Welcome to the AICPA Town Hall Series, your resource for the latest news and updates on pressing issues facing the accounting profession Good afternoon and welcome to the AICPA Town Hall Series It’s a very important time as we start the year There’s a lot going on We have a lot of information to review with you today Let’s get right into it We’re going to have some broad opening comments and then we’re going to give you the latest related to the guidance that has come out from SBA treasury, some that just occurred last night We’re going to then just give you a broad overview of how we’re seeing this next phase of PPP We’re going to also provide you an overview on the CPA loan portal doing a brief demo Then we’re going to also get into a very important topic, ERC enhancements and PPP and some changes that have occurred We’ll always close with the open form and closing remarks You can receive CPE by clicking on 75 percent of the attendance pop-ups You’ve got this toolbar at the bottom You can download today’s presentation There’s also a new 15-page document which we strongly encourage you to take a look at that’s going to address many of your PPP questions If at anytime the video freezes, refresh your browser, you can do that with the F5 function or with Control R. Today with me, and I’m Erik Asgeirsson, one of the AICPA executives, and I oversee the Business and Technology Subsidiary at CPA.com Along with me today are Kristin Esposito, who’s the Director of Tax Policy and Advocacy She’s going to be doing a little bit of a deep dive on ERC We’ve got Kari Hipsak, who many of you know, and she’s been leading up many of the tool development activities related to the PPP program I know you all know Lisa Simpson, who’s here every week with us, and she’s going to be giving you a very thorough overview in the latest related to PPP What’s the hot topic? The hot topic clearly is SBA’s announcement that they’re reopening PPP Things actually are tracking As we have projected, we did a bunch of town halls in the last two weeks of 2020 If we looked at the timeline we highlighted, then it actually plays out rather accurately here Where are we at right now? This week, the SBA started receiving the PPP applications It started on Monday with these CDFIs, these smaller lenders Now, tomorrow, the SBA’s going to be significantly increasing the number of lenders that can submit applications I’ll be getting into that in a second Then next week, they’re going to open it up to all of the lenders But let’s talk a little bit more about what’s happening with the lender community Starting tomorrow, there’ll be 5,000 eligible lenders that can start submitting PPP applications, these next phase PPP applications to the SBA However, most of them will not You have 5,000 that are eligible, we think it probably would be under 10 percent that are going to be ready to start processing in submitting these loans to SBA Then next week, SBA will open the window up for all lenders In particular, the larger lenders, that will be as of Tuesday, January 19th But that doesn’t mean that the large lenders will start submitting applications Let’s talk a little bit more about how this submittal process works The lenders are interpreting the guidance that’s been put out by by SBA and treasury They’re the ones that submit these PPP loans We know the process, and when we reflect back on what happened in April and May What is starting to occur again is lenders are going to have different processes related to how they fill out these applications They’re going to have a times different document requests, Lisa and I have been talking to a lot of firms this week, and they’re hearing from some lenders that they were requiring the first PPP loan application, forgiveness application to be submitted, that is not a requirement of treasuries

However, some lenders are going to make that part of their process That’s something we all need to understand Our goal like it was back in April and May, is to help drive a common approach in understanding That’s why we’re putting out these documents We also think even through our CPA loan portal, we can provide some broad leadership on how this process should work Finally, the lender-agent relationship We have a good understanding of that You clearly need to have an engagement letter or some type of agreement in place with the lender if you want to receive agent fees Our understanding is that most lenders do not plan to pay agent fees Lisa, I know this is high level We’ll be getting into more details, but is there any comment that you want to provide on this slide? I think your comment about lenders having different processes than are outlined is just so on-point We just got a question about a borrower who’s trying to get into the line for a second draw The lender is saying, you’ve got to have that first draw forgiveness application submitted It is just important to understand that these are the processes that SBA has outlined But lenders may throw up their own restrictions It might give you me some encouragement to look for a different option It’s a great segue, Lisa, into this next slide Let’s now talk about, so that last slide was status on lenders Now, this is looking at the firm to lender workflow This is something that I think you all need to be proactive about is understanding when your clients’ lenders are going to start processing applications, understand their process and what we’re recommending and many firms are telling us this is what they’re doing is to have a centralized process to support these draw one and draw two applications With that centralized process, you then will at times will work with your client in their original lender But one thing that should be known is many of these loans were sold In some cases, the original lender might not even have that original PPP loan anymore, but you need to work with your clients in some of them will say, well, I think it makes sense to go with the