How Dentists Can Obtain the PPP Loan within the Newly-Passed Stimulus Package

Art Wiederman, CPA Eide Bailly LLP 657.279.3243 awiederman@eidebailly.com

 

The Transcript

Art Wiederman, CPA And hello, everyone, and welcome to a very special and very important edition of the Art of Dental Finance and Management with Art Wiederman, CPA. I'm your host, Art Wiederman, and it is almost Christmas time here in Southern California. It's actually warming up a little bit. But I think that you will find after listening to this podcast that Christmas has come a little early to the dental profession and hopefully to millions and millions of small businesses in the United States.

So as I'm recording and just give you a little background, when I record these podcasts, usually my wonderful producers Pro Podcast Solutions in Atlanta, they usually need 48 hours. And we publish on Wednesday morning, so I usually have to get them a podcast by Sunday night. Well, this week has been a little bit different, folks.

This week, as I'm sure you're all aware, Congress has been negotiating and going back and forth and trying to finalize a 900 billion dollar coronavirus stimulus package, along with a 1.4 trillion dollar government funding package. Because, folks, if they don't do that, the government runs out of money. They've already had to extend the deadline a couple of times. So I waited and I waited and I waited. And on Sunday afternoon, I was wrapping presents and playing a little golf, watched some football, and then kept waiting and waiting and waiting.

And my dear friend Megan Mortimer from the American Dental Association kept emailing me. It's coming. It's coming, it's coming. The law is coming in. It didn't happen on Sunday. So I called my producer and I said, you know, I really got to get this information out to everybody on Wednesday. Can you turn this thing around in 24 hours? And they're amazing. So they said yes.

So that's what we're doing. So it's about it's close to 9:00 here in Southern California. I've worked a full day, went through a bunch of meetings, explaining to people what the new rules are. And now I'm going to let all of you know and I think you're all going to be very happy. But I'm going to start this off with the definition of delirious, because that's about how we feel right now.

Megan and I were talking today. The definition of delirious. It is an adjective. In an acutely disturbed state of mind resulting from illness or intoxication. And no, I'm not intoxicated, I promise. And characterized by restlessness, illusions and incoherence of thought and speech. That is the definition of delirious. And folks, that is how I feel right now. I have been going through this nightmare of a negotiation for months and months and months and months.

But we have finally gotten a bill and the bill is called the Coronavirus Response and Relief Supplemental Appropriations Act, 2021, even though it will be passed and signed presumably by the President probably on Tuesday the 22nd. As I'm recording, the House of Representatives had just passed it. It's going to go on to the Senate. The Senate's going to basically pass it and then give it to President Trump, who will probably sign it on Tuesday morning, the day before my podcast is published.

Now, it's not a very long bill. It's only 5,593 pages long. I kid you not. There are so many things in here. But I am going to focus on the things that are affecting the dentists that I serve and the dentists that listen to my podcast. So we will get to all of that and give you all the details and all the things that you need to know about this new law. Most all of which is really, really good. In a second.

I just want to remind everyone to go on to our website at our partner, DecisionsinDentistry.com. Again, throughout this whole pandemic, they have been coming through with new continuing education courses, new articles, new information to help the dentists get through this unprecedented year.

And if you're looking for a complimentary consultation from any of us at the Academy of Dental CPAs, please go ahead and call. Go ahead and go on to the website. And at the website, you will be able to ask for a 30 minute complimentary consultation from one of us at the ADCPA, and that is my mother ship, the Academy of CPAs. I am a dental director at the CPA firm of Eide Bailly. We at Eide Bailly have about 800 dentists as clients. We work with about 300 or so in our office in Tustin in Southern California. But if you're looking for a dental CPA anywhere in the United States, call, go to our website at www.ADCPA.org and look for the member in your area and we are all working. I am pretty sure many of us are working right through next week to make sense of all of this.

So let's start off with kind of where are we. Okay, this bill is going to pass. It's going to pass in the next, in the next day or so. And what did it do? OK, let's start off with the what I think is going to be a very important topic for everybody. And actually, I'm going to start off with one of the cornerstones of it. The first one is going to be the fact that they had gone back and forth about giving stimulus to people. You know, people need money. I was reading today that there's over 50 million people in this country who at some time in the last 90 days have been food compromised, which for the greatest country in the world, is tragic. So they're going to go ahead and give an additional 2020 recovery rebate, probably not going to affect many of our dental clients, might affect your children or your parents or grandparents.

So it's going to provide for a refundable tax credit in the amount of 600 dollars. Remember, they did 1,200 dollars with the CARES Act. So it's going to be 600 dollars per taxpayer. 1,200 dollars for a married filing joint, plus 600 dollars for a qualifying child. It's going to phase out for people who make more than 75,000 dollars of modified adjusted gross income. 150,000 for married filing joint under 12,500 phase-out for head of household.

And the way they're going to do it is they're going to look at your 2019 tax return and they're going to see where you're at and they're going to pay you based on that. So let's say that your income in 2019 was 150,000 dollars. Well, you're probably not going to qualify for the 600 dollars, but when we get to the 2020 year, you're going to do your taxes and maybe you were down in your dental practice or maybe your income was significantly less, or God forbid your spouse lost his or her job and your income maybe got under that threshold.

Well, the way that will work is that they'll look at your 2020 return when you file and they'll reconcile it then. So maybe you didn't get the 600 bucks because your income was too high in 2019, but in 2020 it was down and you qualify. At that point, you'll get a tax credit for that money. So you will get that money if your income was down under the thresholds for 2020.

