The direct forgiveness portal is open to borrowers with loans of $150,000 or lower.

This is a departure from the Trump administration’s policy of having banks act as the go-between for the SBA and borrowers. The SBA designed the offering to streamline the process and take pressure off smaller lenders.

The move comes as the agency seeks to wind down the COVID-19 rescue program. There are about 7.1 million PPP loans that remain outstanding and about 6 million are for $150,000 or less.

Eligible borrowers will receive an email from the SBA with a link to the online portal, said the SBA’s Patrick Kelley. The application for forgiveness should take less than 10 minutes to complete, Kelley said. The SBA has created a customer service line to answer borrower questions.

Banks responsible for originating the PPP loans must opt into direct forgiveness before their borrowers can use the SBA’s online platform, which could potentially limit the initiative’s reach.

The SBA portal begins accepting applications for forgiveness Wednesday, Aug. 4.

Source: Wall Street Journal

The PPP is designed to help struggling businesses with fewer than 500 employees keep workers employed during the COVID-19 crisis by providing loans that are forgivable if certain criteria are met.

In related news, Congress added an employee retention credit for disasters other than COVID-19, including the recent severe winter weather.

An employer still can’t “double dip” by using the same wages to claim both the employee retention credit and to obtain forgiveness for a PPP loan, but receiving a PPP loan no longer precludes claiming the employee retention credit. Even if an employer received a PPP loan in 2020 and that loan is forgiven or may be forgiven, the employer may still be eligible for employee retention credits for 2020 retroactively.

Employers should look again at the employee retention credit to see if they might qualify for 2020 and the first half of 2021. Even if there has been no decline in your business’s gross receipts, it may be possible to meet the business suspension test and qualify for these credits.

Sources: Barnes & Thornburg, Society for Human Resource Management

We kick off 2021 with a new stimulus package of benefits for American businesses. President Trump signed the latest stimulus bill Dec. 27. In its more than 5,500 pages, the bill offers tools to support your business, including changes to deductibility and employee tax credits.

Among the most notable pieces of the bill is the creation of a second round of Paycheck Protection Program (PPP) and Congress’s action to allow expenses used for PPP forgiveness to be tax deductible. (At press time, however, states may not have come out with their individual stances on deductibility of PPP forgiveness expenses. You may still have to pay state taxes.)

A business is eligible for the second round of PPP if they do not have more than 300 employees and can show a more than 25 percent reduction in gross receipts for any quarter in 2020. The loans are capped at $2 million.

The bill also added four groups of eligible expenses that are allowed in forgiveness, the most notable to manufacturers being worker-protection costs. These costs include operating or capital expenses made to adapt the business to COVID protocols and personal protection equipment (PPE) costs. In addition, PPP loans less than $150,000 will now be allowed to apply for forgiveness with a much more simplified application.

Another significant change for manufacturers is modifications made to the Employee Retention Tax Credit (ERTC). This is a credit reported on payroll tax form 941 or 943 for qualified wages paid by eligible businesses. For 2020, an eligible business is one that either had operations partially or fully suspended or saw revenues decrease by at least 50 percent for a quarter in 2020 compared to the same quarter in 2019.

The main modification made through this bill is that businesses can use PPP and ERTC together, but they cannot use the same payroll for both programs. This is significant because businesses will want to evaluate the benefit of applying for forgiveness for PPP loans with payroll and foregoing the possible ERTC, or if they should apply for forgiveness utilizing other eligible expenses and utilize the ERTC credits.

ERTC is also extended through July 1. Other applicable changes to the program in 2021 are:

• The eligible business determination is expanded by the decreased receipts requirement (reduced from a 50 percent threshold to 20 percent). Also, with comparing the decrease in revenues, the bill provides a safe harbor allowing employers to use prior quarter gross receipts in addition to the same quarter in the prior year.
• The relevant qualified wage base determination increases from 100 employees to 500 or fewer employees.
• The credit rate increases from 50 percent to 70 percent of qualifying wages.
• The maximum qualifying wage eligible for the credit increases from $10,000 per employee to $10,000 per employee, per quarter.

Finally, within this bill, there are a number of tax credits that were extended. Knowing these will allow you to make decisions for your company in the most tax-efficient way.

The following credits were extended through Dec. 31, 2025:
• Work Opportunity Tax Credit
• Empowerment Zone Tax Credit
• New Markets Tax Credit

In addition, this package also extends the carbon oxide sequestration credit, a credit for electricity produced from renewable sources, mortgage interest premiums deductible as qualified resident interest, and the second generation biofuels producer credit. Notably, the employer credit for paid family and medical leave is extended an additional year.

The new stimulus package is a boost to businesses across the U.S., but it is complex to understand how to maximize those benefits. Please work with a qualified advisor to fully maximize the stimulus support for your specific business needs.

Mentele is principal and CPA for member company KCoe Isom. Members of this Association are entitled to no-cost, confidential, 60-minute consultations with KCoe to discuss the impact of the stimulus bill on their business. To schedule a consultation, contact Jason Southard at Jason.southard@kcoe.com.

This is a significant change. Due to the evolving PPP loan forgiveness process, many businesses and their tax advisers planned to wait to apply for loan forgiveness in 2021. This way, a business could deduct their standard expense for tax year 2020, apply for PPP loan forgiveness in 2021 to evaluate how much is forgiven or deductible, then address tax liability on PPP forgiveness and deductions in later filings. This would retain working capital amid the uncertainty of current events.

However, the Department of Treasury and the IRS issued guidance Nov. 18 that says if “the business reasonably believes that a PPP loan will be forgiven in the future, expenses related to the loan are not deductible whether the business has filed for forgiveness or not.”