original lender, then you have that path It probably makes sense to have an alternative path because there could be issues with your original lender being live with the SBA, and also some other processes may not be in line with what you think the firm that they should be Having an alternative approach makes a lot of sense We have built this CPA loan portal to help give firms options Then after you work with your client to either go to the original lender or a new lender, that lender then decides when to submit to the SBA Now we, based on their systems, have they built their API into the SBA and also based on their policies They set their policies, then that goes into the SBA The SBA then is going to have a more thorough validation process This is why we’re saying it’s important to get it right because some loans applications will be kicked back if there are errors If there’s not errors in it, it’s validated, then you will receive an E-Tran number, and then after you see the E-Tran number, you’ll receive the funding That’s a little bit high level about the process Once again, we think we’re in a completely different position today related to April of 2020 Firms can be much more proactive They can put in place capabilities that can think through lender options Yes, this can be all kinds of confusion out there There’s going to be confusion on how people interpret a portion of the act There’s going to be differences by the lenders as we just discussed, there’s an opportunity to receive agent fees If that’s in your business model, you can receive agent fees and you can build for advisory services This is part of your business practice strategy Great opportunity to gain new clients Then also set yourself up for a better forgiveness process by thinking through this now and being proactive Quick update on where things stand related to forgiveness We’re all talking about getting loans in But let’s look at where forgiveness stands, and if you look at this chart, basically one-third, a little bit less than one-third of the original 5.2 million in PPP loans have been submitted to the SBA for forgiveness

So two-thirds or almost 70 percent of the loans are outstanding I can tell you the lenders want those forgiveness applications to be submitted They’re going to leverage this next phase to get those submitted You do not need to submit a forgiveness application to go for a draw to PPP loan, that’s per Treasury That doesn’t mean that some bank will not state that that’s their policy So with that, Lisa, let’s talk about how the AICPA is seeing this and trying to build this common approach and understanding, so I’ll turn it over to you Thanks, Eric. We have had so much activity in the last seven days Eric, I think if you can advance the slide, there we go So just between the period January 6th through last night, again, once again, after I go to bed, they start sending out stuff But if you look at the screen, you’ll see what information we’ve gotten within the last week, and we talked about the two IFRs last week on the town hall They are easy to read, well-organized Please feel free to jump into those if you have a question that isn’t covered, otherwise, it gives you some fascinating reads on theory and why some decisions were made But then on Friday, we got the revised application for first draw loans and we have the brand new form on second draw loans So they’re going to look very familiar to you They’re not dramatically different than what you have been learning over the past eight, nine months, so that should give you some comfort Just last night, we got a procedural notice that deals with situations where a borrower wants to increase their first draw We’re going get into that a little bit later on and so I won’t hold you up But just to remind everyone, you’re going to have to use some judgment on a lot of your circumstances There are not going to be specific guidance issue around a lot of the detailed questions that you might have So it’s just important to look at the guidance, understand the intent, and then use your judgment, documenting that judgment So to that end, we have added a new resource that is in your materials You were also given a link to it, and it was suggested that you do a pre read on that because what we’re going to try to do is capture a lot of the intel and answer a lot of your common questions within this document It was updated on the 10th, so it does not have this latest procedural notice that came out last night, but we’ll be working on getting that updated quickly You’ll have a link in the slide deck to only be able to check the most recent version It’s available on the AICPA.org/SBA page These are a list of the topics that I’ve covered So if you have asked a question in the Q&A Today, we’re up at over 300 or so already You might want to go back in and check out this document first to see if it’s going to cover your questions because we’ve tried to simply walk through the first draw IFR and the second draw IFR to capture the main questions that are being asked I do want to talk about a couple of things We’re already getting questions about the simplified forgiveness and how that’s going to work and whether FTE requirements are going to be included in forgiveness for the next round, and we are waiting on that IFR The SBA and Treasury have stated that they will be issuing an IFR around forgiveness, so we are just going to wait and see what that process looks like Using the ERC and PPP, getting lots of questions about that It’s a great question We have a blog that just went live earlier today that Carl Peterson, who you saw last week, has worked on around ERC and PPP, and the significant planning opportunities provides for you with your clients Kris Esposito is going to talk with us about that later in the show today One of our favorite topic here So Eric, your favorite topic The thing here is we’re getting lots of questions You’ve got the economic uncertainty affirmation We went through this on Round 1 We called it the self-assessment of need This is a slide from April and May of 2020 So we know that some information will be made public

