Second Draw PPP Loan

December 29, 2020 by 2 Comments

The President has signed the Covid-19 relief legislation, which means that there is an opportunity for businesses to seek a second loan under the Paycheck Protection Program (PPP).

Some things will remain the same with this second iteration of the PPP. The maximum amount of the loan will be equal to 2 and a half months of payroll (this can be based on 2019 payroll OR the one-year period prior to the loan). If you spend the loan on certain authorized expenses during the covered period then the loan can be forgiven (so you do not have to repay it).

But there will be some key differences in the second PPP. The most important of these is that the second draw PPP will be limited to businesses that can show an adverse effect from Covid-19. Nearly all of ASA’s members have been affected by Covid-19 so hopefully this works to the benefit of our members. The manner in which you must show effect is by comparing your 2020 quarterly gross receipts with those of the corollary 2019 quarter. If you can demonstrate that your quarterly gross receipts dropped by 25 percent or more from the corollary 2109 gross receipts for the same quarter, then you meet this prong of the eligibility test. There are also special rules if you were not in business for all of 2019.

We recommend that you simply arrange your gross receipts like this to assess eligibility:

  2019 2020 Subtract the 2020 quarterly gross receipts from the 2019 quarterly gross receipts and divide by the 2019 quarterly gross. If the number is greater than 25% (0.25) then you may be eligible for a second draw PPP Loan.
1st Qtr Q1 gross receipts Q1 gross receipts (2019Q1-2020Q1)/2019Q1
2nd Qtr Q2 gross receipts Q2 gross receipts (2019Q2-2020Q2)/2019Q2
3rd Qtr Q3 gross receipts Q2 gross receipts (2019Q3-2020Q3)/2019Q3
4th Qtr Q4 gross receipts Q4 gross receipts (2019Q4-2020Q4)/2019Q4

Other minor change include a tighter focus on smaller businesses: second draw PPP eligibility will be limited to businesses with fewer than 300 employees. The first round of PPP had a limits of 500 employees.

Payroll, rent and utilities remain allowable expenses for purposes of earning loan forgiveness, and the new law expands the scope of allowable expenditures to include (i) certain operations expenditures, like software that is necessary to facilitate business operation, (ii) uninsured property damage caused by vandalism or looting, (iii) payments to supplier providing essential goods, and (iv) certain worker protection expenses.

The new law also clarifies certain payroll costs. It establishes that group life, disability, vision, or dental insurance are included as part of payroll costs.

The maximum loan for the second draw PPP will be $2,000,000.

One limitation that may affect some ASA members – especially those whose business is focused in China – is a set of second draw PPP limits related to China:

  • If your business enjoys 20% or more ownership by a Chinese entity then your business is excluded from the second draw PPP;
  • If your business enjoys 20% or more ownership by an entity that has significant operations in China (including Hong Kong) then your business is excluded from the second draw PPP [“significant operations in China” is undefined and likely will be defined in the upcoming regulations]; or
  • If your business’ Board of Directors includes a resident of China then your business is excluded from the second draw PPP.

The deadline for second draw PPP application is March 31. The regulations for these new second draw PPP Loans ought to be out soon, and businesses should wait for the new regulations before applying (banks likely will not accept new applications until those regulations have been released).

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Congress Passes Massive Legislation With Significant Aviation Impact

December 22, 2020 by Leave a comment

Congress has passed a massive new piece of legislation that provides for appropriations throughout the government. The version that we reviewed has 5593 pages – it was not a final version (the pagination was off, among other things), but it provides a view as to what subjects are being addressed.

There is an entire division devoted to aviation matters. The section is identified as “Division V.” Not roman numeral “V.” The letter V (this is a huge document). This entire division is separate from the Covid-19 related funding matters found in the Division N, Title IV.

Division V is entitled “Aircraft Certification, Safety and Accountability.” It includes new legislation on the following points (this is a partial list only):

  • The FAA must initiate a Safety Management Systems (SMS) rulemaking within 30 days and must issue a final SMS rule within 24 months. This is a much faster schedule than the FAA’s current path, and may prevent the FAA from relying on some of the best practices being developed through the current SMS pilot program. The SMS requirement is limited only to companies that hold both type certificate and production certificate, although the FAA may choose to expand the scope of the proposed rule.
  • A number of changes related to ODAs (mostly limited to transport aircraft ODAs), including:
    • a requirement that all ODA unit members must be approved by the FAA. I was part of the ARAC group that created the draft regulations and policy for ODA (Subpart 183(d)), and the original concept was that mature ODAs would be able to rely on their internal mechanisms to assess, train, and appoint competent unit members using FAA-approved processes. This was intended to allow ODAs to train and develop their next generation of unit members. Putting the FAA into the appointment loop by statute eliminates one element of an ODA’s control over its future development.
    • ODAs and the ODA program will be subject to extra review
    • In order to minimize interference by an ODA holder with the ODA unit members, it is now illegal to interfere with a unit member. Interference is defined to include “harassment, beratement, or threats, that a reasonable person would conclude was intended to improperly influence or prejudice an ODA unit member’s performance of his or her duties” and also “non-ODA unit duties” that might conflict with performance of the ODA duties (this may lead to a de facto requirement to relieve ODA unit members of any non-ODA duties).
  • Where there are critical features identified for a transport aircraft, the FAA may not delegate findings related to such systems until the FAA has reviewed and validated any underlying human factors assumptions.
  • Type certificate applicants and holders will be required to disclose certain safety critical information and will be required to disclose changes in that information (including newly discovered safety information). This appears to expand the current disclosure requirements under 14 C.F.R. 21.3. New punitive laws for this issue makes a violation punishable by a million-dollar civil penalty.
  • A new dispute resolution process for design approval activities. An important element of this is that dispute resolution decisions will NOT be subject to judicial review, which could leave parties without a first amendment mechanism for petitioning for redress of grievances in certain circumstances.
  • Codification of the two-year disqualification period for former FAA employees who want to work in the private sector.
  • Requirement for new rulemaking on systems safety assessments for transport airplane projects.
  • New whistleblower protections
  • A heightened focus on human factors
  • New standards for Part 147 schools (those that teach A &P Mechanics) (ASA joined in the ATEC efforts to promote this goal)

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