IRS doubles down on nondeductibility of PPP-funded expenses
In guidance issued late on Wednesday, the IRS reiterated its position that taxpayers cannot claim a deduction for any otherwise deductible expense if the payment of the expense results in forgiveness of a Paycheck Protection Program (PPP) loan because the income associated with the forgiveness is excluded from gross income under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136. Read entire article… click here.
Baker to send tens of millions to help small businesses and Main Streets
As part of this the MA Growth Capital Corp is expected to begin accepting applications this week for the $50.8 million in grants. Businesses with up to 50 employees will be eligible for grants of up to $75,000 each, while smaller employers (less than 6) can get up to $25,000.
The application will be open for 3 weeks ending 11/17/2020. To learn more or to apply click here.
The “5 or fewer” grant has a maximum allowed household income requirement to qualify. For information on “Median Household Income” please go to the US Census Bureau and enter your town or city.
SBA and Treasury Announce Simpler PPP Forgiveness for Loans of $50,000 or Less
Recipients of Paycheck Protection Program (PPP) loans of $50,000 or less will be able to apply for forgiveness using a simplified application, Form 3508S, that was released October 8th by Treasury and the U.S. Small Business Administration (SBA).
PPP borrowers of $50,000 or less are exempted from any reductions in forgiveness based on:
- Reductions in full-time-equivalent (FTE) employees; and
- Reductions in employee salary or wages.
If your loan is for more than $50,000 …
When are Loan Forgiveness Applications Due?
The loan forgiveness forms have an expiration date of 10-31-2020 in the upper right hand corner. According to the SBA FAQs, Question 4 released October 13, 2020 this is NOT the deadline. The answer…
“Borrowers may submit a loan forgiveness application any time before the
maturity date of the loan, which is either two or five years from loan origination.
However, if a borrower does not apply for loan forgiveness within 10 months after the
last day of the borrower’s loan forgiveness covered period, loan payments are no longer
deferred and the borrower must begin making payments on the loan. For example, a
borrower whose covered period ends on October 30, 2020 has until August 30, 2021 to
apply for forgiveness before loan repayment begins.
The expiration date in the upper-right corner of the posted PPP loan forgiveness
application forms is displayed for purposes of SBA’s compliance with the Paperwork
Reduction Act, and reflects the temporary expiration date for approved use of the forms.
This date will be extended, and when approved, the same forms with the new expiration
date will be posted.”
A link to the full FAQ is provided below.
PPP Loan Proceeds & Deductibility of Expenses paid with PPP Money (as of 10-27-2020)
While the CARES Act makes it clear that any amount of the PPP Loan that is forgiven is EXCLUDED from gross income, uncertainty remains regarding how expenses paid with PPP money will be treated. The IRS’s position is that any business expenses paid using forgiven PPP loan funds will NOT BE DEDUCTIBLE for tax purposes. Many states have issued guidance that they will also disallow the expenses.
Since the IRS announced its position back in May, various US legislators, taxpayers, and the AICPA have expressed their unhappiness arguing that this was NOT the intent of the CARES Act. There has been legislative activity on this but nothing has cleared the senate as of this writing.
SBA Guidance (updated frequently)
Please use the below links for the most recent guidance from the Small Business Association…
- SBA Paycheck Protection Program FAQs
- Coronavirus (COVID-19): Small Business Guidance & Loan Resources
- Loan Details and Forgiveness
PPP Flexibility Act, Signed 06/05/2020
President Trump, TODAY, signed into law the Paycheck Protection Program Flexibility Act (PPPFA) in an attempt to address many concerns expressed by the small business community around the Paycheck Protection Program (PPP) loan forgiveness guidelines.
The main points of the legislation include:
- The choice to extend the eight-week forgiveness period to 24 weeks, or keep the original eight-week period.
- A drop to 60% from 75% for amount spend on payroll.
- A 24-week period to restore their workforce levels and wages to the pre-pandemic levels required for full forgiveness. This must be done by Dec. 31. The previous deadline was June 30.
- Two new exceptions allowing borrowers to achieve full PPP loan forgiveness even if they don’t fully restore their workforce. The new bill allows borrowers to adjust because they could not find qualified employees or were unable to restore business operations to Feb. 15, 2020, levels due to COVID-19 related operating restrictions.
- Five years to repay the loan instead of two. The interest rate remains at 1%.
Click here to read a more comprehensive overview of the Paycheck Protection Program Flexibility Act.