We know that’s important to do the self-assessment of need discussion, risk discussion with your client, and be aware of these future reviews, and to document all of this With all this said, the intent of this program is to support businesses We had a blog earlier in the last year related to this from Barry Melancon, stating about the intent of the program So there is a lot of uncertainty If you look at what’s happening in the world right now, we’ve got a health crisis, we’ve got an economic crisis, and we’ve got this social justice ongoing dialogue that’s occurring So lots of uncertainty, and if you also qualify for that 25 percent reduction based on a quarter decline, you’re probably in a pretty good position to say that there’s a lot of uncertainty out there and you qualify. So Lisa Again, just document your circumstances at the time of the loan application and make sure that you’ve kept that on file, it’s great All right, so let’s start digging in, and again, I’m not going to go into all of the details that we covered last week They’re in that resource documents But I did want to give you a look at what this new form looks like Again, it looks familiar You’ve seen this before Just a couple of new expense categories that we’ve talked about It is asking for the first draw SBA loan number Apparently, that’s quite a challenge to get your hands on So if you are going to be applying for a second draw, start working on getting that loan number identified, so that you’re ready when you submit the application You’ll see that it’s asking on the face of the application what the actual reduction in gross receipts is for the comparative period, and that is required information Hey, Lisa I was just talking to a banker and the best way to find that is obviously in the declines loan agreement, and people say, “Oh, we never retained it.” You know what? People retain a lot of is their e-mails Have your client go to their e-mail, look for that document, you need to have that number right That is a critical number, and you need to get that right If you put the wrong number in, that probably is going to cause some real delays in the processing One other thing on the application we’re getting a lot of questions about, how are we supposed to calculate the number of employees at the time of the application? It seems like a simple question Apparently, it’s not So we are asking for clarification around the 300 and 500 size standards for eligibility for the loan and what is to be included in that calculation So we’ll get back to you on that For now, if you need to go ahead and apply, document your rationale, and keep it in your file So I mentioned that we’ve got a lot of details in the document This is an area that we can take you to get lots of questions about, what’s in gross receipts? So we touched on this last week I’ve included some descriptions within the summary document, both for for-profit and not-for-profit borrowers We mentioned that PVP and idle funds are not included in gross receipts, so we have some clarity around that But lots of questions around the other pairs, act, and other types of relief funds So for example, funds targeted at higher ed institutions, Medicare or medical provider relief funds We are working on getting clarification around that, so I do not have any answer for you, but do know that we’ve asked the question and they’re processing on it Now, another big topic I had someone e-mail me just before we came on air about, am I using cash? Am I using tax? What am I supposed to use? Let’s just all take a deep breath and acknowledge that we’re not going to get any detailed guidance on what method to use I tried to just frame it around the core concepts of, let’s start with the first one, does the borrower produce regular financial statements either on a monthly or a quarterly basis? They can be internal financial statements They do not have to be audited, reviewed, or compiled They are, what is the basis that the borrower is typically using? It needs to be consistent If they don’t produce regular financial statements, so they just wait until the end of the year and bring in the shoe box and sort through it,

then that’s probably not going to work for you But the alternative is to use cash receipts from your bank statements Obviously, if you’ve got capital infusions or loan amounts going into the deposits for a quarter, then you’re going to need to back those out, document the steps that you’ve taken to go from total cash receipts to the amount that you’re reporting as gross receipts for your comparative period If you’re a restaurant or if you’re a retailer and you’ve got a point of sale system, start with that if that’s a better approach for you The point is you’ve got to be consistent, but don’t overthink it That’s right, Lisa It’s consistent quarter over quarter and it’s also assume positive intent This is where the CPA firms can play a huge role You understand this, you work with your clients, and you keep the comparisons consistent and assume positive intent Then you’re going to have to work with your lender Again, this is one thing that the lender is going to also play a key role because they’re going to be the one that says that I’ve got the right amount of documentation or affirmations to support this Yeah. We know that there are lots of complicated accounting methods You’ve got contractors using percentage of completion or completed contracts So their quarterly financials may not reflect those entries, but that’s okay As long as the methodology is consistent, then you can compare quarter in 2020 to corresponding quarter in 2019 Is there a 25 percent decrease in revenues? Yes, apply if there is economic necessity No, look at the next quarter Hopefully, that helps Again, I know that we all want to get