Alright, let's talk about the big one here. And this is Section 276 of the Act, and I'm going to read it to you because it's very simple and it's very straightforward. Clarification of tax treatment, of Paycheck Protection Program loans. So folks going back, we know that these loans were not tax. These loans, when they're forgiven, are not going to be taxed to you when this forgiveness happens, it's not going to be taxed, which is great.

But we thought that the loan, the money that you're using to pay your expenses, your payroll and your rent and utilities, would be tax deductible. Well, no, it didn't get written into the CARES Act in March. And the Treasury Department, headed by Steven Mnuchin, basically came out with rulings in April and then in November, I believe it was, that basically said if you are expecting forgiveness of your loan in 2021, you cannot write off the expenses in 2020.

Well, that kind of upset a lot of people because, you know, small business owners are really not doing well this year. Many of our dentists have come back strong, but not all the way. Might be at 70, 80, 85, 90 percent of where you were at.

So. The only way that Congress, who were very upset at Treasury, who begged and pleaded and yelled and screamed and stomped their feet to say this is wrong, this is not what we advertised, change this and Treasury told them to pound sand. The only way they could change that, folks, would be a law. Well, here's your law.

Section 276. The provision clarifies that gross income does not include any amount that would otherwise arise from the forgiveness of a Paycheck Protection Program loan. This provision also clarifies that deductions are allowed for otherwise deductible expenses paid with the proceeds of a PPP loan that is forgiven and that the tax basis and other attributes of the borrower's assets will not be reduced as a result of the loan forgiveness. The provision is effective as of the date of enactment of the CARES Act. So goes back to phase one here. The provision provides similar treatment for second draw PPP loans, which we're going to spend a good amount of time on here, effective four years ending after the date of enactment of the provision.

So what that means is that we at Eide Bailly, we're doing tax projections and telling everybody, by the way, here's your profit and loss statement for your S corporation. You grossed this year, you grossed a million bucks. Maybe you were down a couple 100,000. Your net profit after your salary was let's just say it was 200,000 dollars. But that included 125,000 dollars of your PPP loan that you spent on payroll and rent and utilities and interest. Well, now we before we were adding that money back to taxable income and saying, you know, your income is 200, but now it's really 325 because that 125 is not deductible. Well, now it is deductible. You have to be really, really careful about your S corporation basis on all of this.

And these get kind of technical. But I would just say that you need to talk to your CPA about all of this. And the law I think the way it's going to say it's going to say no deductions shall be denied or reduced, no tax attributes shall be reduced, and no basis increase shall be denied by reason of the exclusion from gross income provided in paragraph one. So it has it does have applications to people as far as their s corporation basis. It says that the owners of s corporations and partnerships will receive a step up in basis attributable to the tax-exempt income that result from the PPP loan forgiveness.

Unfortunately, that won't happen until 2021. So you're going to get this loan for 100,000 dollars. Alright. It's sitting on your bank is a loan. Usually if I get 100,000 dollars it would be from doing dentistry and my basis would increase. But your business is not going to increase by the receipt of the loan until it's forgiven and then it will be. So you got to let your S corporation basis on this. And that's a talk to your CPA question. And if your CPA says, I don't know, I don't get it, call one of us at the Academy, call me and we'll help you through all this.

So the good news is that if you have sufficient basis in your S corporation or your partnership and partnerships and proprietorships generally don't have a problem with S corporation, I'm sorry, with their basis because they get basis from taking loans and things like that. So it's not really an issue there.

So that's the first thing is that the deductibility of the PPP expenses that we were all worried about, that we're not going to be tax deductible, apparently are they were talking about saying, OK, well, if your loan was over 150,000 dollars, we're not going to let you. We're not going to let you do this. We're not going to let you have deductibility. But if you're under 150 yes, we will. That got thrown out at the 11th hour and did not end up in there.

OK, let's talk about the next category here. We know that since the end, this program started back in March, March 27th, that there were four categories of expenses. Category one was payroll. You had to spend 60 percent of money on payroll. Category two was rent, three was utilities. Four was interest.

They have now added additional categories of expenses that you can spend your PPP money on. Now, I don't know if that's going to be an issue because most everybody got a loan for two and a half months of payroll and they have five and a half months to spend the money. So I don't think it's an issue. But if you did or maybe you don't have rent, maybe you own your building and you don't have a mortgage, in which case you don't get to count rent. Now, you can count these expenses. Number one, as expenses that are eligible for forgiveness through the Paycheck Protection Program.

Number one, covered operations expenditures, payment for any software, cloud computing and other human resources and accounting needs. Two covered property damage costs, costs related to property damage due to public disturbances that occurred during 2020 that are not covered by insurance. I mean, I was watching on TV one night and I was watching in downtown Los Angeles. There were people just going in and looting businesses because they didn't happen to like what the news was that day and it was really sad. So that's covered. That won't probably be an issue for most of our dental offices. I don't think there's hopefully a lot of dentists that were looted. Number three is covered supplier costs, expenditures to a supplier pursuant to a contract purchase order or order for goods, in effect prior to taking out the loan that are essential to the recipient's operations at the time at which the expenditure was made.

Supplier costs are perishable, goods can be made before or during the life of the loan, again, might not apply to you, but the next one will apply to you. The fourth category that's allowed as an additional eligible expense for forgiveness is covered worker protection expenditure. These are personal protective equipment and adaptive investment to help a loan recipient comply with federal health and safety guidelines or any equivalent state and local guidance relating to COVID-19 during the period March one of 2020 and at the end of the National Emergency Declaration. Hopefully that will come sooner rather than later. So we have more expenses that are going to count towards PPP forgiveness.

