With the first quarter of 2021 in the rearview mirror, there remain opportunities for auto dealers to participate in the remaining stimulus packages passed by congress.

The Paycheck Protection Program was extended at the end of 2020 and at the date of this article, those dealerships qualifying for the second phase of the program have until March 31 to apply. The House and Senate have passed the PPP Extension Act of 2021, which extends the PPP2 deadline through May 31. It will be law when signed by the president.

To qualify for PPP2, businesses must show a 25% decline in sales in any quarter of 2020 compared to the same quarter in 2019 and must have less than 300 employees. In demonstrating the decline in revenues, I would include other income items (doc fees and other below-the-line revenues) in the calculation.

The final caveat is the representation certifying that the funds are needed due to uncertain economic conditions impacting the dealership’s ability to continue operating and keep people employed. The SBA issued FAQ 46 concerning the certification. I quote, “Because Second Draw PPP Loan borrowers must demonstrate that they have had a 25% reduction in gross revenues, all Second Draw PPP Loan borrowers will be deemed to have made the required certification concerning the necessity of the loan in good faith.”

The other opportunity for dealerships is the Employee Retention Credit (ERC). The credit has been extended to the first two quarters of 2021 and is a maximum of $7,000 per employee per quarter. Employers are eligible if, during the first two quarters of 2021, they experience either:

1. A full or partial suspension of the operation of their trade or business during this period because of governmental orders limiting commerce, travel, or group meetings due to COVID-19, or
2. A decline in gross receipts in a calendar quarter in 2021 where the gross receipts of that calendar quarter are less than 80% of the gross receipts in the same calendar quarter in 2019 (to be eligible based on a decline in gross receipts in 2020, the gross receipts were required to be less than 50%).

In addition to the gross receipts test, the franchise indicator codes do not apply and dealers with multiple businesses must use aggregation rules the IRS uses for other consolidating purposes in determining the number of employees limit of 500.

The deductible wages for 2021 must be reduced by the amount of employee retention credit received and, if you qualify for the Second Draw PPP loan, the same wages cannot be used for the ERC and PPP loan forgiveness.

Each dealership’s tax situation is unique. You should consult with your tax adviser to ensure you are taking advantage of all opportunities available to you.