it right and we all want to be as precise as we can be, but this is an area where that’s just not going to be needed to be honest with you Another area that I wanted to make sure we talked about today was around the requirement to use all of the first draw before receiving the second draw If you look at the second draw application, the borrower will attest that they have used or will use all of the funds when they apply But before they actually get the funds, they then have to say, “I’ve done it, I have used all of the funds for my first draw.” It does not mean that 100 percent forgiveness is required As we’ve said earlier, it does not mean that the loan application has to have been submitted You may have spent some of your funds after the end of the covered period so maybe that’s why you’re not getting 100 percent forgiveness That’s okay That counts as a use of funds on eligible expenses Here’s another one that you’ve got to keep in mind At least 60 percent of the funds that were spent have to have been spent on payroll, on eligible payroll The standard caveat, again, let’s go back and say it again, all of the first draw must be spent on eligible expenses I know none of you-all have the clients that are running through cars and jewelry, but we just want to make sure that you’re having that conversation with the client that says, “Did you use this on eligible purposes?” The key thing, Lisa, it can be after the covered period So it just has to be eligible expenses, the 60, 40 percent ratio applies What they’re trying to do here is that they’re going to look for someone that took the original PPP funding and just bought cars and boats That’s what they want to prevent, and then that person getting a second draw After the covered period, it shouldn’t be any issue, they’re still in business to meet the 60, 40 split of eligible expenses Let me clarify something there just before we move on The borrower can apply by saying, “I will use all of my funds by the date I get the disbursement.” They can go ahead and apply for the second draw and get that E-Tran number that we talked about at the beginning because the system will stop accepting new applications on March 31 So a borrower can get that second draw application in, but then before they take the funds, they make that extra certification It’s just a little bit more about a puzzle piece there

Okay All right. We knew from the Economic Aid Act that there was a provision for first draw increases We knew that procedural notice was supposed to be coming out soon and it hit last night A key date here This won’t go into effect until January 25th So you’ve got some time to work through, whether or not you’re in a situation where this is an option for you It is important to note that this is not going to help borrowers whose first draw loans have been paid off, have been forgiven fully and paid to the lender It is not intended to cover a broad range of circumstances It is limited to a few select circumstances right now that we’ll talk about It is not for topping off a loan, where the borrower simply made an error It’s not designed for a situation where these new payroll cost categories, vision, dental, life insurance were added in That’s not what this is for If we move on, you’ve got a few select occurrences where this is available A partnership, I don’t know if you-all remember way back at the beginning of this, but there was a lot of confusion around partnerships and whether partners were to be included with the partnership PPP loan application The answer eventually came out to be yes, but by then a lot of borrowers had already submitted their loan applications This provision allows for those additional partner comp costs to be added as an additional amount for the first loan That’s a little confusing But these three circumstances are only going to work, again, if the SBA has not forgiven the loan and paid the lender Another option is for your seasonal employers because there was a new calculation proposed under the Economic Aid Act; same for farmers and ranchers [inaudible] to those, if you think about, this is the end of January They’re going to give more guidance on this I think right now, some good high-level information, you can’t just top off due to errors There’s got to be very specific reasons The primary thing to focus on right now is getting in these new applications, draw one, for someone who didn’t apply before, or draw two, for a second PPP loan Yeah. They’re also giving opportunities for borrowers who fully repay their first draw before December 27th as long as the loan was shown as canceled or paid in full because they decided not to take it, they returned the money, or they returned a part of it, or they didn’t even accept all of the amount they were approved for The procedural notice is obviously brand new, lots to unpack through the lender process, so I just wanted to point out those high level notes to you Lisa, agent fees Something that we know It continues to be a focus for many firms What you see here is what is in the most recent IFRS, it shows the lender fee percentages and the agent fees There is one category that is in the lender fee amount that’s not in the agent fee category For loans less than 50,000, lenders will receive 50 percent of the loan principal or $2,500, whichever is less We have had a discussion with some of the government officials, and what they let us know was that table was just taken from the original CARES Act, and this is being looked at, and based on these discussions, our expectation is for loans below 50,000, agents will be able to receive a $500 flat fee or 10 percent of the loan principal, whichever is less That’s actually how we’re managing our CPA loan portal, and we think they will be FAQs or guidance issued related to that Once again, let’s look at PPP lending options You’ve got traditional lenders, banks, credit unions, community banks and then you’ve have Fintech What all of these different entities are doing are providing a front end to the SBA

