COVID Relief Update
We’ve been following all the talk out of DC this week related to progress being made on COVID Relief packages. To be clear, there has also been a ton of coverage on the remaining issues that continue to prevent relief from making its way to small businesses.
One Act though has gained momentum and has the best chance at making its way into law. It is being referred to as the “Bipartisan Emergency COVID Relief Act of 2020”. Let’s take a look at what impact it will have on small business.
Second round of PPP. To qualify you must have less than 300 employees and be able to demonstrate a 30 percent loss in revenue in any quarter of 2020.
Forgivable expenses will include supplier costs and investments in facility modifications and PPE.
Business expenses paid for with the proceeds of PPP loans are tax deductible, consistent with Congressional intent in the CARES Act.
Loan forgiveness process is simplified for borrowers with PPP loans of $150,000 or less.
Earmarks for smaller borrowers and underserved communities.
Extension of Section 1112 of the CARES Act, which provides payment of principal, interest, and fees on qualifying SBA 7(a), 504, and microloans.
Funding for SBA loan products to increase guarantees on SBA 7(a) loans; reduction in fees on 7(a) and 504 loans; provide loan subsidies for 7(a) loans; provide EIDL grant advances.
Although this Act is much smaller than what was discussed over the last couple months, it will have a major impact on small businesses. Adding a second round of PPP may be the lifeline many small businesses need as states begin to tighten restrictions again. Additionally, there are two items in this Act that are important as it relates to the first round of PPP as well, assuming these items are applied retroactively.
Point 3 is what we have been waiting for all year. The Act formally states that business expenses funded with PPP dollars are fully tax deductible. We continue to hold the line on our opinion that businesses should wait to file their tax returns until Congress finalizes guidance on this topic.
Point 4 has been talked about for many months as well. The SBA and Treasury Department simplified the forgiveness process for borrowers up to $50,000. This Act would bump that up to $150,000, which would cover the majority of borrowers. It is likely worth the wait to see if the process will be simplified and streamlined.
We will continue to follow what is going on in DC and update you on anything that will impact the small business community.