So that is code section, that is Section 304. That was 304. Yeah. Now we're going to go to Section 307, which is the simplification process. Now, you've got to be really careful here. And by the way, I do want to tell you that we're going to get to the next round of PPP loans, which are going to be available to you in a minute.

But I don't want you to drop your guard on this because they have created a simplified application. So this Section 307 creates a simplified application process for loans under 150,000 dollars. OK, so if you had a loan of under one 150,000 dollars, it says that a borrower shall receive forgiveness if a borrower signs and submits to the lender a certification that is not more than one page in length. So they got to fit all this stuff they want to do for people who are under 150,000 dollars into one page. And remember, folks have been not been saying to you, you can't answer me, but I'm telling you, I've been saying for months there's no rush to file for forgiveness. You don't have to file forgiveness. Let's see what they're going to do.

Well, this is what they're going to do. So the borrower signs and submits to the lender. A certification that's not more than one page in length includes a description of the number of employees the borrower was able to retain because of the covered loan, the estimated total amount of the loan spent on payroll costs and the total loan amount. So we've got to give them some information. How many employees did we have?

Alright. How much did we spend on payroll and the total amount? That's it. The borrower must also attest that the borrower accurately provided the required certification and complied with paycheck protection program loan requirements. Remember, we have all these rules, full time equivalents, not reducing salaries by 25 percent. SBA must establish this form within 24 days of enactment, so if they enact this on December 22nd, that would be nine, that be January 13th. So none of this stuff you're going to have to deal with before the first of the year as you're going to see.

So the SBA has to establish this form within 24 days of enactment and may not require additional materials unless necessary to substantiate revenue loss requirements or satisfy relevant statutory or regulatory requirements. So you're not going to have to submit a whole lot of stuff, if anything. Additionally, borrowers are required to retain relevant records related to employment for four years and other records for three years.

So you got to keep your employment records for four years. So for 2020, that would be through 2024. And your records for rent and payroll, rent and utilities and interest, you have to keep those for three years, including the new expenses. The administrator, that being the SBA, may review and audit these loans to insure against fraud. So what this means, folks, is this it doesn't mean that you just sign this one page and let it go and you forget about it, you have to make sure you met the rules.

Now, again, we talked about 60 day, 60 percent of the money has to be spent on payroll. Again, a slam dunk for most all of you. If your revenues were down for 2020, which 90 plus percent of you are, we have had some that are not, quite frankly. And they've just come back like crazy. But most of our doctors are down five, 10, 15, 20 percent depending on the practice. You have to, you know, if you're if your revenues are down, you meet the exception of basically not having to comply with having the same number of full time equivalent employees because of the June 5th change that changed it from eight weeks to 24 weeks.

But you do have to look at your third rule, which is you can't have reduced salaries and wages by more than 25 percent. So if you sign this one page attestation, but you laid off half your employees in the middle of this. And you get audited, they could ask for some of this money back, you have to be really, really careful, but they are going to simplify this.

Most of my doctors, they basically shut down in March. They met the 60 percent test. They will not have to deal with the FTE because they did have a reduction in revenues in 2020. We still don't have anything from SBA that defines what that means is because of any guidance or recommendations from among other CDC and other organizations that because of sanitation or social distancing or anything having to do with the coronavirus, that revenues are down, that you don't have to deal with this rule. We don't have any guidance on that. So it's the 25 percent rule. But what I'm saying is that you don't have to you have to watch that you follow all the program rules. You can't just sign this piece of paper and assume that you're done.

Please, please know that that is the case. So that's Section 307 of this monstrous 5,600 page act. Alright, here's the big news, and this is this is something that is going to basically evolve. So what they have done is they have created 284.5 billion dollars under what they're calling the Paycheck Protection Program Second Draw Loans. So it's going to create a second opportunity to get a loan from the Paycheck Protection Program called a PPP Second Draw Loan for smaller and harder hit businesses with a maximum amount of two million dollars.

Now, before I go any further, the SBA has been told that they have 10 days to come out with the rules for how this second program is going to work now. I am not optimistic that when the SBA comes out with whatever guidance they come out with, number one, that it's going to be within 10 days. Remember that they had to pay the EIDL loan out over three days, three days after you applied for that EIDL grant that thousand dollars per employee they were supposed to pay it out? No, did not happen. Did not happen. So are they going to get this done in 10 days from basically the 22nd of December? So let's think about this. Where are we now at the 22nd December? So Thursday is Christmas Eve. Friday is Christmas.

I'm going to bet, given the unbelievable year that the people, the United States Small Business Administration had, that most of them are not only leaving town, they might be leaving the planet and taking off the week between Christmas and New Year's. But if you think about it, they have to have this done by New Year's Day because 10 days from the 22nd is New Year's Day. So they've got to basically finish this thing up while they're watching the national semifinals involving Ohio State, Clemson, Notre Dame and Alabama. Alright. That's what they have to do.

