Congress Passes Bill Providing Critical Decisions on PPP Loans and Other Business Benefits

Congress Passes Bill Providing Critical Decisions on PPP Loans and Other Business Benefits

Yesterday, Congress passed the much-awaited COVID relief bill. The $900 billion bill provides more than $300 billion in small business aid as well as individual benefits through stimulus payments and extended unemployment benefits.

The critical business provisions include:

 Deductibility of Business Expenses Paid with Paycheck Protection Program (PPP) Loans: A key to year-end planning for clients, the bill specifies that business expenses paid with forgiven PPP loans are tax-deductible. The bill clarifies this highly contested question stating that “no deduction shall be denied, no tax attribute shall be reduced, and no basis increase shall be denied, by reason of the exclusion from gross income provided.” This supersedes IRS guidance that such expenses could not be deducted.

Extension of the PPP loan program: For small businesses with 300 or fewer employees who can show a 25% gross revenue decline in any 2020 quarter compared to the same quarter in 2019, the SBA can provide additional PPP funding as first or second PPP loans. In addition, now Sec. 501(c)(6) not-for-profit organizations are eligible for the PPP loan program.

Simplified PPP Forgiveness Applications Under $150,000: The bill creates a simplified forgiveness application for loans of $150,000 or less. We anticipate this will be similar to the current Form 3508S which is available for loans under $50,000. This does not eliminate the borrower requirement to retain records related to employment for four years and other records for three years. The bill also repeals the requirement that PPP borrowers deduct the amount of any EIDL advance from their PPP forgiveness amount.

Employee Retention Tax Credit: The bill extends the employee retention tax credit and temporarily allows a 100% business expense deduction for meals when the food and beverages are purchased from a restaurant (through the end of 2022).

For additional details, consider these sources:

https://www.journalofaccountancy.com/news/2020/dec/covid-19-relief-bill-addresses-key-ppp-issues.html

https://www.forbes.com/sites/anthonynitti/2020/12/21/stimulus-payments-paycheck-protection-program-expense-deductibility-headline-tax-changes-in-latest-covid-relief-package/?sh=7fa26ac3168c