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Focus on Taxation: COVID Relief Update

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While the first COVID-related legislation was enacted over a year ago, resulting programs are still ongoing or just getting started. Below is the latest on relief programs available for businesses impacted by the pandemic:
April 22, 2021

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UPDATED: April 24, 2021

While the first COVID-related legislation was enacted over a year ago, resulting programs are still ongoing or just getting started. Below is the latest on relief programs available for businesses impacted by the pandemic:

SVO Grant Plans a Grand Reopening

The Shuttered Venue Operators (SVO) grant program officially opened on April 8th, 2021, but had “technical difficulties” that caused the site to be temporarily suspended only hours after the application portal’s kickoff. SBA officials say they have fixed the initial problem but found new areas of concern they’d like to address before reopening the portal on Monday, April 26. Applicants should review the updated user guide and FAQs for eligibility and complete the application as soon as possible to secure funding.

Once back up and running, the SBA will allocate the $16.2B of available funds on a first-in-first-out basis, with priority allocations in place for small venues and those hit the hardest. The application is fairly involved, including an SVO grant-specific Form 4506-T, Request for Transcript of Tax Return.

Restaurant Revitalization Fund

The American Rescue Plan established a $28.6B fund specifically geared towards bars and restaurants devastated by the pandemic. The SBA is administering the Restaurant Revitalization Fund (RRF) and will soon be ready to launch the tax-free grant program that will allow recipients to receive up to $10M ($5M per physical location) to pay for payroll, supplies, and other operating expenses.

While the official opening date has not yet been set, a dedicated webpage houses useful program information that enables potential applicants to review eligibility and prepare to apply. An online application portal will eventually appear as well, but first the SBA hopes to work out any quirks that could cause problems that have plagued other relief programs.   

A draft application form was released that gives interested participants insight as to what might be requested of them and new program details. Please note in the application is still in draft status and may differ from its final format, but from it we glean the following new information:

  • Recipients will have until March 11, 2023 to utilize funds, which makes the interplay with the Employee Retention Credit (ERC) more favorable since at this moment the ERC ends in 2021.
  • The minimum award will be $1,000 (applicants with less than $1,000 will not be accepted).
  • Hybrid wholesale and retail establishments (bakeries, wineries, breweries) must have at least 33% of gross receipts from onsite sales to the public.

In addition, an RRF program guide was provided as well which explains eligibility, funding, and grant usage. Priority funding will be provided to small businesses at least 51 percent owned and controlled by individuals who are women, veterans, and/or socially and economically disadvantaged individuals. There are also set-asides pools for smaller businesses.  

The SBA has stated that anticipated demand for a grant is well in excess of the $28.6B allotted, so it will be important for eligible recipients to submit an application as soon as the doors open, even if a business is not in a priority recipient category. To prepare, gather the 2019 tax return, and 2020 as well if possible, along with income statements, point of sale reports, or any documentation that demonstrates revenue for both 2019 and 2020.

PPP Apprisal

The PPP Extension Act of 2021 was recently enacted, extending the application due date from March 31, 2021 to May 31, 2021 and allowing an additional 30 days for the SBA to process applications submitted before that date.

SBA data through April 18, 2021 on the 2021 relaunch shows over 4.7M loans approved for nearly $240B in funds. That leaves roughly $51B on the table to be claimed by May 31, 2021 – but the funds may run dry before then, so if you’re considering a First or Second Draw PPP loan, make sure to apply soon!

PPP forgiveness is well under way also, with over 2 million loans having gone through the process so far. Of those application dollars, less than half a percent have been denied forgiveness. That’s not to say the SBA isn’t looking at the files, though, as businesses have been getting pushback on incomplete loan forgiveness applications upon review. Providing a complete forgiveness application is key.

Employee Retention Credit

The Employee Retention Credit (ERC) continues to be an important tax incentive for employers impacted by COVID-19 by either being limited by a government shutdown or having experienced a decline in gross receipts. Initially, an employer could not take both the PPP and the ERC, but subsequent legislation removed that restriction, with the exception that wages cannot be used for both. If you took advantage of the PPP but have not yet considered if an ERC is available as well, it’s not too late! Amended payroll tax filings can be utilized for quarters that have passed and 2021 quarters remain open. It’s also beneficial to analyze the interplay between the ERC and the PPP before filing for PPP loan forgiveness, to maximize the outcome of both programs.

Additionally, guidance was recently issued on the 2021 ERC for Q1 and Q2. While it largely reiterates what we already knew from the legislative text, it did give quiet insight that full-time equivalents do not need to be considered for the FTE count in determining qualifying wages. This means employees with less than 30 hours per week do not need to be included in the headcount, but their wages can still be considered for the credit. This clarification is significant, because once an employer hits the 500 FTE count for 2021 periods, it can only include wages paid to employees who did not provide services. Guidance for Q3 and Q4 nuances is forthcoming.

Please reach out to your RubinBrown contact to discuss any questions or concerns you might have with regard to these COVID relief incentive programs.

By: Tony Nitti, CPA, MST
Partner-In-Charge
National Tax
609.658.9593
tony.nitti@rubinbrown.com

By: Amie Kuntz, CPA, MA
National Tax
amie.kuntz@rubinbrown.com 

 

Readers should not act upon information presented without individual professional consultation.

Any federal tax advice contained in this communication (including any attachments): (i) is intended for your use only; (ii) is based on the accuracy and completeness of the facts you have provided us; and (iii) may not be relied upon to avoid penalties.

 

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