Is that going to happen between Christmas and New Year's to write up the rules for a program that is part of a 5,600 page bill? I'm not betting on it, but we'll see. That's what the law says. So here's the big deal. In order to receive, I'm reading from the summary that we got, in order to receive a paycheck protection program loan under the section eligible entities must No. One employ no more than 300 employees. So that's going to apply to pretty much everybody listening to this podcast. Unless you have 30, 40, 50 dental offices. You have used or will use the full amount of your first PPP loan. So most all of you have finished your covered period. You got your money in April and May, you're covered period ended middle of October, end of October, middle of November. So most of you have finished using the money and you've spent all the money, I don't know of any doctor in my client base or that is with our firm who got a PPP loan and didn't spend all of it on payroll.

Payroll alone, remember, you get a loan for two and a half months, and you had five and a half months to spend it. You probably spent 150 percent of your loan amount just on payroll. So that worked out real well. So you have to have spent your full amount of your first PPP loan. And again, we had talked at the beginning about having a segregated account. And I have doctors call me to say, well, I didn't have to spend any of that money. I still have it in my PPP account that you told me to set up. I said, that's great. Doesn't matter. If you have the money, it's fine.

So you had to use your first PPP loan. Here's the big one, folks. Write this down. You must demonstrate at least a 25 percent. Let me repeat. 25 percent reduction in gross receipts in the first, second or third quarter of 2020 relative to the same 2019 quarter. The bill also applies timelines for businesses that were not in operation in Q1, Q2 and Q3 and Q4 of 2019. So they'll have opportunities. I'm not going to get into all the details there or we'll have a seven hour podcast.

And I have not read. I must be very transparent folks. I'm really good at reading law and stuff like that and referencing cross referencing, I got a copy of the bill today at about four o'clock in the afternoon. It is now about nine o'clock tonight. So I do apologize. I know that a lot of you rely on me for some of your information on this on these programs, but I have not read the 5,593 pages. It took me a while just to get to it in the rule by thumbing through because it was not referenced correctly. We won't go into that. But anyway, the point is, is that I can't cover everything on this podcast.

Application submitted on or after January 1 of 2021 are eligible to utilize the gross receipts for the fourth quarter of 2020. So realistically, realistically, all of you need to go back, look at your gross receipts and again hopefully they will define gross receipts. Should be pretty straightforward. It's only going to be for the second quarter because think about it folks. The first quarter everybody was doing great. Alright. And the pandemic hit March the week of March 16th.

So by the time you got to the end of the first quarter, your revenues were probably not down by very much at all for the first quarter. So the second quarter or the month of April, May and June. Well, most all of you were closed the entire month of April. Most of you were closed maybe the entire month of May. So it would have been, you know, April and May that you had virtually no revenues. So is it realistic that you could have had a 25 percent reduction in your gross receipts in Q2? Yeah, that's where it is. And it's all going to be quarter 2 because by quarter three, we're all open again. You were all using that time to see patients because of what we call the pent up demand. And everybody was at 100, 110, 120 percent of where they were before, before the pandemic. So and Q4 is the same. So you're going to be looking at your second quarter.

So start gathering information as to what were your gross receipts for the second quarter of 2020 versus what your gross receipts were for the second quarter of 2019. And if you have more than a 25 percent reduction, at least a 25 percent reduction for that quarter, which again is going to be, unless you have some seriously extenuating circumstances, you're going to have, you're going to qualify for this. OK, has to be businesses, nonprofit organizations bla bla bla bla bla. It's all covered.

So this is what you need to do is see if you meet these rules. They had started at maybe a 50 percent reduction. Then they came down to a 30 percent reduction, then they came down to a 25 percent reduction. But what I want to do, folks, is before you start spending the second round of PPP money is I want to caution you, I want to caution you very carefully to watch what the SBA comes out with. Because as a general rule, there is usually a needs test that has to do with this.

So what they did was they first when they first set up the first round of PPP, they said, OK, we're going to give you guys this money, but you've got to show that you really needed it, that you didn't have other sources of liquidity, that you didn't have other savings, blah, blah, blah. And then they came out and they said, well, you know, we don't have enough people to enforce all of that. And we really don't want to enforce all of that because there's an election coming up.

Remember, this is back and in the spring, in the summer when the pandemic was just starting. So what we're going to do is we're going to say, OK, anybody who got a loan of under two million bucks, we're assuming that you needed this money. Well, now we're in round two. OK, now we understand restaurants. We understand nail salons. We understand hair salons. We understand gymnasiums. We understand these businesses that have been opened and closed by local and state officials like a yo yo. I mean, those people need this money. Do the dentists need it? Are you back to operating where you were before this pandemic started? Many of my clients are, especially if you did a good job of managing.

So what I want you to do is to watch for the SBA guidance and read the articles and listen to the podcast and our firm, by the way, Eide Bailly. And again, this will have happened by the time we publish. So tomorrow morning at 10:30, Adam Sweet, who's our head PPP guy and a really, really smart guy, is going to talk about all of this. I suspect he'll be up all night reading the law and reading all this and reading whatever he can get his hands on and I will be listening too. So the hope is that I didn't say anything wrong on this podcast if I did, because, again, I got this about four hours ago. If I did, which I don't think I did, I will certainly rectify that when we get some additional guidance. But do watch, if you're going to plan on applying for this and remember that none of this is going to happen until after New Year's.

Remember, the banks now have to get guidance from the SBA, which is in 10 days. Theoretically, they get it done. They have to get the guidance to say, OK, what do we do? How do we calculate this? Now again, I'm going to get into this here in a second as to how we calculate, because it's pretty similar to what the first round was. But the banks aren't going to basically be making any loan applications or giving you any forms until they get the guidance from the SBA. So this is going to be sometime, we hope, in January.

