Congress has approved a second COVID-19 stimulus deal with both business and individual benefits.
Top on the list may be the deductibility of businesses expenses paid with Paycheck Protection Program loans. This was Congress’s original intention and the new stimulus deal remedies the problem. It’s great news for anyone with a current PPP loan.
Each state would now have to act to allow these expenses to be deductible on your state income taxes, as well. We’ll be following the situation in all the many states where our clients are located and will keep you up to date.
More on PPP
The second round of federal stimulus includes another $284 billion for new PPP loans. The new loans have some different rules than the previous PPP loans, including:
- Interested businesses must show a significant revenue reduction through providing documentation of a 25% reduction from the gross receipts during any one quarter of 2020 compared to 2019.
- A maximum loan amount of $2 million compared to the previous $10 million.
- An eligibility requirement of 300 or fewer employees.
- Hotels, restaurants and other businesses with NAICS 72 codes can get up to 3.5 times their average monthly payroll costs instead of the standard 2.5 times.
The additional PPP loans also expand eligibility to more businesses including:
- 501(c)(6) nonprofits, which includes many chambers of commerce and visitors’ bureaus, as long as they don’t receive more than 15% of receipts from lobbying.
- Nonprofits, including Churches
- Businesses with 500 or fewer employees that are eligible for other SBA 7(a) loans
- Local newspapers and radio and TV broadcasters
- Sole proprietors, independent contractors, and eligible self-employed individuals
- Hotels, restaurants and other businesses with NAICS 72 with fewer than 300 employees per physical location
As with the original PPP program, the costs eligible for loan forgiveness include payroll, rent, covered mortgage interest, and utilities. The new PPP program also makes the following potentially forgivable:
- Covered worker protection and facility modification expenditures, including personal protective equipment, to comply with COVID-19 federal health and safety guidelines.
- Expenditures to suppliers that are essential at the time of purchase to the recipient’s current operations.
- Covered operating costs such as software and cloud computing services and accounting needs.
- To be eligible for full loan forgiveness, PPP borrowers will have to spend no less than 60% of the funds on payroll over a covered period of either eight or 24 weeks — the same parameters the original PPP program had when it stopped accepting applications in August.
The legislation also includes a new rule that allows borrowers who received $150,000 or less to only have to submit a one-page application for forgiveness.
Other Business Benefits
- $15 billion for performance venues, independent movie theaters and other cultural institutions.
- $20 billion to provide Economic Injury Disaster Loan (EIDL) Grants to businesses in low-income communities plus another $12 billion for businesses in low-income and minority communities.
- Unfortunately there isn’t anything specific for restaurants beyond the ability to apply or reapply for other business aid if they meet the qualifications (the RESTAURANTS Act was not included in this deal).
- The new stimulus deal reinstates the previous 100% deduction for business meals instead of the current 50% for food or beverage expenses provided by a restaurant incurred after December 31, 2020, and expires at the end of 2022.
- It also extends and improves the Employee Retention Tax Credit, which was enacted under the CARES Act in March. You can get more details on the Employee Retention Tax Credit in this previous article. Note you can’t use both the credit and a PPP loan.
- Extends the Work Opportunity Tax Credit for another five years.
Individual Benefits
The second stimulus also includes additional direct payments to millions of Americans, though there has been a push for additional payments. Here’s what’s in the bill that was approved by Congress:
- Individuals earning up to $75,000 in adjusted gross income will get $600.
- Married couples earning up to $150,000 in AGI will get $1,200.
- Individuals earning up to $99,000 and married couples earning up to $198,000 will get lesser stimulus amounts.
- Qualifying families also will get $600 per child.
The deal also extends a $300 weekly supplement to unemployment benefits through mid-March 2021.
Next Steps
For businesses interested in obtaining PPP or other business funding, it’s best to work with your banker, CPA and other professionals to determine what you qualify for and your best financing options. Also work with your advisors about what the ability to deduct your PPP expenses will mean for your tax situation.
Your Concannon Miller team is ready to guide you through this latest legislation and its impact on you and your business. Please contact us with all your needs.
