Highlights of the New Stimulus Bill for Business
With the President's signature on the year-end omnibus bill, a second round of economic stimulus programs and payments will now take effect. In addition to direct payments to many taxpayers (currently $600 per individual, but potentially rising to $2,000) there are a number of provisions that will impact businesses struggling to cope with the protracted economic slump. Here are some of the key provisions of which you should be aware.
  • Expenses paid with funds from a Paycheck Protection Program (PPP) will be deductible, clarifying a previous ruling from the Internal Revenue Service (IRS). In addition, the list of eligible expenses has been expanded.
  • Companies that have an outstanding PPP loan of $150,000 or less will be able to use a new, one-page forgiveness application form.
  • Businesses that received an emergency cash advance on their Economic Injury Disaster Loan (EIDL) from the SBA will not have to deduct the advance from their PPP loan forgiveness application. The advance will not be taxable, and any qualified expenses paid with the EIDL advance are deductible.
  • Businesses with traditional SBA Section 7 loans (non-PPP) have received some additional relief. They can also deduct eligible expenses, and the loan payments are no longer taxable; plus, the SBA's authorization to pay up to six month's interest and principal on the loans has been extended an additional three months.
  • A second round of PPP loans, with $284 billion in funding, will be rolled out in mid-January. This round will have tighter eligibility requirements, and the maximum loan amount will be capped at $2 million. Borrowers must have fewer than 300 employees and prove their year-to-year revenue has fallen at least 25%, based on a quarter-to-quarter comparison of 2019 and 2020 revenues. As in the first round of PPP, qualifying loans may be forgiven.
The new stimulus package is comprehensive and complex. In particular, the provision that expenses paid with PPP funds are deductible for tax purposes creates some complications in year-end planning for businesses who had proceeded as if the deductions would not be allowed; and eligibility rules for the new PPP loan program are convoluted.
The advisors at Gray, Gray & Gray can assist you in untangling the complexities of this far-reaching legislation. Please contact us at (781) 407-0300 with any questions.

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