So the loan terms. In general, borrowers may receive a loan up to a loan amount of up to two and a half times the average monthly payroll costs in the one year prior to the loan or the calendar year. So let's look at what does that mean? Up to two and a half times the average monthly payroll costs in the one year prior to the loan or the calendar year. I don't know what that means.

I mean, does that mean prior to the loan, does that mean the loan made in 2021, we look at 2020 or the calendar year. I don't know. I suspect that they might let you look at 19 because remember, you know, if all your people went on unemployment, your payroll costs are going to be lower. Therefore the two and a half times monthly payroll is going to be lower. I suspect they'll have something in there similar to the maximum of 100,000 dollars that you can count for payroll and all this kind of stuff. I have not. I have to be honest with you. I have not gotten into the weeds of reading this law or we would have been into January, but it says up to two and a half times the average monthly payroll.

They have rules for seasonal employees. What else do they have in here? Businesses with multiple locations that are eligible entities under the initial PPP requirements may employ not more than the 300 employees per physical location. So that was how the big companies that got these PPP loans were able to get around being so big because they didn't have 300 employees in every location.

What else? We have an eligible entity may only receive one PPP loan Second Draw Loan. And now this is interesting for loans of not more than 150,000, the entity may submit a certification attesting that the entity meets the revenue loss requirement on before the date the entity submits their loan forgiveness application and nonprofit veterans. OK, so what they're saying is, is that they're going to give you an opportunity to attest, that you meet this 25 percent rule. How are they going to do this? I don't know yet. None of us know.

Let's see. Borrowers of a PPP second draw a loan would be eligible for a loan forgiveness equal to the sum of their payroll costs, as well as covered mortgage, rent and utility payments, covered operations expenditures, covered property damage costs, covered supplier cost and covered worker protection expenditures. Those are all the expenditures I was talking to you about earlier incurred during the covered period. The 60 40 cost allocation between payroll and not payroll costs in order to receive full forgiveness will continue to apply.

Now, you are also going to be able to choose between an eight and 24 week forgiveness period covered period. So, again, don't see any reason why you need to go less than 24 weeks unless you believe after you get this loan that you're going to have to lay off a whole bunch of people. The whole idea of folks is that we want people to stay on payroll. Now, the first time this happened, they were given everybody 600 a week plus the state stipend. So in California, you're getting the equivalent of 50,000 a year.

Under this new rule, which I'm not getting into a lot of detail about this, but this is a big part of it. They are going to be, I believe it's for three months extending the unemployment, the federal unemployment benefit to 300 dollars a week. Not enough money to pay somebody so that they're going to say, you know, I'm making more money on unemployment than I am working for you, doc, so I'm going to stay out. So that may not be an issue here. So we'll just have to see. And again, the 60 40 cost allocation between payroll and not payroll costs in order to get the full forgiveness. What else do we have going on here? That is it for that provision of the law. Yeah, that's about all I want to tell you about that.

So basically, start getting ready and we'll see what the SBA says. They may come out with a rule because remember this law and the CARES Act, they are law and most laws are covered by regulation like the Internal Revenue Code has code section 179 you've heard of, which is how you expense equipment. And then there's regulations that interpret the code, because if you try and read the tax code, you will require multiple bottles of Advil. Trust me, I've been doing it for over 40 years and. Still to this day, trying to read the tax code is always a challenge, and that's why we have lots of really smart tax attorney friends to help us with this stuff. So, you know, the devil is going to be in the details and the details are going to come hopefully in 10 days from the SBA. Alright. So we talked about the second draw.

Let's go to the next provision of this law that is applicable to my dentists, which is going to be let's see what we got here. Just some of the numbers. Authorities have extended the time of the program through to March 31, 2021. So I suspect that you'll have until then to file. We don't know yet. Separates regular 7A and PPP loans to ensure the continued operation of the 7A program, 284.45 billion dollars for PPP. Now remember, folks, the first round was 349 billion and 130 billion did not get spent. So 219 billion. So they've given you 284. So I think there's going to be enough money for everybody. They're basically going to make specific set aside.

So 15 billion for PPP loans issued by community financial institutions including community developmental financial institutions and minority depository institutions, small depository institutions, 35 billion for first time borrowers. So if you didn't make it the first time, you've got a pot of money that's available for you, 15 billion, which for smaller first time borrowers with 10 or fewer employees or loans less than 250,000 in low income areas, 25 billion for second draw PPP loans for smaller borrowers with 10 or fewer employees. That's you guys. Many of you have less than 10 employees. So there should be sufficient funds for you to do this. Our recommendation is probably going to be do it sooner rather than later. So that's some of the income here.

One of the other things I want to point out, and I'm not going to get into lots of details about it, there was a tax credit, there still is, called the Employee Retention Tax Credit. Now, the Employee Retention Tax Credit was a credit that you could use only if you did not get a PPP loan. Well, now people who are going to get PPP loans or who have gotten PPP loans can also apply for this tax credit, which could be as much as 70 percent of an eligible employee's wages, up to certain limits every quarter. So we will be reporting more and future podcasts on that.

Again, folks, it is late and I only had so much time to get this information. I wanted to get this out to you today, but we will certainly be reporting on it. Please do go to our website, EideBailly.com.  Again, we are doing a webinar tomorrow morning, which at this time is Tuesday, which if you listen to this on Wednesday, it will be yesterday, but it will be recorded on our website and we'll be talking about these rules as to how they're going to work.

