December 2020 in Business Advisory, Tax

PPP2 Bill Passes, Will Allow Tax Deductibility of Loan Expenses

Earlier this week, both the Senate and House of Representatives passed a COVID relief bill — the Consolidated Appropriations Act of 2021 — that includes an extension of the Paycheck Protection Program as well as a provision that reverses the IRS’ previous position denying deductibility of PPP-related expenses.

Below is a brief overview of the main provisions related to PPP:

PPP2 Overview

• Funding will be available for first-time qualified borrowers
• Funding (up to $2M) will also be available for previous PPP borrowers that meet the following criteria:
  • Have less than 300 employees
  • Have or expect to use the full first round of PPP funding
  • Can demonstrate a 25 percent decrease in revenue in 2020 compared to 2019 (2020 quarter vs. 2019 same quarter)
• Funding will be available to 501(c)(6) nonprofits — who were not eligible in the first round of PPP funding — that meet the following criteria:
  • Have less than 300 employees
  • Do not receive more than 15 percent of receipts from lobbying
• Borrowing terms remain the same as the prior PPP program; qualified borrowers will need to spend at least 60 percent of the loan funding on payroll expenses during their covered period (either 8 or 24 weeks)
• In addition to payroll, rent, mortgage interest and utility costs, PPP2 funding will also permit costs related to personal protective equipment (PPE) and operating costs such as software and cloud computing services that facilitate business operations and accounting, amongst others

Tax Deductibility

• PPP-related expenses will be tax-deductible per the bill, reversing a previous IRS ruling denying deductibility

At the time this article was posted, the bill was still awaiting President Trump’s signature. As more information becomes available, we will keep you informed.

As a reminder, if you have an existing PPP loan and have not yet completed the necessary calculations to secure loan forgiveness, let us know if you’d like our PPP Advisory Team to assist.

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