How the Latest Economic Stimulus Package Can Help Your Company
By Douglas McColloch
First introduced in the CARES Act, the Work Opportunity Tax Credit
still allows credits up to $9,600 per employee to companies that hire
candidates who are veterans, welfare recipients or long-term
unemployed. Shutterstock.com
Last December, Congress passed, and former President Trump signed into law, a bill providing an additional $900 billion in federal stimulus spending in response to the ongoing COVID-19 pandemic and the prospect of a post-holiday economic slowdown. The legislation approves direct payments to individuals of up to $600 and provides a $300 weekly extension of unemployment assistance, some $285 billion in loans under the Paycheck Protection Program (PPP), $25 billion in rent relief, and more than $80 billion to aid schools and colleges.
While some elements of the legislation are continuations of programs enacted under the CARES Act that passed earlier in the year, some beneficial modifications have been made to existing programs, and some new federal initiatives promise additional aid to businesses—and small businesses in particular.
Recently, SEMA Education hosted a virtual webinar, “Everything You Need to Know About the New PPP Program,” in which changes to the program were discussed in detail. In this article, we’ll review highlights of the presentation and shine a light on elements of the new legislation that can benefit SEMA-member companies.
New under the revised PPP legislation, COVID-related workplace
safety expenses that were undertaken to comply with government
health guidance are now forgivable PPP loan expenses, retroactive to
March 2020. Shutterstock.com
PPP: What’s New
Administered by the U.S. Small Business Administration (SBA), the revised PPP provides $285 billion in loans via SBA-approved lenders (including online sources such as Square and PayPal) for small- to medium-size companies. Among the features of the revised program:
First and Second Loans: The PPP program has reopened, and applicants may again seek a potentially forgivable first loan. If first loan funds have already been granted and spent, a qualified applicant may request a forgivable second loan. Companies that did not receive the full amount for which they were eligible under the first loan may now request an increase. (Such increase remains part of the original PPP loan and is not a second loan.)
Covered Period: Funds for potentially forgivable expenses must be spent during the covered period. Borrowers can set the covered period of the loan to be between eight and 24 weeks after the loan disbursement date.
Loan Period: The covered period for all PPP loans is now March 31, 2021.
Application Deadline: Applications for first or second loans must be submitted by March 31, 2021 (unless the program is extended).
Defining Small Business: For first loans, the definition of “small business” is generally 500 employees, but the definition for motor-vehicle parts manufacturers ranges from 1,000–1,500 employees. For a second loan, the business size is limited to 300 employees or fewer, and companies must show a 25% revenue reduction during any quarter of 2020 relative to the same quarter of 2019.
Loan Amount: PPP loans equal the average of one month’s payroll multiplied by 2.5. Payroll costs include compensation along with other payroll-related costs such as retirement payments, state and local taxes on payroll, payment for vacation or paid leave, group healthcare costs, and allowances for separation or dismissal. The maximum amount for a first loan is $10 million. The maximum amount for a second loan is $2 million (and $10 million for a combined first and second loan).
Use of Funds: PPP funds can be used to cover payroll, mortgage interest, rent, utilities, expenditures related to software and cloud computing services, certain property damage costs, certain supplier costs, and certain worker protection expenditures. At least 60% of loan proceeds must be used on payroll costs (i.e., wages, payroll taxes, paid leave, healthcare payments, retirement plan contributions, and group life, disability, dental and vision insurance). Reimbursable compensation in the form of salaries, wages, commissions or similar payments is capped at $100,000 per employee.
Interest Rate and Repayment Terms: The loan interest rate is 1% for five years. Repayments on any amount not forgiven are deferred at least 10 months after the end of the covered period. No collateral or personal guarantees are required, and there are no borrower and lender fees.
Taxable Income: Forgiveness of PPP loans is not to be included as taxable income (federal), but check how your state will treat the loan.
Tax-Deductible PPP Expenses: PPP loan proceeds are tax deductible as business expenses (federal), but check how your state will treat the expenses.
Retaining/Rehiring Workers: Borrowers must attempt to keep the same number of employees to the extent possible. A reduction in over 25% of salaries will result in a commensurate reduction in overall loan forgiveness, but if the reduction is less than 25% of salaries, there will be no reduction in loan forgiveness. If a borrower cannot find employees to rehire, or if the entity is shut down due to COVID 19, the borrower will have a “safe harbor” and will not be penalized for a reduction in head count of greater than 25%.
