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SBA and Treasury Issue New PPP Round 2 Guidance

January 13, 2021


The U.S. Small Business Administration (SBA) and Treasury recently released two interim final rules (IFRs) related to the Consolidated Appropriations Act, 2021 (CAA). The Interim Final Rule on Paycheck Protection Program as Amended by Economic Aid Act (Original PPP IFR) consolidates the interim final rules and significant guidance in addition to incorporating the changes of the CAA. The Interim Final Rule on Second Draw Loans (Second Draw PPP IFR) clarifies some of the eligibility requirements of the second draw PPP loans. (Review KSM’s recent summary of PPP-related provisions as a result of the CAA).

The following highlights a few of the clarifications made by the IFRs.

Original PPP IFR

Increase Loan Amount

The CAA provides the opportunity for borrowers who have not received forgiveness as of Dec. 27, 2020 to apply for an increase in their original loan amount. The Original PPP IFR helps to clarify that the following borrowers will be eligible to apply for an increase in their original loan amount.

  • Partnerships that did not include partner compensation in the payroll costs calculation.
  • Seasonal employers that would benefit from the CAA’s expanded 12-week period to calculate their average monthly payroll costs.
  • Borrowers that returned all or part of a PPP loan.
  • Borrowers that did not accept the full amount of the PPP loan.


Although Section 320 of the CAA seemed to indicate that borrowers in bankruptcy would be eligible to apply, the SBA clarified that a business in bankruptcy will not be eligible to receive a PPP loan.

Second Draw PPP IFR


  • Borrowers must use the full amount of PPP funds on eligible expenses before the expected date on which the second draw PPP loan is disbursed to the borrower.
    • Clarifies that the “full amount” of the borrower’s first draw PPP loan includes the amount of any increase on such first draw PPP loan.
    • The CAA suggests only an intent to use the full amount of the original PPP funds prior to receiving a second draw PPP loan, but the IFR imposes a requirement that the full amount of the funds have been used prior to receiving the second draw PPP loan.
  • Defines Gross Receipts
    • Includes all income (ordinary and investment) except for the following:
      • Net capital gains (losses)
      • Amount of any forgiven first draw PPP loan
      • Taxes remitted to taxing authority if included in gross income (i.e., sales tax)
      • Proceeds from transactions between a concern and its domestic or foreign affiliates
      • Amounts collected as travel agent, real estate agent, advertising agent, conference management service provider, freight forwarder, or customs broker
    • Includes receipts of all affiliates
    • Accounting method: “in accordance with entity’s accounting method”
    • Special rules related to M&A transactions
    • A nonprofit organization defines gross receipts consistent with IRC Section 6033

Maximum Loan Amount

Businesses that are part of a single corporate group (majority owned, directly or indirectly, by a common parent) are limited to a total of $4 million.

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