So this employee retention tax credit is an additional tax bonus. And again, we're going to be waiting to see how that's going to apply, whether you have to file amended payroll returns or whether you can do it as part of your tax return. We don't know yet. We're going to be getting more information as that goes along. So that could be another windfall for you.

So that was Section 323. Now, I want to go to Section 325 of this bill, and this is very cool. So many of you might remember as part of the CARES Act, what happened was, was that as part of the CARES Act. Congress basically said, hey, if you have a 7A or a 504 or something called a micro loan through the SBA. And again, remember, these are in large part real estate loans or maybe you had some credit issues with the dental lenders and maybe you got a loan to buy your practice through the SBA. We don't usually see that, but sometimes we do. Or maybe it was a bigger practice and you couldn't get a regular loan.

But what they did as part of the CARES Act is they started paying your mortgage payment. They basically did it for six months, which is very, very cool. They made your principal and interest payments. As I understand it, they did it for six months. So now what they're going to do is they're going to extend that. So all borrowers with qualifying loans approved by the SBA prior to the CARES Act will receive an additional three months of principal and interest starting in February of 2021. So going forward, those payments will be capped at 9,000 dollars per borrower per month.

So now one thing I do want to point out to you that based on my reading of all of this, is that if you were getting this aid, in other words, if they were basically paying your loan payment for six months, the way that this is going to be treated for tax purposes is that if, let's say your loan was 5,000 a month to the SBA on real estate, so they made six payments of 30,000 dollars, they're going to treat it as if someone gave you 30,000 dollars of income. You have to pay tax on that. And then you paid the principal and the interest on this loan, so you are going to have to be very careful about this to make sure that you know that you're going to have to report this as part of your income.

So they're going to give it to you for another three months starting in February and then after the three month period described above. So February, March and April, I guess, borrowers considered to be underserved, namely the smallest or hardest hit by the pandemic, will receive an additional five months of principal and interest payments, also capped at 9,000 a month. That includes borrowers with SBA microloans or 7A community advantage loans. So check and see what you've got. Borrowers with any 7A or 504 loan in the hardest hit sectors, as measured by the severity of sector wide job losses since the start of the pandemic. That may not be dentistry.

They include food service and accommodations, arts, entertainment and recreation, education and laundry and personal care services. SBA payments of principal and interest on the first six months of newly approved loans will resume for all loans approved between February 1 and September 30 of 2021, also capped at 9,000 per month. And what else am I going to tell you about this? That's about it. There's some other rules which we're not going to get into now, so that's a big deal for those of you that have SBA loans that are not PPP loans, OK?

And then there's one more here that I think I wanted to share with you. It was 333. Yes. So everybody might remember that when this whole thing started before there was a PPP program which didn't start doling money out until I believe it was the first or second week in April, everybody applied for EIDL loans and EIDL grants. OK, so everybody was getting what it turned out to be a thousand dollars per employee, up to a maximum of 10,000 dollars for everybody. And they got that money and that was not taxable. It was a grant and it went into your bank account and you don't have to pay it back.

But what everybody was saying was, hey, so you got this free 10,000 and maybe you got an 80,000 dollars or 100,000 dollars PPP loan. So now you get 110,000. The government's only going to give you they're not going to give you both. They're not going to let you double dip. A lot of dentists called the ADA and they very angry about this. But folks, you know, it's free money.

And basically what they said was if you had 100,000 dollars PPP loan and you got a 10,000 dollar EIDL grant your forgiveness was 90,000 dollars. Well, Section 333 has repealed the EIDL advanced deduction section, which basically says it repeals Section 1110 E6 of the CARES Act, which requires PPP borrowers to deduct the amount of their EIDL advance from their PPP forgiveness amount. So again, you got a loan for 100,000, you got a 10,000 EIDL grant under the old rules, you got 90,000 forgiveness, you got 110,000 in total money and you had to pay back 10,000.

You don't have to do that anymore. So that is and again establishes the sense of Congress. Did I say the sense of Congress? Establishes the sense of Congress that EIDL advanced borrowers should be made whole without regard to whether those borrowers are eligible for PPP forgiveness. And they'll come up with rules on that, too.

So we have a lot of really good news. What does that mean if you're listening to this podcast in the last 10 days of the year or in the last nine days, I guess it would be. Number one if I'm your CPA and I told you that your taxable income is 80,000 higher, it's now 80,000 lower, are you going to end up with some taxable income because of your tax basis? Maybe. Is it something we could have figured out when we did your tax planning or any CPA could've figured out? Probably not, because we didn't know that they were going to do all this. And none of this happened until December 21st, which is the way this seems to always work. So that's number one.

Number two is going to be that your forgiveness is going to be easier, but you still have to follow the rules. OK, number three is you're going to be able to potentially use this employee retention tax credit to get more money from the government. The next thing we got to remember is there's another round of PPP. And we need to look at the rules to see if you really need the money, if your practice is back at 100 percent. I have some doctors who say, you know what, I've been through hell and beyond in 2020. And if they're offering me this money and I need the rules, I'm taking the money.

I have other doctors who say, you know what, I'm doing really well, because you got to remember, you have your PPP money. You have your money from the HHS, which we're going to talk about in a second. That's been another development that came up this past week. And you have your EIDL grant. You have maybe an EIDL loan. We have doctors, some doctors sitting with hundreds of thousands of dollars in their bank account. And I'm getting the calls is like, I want to get it out. Wait a minute. Wait a minute. Before we get it out, let's look at the situation. So it's going to be very, very important that you look at your tax basis and you look at how much money you're getting and you look at where you're at.

