By Dean Ridings, CEO, America's Newspapers
The House and Senate have passed a $900 billion relief bill that will provide direct relief to newspapers and other local news media. The bill is expected to be signed by the President today.
Sen. Maria Cantwell (D-WA) was instrumental in securing the fix that increased newspapers' eligibility under the new package. “During this pandemic, local newspapers and broadcasters must continue to communicate vital COVID health data, including lifesaving information about public health guidance, the vaccines and vaccine distribution,” said Senator Cantwell.
“Local news is essential," she said. "It makes our communities — and our country — stronger by asking important questions, providing accurate facts, and countering misinformation and disinformation. This bill will make more newspapers, TV and radio stations, and public broadcasters eligible for the Paycheck Protection Program so local reporters can keep us informed.”
America's Newspapers President Alan Fisco, president of The Seattle Times Co., expressed his appreciation to legislators for their support, saying: "The expansion of small business loans to many newspapers that did not qualify initially will be a huge benefit to our industry while protecting ever-shrinking newsroom ranks. Special thanks go out to our legislative champions including, Senators Maria Cantwell, John Boozeman, Amy Klobuchar, Joni Ernst and Chuck Schumer. They along with Representatives David Cicilline and Jim Sensenbrenner introduced the initial bill, the Local News and Emergency Information Act, that led to this critical fix being included in the new stimulus bill. The bill also allows for a second loan for those who already qualified under certain conditions."
Steve Shelton, managing shareholder, Way, Ray, Shelton & Co., P.C. provided a summary of the bill’s impact on newspapers.
Tax Treatment of Paycheck Protection Program (PPP) Loans:
• In short, PPP loan proceeds are not taxable, and expenses paid with the proceeds are deductible.
• The bill clarifies that gross income does not include amounts forgiven under the PPP Program.
• It also clarifies that deductions are allowed for otherwise deductible expenses paid with the proceeds of a PPP loan.
• This applies to both first and second draw PPP loans.
PPP Second Draw Loans:
• The bill creates a second loan program from the PPP with a maximum amount of $2 million.
• As with the first PPP loans, these loans will be eligible for full forgiveness.
• Among other factors, to qualify for this loan, an entity must demonstrate at least a 25 percent reduction in gross receipts in any quarter of 2020 when compared to the same quarter of 2019.
• The loan amount will be up to 2.5 times average monthly payroll costs.
• The Second Draw Loan program has an affiliation waiver for news organizations, which allows individual newspapers to apply for these loans independent of its owner of other small newspapers or other businesses.
This waiver should allow newspaper groups to apply for a larger number of loans and potentially receive a larger total loan amount, as they can apply on a lower, non-consolidated level and thus would not be as affected by the $2 million maximum.
This also helps newspaper groups that might not qualify with a revenue decrease at the consolidated level, but have individual locations that would qualify.
PPP Loan Forgiveness:
• PPP loans less than $150,000 shall be forgiven if the recipient signs a one-page certification.
• A forgiveness application, or other documentation, will not be required for loans of this size.
Repeal of EIDL Advance Deduction:
• Repeals the section of the CARES Act that required PPP borrowers to deduct the amount of the EIDL advance from their PPP forgiveness amount.
Once the bill is enacted, the bill gives the SBA 10 days to issue regulations to carry out this Act.
Therefore, at this point, there are no regulations on the new PPP loans, and a loan application has not been created. For those who are interested in obtaining a PPP Second Draw loan, Shelton recommends that you review your quarterly revenue totals for all quarters of 2019 and 2020 to see if any quarter has a decrease of over 25%, as this is the main eligibility test for a PPP Second Draw Loan.