Community Bank Provisions of Bipartisan Bicameral Stimulus Package

President Trump signed into law the year-end stimulus package designed to provide economic relief for communities, small businesses, families, and individuals affected by the COVID-19 pandemic as well as public health measures.

In a victory for ICBA and community banks, the law contains a number of ICBA priority requests, including the EIDL Advance fix, simplified forgiveness, relief from TDR classifications, CECL delay, and a second draw PPP.

Below is a description of the provisions that affect community banks.

SBA Programs

Reforms to Current PPP

• EIDL Advance fix. Repeal of the EIDL Advance deduction of the CARES Act.
• Simplified forgiveness for smaller loans. For PPP loans of $150,000 or less, the borrower submits to the lender a one-page attestation of compliance with program requirements. The inclusion of demographic information is discretionary
• Lender held harmless The bill provides that a PPP lender may rely on all documentation and certifications submitted by a borrower and is not subject for enforcement action for any falsehoods contained therein if (i) the lender acts in good faith relating to loan origination or forgiveness; and (ii) all relevant federal, state, local and other statutory and regulatory requirements are satisfied
• Expenses are tax deductible. Provides that business expense paid with forgiven PPP loan proceeds may be deducted from taxable income
• Agent fees. Provides that a PPP lender shall only be responsible for paying fees to an agent for services for which the lender directly contracts with the agent. This applies to the original PPP as well as the second draw program described below

PPP Second Draw Loans

• Authorizes $325 billion for PPP, EIDL and other small business assistance
• Eligible borrowers:
  • Fewer than 300 employees
  • Must have a reduction in quarterly revenues of at least 25% compared to the same quarter in 2019
  • Stock not traded on a national exchange
  • • 501(c)(6) are eligible, but any entity for which lobbying comprises more than 15% of receipts or activities is not eligible
• Maximum loan. 2.5 times average monthly payroll or $2 million, whichever is less. Businesses in the restaurant and hospitality industries are eligible for loans for 3.5 times average monthly payroll
• Lender fees: three tiers.
  • For loans up to $50,000, the lender processing fee is the lesser of 50 percent of the principal amount or $2,500
  • For loans between $50,000 and $350,000, the lender fee is 5%
  • For loans $350,000 and above, the lender fee is 3%
• Interest rate and term. 1%, 5 years
• Set asides:
  • $15 billion for PPP loans (initial and second draw) issued by community financial institutions, including community development financial institutions (CDFIs) and minority depository intuitions (MDIs).
  • $15 billion for PPP loans (initial and second draw) issued by depository institutions with under $10 billion in assets.
• Eligible expenses. The bill expands eligible expenses to include PPE expense, costs associated with outdoor dining, and supplier costs, but payroll expenses must still comprise no less than 60 percent of eligible expenses.

SBA Debt Relief Payments Extended

• Resumes the payment of principal and interest (P&I) on small business loans guaranteed by the SBA under the 7(a), 504 and Microloan programs, established under the CARES Act
• Reduced fees on 7(a) and 504 loans

Modifications to 7(a) Program

• Increased guarantees on SBA 7(a) loans
• Reduced fees on 7(a) and 504 loans

New EIDL Advances

• Authorizes $20 billion through the end of 2021
• The maximum grant is equal to $10,000

Accounting Provisions

• Troubled Debt Restructuring. Suspension of TDR classification is extended through 2021
• CECL Relief Extended. Relief from CECL is extended through January 1, 2022

$12 Billion for CDFIs/MDIs/Capital Investment Program

• $9 billion in emergency capital investments in eligible CDFIs and MDIs to support immediate economic relief in low-income and minority communities struggling to respond to the COVID-19 pandemic
  • Eligible institutions must demonstrate that over the past 2 years, 30% of lending was to LMI borrowers or to create direct benefit to LMI populations
  • Does not include interest rate cap requirement that had previously been included in similar proposals
  • Authority to provide new capital investments expires 6 months after the end of the covid-19 national emergency
• $3 billion in emergency COVID-19 funding to the CDFI fund
  • $1.25 billion, available until Sept 30, 2021, in grants
    • $25 million in direct grants to Native American, Native Hawaiian, and Native Alaskan communities
  • $1.75 billion, available until expended, for CDFIs to provide loans, grants, or other investments for LMI and minority communities $1.2 billion of which is used for financial and technical assistance and other support specifically for minority lending institutions

Support for Agriculture

• $26 billion provided for agriculture: $13 billion for farmers and ranchers and $13 billion for nutrition assistance programs (includes 15% SNAP increase for six months)

Grants for Entertainment Venue Operators

• Provides $15 billion in grant of up to $10 million for a variety of entertainment venue operators

Expansion of Employee Retention Tax Credit

• Expands the value and the eligibility of the ERTC
• Extends credit for wages paid through July 1, 2021

Extension of Paid Leave Credits

• Refundable payroll tax credits for paid family and sick leave are extended through March 31, 2021

Expanded Unemployment Insurance and Economic Impact Payments

• Provides $300 per week in expanded unemployment insurance through March 14, 2021
• Provides one-time, direct payments of $600 to individuals with income up to $75,000 and $1,200 for married couples with income up to $150,000, plus a payment for $600 for each dependent

Termination of Federal Reserve Facilities

• Terminates four CARES Act Federal Reserve lending facilities: the Primary Market Corporate Credit Facility, the Secondary Market Corporate Credit Facility, the Main Street Lending Program, and the Municipal Credit Facility.
• The PPP Lending Facility will continue through March, and the Fed retains authority to replicate the Term Asset Lending Authority.