Amount Forgiven: The SBA will forgive up to 100% of the loan principal if the funds have been used appropriately (for payroll, rent, utilities, etc.).
Streamlined Loan Forgiveness Application: The SBA now has a simple one-page form to seek forgiveness of a loan of $150,000 that does not require any submission of documentation. The borrower must simply certify to the following: 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. The borrower must attest that the loan was spent on eligible expenses and that the borrower will retain records that prove compliance with PPP requirements. Employment records must be retained for four years, and other records must be retained for three years. (The borrower remains subject to an audit.)
Economic Injury: To qualify for a PPP loan, the borrower must certify that the company has economic need (the “Necessity” test). The SBA provides this guidance: “Borrowers...must certify in good faith that current economic uncertainty makes the loan request necessary to support the ongoing operations of the Applicant...taking into account their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business.”
Payroll Taxes: Businesses receiving a PPP loan may also defer payment of 2020 payroll taxes.
Receiving PPP Funds: Once a borrower receives a Preferred Lender Program (PLP) number for its loan, the SBA approves the loan and funds are reserved for the borrower. Starting on the date a borrower receives a PLP number, the lender has 10 calendar days to disburse funds. The loan must be disbursed in full, and the 24-week loan forgiveness period begins the day funds are disbursed.
Apply Now: Loan applications for the new PPP program are now being accepted through SBA-approved lenders (banks and community financial institutions). For more information, visit www.sba.gov.
PPP Low- to Moderate-Income (LMI) Area Program
The PPP program under the initial CARES Act came in for a fair amount of criticism because it ended up disbursing money to companies that were not in dire financial straits, so the new program includes a new initiative designed to target PPP relief for businesses located in low- to moderate-income (LMI) areas, which is defined in the legislation as either:
A census tract in the most recently completed decennial census published by the U.S. Census Bureau that has a poverty rate of at least 20%.
A census tract in which median family income does not exceed 50 to 80% of statewide or metropolitan median family income, whichever is greater.
The legislation sets aside $15 billion for initial PPP loans, $25 billion for second loans, $15 billion for smaller community banks and credit unions, and $15 billion for mission-based community lenders such as community development financial institutions and minority depository institutions. For borrowers with fewer than 10 employees in low- to moderate-income areas, loans of up to $250,000 are available immediately.
Economic Injury Disaster Loan Program
The Economic Injury Disaster Loan (EIDL) program, first rolled out with the CARES Act, returns in the new legislation. It’s distinguished from the other loan programs because the SBA is both the administrator and the lender; prospective borrowers need simply log onto www.sba.gov to begin the loan application process. Loans are available up to $2 million with a 30-year maturity at 3.75% interest for for-profit companies. Companies may apply for a loan until December 31, 2021.
As written, the law reserves the loans for companies that are located in a designated “disaster area,” but because of COVID, any company located in the entire U.S. currently qualifies under the program. Unlike the PPP program, these loans are not forgivable but instead present a cost-efficient long-term option for companies in need of additional funding. Companies currently receiving PPP loans can apply for EIDL assistance as well.
The SBA previously provided a loan advance of up to $10,000, which automatically became a forgivable grant. EIDL advances are no longer available at this time.
Companies operating in low- to moderate-income areas can qualify
for additional relief under the new legislation, with loans up to
$250,000 available immediately for companies with 10 or fewer
employees in those areas. Shutterstock.com
Other SBA Loan Programs and Chances for Forgiveness
Also under the new legislation, additional SBA-administered loans are available for companies that were largely spared during the pandemic. SBA Section 7(a) and 504 loans are available for companies with up to 500 employees. Both Section 7(a) and 504 loans are available up to $5 million; SBA microloans of $50,000 are also available. These loans can be used for working capital, inventory, equipment, inventory or business acquisition. To encourage lending, banks have been incentivized with 90% federal loan guarantees (up from 75% previously), and all federal guarantee fees have been waived.
Companies with an existing SBA loan can now receive immediate three-month loan forgiveness, with an additional five months available if the company can prove that it is in a hard-hit industry such as hospitality or food service. Also, companies applying for a new SBA loan from now until September 20, 2021, can, if accepted, receive six months’ forgiveness of principal and interest, with amounts capped at $9,000 per month. These new forgiveness programs are not contingent on COVID or financial distress; they’re available for any company that qualifies for a loan.