They have application systems that are taking this information in from the small businesses They’re both submitting that to the SBA The SBA then provides an E-Tran number, which enables the funding to be provided to the business What we’re going to do now is we’re going to do a brief demo in the CPA Business Funding Portal, which has thousands of CPAs as registered users As of this morning, there’s something like over 4,000, close to 5,000 applications that have already been loaded into the system for this next phase I’ve seen some questions coming in, is this portal in Biz2Credit going to be open in submitting applications through the SBA tomorrow? The answer to that question is yes They are in that 5,000 lender eligible group, and they are ready to start submitting the applications to the SBA systems starting tomorrow Kari, I’ll let you give us a brief overview of the portal, and this is a sign that the AICPA PCPS team is working in collaboration with Biz2Credit on putting a lot of of our guidance and recommendations into this platform Great. Thank you so much, Erik, and thank you everyone for joining us A couple of quick things I’d like to mention before I jump into the Business Funding Portal One is that if you’re a person that likes to follow along, please feel free to go directly to the link down at the bottom right hand corner of this slide, CPALoanPortal.com, and I’ll go through some of the background while you have an opportunity to pull that up As Erik mentioned, this is a solution for PPP business relief There are two components currently available in the portal One is for applications for this new round of PPP that we’re in, and the second is the loan forgiveness application component Those that might have received a loan in the first round and are now looking to get that forgiven There are a number of features One of the most prominent feature that you see right on the slide in front of you is the dashboard, so it really helps with maintaining your client records There is unit user management and firm capabilities also within the portal There’s a variety of features that based on the subscription model, so also if you take a moment to go to CPALoanPortal.com, you’ll see the breakout of features by the different models I will be going through the free model today so everything that you see is available without cost One of the biggest components of a subscription model under the CPA Loan Portal, is that you can get the agent fees that Erik mentioned One more area to quick talk about are the different values of using this CPA Loan Portal One is that it’s user friendly, I just have a few minutes to go through the portal and that’s all it will take to show the platform It’s also very quick Erik had mentioned earlier about the E-Tran and the API system with the SBA There is an opportunity to get your PPP loan approvals a little bit quicker Also, the portal is secure When you go to that main page, CPALoanPortal.com, there is some information about the security of the platform Finally, Biz2Credit is a direct funder, so they are approved by the SBA to make PPP loans and they are not an intermediary With that, I am going to jump on over to a live demo of the platform so we can stop talking about it and really see it in action Here we see the dashboard that I was talking about, I went ahead and logged in so we didn’t have to use any time for that You’ll see a summary of your portfolio here It talks a little bit about your clients This indicates the PPP forgiveness applications in process, that middle section Then off to the right, you’ll see the PPP applications that are in process as well As I scroll down, you’ll see that I have three different test clients established, and if I need to go and open one that’s already been established, I can click on the little button that indicates “Existing Client Applications” and then go over to the action to complete the PPP app

Now, I’ve pre-entered data, so no worries, no one has to see me type, but I did want to start at the beginning, so let’s look at this process from the first question that you’re asked The first question is if this is a first draw PPP loan or a second? Initially, let’s look at a first draw PPP loan Give that some time Let me try and refresh real quick Okay, I am having some very technical issues right now I don’t know if it’s the double of you being on the webinar and doing that, so this wasn’t tested I know in advance, I mean, the platform [inaudible] It is working So you’re having some type of unfortunately demo issue here Yes. So what I can do, let me just quickly describe the process So there are the two different segments Once you get through that loan portal through dashboard, excuse me, there are two different segments, you can go for the first draw or the second draw, and it will just walk through the demographics The first component of the portal, it’ll walk through the actual eligibility When you go through the eligibility, it’ll walk-through step-by-step the different questions and if the answer is given, that makes the borrower ineligible, you can’t proceed in the process So for example, I know the first question is if the business was in operation as of February 15th, 2020, and if the answer to that is no, the portal will pop up and say that due to the regulations, you’re not able to apply for a PPP loan and then the same level of integration is also included on second draw loans Any borrower, any eligible borrower, let me clarify, can apply for a second draw loan if they meet those requirements that Lisa mentioned earlier One of the areas that we received a lot of questions on is the gross receipts and the revenue reduction testing The portal will walk through the different options for those revenue reduction testing and it will help you check yourself and make sure that the borrower is actually eligible So that is a perk of the portal, is