CAA 2021 COVID Relief Bill Presented by Brinker

CAA 2021 COVID Relief Bill Presented by Brinker Simpson December 30, 2020

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AGENDA • Intro and Overview • Consolidated Appropriations Act, 2021 (including $900 billion for COVID 19 economic relief) • FFCRA Sick Pay and Family Leave - update • Employee Retention Credit • EIDL Advance update • Paycheck Protection Program • • • What's changed? • Deductibility of Expenses Paid with Forgiven PPP Funds • Expansion of Streamlined forgiveness • New covered expenses Round Two - What's new? Q&A • Eligibility • Calculations • Example

Consolidated Appropriations Act, 2021 (the Act) – CAA 2021 Economic impact payments Extension of SBA loan payment deferrals on existing loans through 3/31 Grants for Shuttered live venues/museums and other eligible organizations -$15 billion Unemployment supplements Rental assistance to avoid evictions Student debt forgiveness not addressed. Interest free expires 12/31 Covid vaccine delivery Medical expenses deduction extended Extends many tax credits set to expire; others made permanent Retirement plan withdrawals Business meals 100% deductible through 12/31/2022 Charity deduction $300/$600 for non itemizers Repeals tuition credits Flexible spending accounts – even more flexible!

FFCRA Paid Sick and Family Leave Families First Coronavirus Response Act (FFCRA) requires private employers with less than 500 employees and certain public employers to provide employees with 80 hours of paid sick leave for specified reasons related to COVID-19 and up to 10 weeks of paid, job-protected leave for employees who have worked for their employer for at least 30 days and who are unable to work due to the need to care for a son or daughter whose school is closed or the unavailability of a child care provider due to COVID-19. Credit availability extended through 3/31/2021 for employers who voluntarily provide leave for FFCRA eligible reasons; mandate to employers expires at 12/31. The amount of leave that is available to employees has not been expanded. Considerations for employers: Decide whether your company will continue providing leave for reasons under the FFCRA. Communicate proactively with employees regarding the availability of leave after 12/31/20. Review usage and available leave and consider communicating balances or exhausted leave with employees after year end Be consistent – do not allow on a case by case basis Consider impact of school closures in your organization; leave is available to parents who are not able to work due to mandated remote learning

EIDL Advance Extension of CARES advances $10, 000 maximum Recipients who received less than the full $10, 000 are eligible to receive the difference Available for first time applicants and those locked out of 1 st round due to funding Special fund Allocation for targeted EIDL Advance for small business continuity Eligible Entities: Must be eligible for an EIDL (loan), per program regulations and guidelines; Must be located in a low-income community; Must have suffered an economic loss of greater than 30%; and Employs not more than 300 employees

Employee Retention Credit – Section 206 retroactive to 3/12/20 PPP borrowers are eligible SPECIAL RULE For PPP borrowers who would have been otherwise eligible who have already filed payroll tax returns can elect to treat any applicable amount PAID AFTER December 31, 2019 and before October 1, 2020 as being paid in the quarter the Act is enacted (4 th quarter of 2020) PPP borrowers should consider reducing the payroll costs eligible forgiveness if those wages might be otherwise eligible for the retention credit as a result of the revised rules Business owners should go back and determine if they had eligible quarters and then evaluate if they should consider electing the retention credit for any qualified wages and excluding those wage from the PPP forgivable payroll expenses

Employee Retention Credit – Section 207 Provisions apply to 2021 only; not retroactive Extension to include wages paid through 6/30/2021 FTE eligibility threshold increased from 100 to 500 Decrease in reduction in gross receipts % required to qualify from 50% to 20% Credit increased to 70% of qualified wages from 50% Qualifying wages increased from $10, 000 per employee to $10, 000 per eligible quarter Increases flexibility to make bonuses and other departures from 2019 payroll eligible Option to elect to satisfy the gross receipts test by looking at the immediately preceding calendar quarter, and comparing that quarter to the corresponding quarter in 2019 up to 70% of the average quarterly wages for 2019 Unclear if election is permanent; will likely need to be made each quarter

