Late Sunday, December 20th, lawmakers reached an agreement on a $900 billion relief bill, including another round of the Paycheck Protection Program (‘PPP’).  While votes were projected to take place today, Monday, December 21st, a copy of the bill was only recently released this afternoon. It is widely reported that the legislation includes $300 billion for the Small Business Administration and a restart of the PPP, which closed in August 2020.

Of particular interest to most businesses are the resurrection of the PPP program and the provision that would allow for the deductibility of expenses paid with PPP loan proceeds.  Under the current law, expenses associated with tax-exempt or non-taxable income cannot be deducted for purposes of determining taxable income.  However, many have argued that this was inconsistent with the intent of the CARES Act (enacted on March 27, 2020), and this legislation would address that concern, allowing for the deductibility of PPP expenses.

We have recapped the highlights of the legislation below:

  • Direct Payments to Individuals
    • The legislation will include direct payments of up to $600 for individuals making up to $75,000 per year, $1,200 for couples making up to $150,000 per year, and $600 per qualifying child. There would also be phase-outs above the $75,000 and $150,000 income levels.
  • Unemployment
    • Extensions of unemployment assistance at the outset of the pandemic included extending the unemployment period from 26 weeks to 39 weeks, and an extension of the $600 per week unemployment assistance benefit, which expired at the end of July. Additional relief would be extended for 16 weeks at a reduced benefit of $300 per week.
  • PPP and Small Business Support- $300 billion in funding
    • PPP
      • Proposed eligibility that would allow businesses to obtain a second loan:
        • The original bill included language that small businesses with 300 or fewer employees that have sustained a decline in revenue loss in any quarter of 2020 (presumably as compared to the same quarter in 2019, but details have not been released as to the benchmark period against which the decline will be measured) would be eligible. Given this afternoon’s release of the legislative text, GBQ will provide updates regarding PPP in the coming days.
      • Forgivable expenses may include supplier costs, investments in facility modifications and personal protective equipment to operate safely.
      • Business expenses paid for with the proceeds of PPP loans are tax deductible for all rounds of PPP loans.
      • Simplified loan forgiveness process for borrowers with PPP loans of $150,000 or less.
      • Set-asides are included to ensure dollars flow to underserved communities.
      • Includes re-purposing of $138 billion in unspent allocations to be reinvested in the PPP program.
    • Funding for independent live venue operators, including eligible independent movie theaters and museums, affected by COVID-19 stay-at-home orders.
    • Additional funding of $20 billion for new Economic Injury Disaster Loan (EIDL) grants for businesses in low-income communities.
    • Extension of Section 1112 of the CARES Act, which provides payment of principal, interest, and associated fees on qualifying Small Business Administration (SBA) 7(a), 504 and microloans.
    • Funding for SBA loan products to increase guarantees on SBA 7(a) loans and reduce fees on 7(a) and 504 loans; provide loan subsidies for 7(a) loans; and provide EIDL grant advances.

The proposal also includes an extension of the employee retention tax credit and a change in the deductibility of business lunches.  Further, the bill also includes funding for a variety of other items, many of which are health- and safety-related, as targeted assistance to specific industries such as aviation, airport, motorcoach and bus (including passenger ferries and school buses), agriculture and fisheries, public transit system and Amtrak.  The proposal also provides for rental assistance, including extending the CDC eviction moratorium until January 31, 2021, and continued forbearance of student loan payments.

The legislators also agreed to extend the deadline for states and cities to use unspent money approved for them by the CARES Act. States and cities have until the end of the year to spend billions of dollars before it expires and has to be returned to the federal government. The deal would instead extend that deadline for a full year.

We will communicate updates as they occur. For additional information, please visit our COVID-19 Resources page or contact a member of the GBQ team.


Article written by:
Rebekah Smith, CPA, CFF, CVA, MAFF
  Director of Forensic & Dispute Advisory Services
Dustin Minton, CPA, MBA
  Director, Assurance & Business Advisory Services
Jeremy Bronson
  Director, Accounting & Business Advisory Services

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