As you may have heard, Congress overwhelmingly approved a $900 Billion relief bill on Monday. It has been sent to the White House for the expected signature from the President. This is the second such bill this year passed in response to the pandemic. Many of the principles and programs from that initial March bill (CARES Act) are rehashed in this bill.
PPP Loan Forgiveness
Perhaps most important to many small businesses is clarification on the tax impact of PPP Loan Forgiveness. The original CARES Act text stated that the loan forgiveness would NOT be treated as taxable income. However, the IRS threw a curve ball in the treatment over the summer. They stated that while the forgiven loans would not be included as income, expenses paid using forgiven amounts COULD NOT be deducted. This effect of this was the same as including it in income. This bill clarifies that the forgiveness does not generate taxable income AND the expenses paid with forgiven loan amounts are to be deducted. This is a huge win for PPP recipients and returns treatment to the intent of the CARES Act.
PPP Round 2
The bill funds another round of PPP for those that didn’t receive a PPP loan initially. It also provides for second loans for small businesses that can demonstrate a 25% reduction in gross receipts during a quarter in 2020. The bill further provides for increased PPP loans for industries particularly hard hit by the pandemic (notably restaurants).
Another round of direct stimulus payments is authorized (although at a lower amount than last spring). These stimulus payments will total $600 per adult and $600 per qualifying child. The income thresholds for these payments remains the same at what was authorized in CARES. Secretary Mnuchin has stated that funds should start hitting accounts quicker that the last round of stimulus.
As was done through CARES, the federal government will continue to supplement unemployment payments. This round authorizes $300/week of unemployment supplement (CARES was $600/week) for 11 weeks.
There were a few other small changes made that impact taxes, but most of the remainder of the bill was focused on funding various governmental programs, vaccination delivery systems, etc.
If you have any questions about the impact of this new bill, please contact us.