ERC Considerations Forgiveness Considerations PPP loan - April 10 th, 2020 Eligible Payroll Costs Eligible non payroll $ 200, 000. 00 $ 265, 000. 00 $ 20, 000. 00 Assume eligible payroll costs include $50, 000 of wages paid in ERC eligible quarter. Borrowers may consider electing to treat those wages as eligible for the ERC and not PPP forgiveness. Potential Credit under revised rules 2021 WAGES PAID in 2021 - TOTAL (assume ERC eligible quarters in gray) Q 1 (ERC Q 2 (ERC EE eligible) Q 3 Q 4 Q 1 Q 2 TOTAL $ Employee 1 37, 500 $ 7, 000 $ 14, 000 $ Employee 2 6, 000 $ 4, 200 $ 8, 400 $ Employee 3 10, 000 $ 7, 000 $ 14, 000 $ Employee 4 19, 000 $ 7, 000 $ 14, 000 $ Employee 5 14, 000 $ 7, 000 $ 14, 000 $ 86, 500 $ 32, 200 $ 95, 200 $ 64, 400 $ 86, 500 CREDIT $

Paycheck Protection Program Update • Tax deductibility of PPP expenses • Expenses paid with forgiven PPP funds are now tax-deductible • CAA 2021 replaces previous IRS guidance • Basis considerations • EIDL advance no longer reduces PPP forgiveness • Clarification on payroll costs • • Includes group life, disability, dental and vision insurance Expansion of PPP eligible expenses • Business software, cloud computing, or other human resources and accounting needs • Expenditure to a supplier that are essential at the time of purchase to operations • Worker protection such as personal protection equipment or expenditures to remain compliant with government issued COVID-19 guidance • Cost related to property damage due to public disturbances during 2020 not covered by insurance or other compensation

Paycheck Protection Program Update • Streamlined forgiveness for loans under $150, 000 • One-page application forgiveness • All forgiveness requirements still apply • Recommend completing full forgiveness application, but only submit shorten version • Borrowers select a covered period anywhere between 8 and 24 weeks • Ability to request PPP loan amount increase • Borrower may request an increase only if the increase results from changes to the interim final rules • SBA to issue guidance within 17 days on process to request increase • Can not apply for increase if already applied forgiveness

Paycheck Protection Program 2 (PPP 2) • SBA has 10 days from the signing of the bill to issue guidance • Appears to have same terms are original PPP loans • First-time applications • Same requirements as original PPP loans • 501(c)(6) organization are newly eligible • • Increased limitations: 300 employee limit, limited lobbying activities, etc. Second draw eligibility • Employs not more than 300 employees; • Has or will use the full amount of their first PPP loan; and • Had gross receipts during the first, second, third, or fourth quarter in 2020 that demonstrate not less than a 25 percent reduction from the gross receipts during the same quarter in 2019

Paycheck Protection Program 2 (PPP 2) Gross Receipts Threshold Testing Quarter 2019 Gross Receipts Gross Receipt Reduction Threshold 2020 Gross Receipts Q 1 $100, 000 $75, 000 $95, 000 Q 2 $100, 000 $75, 000 $25, 000 Q 3 $100, 000 $75, 000 $62, 500 Q 4 $125, 000 $93, 750 ? • Definition of “gross receipt”? • Specifically defined as calendar quarter • Does not include disbursements of original PPP loan or other CARES act provisions

Paycheck Protection Program 2 (PPP 2) • • • Necessity test • Same goodwill certification as original PPP loan • “necessary to support the on-going operations of the applicant. ” Loan amount 2. 5 times average total monthly payroll costs • Calculated using the one-year period before the loan application or the calendar year of 2019 • $2 million maximum loan amount NAICS 72 - Accommodation and Food Services • • Eligible to receive loan amount based upon 3. 5 times the average total monthly payroll costs Seasonal employers and new entities receive greater flexibility regarding base period

Provisions targeted towards lenders Economic impact payments – not subject to garnishment – caused major issues with ACH processing for lenders Language requires non compounding interest rate not to exceed 4%; retroactive eligibility if agreement between lender & borrower Strengthened PPP Lender Hold Harmless language The Act renews the subsidies established under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) for up to $9, 000 per month of principal and interest (P&I) payments on small business loans that are not made under the PPP Extensions of Temporary Relief from TDR and CECL Accounting Requirements extends the time that insured depository institutions and depository institution holding companies have to comply with the current expected credit losses (CECL) accounting standard until the earlier of the termination of the COVID-19 public health emergency or January 1, 2022. extends the authority granted to banks under the CARES Act to elect to temporarily suspend the requirements under U. S. GAAP applicable to troubled debt restructurings (TDRs) for loan modifications related to the COVID 19 pandemic for any loan that was not more than 30 days past due as of December 31, 2019. Loan modifications that would otherwise be categorized as TDRs are not required to be reported as such, and banks are not subject to TDR impairment requirements for accounting purposes, if the bank elects to suspend TDR treatment. The suspension is permitted to be effective until the earlier of January 1, 2022, or the date that is 60 days after the date on which the COVID-19 public health emergency is terminated.

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