Details on this crazy thing remain sketchy. The bill is only 5,593 pages long. Since it’s all in legalese, it’s rather impossible to read and actually understand. I’m sure that I will be writing about this nightmare for the next month, but here are some of the highlights to get us started.
SBA 15 Day Review Period
The SBA has a 15 day review period written into the law. What does that mean in english? As I have mentioned in previous columns, they can pretty much change anything they want through their process of “interpretation.” Don’t you just love this insanity? Welcome to my world.
This means that absolutely anything and everything I’m writing about on this thing could change as a matter of law. Let’s not forget the ways that they normally change laws that they don’t like, such as the tax court system, case law, or simple revenue procedures.
Seeing something like this in a law as important as this one is extremely uncommon. They normally don’t write laws saying that they can change anything they want, and then they change them anyway. Something tells me that there’s going to be even more drama on this one then we had on the last.
Expenses used for PPP Loan Forgiveness are now deductible
According to the law, the expenses used in PPP Loan forgiveness on round one and round two can now be deducted on your income tax return. There is no offset given its cancellation of debt attributes. Again, we’ll see if this holds up in the next couple of months.
2nd Round of PPP Loans Available
A second round is available, but you must qualify. This is a fully forgivable loan just like the first. Borrowers can choose an 8 or 24 week forgiveness period.
1 – Loans are capped at $2M
2 – Entities must demonstrate at least a 25% drop in revenues between the 4th Quarter of 2020 and the same period in 2019
3 – The bill expands the covered expenses for loan forgiveness to include cloud computing, equipment for government mandated sanitation or social distancing and property damage due to looting
4 – Loan amounts are calculated at 2.5 times your monthly payroll from 2019 or 3.5 times the payroll if you are a restaurant or hospitality business
5 – The application deadline is March 31, 2021
Can I get a PPP Loan now if I didn’t get one in the first round
Yes, but don’t ask me how it works. I haven’t read that far. I don’t know if the old rules apply for first time borrowers or the new. Even after I read the bill, it all may change.
$20B was set aside for a new round of EIDL Grants. This is not the loan, but rather a new round of $10,000 grants. There is nothing new on the loans. They are still in place along with the process that I have detailed to either re-apply or increase the loan. In order to qualify for this grant, your business must
1 – Be located in a low-income community
2 – Have suffered an economic loss greater than 30%
3 – Employ less than 300 people
4 – Qualify as an eligible entity as defined in the CARES Act
One must apply directly to the SBA for this grant. The application process is not in place yet.
Let me leave you with this.
I’m glad to see that our Congress and President actually finished this one. It’s a nice holiday present for all of us, but I wouldn’t bet the farm on any of it quite yet.
If you’ll remember what happened the last time was they passed a law, and then spent four months changing it. With the new administration coming in, I’d be extremely surprised not to see that happen again. New administrations always want to stake their claim and change things.
A reasonable person would think that after 5,593 pages, they’d actually thought through most of this and already provided answers, but nothing could be further from the truth. This already raises questions like
Given the new items allowed to be included in forgiveness, what do we do about the loans that have already been forgiven? If they were only partially forgiven, can we resubmit them with the new forgivable items to receive additional forgiveness?
Casualty losses such as the ones created by looters burning buildings are extremely difficult to deduct on Income Tax Returns. They are normally only deductible in federally declared disaster areas. The IRS has to be careful, especially since most of the time insurance companies have already reimbursed a policy-holder for the loss. Will they actually allow this? We’ll see.
That’s just a couple that I thought off the top of my head. There will certainly be dozens more.
What I’m trying to say is that I wouldn’t be in a hurry to apply for any of this until we actually know what this happens to be in the first place. As it enfolds, I’ll do my best to keep you informed.
We’re all going to get through this. Let’s get through it together.
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