Congressional leaders are currently working on a bipartisan proposal to provide additional stimulus to the U.S. economy in the waning days of the lame duck session. Although many of the details are still unknown, the American Institute of CPAs has provided some insight into the details.

The signs appear bright that two key areas would be addressed in this proposal. One is establishing a new round of Paycheck Protection Program (PPP) loans to small businesses and the other being a technical correction to the CARES Act by clarifying that expenses associated with PPP loans are deductible for income tax purposes. The proposal does not include another round of stimulus checks to taxpayers but did include funding for additional unemployment compensation.

There are two competing proposals, with Treasury Secretary Steven Mnunchin having proposed an alternate. These proposals are very close in terms of the total cost, which is a good indication that they are likely to get something done even though some of the details might change along the way.

We’ve included a summary of what is included in the most recent proposal:

  • $300 billion to be made available for new PPP loans (partially funded by $140 billion not used in the last round of PPP lending)
  • Eligibility would be much more limited – companies with 300 or fewer employees that have sustained a loss in revenue of at least 30% in any 2020 calendar quarter
  • Small 501(c)(6) organizations (such as chambers of commerce) would be eligible but lobbying activities of such organizations would not be eligible
  • Loans up to $2,000,000 that would be based on 2.5x average monthly payroll costs (with payroll being subject to the same limitations as with past PPP loans)
  • Costs eligible for forgiveness would be the same as earlier PPP lending, but would also address worker protection expenditures and facility modification costs, such as PPE and costs to comply with COVID-19 federal health and safety guidelines, as well as expenditures to a supplier that is essential to the borrower’s current operation
  • Simplified forgiveness for loans at or below $150,000
  • And the big news we’ve all been waiting for: forgiveness of PPP loans is included in the proposal to be non-taxable and the expenses associated with the forgiven loan would be deductible.

Of course, given the current political disparities in Washington, there can be no assurance as to what will pass or when.

With the status of these current negotiations, as well as activities for Congress to pass a new funding bill, current speculation is that this proposal may be headed toward a vote sometime between December 18-23, 2020. If passed, a new window for PPP loans would likely open in early January 2021.

Your BMF Advisors are closely monitoring these developments and will keep you informed on updates that impact you or your business.

About the Authors

James E. Merklin
CPA/CFF, CFE, CGMA, MAcc
Partner, Assurance and Advisory

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