that it tries to simplify the process by giving you bite-sized pieces I think a lot of us are very PPP We’re drowning a little bit, there’s a lot of information, but the portal really takes it down to bite-size level So you have a screen by screen opportunity to enter the appropriate information. With that, Eric, I know everyone’s really excited to hear about ERC and unfortunately, the demo did not go as planned so we might as well turn to another hot topic Yeah. Let me just kind of give some wrapping comment here, but thanks, Kari What I can tell you is that, just whenever we had the multiple webinars to webinar kind of screens here that cause some type of login issue is that, every day we’re receiving reports on the amount of firms using it and the number of applications that are being uploaded and it’s significant It will be open tomorrow and what we’re doing here is we’ll be having regular updates on it that we’re sending out through the notices to all of the registered users and just the why on this The why behind what we’ve done here is that building capabilities for the firms is critically important That’s one of the primary missions of CPA.com and what we did in June of last year was decided that we knew that there will be a next round of relief and we wanted to take the AICPA calculators and build it into a platform, which would give more options and more capabilities to the firms and that’s what we’ve done One thing, we’re also looking to work with the lending institutes There are many lending institutes that are leveraging fintech platforms and we are open If there’s some local community bank in your town that wants to work with the firm and leverage a platform like this, we’re working on affiliate programs It’s really about us all working together to try to drive a common approach and to do this in the most efficient manner So that’s a little bit of additional background and with that, we’re still on track here with time Lisa, let’s move to the ERC discussion

Absolutely. I know this is another hot topic and lots of questions around this, so we’ve brought in Kris Esposito Kris is a director of tax policy and advocacy in our DC office and she and I have been really getting to know each other this last month especially as we talk about, not just the enhancement to ERC, but the interaction with PPP Because now with the Economic Aid Act, borrowers who took PPP are eligible for ERC and you’ve got new borrowers eligible for PPP who’d already taken ERC We’re having fun. This is a great All right, so Kris, let’s jump into it and learn a little more about ERC Okay. Thanks for having me, Liz and Eric Let’s talk about the Employee Retention Credit or ERC as we referred to it We’re going to cover a few basics So CARES Act created it and then the new law enhanced and extended it and the new law is the Taxpayer Certainty and Disaster Tax Relief Act of 2020, which was actually part of the Consolidated Appropriations Act of 2021 that was signed into law at the end of December Even the name is a mouthful I’m just going to focus on some high-level basics today, but I will be co-presenting on an AICPA webcast next Friday and we’re going to walk you through everything in detail, everything you would need to know about the credit, including if you’ve already filed for PPP loans or even the loan forgiveness So what is the ERC? Well, it’s a refundable payroll tax credit and it’s available to certain employers during the pandemic and when the CARES Act created it, they created the PPP loans and the ERC for the sole purpose of helping employers to retain employees on the payroll during the pandemic It’s all about really employee retention, and most folks, you’re all on the town hall, you are more familiar with the PPP loans because if the employer was eligible for the loan, then they went with that option since getting the loan actually put more money in to the employers pocket than the credit would have Before the most recent law was enacted, getting a loan or claiming the credit, it was really an either/or decision You could not take advantage of both in 2020 So, employers that received the loan, they didn’t give the credit a second thought and they really, they just didn’t need to. Who can take the credit? Basically, in a nutshell, there’s no limit on the number of employees that a company can have in order to take the credit, which is good Eligible employers include tax-exempt organizations and in 2021, they said, okay, some governmental entities are able to claim the credit There are two tests that an employer would have to meet to take the credit In these tests, you look at the wages paid in a calendar quarter in which either the business operations are fully or partially suspended due to a government order and government order is defined by the IRS and treasury in their FAQs or the business had a greater than 50 percent decline in gross receipts in a calendar quarter in 2020 compared to the same quarter in 2019 Now, there’s something new for 2021 and that percentage is only a 20 percent decline, so that’s actually taxpayer-friendly and we’ll talk about that in a little bit There’s a lot more to the credit, but those are the very basic principles and the IRS currently has close to a hundred FAQs on their website that explain who is eligible and how to calculate the credit based on the CARES Act But they have not yet updated their FAQs for the new law and we do expect them to do that very soon, next week, the week after, hopefully at the latest We can go to the next slide Let’s talk about some of the enhancements that the new law gave employers It allows more types of employers to take the credit and the credit actually increase But then this comes with more rules to know Originally an employer could claim the credit for wages paid at March 12th-December 31st of 2020 if they met those two tests we talked about Now the credit is extended through June 30th of 2021

