What the $900 Billion Omnibus COVID Relief Bill Means for Gyms
Posted: December 23, 2020 in IHRSA
IHRSA Advocate
BOSTON, MA – Congress has finally passed a COVID relief bill, and this alert summarizes what you need to know about the $900 billion package. While it is good to see Congress finally take action, the bill fell short of expectations. Unfortunately, the bill does not contain specific grants for health and fitness businesses. The good news is some Democratic leaders are already describing it as a “down payment” for a larger relief bill expected to come in the new 117th Congress, following the change in administration.
There are a few provisions that should prove helpful to many clubs, including:
- Paycheck Protection Program (PPP) Updates,
- New Expenses Eligible for Forgiveness,
- Loan and Bankruptcy Changes, and
- Three Other Key Provisions
Paycheck Protection Program (PPP) Updates
This bill adds an additional $284.45 billion to the PPP and allows first time PPP loan applicants to apply for the loan through March 31, 2021.
Second Chance PPP Loans for Eligible Businesses
Businesses can apply for a maximum loan of 2.5x average monthly payroll costs, up to $2 million, if they:
- Employ no more than 300 employees – IHRSA is seeking clarity on what time period SBA will be looking at to determining employee count,
- Have used, or will use, the full amount of their first PPP; and
- Demonstrate at least 25% reduction in gross receipts in the first, second, or third quarter of 2020 relative to the same quarter in 2019.
Borrowers can receive full loan forgiveness if they spend at least 60% of their PPP second draw loan on payroll costs.
Borrowers can now select between 8 weeks and 24 weeks for their loan forgiveness coverage period. The bill also sets aside support for first-time PPP borrowers with 10 or fewer employees, second-time PPP borrowers with 10 or fewer employees, first-time PPP borrowers who have been made newly eligible, and second-time returning PPP borrowers.
New Expenses Eligible for Forgiveness (Applies to ALL PPP loans)
- Software, cloud computing, human resources and accounting needs;
- Property damage due to public disturbances not covered by insurance;
- Supplier costs – pursuant a contract, purchase order, or order for goods in effect prior to taking out the loan that are essential to the recipient’s operations at the time the expenditure was made. Supplier costs for perishable goods can be made before or during the life of the loan.
New Payroll Expenses
Borrowers can now include group life insurance, disability, vision or dental in payroll costs. This update applies to ALL PPP loans, including those previously taken out.
Reapply
Borrowers who returned all or part of their PPP loan can reapply for the maximum amount applicable. It also allows lenders to recalculate borrowers’ loan amounts due to changes in regulations regardless of whether an SBA Form 1502 has been submitted.
Four Tax Implications of PPP
- 1. Clarifies that gross income does not include any amount that would otherwise arise from the forgiveness of a Paycheck Protection Program (PPP) loan.
- 2. This provision also clarifies that deductions are allowed for otherwise deductible expenses paid with the proceeds of a PPP loan that is forgiven, and that the tax basis and other attributes of the borrower’s assets will not be reduced as a result of the loan forgiveness.
- 3. The provision is effective as of the date of enactment of the CARES Act.
- 4. The provision provides similar treatment for Second Draw PPP loans, effective for tax years ending after the date of enactment of the provision.
Bankruptcy
Establishes a procedure in the bankruptcy process if the Administrator determines certain small business debtors in Chapter 11 are eligible for PPP loans.
$20 Billion Allocated for Economic Injury Disaster Loans (EIDL)
This bill provides additional targeted funding for eligible entities located in low-income communities. It also eliminates the requirement that EIDL advances be subtracted from PPP forgiveness.
Threee Other Key Provisions
- A new round of direct payments worth up to $600 per adult and child;
- A $300 per week UI enhancement for Americans out of work;
- Extends and expands the Employee Retention Tax Credit through July 1, 2021.
The bill increases the refundable payroll tax credit from a maximum of $5,000 to $14,000 by changing the calculation from 50% of wages paid up to $10,000 to 70% of wages paid up to $10,000 for any quarter. The bill clarifies that businesses will now be able to take the Employee Retention Tax Credit and participate in the PPP.
IHRSA will continue to fight for federal relief for our industry. Our work positioning the industry for assistance in the next relief bill has already begun, we will be back with more information on the next phase after the holidays.
If you have questions, please email Jeff Perkins, IHRSA’s assistant vice president of government relations.