And we read the rules and say, you know, that's great they're offering a second group, but honestly, if you look at the intention of Congress, what they're really saying is, you know, to that restaurant, that restaurant has been opened and closed and opened and closed. And now you can do outside. Now you can do 25 percent inside dining. I mean, we started here in California. New York was the hot spot. Texas was the hot spot. Minnesota. Michigan, they were hot spots. Now California is the hot spot. I mean, we are having they've, there is no outside dining anymore unless they're not following the rules, which some businesses are. That's just a fact because they're going to shut down if they don't. And that's what we're seeing. It's not a secret folks.

Drive by areas where there are restaurants and you will see people in some restaurant eating outside. That's just what happens in life. In a democratic country. People are going to do what they got to do to survive. And a lot of these I think I read that 17 percent of all restaurants have now shut down permanently, which is just so sad. Some of my favorite restaurants in here in South Orange County have shut down. It's really, really sad. So you need to think about do you need this money? That's your decision.

If you meet the rules and you feel like you want to make the application and you can follow the rules, it's going to be tax free money that you're going to get to write off. If you follow those rules. If you say, you know, I'm good, I don't need any more money, let's save that money for somebody else. And again, I'm not suggesting or urging you one way or another. I'm just saying these are the decisions that you have to make. Alright. If you have built a war chest and you have an EIDL loan, I am telling doctors, give it back. Give it back because what's going to happen is, is that ultimately you're going to have to pay it back one way or another, and if you spend it, you just need to be prepared to pay it back either over 30 years, which may be an option for you.

It may be if this is the only money that you have, then by all means, use it as your safety net. Use it to help you, you know, wherever you are going to be going down the road with your practice and keep it. But if you are in really good financial shape, I would look at returning that money. Look at the employee retention tax credit we'll be talking about that in future episodes. And that's about it for now. Just start reading articles, start reading, you know, my favorite articles. I mean, I like Forbes magazine. I think it's Allen Grossman. Tony Nitti. I think they do a really, really they're very quick, very timely. And they have, you know, people reading these things give you a really good in plain English understanding of what the issues are.

I think Forbes has done a great job. I think if you are a professional and you really get into reading this stuff, the National Law Review is a great document, a great periodical to read about these rules. And again, don't read everything that you hear. You do not need someone. You do not need to pay someone to help you apply for these loans or apply for forgiveness. You go to your CPA. If your CPA says no, I don't know how to do this, go to www.ADCPA.org or to EideBailly.com. That's our website. The ADCPA our firm we can help you file for forgiveness, understand the rules of how this works.

There's one more thing I do want to cover with everybody. So that's everything about what, that's everything I think that for now is relevant to dentistry. PPP expenses are deductible. There's going to be a second round of PPP loans made. You are going to have a simplified forgiveness. Also, there's going to be I didn't mention a simplified forgiveness process, I believe, unless they took it out for doctors who have loans between 150,000 and two million. Didn't get to that. We'll get to that in a future podcast for those of you who have big, big, big, big, big practices or multiple practices and you get over two million, you would best be prepared to show why you needed that money and what you spend it on because they're going to audit you.

That's the loans where they're going to use their resources. Your EIDL grant is no longer has to be reduced by taking off of the PPP forgiveness.  Those are the main points I wanted you to know for tonight. Again, we have another podcast coming up to finish out the year. I usually take the year off, but this is a year like no others, I'm not taking the year off. And there's one more thing I do want to point out that has to do with the HHS Provider Relief Fund. Be prepared, folks, to get into the portal next month. And next month is nine days away. 10 days away right now.

And you're going to have to justify your lost revenues. You're going to have to justify the money you spent for PPE and other things to fight coronavirus. But for those of you who applied for the phase three part of this, which was 20 billion dollars, because remember, back in March when they passed the CARES Act, 349 billion for the PPP program and 175 billion for the HHS Provider Relief Fund, which was administered by the Department of Health and Human Services, which was money to go to health care providers like yourselves to fight coronavirus.

Well, dentists got two percent of their revenues starting in August if you applied. And then there was a phase three, we didn't know what phase three meant. Well, we found out this week what it meant, folks. And I'll tell you what. Check your bank account every single day. Very, very important, especially if you're a C corporation, because the Department of Health and Human Services set up 20 billion dollars, which ended up to be 24 and a half billion. That was going to basically bring my dentists lost revenues whole. In other words, they are going to make you whole for 88 percent of your lost revenue.

So let's just say that you lost 100,000 dollars. In other words, your revenues were down from a million to 900,000, OK, your revenues are down 100,000. 88 percent of that is 88,000 dollars. Maybe if you did a million, you got two percent. 20,000. And I'm just speculating that this is what they're doing. So that means that you could get 68,000 dollars in a check. Now, maybe you will. Maybe you won't.

So some examples. We have a very, very large specialty group practice that grossed six million dollars last year. They got 120,000 dollars in PPP in HHS money in August. And their CFO called me the other day and said, Art. I got some news for you. What's that? We got a deposit in our bank account, by the way, when you get this phase three money, they don't call you say, hey, by the way, by the way, we're sending you this money, OK? It just shows up in your bank account unless you haven't given them some information and they might call or email and say, can you send me this? Can you send me that?

This practice we've got 120,000 in August. Got deposited last week 466,000 dollars. Let me say that again. 466,000 dollars. Another client did about 800 last year. 800,000 in gross revenues. He got 16,058 or something like that in his loan. And his grant, his HHS provider relief fund grant in August. He got 66,000 dollars folks deposited in his bank account on Wednesday of last week.

