COVID-19 Crisis: Coronavirus Response and Relief Supplemental Appropriations Act

By: Bob Goldberg, RSPA General Counsel

On Dec. 28, the President signed the Coronavirus Response and Relief Supplemental Appropriations Act, 2021, over 5,000 pages of funding for government and further pandemic assistance. Although the President is seeking amendments to this legislation it is not clear Congress will support those requests. The bill, among other things, creates a second possible loan from the Paycheck Protection Program called a PPP Second Draw Loan for smaller (fewer than 300 employees) and harder-hit businesses. Below is an overview of the terms of the PPP Second Draw Loan for resellers.

Paycheck Protection Program Second Draw Loans


  • In order to receive a PPP Second Loan Draw, eligible entities must: (1) employ no more than 300 employees; (2) have used or will use the full amount of their first PPP; and (3) demonstrate at least a 25% reduction in gross receipts in the first, second, or third quarter of 2020 relative to the same 2019 quarter. Applications submitted on or after January 1, 2021 are eligible to utilize the gross receipts for the fourth quarter of 2020.

Loan Terms

  • In general, borrowers may receive a loan amount of up to 2.5X the average monthly payrolls costs in the one year prior to the loan or the calendar year.
  • No loan can be greater than $2 million.
  • For loans no more than $150,000, the entity must submit a certification attesting that the entity meets the revenue loss requirements on or before the date the entity submits their loan forgiveness application.

Additional Eligible Expenses
The legislation adds the following expenses allowable and forgivable uses for Paycheck Protection Program Funds:

  • Covered operations expenditures. Payment for any software, cloud computing, and other human resources and accounting needs.
  • Covered property damage costs. Costs related to property damage due to public disturbances that occurred during 2020 that are not covered by insurance.
  • Covered supplier costs. Expenditures to a supplier pursuant to 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 at which the expenditure was made.
  • Covered worker protection expenditure. Personal protective equipment and adaptive investments to help a loan recipient comply with federal health and safety guidelines or any equivalent State and local guidance related to COVID-19 during the period between March 1, 2020, and the end of the national emergency declaration.

Loan Forgiveness

  • Borrowers of a PPP Second Draw Loan would be eligible for loan forgiveness equal to the sum of their payroll costs, as well as covered mortgage, rent, and utility payments, covered operations expenditures, covered property damage costs, covered supplier costs, and covered work protection expenditures incurred during the covered period (borrower can choose between 8 and 24 weeks after origination).
  • The 60/40 cost allocation between payroll and non-payroll costs in order to receive full forgiveness will continue to apply.

Application of Exemption Based on Employee

  • Extends existing safe harbors on restoring FTE and salaries and wages. Specifically, applies the rule of reducing loan forgiveness for the borrower reducing the number of employees retained and reducing employees’ salaries in excess of 25%.

Tax Benefit

  • In a reversal of Internal Revenue stance on tax treatment, expenses paid with Paycheck Payment Protection funds will be tax deductible.

These comments are based upon a preliminary review of applicable provisions. The Small Business Administration, Department of Treasury, and Internal Revenue Service are certain to provide further guidance and interpretation. In addition, Congress may take further action. RSPA will keep you advised.