PPP is Back with Second Draws and Favorable Tax Treatment


By: Justin Boron

The Paycheck Protection Program is set to return in 2021. 

As part of the $900 billion COVID-19 relief bill passed yesterday, Congress renewed the popular small business relief program administered by the Small Business Administration to allow certain qualifying businesses to take out a second draw on their forgivable loan, re-opened PPP to first-time borrowers that qualify, and set tax law to allow businesses to take advantage of tax deductions associated with PPP-funded expenses.

To qualify for a second draw loan, the business must have 300 or fewer employees, exhaust their current loan proceeds before the second loan is issued, and show a 25 percent decline in gross receipts in any 2020 quarter compared to the same quarter in 2019.  These are new requirements that apply only to second loans.

The loan comes with some of the same conditions as the PPP loans issued in the first two rounds of funding in 2020—such as requirement that 60 percent of the funds be spent on payroll.  But it also eliminated a disfavored IRS ruling that effectively diminished the value of forgiveness by prohibiting deductions for expenses using PPP funds.  The new provision expressly states that the forgiveness amount will not be treated as income and the expenses may be deducted.

Additionally, the new law expands the list of forgivable expenses to include certain personal protective equipment needed to comply with federal COVID-19 guidelines, certain operations expenses such as HR and payroll accounting software, and certain property damage costs caused by public disturbances in 2020.

The amount of the loan will remain the same—2.5 times the business’s average monthly payroll costs in the year prior to the loan or the calendar year—unless the business has a NAICS code beginning with 72, such as restaurant and hospitality businesses.  Congress upped their loan amount to 3.5 times the monthly payroll cost calculation.  But it lowered the cap on all loans to $2 million.

The new law also opened forgivable loans up to 501(c)(6) organizations, such as chambers of commerce or certain industry associations as long as they don’t exceed certain lobbying activities.

It will take some time for the SBA to be set up for new loan applications.  But the law requires it to issue regulations within 10 days after the legislation is signed into law.

FMG’s Coronavirus Task Force is reviewing the entire stimulus bill passed by Congress to advise clients on the benefits and obligations it creates. Please check back for additional posts on this topic.

If you have questions or would like more information, please contact Justin Boron at

Additional Information:

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You can also contact your FMG relationship partner or email the team with any questions at

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