The new legislation settles the dispute by providing that forgiven PPP loans do not produce taxable income and eligible expenditures giving rise to forgiveness are tax deductible.

A second round of PPP loans called “second draw loans” is authorized by this new legislation. Eligible entities with less than 300 employees that can demonstrate at least a 25% reduction in gross receipts in the first, second, or third quarter of 2020 as compared to the same quarter in 2019 can apply for a second draw loan. If entities apply after January 1, 2021, they can use their 2020 and 2019 fourth quarter gross receipts. Entities not in business as of February 15, 2020, are not eligible for second draw loans. There is no further guidance on how to measure gross receipts.

Like the first round of PPP loans, the second draw borrowers generally must use 60% of the loan proceeds on payroll, and borrowers can be subject to forgiveness reductions if they reduce their full time equivalency (FTE) counts or certain employee salaries by more than 25%. The remaining 40% can be used on qualified overhead like rent, mortgage, and utilities. The new legislation also created new categories of eligible non-payroll expenses for both existing and new borrowers, including:

Covered operations expenditures: Payments for any business software or cloud computing service that facilitates business operations, product or service delivery, the processing, payment, or tracking of payroll expenses, human resources, sales and billing functions, or accounting or tracking of supplies, inventory, records and expenses.
Covered property damage costs: Costs related to property damage and vandalism or looting due to public disturbances that occurred during 2020 that was not covered by insurance or other compensation.
Covered supplier costs: Payments made to a supplier for goods that are essential to a business if the obligation was binding prior to the covered period of the loan or for perishable goods during the covered period.
Covered worker protection expenditures: Operating and capital costs incurred to comply with published health and worker protection guidance.

There are new forgiveness rules for both existing and new PPP loans not exceeding $150,000. Borrowers under $150,000 will only need to complete a one-page forgiveness application with associated certifications and attestations about the loan and uses of the proceeds. No supporting documentation is required; however, borrowers are required to retain documentation related to employment for four years and other records for three years. There maybe changes in the future.