Employee Retention Tax Credit
First launched under the CARES Act, this refundable federal tax credit has been made more generous for 2020. Companies with up to 500 employees can qualify (up from 100 previously) if they can show in their quarterly tax filings either:
That their businesses were partially or completely shut down during that quarter.
They are reporting revenue losses of 20% or greater versus the same quarter in 2019. (Under the old law, companies had to show a 50% loss.)
Beginning January 1, 2021, the tax credit is 70% of qualified wages plus the cost to continue providing health benefits to the employee. As of January 1, 2021, allowable credits can be taken up to $7,000 per employee per quarter ($5,000 previously) and are retroactive to 2020. Companies making the credit can still qualify for a PPP loan (they couldn’t previously), and employer group health insurance is now included in the revenue calculations. Qualified wages are those paid after March 12, 2020, and before July 1, 2021. The credit is refundable if the tax credit exceeds the payroll taxes due for that quarter.
Other Tax Policy Updates
Whether or not your company has been affected by COVID-19, the FICA/social-security tax deferral first permitted under the CARES Act has been extended to cover the first quarter of 2021. The money will need to be repaid, interest-free—50% by the end of 2021 and the other 50% in 2022—but it’s an attractive option for companies still suffering from negative cash flow.
Tax credits under the Families First Coronavirus Response Act are still available under the new legislation, but participation is now voluntary. Under the CARES Act, employers had to keep their employees on the payroll through the end of the year to qualify for PPP assistance. Now employers who opt not to maintain a full payroll can still qualify for PPP loans, but companies that do can still qualify for tax credits through the first quarter of 2021.
The Work Opportunity Tax Credit has been extended through 2025. The credit provides $1,200–$9,600 per employee to companies who hire candidates this year who meet one of the following criteria:
Are long-term unemployed (six months or longer).
Are veterans.
Are welfare recipients.
Have successfully completed a rehab program.
Finally, tax deductions for charitable giving expenses have been made more generous for individuals and businesses for 2021. Companies can now deduct up to 25% of taxable income for charitable contributions (10% formerly), and deduction for food donations will remain at 25% of taxable income instead of reverting to 15% (the rate before the CARES Act was enacted).
View the Presentation
Accessing SEMA’s industry-leading education is easier than ever. With dozens of live and on-demand offerings, and more debuting during the year, SEMA Virtual Education includes comprehensive presentations, insightful discussions, and short videos that teach, inform, inspire and entertain automotive specialty-equipment professionals. From builders and engineers, to marketers and sales staff and much more, participants will become more educated and prepared for success through SEMA’s Virtual Education. Visit www.sema.org/virtual-education to learn more.
Here’s a first look at the ’22 Subaru WRX testing near Ann Arbor, Michigan.
Subaru used the 2017 Tokyo Motor Show to unveil its Viziv Performance Concept, which offered a glimpse at the next-generation WRX models due for the ’22 model year. A couple of months later at the 2018 Tokyo Auto Saloon, the Viziv Performance STi concept was revealed. The prototype seen here appears to draw a lot of styling influence from that concept. Autocar spoke to Subaru Design chief Mamoru Ishii where he stated “Such a car [the concept] brings lots of expectation, from within the company and from our customers. What we know is that our customers’ lifestyles are changing and we have to respond to that.”
Rumors have been circulating about a replacement turbocharged 2.4L four-cylinder (a boxer type) referred to as the FA24, could power the next WRX STI with 400 hp and 361 lb.-ft. of torque. Currently, the FA24 2.4L turbocharged four-cylinder moves Subaru's bigger three-row Ascent. There’s zero confirmation on whether the WRX will use a similar version of that new turbocharged 2.4L, or if they’ll rely on the established 2.0L turbocharged four-cylinder. Expect the next-gen WRX to offer a six-speed manual or an automatic transmission.
An official debut is expected around the second quarter of 2021.
Here’s a first look at the ’22 Subaru WRX testing near Ann Arbor, Michigan.
Subaru used the 2017 Tokyo Motor Show to unveil its Viziv Performance Concept, which offered a glimpse at the next-generation WRX models due for the ’22 model year. A couple of months later at the 2018 Tokyo Auto Saloon, the Viziv Performance STi concept was revealed. The prototype seen here appears to draw a lot of styling influence from that concept. Autocar spoke to Subaru Design chief Mamoru Ishii where he stated “Such a car [the concept] brings lots of expectation, from within the company and from our customers. What we know is that our customers’ lifestyles are changing and we have to respond to that.”
