We hope you are safe and well and still enjoying this holiday season although it is very different from past years. As we rapidly approach year-end we know many of you are eager to file your PPP loan forgiveness application.
As you may have heard, there is a proposed $748 billion COVID economic relief plan being debated in Congress that is gaining strong support from both Democrats and Republicans. There is hope that this relief plan will be passed before the end of the year. While many of the exact details of the proposed legislation remain to be worked out, we did want to highlight a few key areas being discussed:
- $300 billion earmarked for a new round of PPP funding. This would be aimed at businesses that can demonstrate economic hardship, with one of the main factors being a 30% decline in gross revenues during any quarter in 2020. It appears the amount you can apply for would again be based on 2.5 months’ worth of payroll costs. To qualify for loan forgiveness, at least 60% would again need to be spent on payroll costs, and you would once again be able to elect either an 8 or 24 week period. There is also discussion on expanding eligible expenses to include supplier costs and certain equipment purchases that help the business operate safely. You did NOT have to apply for the first round of PPP funding to be eligible to apply for this second round.
- Simplified forgiveness for loans under $150,000. We expect this will most likely come in the form of expanding the dollar limit on who can file the form 3508S (currently $50,000 or less). The form 3508S is the one-page self-certification application.
- Simplified forgiveness for loans between $150,000 and $2 million. This proposal allows borrowers to maintain, but not submit, supporting documentation such as payroll reports, rent and utility bills, etc.
- Deductibility of the expenses paid with PPP funds. This is probably the most relevant item for small businesses as it would offer much-needed income tax relief for those who borrowed based on the provisions of the original CARES Act that provided PPP loan forgiveness would NOT be taxable.
Please note this is only a proposed relief plan and it does not mean all of the above will pass in a new bill. Additional items are also expected to make it into this plan.
Our previous communications have recommended waiting to apply for forgiveness as there was the expectation of additional guidance. In addition, you have 10 months to submit a forgiveness application after your 8 or 24 week period ends. It seems likely something will pass soon, and we strongly recommend holding off on submitting your forgiveness application UNLESS your loan was under $50,000. We are not aware of anything in the above plan that will change how those with PPP loans under $50,000 will apply for forgiveness.
If you already applied for forgiveness, there is no reason to worry. The above areas of discussion are only an attempt to lessen the burden of what is submitted with a forgiveness application. Nothing is changing the parameters of what amounts and expenses qualify for forgiveness. When Congress passes any legislation, we will follow up with additional information.
As always, please contact your DunlapSLK team member with any questions you may have.