Update: December 28, 2020

New COVID Relief Package

We are still waiting to see if there will be additional legislation with the current administration so there isn’t a lot new with the Payroll Protection Program (PPP) situation.  Many companies are anxious to put the PPP loans in the rear view mirror.

We finally have some additional support from our legislators.   Here is a summary of the new bill that was just signed by President Trump on Sunday:

Tax Treatment:

    • Proceeds received from PPP loans that are forgiven is tax exempt
    • Expenses paid by those proceeds are tax deductible
    • EIDL grants proceeds received are not taxable

Application for a second PPP Loan (maximum amount of $2 million):

    • Less than 300 employees
    • Must demonstrate a loss of 25% of gross receipts in any quarter in 2020 compared to same quarter in 2019
    • Loan amount up to 2.5 times average monthly payroll from 2019
    • NAICS code 72 businesses (restaurants, travel industry, hotels…) – can request up to 3.5 times average monthly payroll from 2019
    • 501(c)6 organizations are now eligible to apply

Forgiveness:

    • Simplified application for loans under $150,000 (1st and 2nd loans)
    • Additional expenses allowed to use but still need to spend at least 60% on payroll
    • Covered period with second PPP is between 8 and 24 weeks

EIDL Grants

    • Applicant criteria
      • Less than 300 employees
      • Economic loss of 30% or more during an 8 week period between March 2, and December 31, 2020
      • Located in a low income community
    • Can reapply for EIDL advance from difference from what you previously received up to $10,000 (so if you received an EIDL advance previously for $6,000 you can get an additional $4,000)
    • EIDL advance does not have to be deducted from the PPP Loan forgiveness

Grants for Live Venue Operators (up to $10 million) – you can’t apply for both PPP and this Grant.  Priority will be given to organizations with the largest reduction of gross receipts.

    • Grant amount up to 45% of 2019 gross receipts
    • Must demonstrate a loss of 25% of gross receipts in any quarter in 2020 compared to same quarter in 2019

SBA Loans

    • Additional payments made by SBA for borrower – check with your lender to see if you qualify and the number of payments to be paid

The bill indicates that the SBA has 10 – 15 days to get the new rules and applications available.  While the above is a general summary of what is in the bill the SBA is supposed to provide clarification within the application process of the specifics.  We’re sure you all remember how that worked in April and we would expect that there will be several rounds of rules released.  At this point all we know is the summary information above and not how we need to apply or what documentation will be required.

There are numerous items in this bill and the summary above does not cover everything for every company.  Please contact ESG, your Tax Advisor, Attorney or Bank if you have questions about items above or other things that you might believe are covered in the bill.

If you have questions or need assistance with the application process, please complete our contact form and we will be glad to help.

Update: December 8, 2020

We are still waiting to see if there will be additional legislation with the current administration so there isn’t a lot new with the Payroll Protection Program (PPP) situation.  Many companies are anxious to put the PPP loans in the rear view mirror.

Here are some of the things that you should be considering before year end…

Legislation:

Congress is back in session and they are talking about a new stimulus/relief package so maybe we will get one before the end of the year.  There has been one thing in particular that has changed since our last update.  The IRS released a new revenue ruling (2020-27) indicating that if you expect that your loan will be forgiven then you are not allowed to deduct the associated expenses in the year you received the loan proceeds.  This means that you cannot deduct your expenses (payroll, utilities, rent) up to the loan amount in 2020.  Please make sure you are talking with your Tax Advisor to determine how this might impact your business.

Remember that you are not required to file your application for forgiveness in 2020.  You have 10 months from the end of your 24-week period to file.  At this point we do not have a recommendation on filing for forgiveness as this is now a matter of personal preference or based on your tax advisor’s recommendation.

Accounting for your PPP Loan:

There are a couple different ways that you can account for your PPP loan on your balance sheet and income statement regardless of the tax implications or if you have applied for forgiveness (unless you have received a forgiveness notification from the SBA already). If you have questions, please contact us to discuss options that are right for your company.

Please continue to check back for more updates.
If you have questions or need assistance with the application process, please complete our contact form and we will be glad to help.

Update: November 18, 2020

We are still waiting to see if there will be additional legislation with the current administration so there isn’t a lot new with the Payroll Protection Program (PPP) situation.  Many companies are anxious to put the PPP loans in the rear view mirror.