Rumors have been circulating about a replacement turbocharged 2.4L four-cylinder (a boxer type) referred to as the FA24, could power the next WRX STI with 400 hp and 361 lb.-ft. of torque. Currently, the FA24 2.4L turbocharged four-cylinder moves Subaru's bigger three-row Ascent. There’s zero confirmation on whether the WRX will use a similar version of that new turbocharged 2.4L, or if they’ll rely on the established 2.0L turbocharged four-cylinder. Expect the next-gen WRX to offer a six-speed manual or an automatic transmission.
An official debut is expected around the second quarter of 2021.
The deadline for SEMA-member companies to submit project overviews to participate in the 2021 Jeep, Ram and Dodge Project Vehicle Program is 11:59 p.m. (EDT), April 8, 2021.
Companies are invited to submit proposals based on the criteria outlined below. Applicants need to meet all of the requirements outlined or the submission will be removed from consideration.
Chosen companies will be selected by Stellantis from the total number of eligible submissions to take part in the program.
Interested companies must submit a detailed marketing plan. If selected, each participant must actively promote, at its sole expense, the project vehicle according to the Stellantis-approved marketing plan.
The Stellantis/Mopar booth at the 2021 SEMA Show will highlight the following
vehicles in addition to other vehicles from its existing lineup:
Dodge Challenger SRT Hellcat Widebody
Wagoneer
Jeep Wrangler Rubicon 4xe
Jeep Gladiator
Ram 1500 Rebel
Ram 1500 TRX
Ram 2500 Mega Cab
Ram 2500 Power Wagon
Ram 3500 Chassis Cab
Dodge Challenger SRT Hellcat Widebody
Information on Jeep, Ram and Dodge Vehicles can be found at:
Stellantis/Jeep, Ram and Dodge Project Vehicle Program Criteria
Open to SEMA-member company manufacturers, designers, customizers and/or retailers.
Submissions for multiple vehicles will be permitted, but does not increase odds of being selected.
Submissions must be submitted to: submissions@moparbuilds.com and must be received by 11:59 PM, April 8, 2021.
Each company requesting vehicles must be willing to enter into an agreement with FCA US LLC requiring the company to:
Jeep Wrangler Rubicon 4xe
Feature the vehicle in a booth at the 2021 Las Vegas SEMA Show.
Register and keep the vehicle in the participant’s name for the duration of the agreement.
Use the provided Mopar and Jeep Performance Parts accessory products as specified and provided by Stellantis.
Purchase and maintain $5 million in general liability insurance, $5 million in automotive liability insurance, $1 million employer liability and demonstrate workers’ compensation coverage; an umbrella policy may be used to achieve coverage limits.
Enter into an agreement with FCA US LLC agreeing to dispose of the vehicle at the end of the agreement, and provide proof of such disposal.
Commit to feature the vehicle with the Jeep, Ram, or Dodge logo intact and visible.
Make vehicles available to Stellantis or its Dealers for display.
Jeep Gladiator
Companies must submit written quarterly status reports for a period of 18 months, as specified in the contract, detailing:
Modifications to the vehicle.
Events (including dates, location and type of event).
Media exposure (originals or color copies).
Company print and digital advertising featuring the vehicle.
Social media exposure with statistics.
A copy of the project vehicle registration.
Submission Requirements
Step 1: Project Overview/Summary—Must be Received by 11:59 p.m. (EDT), April 8, 2021.
E-mail a one-page project summary with the following information to submissions@moparbuilds.com
Vehicle/theme.
Vehicle modifications.
Promotional plan, including the events at which the vehicle would be displayed (in addition to the SEMA Show); social media plan (please include your potential exposure/reach with your followers).
Your proposed vehicle-display location at the 2021 SEMA Show. Please also include what other vehicles will be featured within that display.
Step 2: Email Detailed Project Proposal to submissions@moparbuilds.com by 11:59 p.m. (EDT) April 30, 2021.
Include: all details that support the one-page project summary on company letterhead, color rendering(s) and past project vehicles examples. If the interior is to be significantly modified, an interior sketch should also be included.
Selection Criteria:
Stellantis will determine the number of participants in its sole discretion. The participants will be selected from the total number of submissions received. Participants will be selected according to the above-mentioned and following criteria:
Originality.
Demonstrating an understanding of the vehicle’s position in the market, and complementing that position.
Jim Liaw – President/Co-Founder, Formula Drift Holdings
Voting will take place online between May 11–25, and is open to current SEMA-member companies. Votes must be cast by each company’s primary contact. Details on the upcoming election will be sent to the member company’s designated primary contact beginning April 30. Winners will be announced by May 28.
