TAXING MATTERS
T . MARK RUSH , CPA
Partner Ham , Langston & Brezina , LLP
New Stimulus Bill Brings PPP Aid , Tax Relief to Small Business
If you are a small business owner , the COVID-19
stimulus package that Congress passed on Monday evening ( December 21 , 2020 ), has some very good news .
Another round of PPP loans ( called PPP2 ) is available , both to previous recipients and first time borrowers , and for community groups . A total of $ 325 billion is available .
Previous Recipients . Additional loans are available up to $ 2 million each , for previous PPP recipients , provided they meet these 3 criteria :
• Have no more than 300 employees .
• Used up all prior funds .
• Show a gross revenue decline in any quarter of 25 % over the prior year ’ s quarter . First Time PPP Borrowers . PPP2 will also permit loans to first-time borrowers of up to $ 2 million ( it was $ 10 million in the first PPP program ). Eligible small business borrowers must fall into one of the following groups :
• Have no more than 500 employees and meet eligibility for SBSBA 7 ( a ) loansA 7 ( a ) loans .
• Sole proprietors , independent contractors , and eligible self-employed individuals .
• Not-for-profits . PPP2 creates a simplified forgiveness process for loans of up to $ 150,000 .
• Forgiveness is not automatic . You still must apply , but for loans of $ 150K or less , you can use a one-page certification . It simply describes how many employees you were able to retain and how much you spent on payroll costs .
• You do not need to submit supporting documentation when applying . However , you must retain records for up to four years and make them available should the government ask or audit you for PPP fraud .
• The SBA has to create the simplified form within 24 days
of enactment , which would be mid-January .
PPP borrowers are not required to deduct the amount of any EIDL advance from their forgiveness amount . The original provision requiring this was repealed . Tax Deductibility Clarified The bill clarifies that qualifying business expenses paid with forgiven PPP funds will still be tax deductible . This is causing owners and accountants everywhere to heave a sigh of relief .
This supersedes IRS guidance saying that if you paid business expenses with forgiven PPP funds , the expenses would not qualify for small business tax deductions as they ordinarily would . The IRS position blindsided small business owners earlier in the year , and the tax situation has now been addressed by Congress . Use of PPP Funds Expanded
• Costs eligible for loan forgiveness continue to include payroll , rent and utilities . PPP2 also adds the following as forgivable :
• Costs of providing facility modifications and worker protection against the virus . Essential expenditures .
• Certain operating costs such as cloud software and computing services . PPP borrowers with NAICS industry codes for hotels and restaurants , starting with 72 , can receive up to 3.5 times their average monthly payroll costs ( instead of just 2.5 times as other borrowers are limited to ). Rental Industry
• There ’ s $ 25 billion in emergency rental aid .
• Congress extended the national eviction moratorium through Jan . 31 , 2021 . There ’ s much more in the COVID-19 stimulus bill that is sure to come to light as everyone digests the more than 5,000 pages .
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