On Sunday evening, Congressional leaders tentatively agreed on a $900 Billion stimulus package for US taxpayers and businesses. The House is expected to vote on the package today and the Senate shortly thereafter. It is expected to be signed by President Trump and become law before the end of the year.
It is our understanding that included in the package is the long-awaited Congressional change to the deductibility of expenses paid with Paycheck Protection Program (PPP) loan proceeds. It has been the intent of Congress that these expenses should be deductible under the CARES ACT passed earlier this year, but the IRS has ruled that under current law, these expenses would not be deductible due to the tax exempt nature of the loan proceeds. This uncertainty has caused no small amount of difficulty for small businesses in terms of cash flow and tax planning.
This stimulus bill, if passed, would allow all qualified borrowers to deduct qualified expenses paid with PPP loan proceeds regardless of the loan’s tax exempt nature and whether or not part or all of the loan proceeds are forgiven. This would be a big win for small businesses in their struggle to stay cash flow positive in the Covid environment. It is unclear as of this writing as to who would be a qualified borrower. We will update you with more details as they become available.
Although the draft of the bill has not yet been released to the public, we expect that the following will be part of the package:
- An additional $600 stimulus payment to eligible taxpayers, similar to the $1200 payments sent out earlier this year.
- An extra $300/week of Federal unemployment assistance, similar to the $600/week paid earlier this year for taxpayers eligible for at least $1 of state unemployment.
- $300 Billion for additional PPP loans for small businesses, including some newly eligible types of businesses and nonprofits.
- $15 Billion for airlines to spend on payroll to bring back thousands of laid off employees.
Unfortunately, two important provisions did not make the cut and will not be part of this round of economic aid:
- There is no provision to limit legal liability for small businesses from Coronavirus lawsuits.
- State and Local governments will not receive any additional aid from Federal stimulus dollars.
We will update you with more details when a draft of the bill is made available. Should you have any questions, please don’t hesitate to reach out to your tonneson + co representative.