Latest PPP News Says Expenses Paid by PPP Loan Now Deductible
In the latest PPP news, a new pandemic relief bill became law this week. Among the positive developments for small businesses, expenses paid by Paycheck Protection Program loans earlier this year are now deductible on a company’s tax return. The new bill also makes a second round of PPP loans available for businesses that have exhausted the earlier loans.
PPP-Paid Expenses Are Tax Deductible
The Internal Revenue Service had issued statements saying specifically that PPP-covered expenses were not tax-deductible. But Congress wrote new specifications overruling the IRS in this latest bill, allowing businesses to deduct the expenses. Covered expenses included payroll, rent/mortgage payments and utilities. The loan may be forgiven if at least 60 percent of the proceeds went to payroll.
Second Round of PPP Loans Available
In addition, the bill makes an additional $284 billion available for a second round of PPP loans. Businesses that did not apply previously, as well as businesses who’ve used up the first loan proceeds. Business must have fewer than 300 employees to be eligible. They must also be able to show a 25-percent loss in revenue in 2020 from the same time period in 2019. Loans top out at $2 million.
As before, lenders will calculate the loans at 2.5 times the amount of a single, normal payroll. And again, borrowers must use at least 60 percent of the loan on payroll. This new bill allows loan proceeds to cover some additional expenses, in particular employee and customer safety measures aimed at slowing the pandemic. This includes things like PPE for employees and plexiglass partitions to shield customers and employees. Another covered expense is cloud computing and remote-meeting software.
Simplified Forgiveness Application
The bill also offers a simplified application for loan forgiveness, and expands eligibility for the application to companies that borrowed $150,000 or less. Another positive note is the news that EIDL grants no longer affect the forgivable amount of a PPP loan. Most banks have temporarily shut down their online portals to adapt to the new rules both for forgiveness and applying for new loans.
Help for Restaurants, Entertainment Businesses
Businesses such as restaurants, theaters and music venues now have some relief options in the new bill as well. The Shuttered Venue Operator Grants, totaling $15 billion, have eligibility conditions similar to PPP loans (which haven’t been available to entertainment businesses).
The SBA Office of Advocacy has this article explaining tax-deductible expenses.
This FAQ has more information on Shuttered Venue Operator Grants.
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