The bill passed by congress late Sunday evening may now not immediately become law. There are several provisions, mainly direct payments, that President Trump has indicated publicly he would like Congress to amend.
The timing on when the bill will become law is uncertain. However, if President Trump won’t sign there is a very high probability the provisions in this bill would be the basis of any legislation if not the same legislation that would be passed and signed into law in 2021.
- Tax Changes
- 100% of AGI can be deducted for charitable contributions for both 2020 and 2021
- $300 ($600 for married couple) charitable deduction for non-itemizers.
- Business meals and beverages will now be 100% tax-deductible if provided by restaurants for 2021 and 2022 tax year.
- Medical expenses exceeding 7.5% of AGI will be deductible permanently
- Educator expense deduction includes expenses incurred for purchase of personal protection equipment purchased
- HSA and Dependent Care FSA plans may now permit unused benefits to be carried over to next tax year through 2021 plan year
- PPP Loan Changes
- Expenses related to PPP Forgiveness are tax deductible for new and old PPP Loans
- Eligibility Changes
- 300 or fewer employees
- Have used or will use all of their first PPP Loan
- Had a 25% reduction of revenue in any quarter of 2020 compared with the same quarter of 2019.
- Calculated on 2.5 times average monthly payroll
- $2 Million maximum per borrower
- Restaurants and hotels can use 3.5 times average monthly payroll
- Hold harmless arrangement for Banks involved in the lending
- Simplified form for $150,000 or less
- 501(c)6 added to eligible organizations (with the exception of lobbying groups)
- Added additional expense types
- Property damage from rioting not covered by insurance
- Business software or cloud computing service that facilitates business operations
- product or service delivery
- processing, payment, or tracking of payroll expenses
- human resources functions
- sales and billing functions
- accounting or tracking of supplies, inventory, records and expenses
- Covered supplier costs
- essential to the operations of the entity
- made pursuant to a contract, order, or purchase order in effect at any time before the covered period
- Covered Worker Protection Expenditure (PPE etc.)
- Clarifies Farmer Eligibility is treated as a Schedule C
- Reopens EIDL for “Hardest-hit Businesses”
- Covered Entities get priority
- Low-income community
- 300 or less employees
- Has loss greater than 30%
- First-time borrowers receive second priority
- Advances are not taxable
- Advances do not reduce PPP Forgiveness
- Covered Entities get priority
- Direct Stimulus Payments
- $600 per individual ($1200 for MFJ)
- Additional $600 per dependent
- Phase-out starts at $75,000 ($150,000 MFJ)
- Payroll taxes may be deferred until December 31, 2021, and no penalties or interest will accrue until January 1, 2022.
- PUA payments of an additional $300/ week applies through March 14, 2021 or maximum of 24 weeks
- Additional $3 billion provided to the HHS Provider Relief Fund
- FFCRA credits for paid sick and family medical leave extended through March 2021
- $15 Billion set aside for Shuttered Venue Grants
- 25% reduction in revenue in first, second, or third quarter of 2020 as compared to the same quarter in 2019
As indicated in our message sent yesterday, some readers of the legislation are of the opinion that a business who is still operational after the first year of the pandemic are in some way automatically disqualified from the second round. As we also indicated yesterday, it is our opinion that each individual, business, and organization is unique and the necessity of this second round is also unique.
To a degree, those that say survival through the first phase of the Pandemic would indicate a lack of a need or justification of a second PPP loan, may in certain specific circumstance, have a valid, albeit simplistic and narrow, point of view.
However in general when the President elect, scientists and other officials have warned that “the darkest days are ahead” and there are on-going and almost certain future shutdowns in different parts of the country, it is not unreasonable to conclude that using past experience and weathering the storm is a basis for denying one an opportunity to prudently guard against a future unknown storm. This is analogous to surviving a flood and using that fact to not prepare for a potential tornado. The circumstance of a potential “dark winter” and potential for the government to make a decision to shut down different industries and making a decision on what part of the economy stays open could produce different impacts in the US and be different than what was experienced thus far. Therefore, instead of, as some would, use a red line test, survival to bar one from obtaining a 2nd round of PPP, we believe in general and in most cases, it would be imprudent not to explore based on specific facts and circumstances the viability of getting another PPP loan.
We will do our best to keep you timely informed of the evolving circumstances regarding the signing of the legislation.
Please reach out to discuss your individual situation, receive more information, or to receive assistance with the application process.