PPP, Covid Stimulus Congressional Act - The Votes Are In, But...
…the bill is not law yet. President Trump has until December 28 to sign it, but we do know the contents. Now on to the details. My apologies, but this blog is a bit longer than most.
My Top Two most important takeaways are:
For purposes of the Internal Revenue Code of 1986: “ 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…”. This applies to all PPP loans received since the program began. Just look up section 276 – it’s all there. I dare you.
So what did that mean? All expenses paid for by your PPP loan are, in fact, tax deductible. That is, without question, the biggest concern among business owners.
Restaurants, (NAICS Code 72) for PPP Round Two, will get 3.5x the monthly payroll. THAT’s what I’m talking about!
The EIDL Grant advance will no longer be taken out of your PPP forgiveness. OK, that’s three, but this one is pretty cool too.
In regards to new PPP funding…
There will be new PPP Funding. The SBA has 10 days from the passage of the act to issue regulations to carry out the Act. I guess the SBA will NOT be taking the week after Christmas off. Was anyone really going anywhere anyway??
In addition to rent, leases, utilities and benefits, other qualifying expenditures will include funds spent to protect workers and customers, such as PPE, plexiglass etc.
It will also cover payment for any business software or cloud computing service that facilitates business operations, product or service delivery, the processing, payment, or tracking of payroll expenses, human resources, sales and billing functions, or accounting or tracking of supplies, inventory, records and expenses;
Limits/Notes are:
Borrower can have no more than 300 employees
The business must be able to demonstrate a gross revenue loss of 25% in any of the calendar quarters in 2020 when compared to the respective quarters in 2019.
Excluded businesses include those that are 20% or more owned by Chinese or Hong Kong entities. That just seemed like it was worth throwing in.
Maximum amount of $2 million
2.5x monthly payroll based on the immediate previous 12 months payroll or calendar year 2019
As I said before, restaurants get 3.5x the monthly payroll
PPP Loan Forgiveness:
PPP Loans up to $150,000:
Within 24 days of the Act being made into law, the SBA will put together a new, 1 page forgiveness form that will apply to all loans less than $150,000. As a borrower, you will:
Certify the number of employees you were able to retain because of the loan
State the amount spent on payroll
State you have provided a true and accurate attestation in the certification
Retain your employment records for 4 years.
In theory, you won’t need to provide documentation. I guess we’ll find out in mid-January.
PPP Loans over $150,000:
The only thing new is that the SBA will have 45 days from the Act becoming law to submit an audit plan to show:
Policies and procedures for conducting forgiveness reviews and audits
The metrics that the SBA will use to determine which covered loans will be audited
The SBA will then submit monthly reports to congress keeping them apprised of their audits
A little known fact that was also in the Act: PPE (Personal Protective Equipment) qualifies for an Educator Expense Tax Deduction. Of course, that is capped at $250 for the year for teachers. I may write a strongly worded letter about that to my congressional representative.
FINAL NOTES:
If you have a PPP loan of $150,000 or less, wait for the new form before applying for forgiveness. It will be out by the end of January.
If you need more money:
Make sure you can produce quarterly income statements for 2019 and 2020, or find some other way to prove that you had a 25% reduction in revenue quarter over quarter for any one quarter in 2020 compared to 2019.
There will be no form to fill out until January 10, so hold your horses.
You can check with your bank if they will be doing PPP2 loans. Many will not.
