The Biden-Harris Administration and the SBA are expanding the Paycheck Protection Program (PPP) to further promote equitable relief for America’s small businesses.
The changes for IRS Form 1040 Schedule C filers (sole proprietors, independent contractors, and self-employed individuals) are as follows:
- SBA is revising the formula for calculating maximum loan amount.
- Schedule C filers will be able to calculate their PPP loan amount using the gross income on Line 7 of IRS Form 1040 Schedule C. As a side note, Line 7 gross income is gross receipts less returns and allowances, less cost of goods sold, and plus other income. It is unclear if the Schedule C business has employees, what the calculation will look like. Also, if there are no employees, it is possible the SBA will cap the gross income amount to $100,000.
- $1 billion has been set aside for Schedule C applicants which don’t have employees and are located in LMI census tracts. This is a just a set-aside of funds. A Schedule C business does not need to be located in LMI census tracts to use the new gross income calculation.
- This is only a prospective change, so any Schedule C businesses that already applied for PPP 1 and 2, can’t “amend.”
More information will be coming soon. The SBA will publish an interim final rule and a new application for Schedule C filers. We anticipate that the new rules and new application will be implemented the first week of March.
The calculation changes for Schedule C filers should be good news for many Schedule C filers that were previously not allowed to apply for PPP funds due to Schedule C net losses.
In addition to the above rule changes, the SBA will eliminate exclusionary restrictions on PPP access for business owners with prior non-fraud felony convictions and federal student loan debt delinquencies.
Also, beginning on Wednesday, February 24, 2021 and running 14 days, the SBA will only accept PPP applications from businesses with fewer than 20 employees. The PPP program will open back up for other businesses around March 10, 2021 and close down on March 31, 2021.
Bodine Perry will continue to monitor the status of these changes and update our clients as the Interim Final Rule is released.