The old rules will stay in place for 2020, but there are new rules for 2021 Then, as Lisa said, the showstopper in all of this was the PPP loan borrowers are now allowed to go back and see if they have qualified wages from March 13th to December 31st in 2020 and retroactively claim a credit for 2020 They can also claim in 2021 as long as they’re eligible But the kicker is you can’t use the same wages that you use for the PPP learn Let’s just table this for one second because we’re going to get into a bigger discussion on another slide Let’s just talk about some of these other enhancements As I said, certain governmental entities can now claim the credit Universities, colleges, certain medical facilities, and they couldn’t do that in 2020 But they can in 2021 Some of the other enhancements to the credit deal with the amount of qualified wages that an employer pays their employees Those translate into an increase in the maximum credit per employee, which in 2020 was $5,000 per employee, and in 2021, it’s $14,000 These are all taxpayer friendly enhancements and changes but they do come with some learning and there are some rules that the IRS and treasury are going to have to put out on that Now, let’s go to the next slide and get back to our big ticket item of PPP loan and ERC interplay Now that a PPP loan borrower can go back and take the credit for 2020 and also in 2021, they have to think about, well, but we can’t use the same wages for both That gets a little tricky because both the loans and the credit are based on wages PPP loans, they have to be spent primarily on payroll to be forgiven, and the credit is based on qualified wages In 2020, employers weren’t worrying about, oh, what do I have enough wages for both? Now we’re getting questions from PPP loan borrowers Well, do you think we’re going to have enough wages leftover to claim the credit? I think in most cases the answer is going to be yes But we’ve been hearing from members concerned about this wage issue, especially if clients may have already filed a PPP loan forgiveness application because they’ve actually reported wages on that forgiveness application In cases where an employer filed an application for the PPP loan forgiveness, they actually might have recorded wages in excess of the amount they may have needed for forgiveness because they just wanted that loan forgiveness They just wanted to say, “Okay, I have more than enough to get forgiveness for 100 percent of my loan.” That was all they worried about They didn’t worry about, well, let me save enough wages for this ERC credit that I didn’t know I could get They’re saying, “Can we claim a credit for the excess?” I’m just going to walk you through a quick example Say an employer received a million dollar PPP loan, and they filed a loan forgiveness application reporting a million and a half of payroll costs They reported more than enough wages for the entire loan to be forgiven obviously Now, when the employer goes back to look to see, are they eligible for the credit, they may wonder, well, can I put that extra 500,000 of wages toward the credit that I actually put on my loan forgiveness application? Because I really didn’t need it for forgiveness but I put it there because I just wanted to make sure I had gotten my 100 percent forgiveness There is no formal guidance on this yet But I’m on to honor tax advocacy team and we have a letter ready for submission to the IRS and treasury, it’s just gone through our final reviews That is actually on this particular point saying, hey, in this situation, we think that an employer should be permitted to claim the credit for any amount of that 500,000 of extra wages that are considered qualified wages for the credit, as long as they meet the other criteria to claim the credit I know, Lisa, you know that we’ve also added another scenario that our members have been concerned about They’re going to run into with their clients Say an employer received that same million dollar PPP loan, and they reported that same million and a half of payroll cost on the loan forgiveness application Again, that’s 500,000 more of wages than they need for the loan forgiveness But the employer is now saying, “Well, I also incurred 100,000 of rent expenses during the covered period,

but I didn’t report them on the loan forgiveness application because it was just easier to record the wages and I had more than enough wages to get my loan forgiven Why did I bother having to put utilities or rent or whatever?” In that situation, we addressed it in our letter as well, saying, “Well, the employer should be able to claim the credit for any qualified wages that are included in 600,000 of payroll cost.” It’s the 500,000 of additional wages The excess wages, they were reported on the PPP loan forgiveness application, and the 100 of rent expense, they could’ve used instead of some payroll on that form We’re not saying that we want these PPP loan forgiveness forms to have to be refilled or anything No, we’re just saying that if an employer is actually doing the calculation for their employee retention credit, that they just keep record of what wages they actually had that could support both the loan forgiveness and the credit No resubmitting of that But we do think that employers, because they didn’t know about this, but they were going to be able to take this credit, they shouldn’t be penalized They should be able to do both Kristin, just to give you a breath, that was quite an explanation, some great examples Basically, I summarizes, we’re going to work this out and we know there’s only one-third had been submitted for forgiveness, 1.3 million loans have been submitted for forgiveness Those are going to get refiled I can just tell you the practicality of that We’ll work it out with some other type of documentation done that you can build a file on, imply for the ERC and the tax executive committees doing great work here Then clearly, you’ll take this into account if you haven’t