Congress has passed the Stimulus Bills and is waiting for President Trump to sign it into law. We’re hearing that this contains these provisions for businesses:
- Deductibility of PPP (Payroll Protection Program) loan proceeds that were used for allowed purposes.
- An additional round of PPP (Payroll Protection Program) loans, (nick named PPP round #2) for those businesses that have incurred a drop in gross receipts of at least 25% in a given quarter of year 2020, compared to that same quarter in year 2019.
The provision is essentially the same as round #1, 2.5 months of average “payroll costs” for a loan amount up to $2M for employers with less than 300 employees. However, this time, there’s a choice of wage period by the borrower: 2019 or the previous 12 months.
If you’ve received PPP round #1, and used all the proceeds for allowed purposes, you can apply for round #2, if you have met the gross receipts drop test.
It’s unclear how to apply the gross receipts test for taxpayers who report their income on an accrual basis, whether this is determined on cash or accrual basis.
Loan proceeds used for approved expenses, which now will include operating costs (for round #2 loans) will be tax deductible to the extent they would without the PPP. - Expanded provision of the ability for employers to take the Employee Retention Credit even if they received PPP #1 or #2. Additionally the credit will now be 70% of an employee’s wages (including certain health benefits), up to a maximum of $10,000 of wages per employee per quarter. File IRS Form 7200 to claim, but read the form’s instructions and the IRS’ Employee Retention Credit info page. The links in this article at the time of writing have not been updated to reflect these provisions, as they have not yet been signed into law.
