Late Monday, both Houses of Congress approved the Consolidated Appropriations Act, 2021 (“CAA”) providing for a sweeping $900 billion rescue package to deliver much-needed relief for small businesses.
Hundreds of thousands of small businesses have been waiting for a second round of Paycheck Protection Program (“PPP”) loans to keep businesses and professionals operational. The CAA is now before the President awaiting his signature. The 5,500 page act appears to contain many provisions unrelated to Covid-19 issues, such as $250 million in aid to the Palestinians.
The CAA includes tax provisions of critical importance for our clients who received PPP loans earlier in the year. The new tax provisions made the loan forgiveness provisions of even more critical importance. The Feldman Law Firm LLP continues to assist clients in navigating the PPP and the CAA provisions to secure full benefits of PPP loans and forgiveness.
The new law includes provisions that amend the existing Paycheck Protection Program such as:
Proceeds of PPP Loans are Not Taxable and the Proceeds Result in Deductible Expenses. Congress has overridden the IRS, which had issued a series of notices and rulings that expenses paid for with forgiven loans were not deductible expenses for tax purposes. The CAA legislation expressly overrides these IRS positions so as to permit PPP loan funds spent on such qualifying expenses to be deductible, while loan forgiveness on PPP loans will continue to be nontaxable. This almost doubles the tax benefits to PPP loan recipients.
“Eligible Entities” Have a Second Chance to Receive a PPP Loan. Many borrowers have requested a second round of PPP loans. The CAA allows new and old borrowers to receive a PPP loan if they meet the 3 new requirements below of an “eligible entity.”
The borrower must demonstrate that there was a 25% reduction in the 2020 gross receipts for a given quarter as compared to the same quarter in 2019.
The borrower must have used or will use the full amount of their first PPP loan.
The borrower must employ no more than 300 employees, or meet an alternative size standard.
PPP Borrowers Can Select Covered Period for as Short as 8-Weeks and as Long as 24-Weeks. Borrowers are now able to choose the 8 to 24 week covered period during which the borrower is required to spend a sufficient amount on qualified expenses to receive forgiveness.
Simplified Applications for Loan Forgiveness for Certain Borrowers. For borrowers of more than $150,000 but less than $2 million, the CAA provides that these borrowers will no longer be required to submit payroll tax filings, state unemployment filings, or the canceled checks, receipts, or other proof of payment for nonpayroll costs.
Please contact Coby Hyman chyman@feldlaw.com or Logan Gremillion lgremillion@feldlaw.com at The Feldman Law Firm LLP (713.850.0700) with questions about the services that our Firm provides in terms of loans and loan forgiveness under the PPP and the CAA.
The Feldman Law Firm LLP
The Feldman Law Firm LLP’s focus is providing the full range of captive insurance services, spanning tax, insurance, regulatory, and tax controversy defense. The firm has led more than 200 captive planning assignments since 1998.
The Law Firm’s practice concentrates on the representation of closely held businesses and their principal owners in tax and corporate matters and in commercial and business litigation. It has substantial experience and expertise in single-parent, group, and special purpose captives.
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