Here are some of the things that you should be considering before year end…

Legislation:

  • While there is bipartisan support to ensure that the PPP loans don’t create a taxable event, current IRS rules make the expenses paid with the PPP loan nondeductible and thus creating additional taxable income. So, discuss with your Tax Advisor the best option for you related to applying for forgiveness.

Forgiveness Applications:

  • For those with loans less than $50k the SBA has come out with a simple form for forgiveness – Form 3508S. This simplifies the application process, but please discuss with your Tax Advisor prior to submitting to your bank.
  • For those with loans greater than $2 million the SBA has come out with a loan necessity questionnaire that your bank should be sending you to complete. This has not been publicly released so we are not exactly sure what all is entailed with the form or when you might receive from your bank.
  • For the use of proceeds for eligible expenses – you can use both incurred and paid expenses for payroll, rent, and utilities.

Payment deferrals:

  • Make sure that your bank is deferring your loan payments. With the PPP Flexibility Act (signed June 5th) banks are required to defer your loan until you have a determination from the SBA.  You have up to 10 months after your 24-week period ends to apply for forgiveness.
We are a proponent of waiting to file for forgiveness in hopes that more clarity and legislation will come before year end. Check back for more updates.
If you have questions or need assistance with the application process, please complete our contact form and we will be glad to help.

Update: December 8, 2020

We are still waiting to see if there will be additional legislation with the current administration so there isn’t a lot new with the Payroll Protection Program (PPP) situation.  Many companies are anxious to put the PPP loans in the rear view mirror.

Here are some of the things that you should be considering before year end…

Legislation:

Congress is back in session and they are talking about a new stimulus/relief package so maybe we will get one before the end of the year.  There has been one thing in particular that has changed since our last update.  The IRS released a new revenue ruling (2020-27) indicating that if you expect that your loan will be forgiven then you are not allowed to deduct the associated expenses in the year you received the loan proceeds.  This means that you cannot deduct your expenses (payroll, utilities, rent) up to the loan amount in 2020.  Please make sure you are talking with your Tax Advisor to determine how this might impact your business.

Remember that you are not required to file your application for forgiveness in 2020.  You have 10 months from the end of your 24-week period to file.  At this point we do not have a recommendation on filing for forgiveness as this is now a matter of personal preference or based on your tax advisor’s recommendation.

Accounting for your PPP Loan:

There are a couple different ways that you can account for your PPP loan on your balance sheet and income statement regardless of the tax implications or if you have applied for forgiveness (unless you have received a forgiveness notification from the SBA already). If you have questions, please contact us to discuss options that are right for your company.

Please continue to check back for more updates.
If you have questions or need assistance with the application process, please complete our contact form and we will be glad to help.

Update: November 18, 2020

We are still waiting to see if there will be additional legislation with the current administration so there isn’t a lot new with the Payroll Protection Program (PPP) situation.  Many companies are anxious to put the PPP loans in the rear view mirror.

Here are some of the things that you should be considering before year end…

Legislation:

  • While there is bipartisan support to ensure that the PPP loans don’t create a taxable event, current IRS rules make the expenses paid with the PPP loan nondeductible and thus creating additional taxable income. So, discuss with your Tax Advisor the best option for you related to applying for forgiveness.

Forgiveness Applications:

  • For those with loans less than $50k the SBA has come out with a simple form for forgiveness – Form 3508S. This simplifies the application process, but please discuss with your Tax Advisor prior to submitting to your bank.
  • For those with loans greater than $2 million the SBA has come out with a loan necessity questionnaire that your bank should be sending you to complete. This has not been publicly released so we are not exactly sure what all is entailed with the form or when you might receive from your bank.
  • For the use of proceeds for eligible expenses – you can use both incurred and paid expenses for payroll, rent, and utilities.

Payment deferrals:

  • Make sure that your bank is deferring your loan payments. With the PPP Flexibility Act (signed June 5th) banks are required to defer your loan until you have a determination from the SBA.  You have up to 10 months after your 24-week period ends to apply for forgiveness.
We are a proponent of waiting to file for forgiveness in hopes that more clarity and legislation will come before year end. Check back for more updates.
If you have questions or need assistance with the application process, please complete our contact form and we will be glad to help.