While SEMA is unable to host its traditional in-person Washington Rally event this year, SEMA members still have the opportunity to connect with their lawmakers in our nation’s capital to impact the issues that matter most to the industry.
SEMA invites members to virtually meet with their elected representatives this spring. Unlike the single day in-person event, meetings will be scheduled over the course of several weeks, allowing SEMA Government Affairs to make arrangements with your schedule in mind. There are no registration fees to participate.
Whether it’s standing up for motorsports, combating zero-emissions vehicle mandates, or ensuring vehicle data access for the specialty-aftermarket industry, there are many issues facing SEMA members in the nation’s capital. That’s why it’s more important than ever to get engaged with your elected officials.
If you are interested in participating in the virtual Washington Rally, please contact Christian Robinson at christianr@sema.org.
Are you hunting for a new job? The SEMA Career Center has a comprehensive listing of automotive-related job openings around the country. Here are some of the latest jobs posted to the website.
Technical Salesperson Air Flow Research is hiring a technical salespersonto provide automotive and technical information/assistance to customers. This position requires the selected candidate to spend 95% of his/her time resolving automotive technical issues by phone and email as well as selling products to consumers. Prior experience working with natural aspirated engines and customer service skills is preferred. A high school diploma or equivalent is required.
Shipping Associate Modern Driveline is hiring a shipping associateresponsible for maintaining organized product shelves, pulling items from stock, preparing invoices, packaging items for shipment and assisting in loading carrier trucks for domestic and international delivery. The shipping associate is also expected to participate in restocking efforts and clean up duties to maintain a ready, clean and safe work environment.
Domestic Market Sales Manager Turn 14 Distribution is hiring a domestic market sales managerto lead the company’s domestic sales team. The ideal candidate has a strong understanding of modern muscle applications and a solid background in e-commerce wholesale distribution sales. The ideal candidate is a leader who loves working with people. Candidates must have one to three years of management experience and five years of inside sales experience.
The September 2021 issue of SEMA News will highlight rising stars in the automotive aftermarket industry who are age 35 and younger. If you know a leader in that age range as of September 1, 2021—whether they are in manufacturing and design, marketing, retail, events and media, or distribution—we would like to hear from you.
Many SEMA members are currently working with creative young professionals who are already industry trailblazers. They may have played key roles in leveraging new and emerging technologies with a traditional automotive aftermarket business to expand company reach, improve product development, energize marketing efforts or upgrade customer interaction.
They could be budding talents at an established company, entrepreneurs building their own brands or innovators who have launched companies that might become big names in the future. What they all will have in common are fresh ideas, enthusiasm, charisma and the drive to succeed.
SEMA News looks for candidates drawn from diverse industry segments who are already making a significant impact through their leadership within their organizations or businesses. Entrepreneurship, commitment, insight, innovation, integrity, responsibility, demonstrated skill, involvement and success within the marketplace weigh heavily in the decision-making process. We’ll honor the winners in the September issue of SEMA News and on www.sema.org.
Exhibit at the 2021 SEMA Show and shine the spotlight on your company in front of tens of thousands of qualified buyers looking for the best that the automotive specialty-equipment market has to offer.
In addition to buyers, the Show also attracts thousands of traditional media and social-media influencers ready to let the rest of the world know about your products and applications, opening up even more sales opportunities well after the Show concludes.
Access SEMA's worldwide network and create more opportunities to sell. Be there to reconnect at the 2021 SEMA Show, Tuesday-Friday, November 2-5, Las Vegas.
Below are key dates that SEMA Show exhibitors are encouraged to mark on their calendars.
The Exhibitor Services Manual (ESM) will be live in May. The ESM contains all of the forms and applications required to prepare for the Show: feature vehicles, new products, booth vehicles, celebrity appearances, etc.
The Exhibit Space Rental Application and deposit are due May 7.
Dates for the SEMA Show Space Selection: June 7-23
View the Presentation
The September 2021 issue of SEMA News will highlight rising stars in the automotive aftermarket industry who are age 35 and younger. If you know a leader in that age range as of September 1, 2021—whether they are in manufacturing and design, marketing, retail, events and media, or distribution—we would like to hear from you.
Exhibit at the 2021 SEMA Show and shine the spotlight on your company in front of tens of thousands of qualified buyers looking for the best that the automotive specialty-equipment market has to offer.