A business that received a PPP loan and paid otherwise deductible expenses such as payroll, rent, mortgage, or utilities during the covered period may not deduct those expenses for tax year 2020 even if the business does not submit an application for loan forgiveness in 2020.

If a business “reasonably expects to receive forgiveness,” it automatically loses these tax deductions.

The IRS has also noted that if the loan is subsequently not forgiven, businesses can treat these expenses as deductible in an amended filing. Companies that do not intend to seek forgiveness may deduct the expenses this year.

Some businesses are supporting a bipartisan reversal of this position, which is S.3612/H.R.6821.

Source: Dady & Gardner, P.A.

The request is being made by the Pandemic Response Accountability Committee, a panel of inspectors general from across the government that is responsible for ensuring relief funds appropriated under the $2 trillion CARES Act and other pandemic relief measures are being spent appropriately.

The 2006 Federal Funding Accountability and Transparency Act says that loans, grants, contracts and other forms of federal financial assistance totaling $25,000 or more must be disclosed on a publicly searchable website, . The disclosures must include the name of the entity receiving the award, the amount of the award and other relevant details.

The SBA contends that disclosing the names of loan recipients could violate their privacy because PPP loans are scaled to the size of a business’s payroll.

“SBA is acting, consistent with legal requirements, to protect this sensitive information for small businesses,” the agency said.

But advocates for disclosure say it is important to gauge the program’s effectiveness. Publicly traded companies, big law firms, government contractors with steady incomes, companies accused of fraud, private-equity firms, hedge funds and luxury real-estate developers all participated in the program aimed at supporting small businesses.

In July and August, the SBA disclosed the names of borrowers receiving PPP loans of $150,000 or more along with loan ranges across five categories ranging from $150,000 to the maximum of $10 million.

Releasing the names of all those who received loans of $25,000 or more would have led to disclosure of about 1.8 million additional recipients, according to Wall Street Journal estimates.

Source: Wall Street Journal

“As part of the next round of COVID-19 relief, we request that Congress reaffirm its intent and restore the tax benefits it intended to give distressed Main Street businesses as part of the CARES Act,” the groups wrote in a letter to House and Senate leaders.

Groups that signed the letter include the American Farm Bureau Federation, the National Association of Home Builders, and the National Retail Federation.

Under the PPP, small businesses can get loans that are forgivable if the proceeds are used for payroll, rent, mortgage interest and utilities. The CARES Act, the broad law that includes PPP, specified that forgiveness of PPP loans is not taxable income.

The IRS in April issued guidance stating that expenses are not deductible if their payment results in a PPP loan being forgiven. The guidance has been criticized by some key lawmakers on both sides of the aisle, who argue it goes against congressional intent. Treasury Secretary Steven Mnuchin has defended the guidance, saying that businesses cannot “double dip.”

The groups pushed back against arguments supporting the guidance.
“Congress intended for the loan forgiveness under PPP to be tax-free. The IRS notice reverses that position and eliminates any benefit, let alone a double benefit,” the groups wrote.

The groups also said that denying tax deductions for expenses paid with PPP loans would be burdensome for businesses that have experienced financial hardship during the pandemic. They said the IRS’s position represents a tax increase of about $100 billion.

Source: The Hill

More than 229,000 manufacturing companies received loans for a total of $54 billion, or 10.36 percent of the total spent to date.

The Treasury Department published the information and broke down dollars spent by lender size, amount of money in the loan, and industry.
About two-thirds of all loans spent under the program were under $50,000. Eighty-six percent were for less than $150,000.

The average loan was for about $107,000.

Loans are forgivable if borrowers meet certain criteria, primarily retaining their workforce.

About $130 billion remains available to borrow through PPP. The deadline to apply has been extended to August 8.

Lawmakers also revised program rules to allow employers 24 weeks instead of eight weeks to spend PPP funds and still qualify for loan forgiveness. The portion of the loan that must be spent on payroll also was reduced from 75 percent to 60 percent. Companies won’t be penalized if workers who have been offered their jobs back with the same hours and pay don’t return.

Sources: Industry Week, Wall Street Journal

The Calculate Loan Forgiveness Act would require the administrator of the
Small Business Administration, in coordination with the treasury secretary, to establish a free, publicly accessible online calculator and/or certify free, accurate and publicly accessible third-party calculators “to provide certainty and assistance to lenders and small businesses as they fill out PPP loan forgiveness forms,” the legislators said in the announcement.

In addition to providing support for accurate estimations of forgiveness, it
would provide tools for completing an application to request loan forgiveness.

Source: ThinkAdvisor

The bill passed easily by a vote of 417-1.

The legislation expands the terms of the loans from the Paycheck Protection Program, which was created by the $2.2 trillion coronavirus relief package that Congress and the Trump administration enacted in late March.

Lawmakers say that additional changes are needed following complaints from small businesses that they’re not able to take advantage of the loans under the current terms, particularly those that still face coronavirus-imposed safety restrictions. They are not in a position to rehire all their employees in the time currently required to qualify for loan forgiveness.

The bill would give small businesses up to 24 weeks, up from the current eight weeks, to use the loans and extend the deadline for rehiring workers from June 30 to the end of this year.

It would also allow small businesses to spend more of the money on non-payroll costs. The current terms of the loans require recipients to use 75 percent of the funds on payroll and up to 25 percent on other costs to qualify for loan forgiveness. But the legislation would change the ratio to at least 60 percent on payroll and up to 40 percent on rent, overhead and other costs.

The bill is awaiting consideration in the Senate, which has its own version of legislation to make changes to the small business loans. That version is largely similar to what the House has passed, but it only extends the timeframe for small businesses to spend the funds to 16 weeks instead of 24. The Senate may consider that legislation this week.

Source: The Hill