So let's see, what would that be? Today is the 21st that would be on the 16th. So on the 16th, they started sending this money out. Of the 24.5 billion dollars they sent out 11 billion dollars on Wednesday. I don't have the reports for the other days of the week. So I'm going to suggest and again, especially if you're a C corporation, because if you want to zero out your corporation and they drop 100,000 in your bank account, you already zeroed it out. You could have to pay some corporate tax. That's something that you should be looking at.

So for all of you, if you apply for the phase three money, what you need to do is you need to watch your bank account. And then if you get this big check, you probably need to try and get a hold of your CPA unless he or she is on an island in Barbados or the Maldives or something, and let them know that we might have to rework some numbers. Now, we just this is now the part of the show where I tell you to be kind to your CPA.

This has been, I mean, while it's been a challenging year for all of us, we've all had to continue to do tax returns. We've had to consult on the PPP. We've had to consult on the HHS. We got to consult on the EIDL loan. And now on the 21st of December, once we've done most all of your tax planning, they drop this on us and we still don't know and we won't know for 10 days some of these rules. We do know now that PPP is not deductible.

I was doing tax projections ever since Treasury came out and said that these expenses are not deductible. We just added them back and said, guys, here's the deal. If this happens and they change it, you're going to get a windfall possibly. But for a CPA to try and play all of the ins and outs of all this, like we had a client I was consulting with a really, really nice person. And this particular doctor got only got 3,900 dollars I think it was in his PPP loan the other day because his revenues were just he said, well, wait a minute, I was talking to my friends, in the dental society. Hey, wait a minute, why didn't I get more money? And the answer is the reason you didn't get more money is because you didn't lose revenues. That's why. So you got to check where you're at and see where you're at.

And but I was doing this doctor's tax planning and I said, OK, so what we have to do is, so here's where you're at. But it could change because your PPP might be deductible. It could change because your HHS money is going to come in and you may not even know it and you may not tell me until after the first of the year. So it's just been a tax planning nightmare year like no other. So I am going to ask all of you, when you send your tax information in, it's going to be kind to your CPA or tax preparer, whatever that month is that's what we're going to call it, because, gosh, we've tried. I mean, if you talk to my friends at the Academy of Dental CPAs, they are, I mean we're all exhausted. I mean, you guys are exhausted having to practice completely differently than you've ever had to practice before and, you know, putting on more layers of masks, gowns and, you know, sanitation and everything is, you know, everything is just different.

Well, for us, it's been nonstop. And I'm not complaining because I'm, God bless, I have a job. I am not in a situation like many Americans, like I said, 50 million Americans food compromised. I've been handing out food. I'm going to be, you know, donating money to help people because we need to help people. That's what we need to do. If you have money and you can help people that aren't able to get food help them. I mean, that's my feeling about the whole thing. And it's a personal thing. And maybe I should get off my soapbox. But I really am adamant about, you know, we want to help people. And it's been a tough year. And thank goodness this vaccine is out. And it's, we've got two of them, maybe two or three more.

And let's just hope and pray that by this time next year, everybody is able to get on an airplane or get in a car and go see their loved ones for Hanukkah or Christmas and that we're back to where we were before March the 16th. So I hope this has been helpful for you. Please listen to our webinar, it'll be on demand on our website, probably be on demand Christmas Eve or maybe next week sometime. Call us if you have any questions. Again, my office number is 657.279.3243. Please give me a call.

Call one of our members of the Academy of Dental CPAs. Lean on your advisors, ask for some information, ask for the help. We are still going to be getting information about this new massive, massive 5,600 page bill. You know, there's tax extenders, which I didn't have time to get into. We're going to be getting into all this over the next several weeks and months, along with a lot of other great programing and other wonderful information.

One more thing I forget to mention. Again, we're starting our annual series here in Southern California, having to do with the business of dentistry and transition. So the business of dentistry will be the second Wednesday of every month, starting January 13th with my good friend Kiera Dent, who's a dynamite speaker. Go to www.EideBailly.com/dentalseries. Go to that website and we will have the information for you to be able to sign up and to listen to all these webinars.

And then on January 20th, we're going to start my good friend Pat Wood, who's going to talk about the legal aspects of transitions. And we're going to do four webinars on that and then starting I think it's the 26th of January we're going to do two series for new dentists. So anyway, I'm exhausted. I'm delirious. I'm there's probably other adjectives I can find. But you know what? I'm very blessed. I'm very blessed that I've been able to serve the dental industry, the dental profession for 36 years. It'll be 37 next year.

Dentists are some of the most wonderful, caring human beings I've ever met. I see it when I work with them. I see it when they treat their patients. And you guys have had a tough year like everybody else and you're still standing is what's happening. And that's really good. And I'm glad to hear that about a lot of our practices. So that is enough here from Southern California on a late Monday night, December 21st. And I hope this information will be helpful to you.

So this is Art Wiederman, the Art of Dental Finance and Management podcast. Thank you for listening. Please tell all your friends about our podcast. It is exploding. We just went over 100,000 downloads for our podcasts, and I am so proud of that, and we're going to keep going till we get to 200,000. So anyway, this is Art Wiederman for the Art of Dental Finance and Management podcast. Have a wonderful evening. God bless all of you. Just remember five words - failure is not an option. Good night. And we'll see you next time. Bye bye.