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Current Treatment of Fringe Scenarios

Legend

Reasonably Sure - Seems pretty clear but is the kind of thing they could totally screw up in the regs/forms.

Somewhat Sure - Seems to be the most logical approach to take at this time.

No Idea - Your guess is as good as mine. Subject to change.

PPP

Open Scenarios

Scenario 1 - Receipts decrease is exactly 25%

Current Treatment: Treating as eligible quarter

Reasonably Sure

The IFR very clearly says less than or equal to. I point it out because it's different than the ERC, and just the sort of thing I would expect the forms to contradict.

The Economic Aid Act provides that, to be eligible for a Second Draw PPP Loan, the borrower must have experienced a revenue reduction of 25% or greater in 2020 relative to 2019.

ERC

Open Scenarios

Scenario 1 - Receipts decrease is exactly 50%

Current Treatment: Treating as ineligible quarter

Reasonably Sure

Based on current guidance from the IRS, the tool is assuming the reduction must be more than 50%, due to the following excerpt from the FAQs:

An employer is considered to have a significant decline in gross receipts for the period beginning with the first calendar quarter in 2020 for which its gross receipts are less than 50 percent of gross receipts

Scenario 2 - Receipts decline more than 50% quarter over quarter, go back to more than 80%, then again dip below 50%

Current Treatment: Treating as ineligible quarter

No Idea

While this seems counter to the spirit of the relief, it looks as though only a single cycle of 50-80-80+ eligibility is allowed. This interpretation comes from the follow IRS FAQs:

An employer is considered to have a significant decline in gross receipts for the period beginning with the first calendar quarter in 2020 for which its gross receipts are less than 50 percent of gross receipts from the same calendar quarter in 2019

Scenario 3 - 2021 Q2 receipts are greater than 80% the lookback period, but 2021 Q1 was an eligible quarter.

Current Treatment: Treating as eligible quarter

Reasonably Sure

The 2021 rules include a provision which allows you to look to the previous quarter for eligibility, if the current quarter is not eligible, but it references a comparison of Q4 '20 to Q4 '19. How this applies to Q2 of '21 is unclear, but we're currently treating Q2 as eligible automatically if Q1 is eligible. The rationale here is this would follow the pattern used in 2020, allowing for a trailing eligible quarter after receipts exceed 80%.

Scenario 4 - Archived

See archive toggle at the bottom of the page for details.

Scenario 5 - ERC shutdown eligibility for newly created companies

[Update scheduled]

Somewhat Sure

Treatment: Businesses started as of any date can take the ERC if they meet the shutdown test.

There doesn't look to be anything that prevents a recently created business from taking the ERC if they meet the shutdown test, so it is currently being allowed.

Archived Scenarios

Scenarios are archived once we have a reasonable degree of confidence that this item is relatively well defined in the current rules.

Scenario 4 - ERC eligibility for businesses opened in 2020

Reasonably Sure

Treatment: Now allowing ERC in Q1-Q2 2021 if biz started Q1 or Q2 of 2020, and passes the receipts test.

Section 207 (only applies to 2021) includes a section that directs you to use 2020 for your lookback period rather than 2019 in situations when a company was not in business in 2019. See this discussion for details.

[Previous treatment]

Previous Treatment: Businesses must have been in operation prior to 2020

The rules are clear about what 2019 period to use as your lookback period if you started business in 2019, but I didn't see a direct reference as to whether a business starting in Q1 of 2020 was eligible. So I assumed, since there isn't a framework provided to determine a lookback period, that businesses must have been started in pre-2020.