In December, last minute laws were enacted to seal the gaps in previous stimulus legislation and to reiterate, without a doubt, the purpose of the governments actions: to support and not over burden already struggling small business owners. Their actions negated the recent Treasury stance that PPP money was not considered taxable income, but the expenses that money paid for were not deductible as legitimate business expenses. Finally, common sense took center stage and the end result: First Draw PPP funds are not taxable income and the expenses ARE tax deductible.
In January PPP2 stimulus rolled out with the goal of further supporting those small businesses with fewer than 15 employees, especially those hardest hit in early 2020 such as restaurants, gyms or other companies forced into shut down early on. The main qualification for this Second PPP Draw is to show validation that a single quarter in 2020 gross receipts had decreased at least 25% over the same quarter in 2019. Millions of dollars are going to truly small businesses.
However, consider a restaurant who opened in October 2019, the last quarter of the year. This would be called their start-up quarter, which normally is accompanied by high expense and low income, often resulting in a loss overall for the start-up quarter. The new rules state that if a business was only in operation for Q4 of 2019 then any quarter in 2020 that results in a 25% decrease of gross receipts when compared will make the business eligible for PPP2, second draw funding. This crushes the hopes of new 2019 start-up businesses in struggling industries for some payroll assistance in 2021. Layoffs may ensure. Additional closures are expected, notably in the restaurant, fitness and small business arenas.
To combat this, I am urging you to EAT, SHOP and PLAY LOCAL. Keep those Mom & Pop businesses alive as they are the foundation on which this country, and your community, were built. Initiative, drive, hard work and the willingness to stake their livelihoods on a dream are required for success in any business venture. Support a dream, EAT, SHOP and PLAY LOCAL.