paycheck Protection Program following the enactment of the year-end package.
• $840 million in additional administrative funds for the SBA to carry out the Paycheck Protection Program and other initiatives to aid small businesses during Covid-19.
• $390 million to administer the SBA’s disaster loan program and $70 million for the cost of additional loans.
• $100 million for the SBA to establish a community navigator pilot program for small businesses and $75 million for the SBA to promote community navigator services to small businesses.

Other Tax Changes

Small Business Grants Exclusion

Advance funds provided through the Small Business Administration’s Economic Injury Disaster Loan program and restaurant grants created by the bill would be excluded from gross income for tax purposes.