applied for forgiveness yet You can just make your life easier I think a lot more to come on this, and I know we’ve got even some webcast coming up I’ll let you continue [inaudible] at least once But I as I said, I’m confident that we will work this out and provide some good recommendations and direction on how to get this done If I’m done with the next slide, we’ll start teasing everybody Here’s where you’ll find Kristin’s webcast next week, and it’s going to be 75 minutes Employee retention credit starts to stop As Kris mentioned, we’re waiting on that guidance for how to layer the wages But Kris and her team are really working hard on the advocacy and efficiency aspect of allowing the borrowers who need those to be able to use them There’s so many questions, Kris on the ERC so I’m thankful that you’re here, and I’m just really looking forward to next week’s webcast Absolutely Thank you Thanks and we will be having more about ERC and PPP on future town halls Thanks, Kris, for that overview and we’re going to go into, we got lots of questions We’ve got lots of questions coming in Lisa and I will grab a couple But just one thing that we want to talk about is just continuing all of us to think about stepping back, 2021 plans, priorities, where you’re making the investments, client-focused I’m talking to some firms right now about applying focus around the PPP process You need to make intentional decisions on what you want to do with these different opportunities There’s lots of opportunities and lots of issues to address I see lots of good questions coming in. We continue One thing we’re going to do, we’ve got the AICPA SBA Resource Center We also have some materials that we are putting on CPA.com related to the CPA Loan Portal We also have some special dedicated already recorded overviews on some of these topics and particularly CPA Loan Portal that we just covered Lisa, is there anything that you want to comment on or maybe take a question that’s coming in? I think like usual, well over 1,000, we get close to 10,000 attendees here There’s a lot of good questions coming in One thing I hope everyone appreciated, is that we’re going to always now send out the top 7 or so questions with answers after our town hall We have this Town Hall Newsletter that we’re sending out. Lisa We got a question that is around whether or not we have sample engagement letters where the CPA is acting as an agent

Our friends at AON and CNA through the AICPA Member Insurance Program provided us those templates You’ll find them on our website at aicpa.org/sba You can go there to find that Someone’s questioning me on my math on how long an hour and a half is I’ll work on my math skills Lots of good questions about ERC Make sure if you aren’t getting the link through the slides, once you’ve downloaded those, you can find that on the AICPA store Great. It’s going to be a great session Lisa, with that, let’s just go back to the slides, talk about some of the available information that we have out there We’ve got there recorded AICPA Town Halls We will be publishing today’s town hall a little quicker It will be published later this early evening You can share that with others I think the opening portion we had high level about status of the lenders and then Lisa’s high-level overview You may want to share that with others in a good way to do it is to this AICPA TV archives Here’s the resource page which most of you are familiar with, aicpa.org/sba, which has a lot of the information that we’re covering today Another big announcement, tomorrow, January 15th at 10:00 AM, individual licensed CPAs will be able to apply and register for a .CPA domain We’re moving to general availability I know there’s a lot of interest on that You can find out information at domains.CPA if you’re an individualized and CPA like Lisa Simpson here, if she could go after Simpson.CPA Just lots of information there on that opportunity We now have a podcast available for the town halls It’s a very convenient way to listen to the town halls Here’s information on that Getting it through Apple, Google, or Spotify for those of you that leverage these podcasts platform Team did a lot of work in all of the archives are available on the Town Hall Twitter and LinkedIn, and social media is a great way for us to stay in touch with you Today, we brought to the latest information when we share things on our site or via the social channels It’s always the latest information. It’s very dynamic Even this week, we said we’d heard that all lenders would be open as of Friday, turned out that the SBA still doing it in a phased approach with 5,000 lenders What we do is we share the best available information with you on town halls and through these other channels, encourage you to leverage them They’re really helpful in times like this Here’s the plan, whereas we’re in the sprint weeks, this is a marathon, maybe a triathlon But we are in a sprint week and we’re going to have another town hall next Thursday January 21st Barry Melancon will be with us We’ll be providing some great perspective on how he’s seeing the strategies firms are putting in place and he’ll also comment on some of these major legislative items that we’ve been discussing in these programs Thank you very much for your time today Thank you, Lisa Thanks to everybody who’s helping us put this information together We look forward to seeing you next week Have a good weekend, it’s going to be a busy weekend, I think, for many of you We’ll be here supporting you, and really doing everything we can to help you support your clients as they move into this next phase of business release. Thank you very much Thanks, everyone Thank you for your participation You can now subscribe to the AICPA Town Hall Series on your favorite podcast platform, as well as watch archives on YouTube and AICPA TV Tune-in for live broadcasts, Thursdays at 3:00 PM Eastern Time

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