WorldWide Drilling Resource

37 APRIL 2021 WorldWide Drilling Resource ® Drilling Into Money Not Boring ~ COVID-19 = PPP2 by Mark E. Battersby Thanks to the December passage of the Emergency Coronavirus Relief Act of 2020, a bill containing $284 billion for the renewed Paycheck Protection Program (PPP), drilling operations now have another funding option. The new PPP loans offer a direct incentive for drilling businesses to keep their workers on the payroll. All can apply, including sole proprietors, independent contractors, and the self-employed, even if they previously applied and were granted a PPP loan from the first round. In addition to providing relief for first-time borrowers, second-time borrowers can take a maximum loan amount of 2½ times their average monthly 2019 or 2020 payroll costs, up to $2 million. The new loans, with their 1% interest rate, are avail- able to any business with fewer than 300 workers. Remember though, while the funds were allocated to the Small Business Administration (SBA), a drilling business owner must apply through an existing, qualified SBA lender, federally insured depository institution, federally insured credit union, or Farm Credit System institution. The COVID Relief bill created a simplified application process for loans of $150,000 or less. Specifically, a borrower’s loan will be forgiven if a borrower signs and submits to the lender a one-page certification containing a description of the number of employees the borrower was able to retain because of the loan, the estimated total amount of the loan spent on payroll costs, and the total loan amount. Of course, as with the original PPP, the SBA may view and audit these loans to check for fraud. PPP2 includes set-asides to support both first- and second-time borrowers with ten or fewer employees, first-time PPP bor- rowers who have recently become eligible, and for loans made by community lenders. The new COVID Relief bill specifically states that business expenses paid with forgiven PPP loans are tax deductible. However, although the COVID Relief bill contained a provision allowing deductions for expenses paid for with PPP loan pro- ceeds forgiven without incurring a tax, the states may not go along with this treatment. Because the state may not allow these deductions or tax-free loan forgiveness, the result may be an unexpected state tax bill. For drilling operations and businesses struggling with the impact of the COVID-19 pandemic, this second round of financial help may be a business saver. Thus, now might be a good time to discuss the oppor- tunities presented under the reconstituted PPP with your banker or financial advisor. Mark Mark E. Battersby may be contacted via e-mail to michele@ worldwidedrillingresource.com

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