As we draft this alert, Congress is still in Washington. And as you will read, that is a very good thing. Congress is spreading holiday cheer and we admit it’s affecting our mood too.
On Monday night, Congress passed and sent to the President the 5,593 page Consolidated Appropriations Act [of] 2021 to which it has attached the Coronavirus Response and Relief Supplemental Appropriations Act [of] 2021 and the Additional Coronavirus Response and Relief [Act of 2021]. What does all of that mean to you? Lots and lots and lots of presents under the tree!
Arguably the largest present is confirmed deductibility of the expenses paid with PPP loan funds. Santa had a chat with all of our nice Senators and Representatives. And they came through for all of us. Even though your PPP loan forgiveness will be tax free, you can still deduct the expenses that you paid with the loan funds, just like Congress promised back in March. Doesn’t that seem like a lifetime ago?
And just in case someone from Scrooge and Marley is still whispering in Treasury’s ear, Congress went all out this time. Section 276 seems pretty clear to us: “no amount shall be included in gross income…no deduction shall be denied, no tax attribute shall be reduced, and no basis increase shall be denied….” When Congress said tax free, they meant tax free. And, no, you don’t have to pay for shipping. There should be no gotchas this time.
More Good News
Mrs. Claus has been worried about small businesses all year. So, she doesn’t know which to be more thankful for: the second chance opportunity for those businesses that didn’t get one earlier to get a PPP loan now; or the opportunity for those businesses that need it the most to get a second PPP loan. Either way, business owners, customers, suppliers and most of all, many employees, just found a neatly wrapped present with a very shiny bow.
To qualify for a second loan, businesses must have suffered a 25% reduction of gross receipts in a calendar quarter compared to the same quarter in 2019. Businesses must have no more than 300 employees and the loan amount, which is again set at 2.5 x average monthly payroll, is limited to $2 million. A business in hospitality or food service may qualify for a loan amount that is 3.5 x average monthly payroll. Other terms, including forgiveness, are similar to the original PPP loans with the exception that 501(c)(6) business leagues, chambers of commerce, and visitors’ bureaus also qualify. In addition, for both future and existing loans, there are several new classes of forgivable expenses such as worker protection, certain accounting costs, and payments to essential suppliers.
Even More Good News
When considering this overflowing sleigh full of presents, the reindeer all have their favorites too:
- Rudolf likes the simplified loan forgiveness requirements for PPP loans under $150,000.
- Dasher likes the extension of the extra $300 unemployment benefit through March. The 39-week limit is also extended to 50.
- Dancer is happy that there will be another stimulus check coming soon. It’s $600 this time for individuals making up to $75,000 or $1,200 for couples making up to $150,000.
- Prancer is excited that section 25D residential energy efficient property credits have been extended and will stay at 26% for another year. (But why does a reindeer need solar panels? Maybe your authors are projecting a little?)
- Vixen wants everyone to know that the Employee Retention Tax Credit has also been extended.
- Comet is glad to see that Congress is supporting rapid vaccine procurement and distribution.
- Cupid likes the additional $25 billion for the EIDL and other SBA programs. He is also excited that the $10,000 EIDL advances are no longer deducted from the PPP forgiveness.
- Donner is pleased that many specific industries and communities received special appropriations including the arts, transportation, and education.
- Blitzen is happy to say that there are so many choices left that he doesn’t know what to pick.
We have to say that we agree with Blitzen.
More details on many of these programs will be coming soon. As always, if you have questions about your specific situation, please don’t hesitate to contact your LSL partner or team member.
Happy New Year!
Dave focuses on tax compliance and planning in the areas of income and estate tax. He is the tax partner for our automotive group but he’s also tapped for his expertise in real estate, manufacturing and professional services. He’s a whiz at estate and gift taxation and can create a customized approach to designing and implementing a successful exit plan for business owners.
You can reach Dave at 714-672-0022.
Read Dave’s full bio.