PPP Expenses May Be Deductible; Second Round of PPP Funding on the Horizon

The bipartisan push on Capitol Hill for Paycheck Protection Program (PPP) deductibility has passed the House and Senate and awaits the President’s signature. The bill includes a provision clarifying the congressional intent for the PPP that ordinary and necessary business expenses are deductible, even if paid with funds from a forgiven or forgivable PPP loan. The legislation largely overrides the Treasury and the IRS’s guidance on the issue, which we announced in our blog of November 23. 

 

The bill also provides additional funding to support small businesses, including a second round of PPP loans.  Businesses can qualify for a second PPP loan if they meet the following criteria: 

  • They have 300 or fewer employees

  • They have used or will use the full amount of their first PPP loan

  • They can show a 25% gross revenue decline in any 2020 quarter compared with the same quarter in 2019

 

Certain businesses and other organizations that did not participate in the first round of PPP funding will be able apply for the new PPP loans, including Sec 501c(6) non-profits, which were excluded from applying the first time around. 

 

The bill also includes: 

  • A simplified forgiveness application process for PPP loans of $150,000 or less

  • Repeal of the requirement that PPP borrowers deduct the amount of any EIDL advance from their PPP forgiveness amount

  • Extension of the Employee Retention Tax Credit

  • Temporary 100% deductibility of business meals in 2021 and 2022

 

President Trump is asking for additional changes to the bill before he will sign it, but as of this writing he has not vetoed it.  We will keep you updated on any additional changes as they occur. 

 

Wishing you the very best holiday season!

Clarissa Heneghen