The challenges faced by Denver individuals and businesses continue as the COVID-19 pandemic persists. The government orders designed to stem virus transmission have left many operating under different conditions or unable to open at all. Attempting to survive the deluge has left many looking for financial relief. The Consolidated Appropriations Act, 2021, (CAA) provides comprehensive relief through economic stimulus payments, expanded business tax credits and incentives, favorable changes to the Paycheck Protection Program (PPP2), and renewal of Economic Injury Disaster Loans (EIDLs). There was also a renewal of the popular $10,000 advance, with modifications, for those applying for an EIDL. To help clients, prospects, and others, Hanson & Co has provided a brief summary of the key details below.
In order to qualify, a business that applies for an EIDL must be located within a low-income community, suffered an economic loss greater than 30%, and not have more than 300 employees.
Economic loss is determined by comparing the decline in gross receipts during any 8-week period between March 2, 2020, and December 31, 2021, to a similar 8-week period immediately preceding March 2, 2020, or during 2019. There is an alternate calculation method that seasonal businesses need to use, but the Small Business Administration (SBA) has not yet released details.
A business operates in a low-income community if the poverty rate is 20% or:
- In cases where a business is not located within a metropolitan area, the median family income can not exceed 80% of the statewide median income, or
- When located within a metropolitan area, including Atlanta, the median family income can not exceed 80% of either the statewide median income or metropolitan median income, which is greater.
It is important to note that businesses that received a $10,000 EIDL advance in 2020 are not eligible to participate. In cases of partial advances assuming the above criteria is met, an additional advance is possible but would be limited to the difference of the prior advance and $10,000.
Unlike the first round of advances which were approved 3 days after application, the second round will feature a longer approval timeline of 21 days.
Congress determined, and included in the CCA at the first, and now the second EIDL advances are tax-free grants and the expenses associated with the grants are tax-deductible.
The renewal of EIDL advances provides an extra dimension of financial assistance for Denver businesses managing through the pandemic. The SBA has not yet issued guidance or started accepting new applications, but we will keep you informed of important developments. If you have questions or need assistance with a tax or accounting issue, Hanson & Co can help. For additional information call us at 303-388-1010 or click here to contact us. We look forward to speaking with you soon.