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Stimulus Package: Highlights, Including Deductibility of Expenses for PPP Loan Recipients

The House and Senate passed a new stimulus legislation that will include direct payments to Americans, jobless benefits, and funds for businesses and vaccine distribution, which the President signed on December 27th.

AAFCPAs’ COVID-19 Task Force will continue to digest the contents of the forthcoming, 5,593-page legislation and will advise clients as appropriate on its implications.

The Task Force has summarized some of the highlights of the Act that clients must be aware of now:

  • AAFCPAs advises clients who are in the process of submitting your PPP Loan forgiveness application, and are not expecting full forgiveness, to hold off until we understand the implications of the new Act, including key points below. If you have submitted the application to the bank, and the bank has not made the decision yet, we advise you to call your bank to request that they stop processing your application.
  • PPP Loan qualified expenses have been expanded to include COVID-related expenses, such as PPE, adaptations at the workplace, cloud computing, business software to facilitate business operations, and more.
  • Qualified expenses paid with forgiven PPP Loans are now tax deductible. Previously, the IRS had taken the position that the expenses for which entities had a “reasonable expectation of forgiveness” would be disallowed a deduction as an ordinary and necessary business expense. The IRS position essentially resulted in a loan amount’s inclusion in taxable income, which was the opposite of Congress’ intent. Within the new Act, Congress is set to override the IRS’s position and make clear their original intent, which is to provide a tax-free forgivable loan to businesses who qualify. This guidance is much welcomed news as we conduct year-end tax planning.
  • Organizations who obtained a PPP Loan are now eligible for the Employee Retention Credit.
  • We anticipate a simplified PPP Loan application to come from the SBA for loans under $150,000.

As always, AAFCPAs’ COVID-19 Task Force will continue to monitor the status of the legislation, as well as communications from the IRS and the Treasury Department. We will keep you informed as changes occur or become clarified.

If you have any questions, please contact Brittany Besler, MBA, CPA, Esq. at 774.512.9001, bbesler@nullaafcpa.comRichard Weiner, CPA, MST at 774.512.4078, rweiner@nullaafcpa.com; or your AAFCPAs Partner.

About the Authors

Brittany Besler
Brittany possesses a unique combination of tax, legal, and business backgrounds, and is a valuable member of AAFCPAs’ Tax practice. She provides tax planning, research, and compliance solutions for corporations, partnerships, nonprofits, individuals, estates & trusts. Brittany advises businesses and individuals on various federal, state, local and foreign tax-related issues, including counseling clients on the consequences of new and updated tax laws. She assists clients in the creation of appropriate and optimal organizational structures, and advises on tax planning and tax exemption compliance. She advises newly-formed and well-established nonprofit clients on meeting compliance requirements of various government agencies, including the IRS rules on fundraising and political activities.
Richard Weiner CPA
Rich has over 30 years of broad tax experience with a specialty in tax planning and consulting for private and publicly-held businesses. Rich has specific expertise in the Software, Bio-Technology, Medical Device, Life Science, Manufacturing, Retail, Professional Service and Publishing industries, as well as U.S. aspects of international taxation. He works extensively with European companies expanding into the U.S. market. Additional areas of focus include companies and stockholders in transition, including structuring of and planning for Mergers & Acquisitions, planning for changes in ownership and management, and adoption of tax methodologies with a view toward the long term. He is well known in his field and is a frequent speaker on a variety of tax related topics.