Covid Relief – Second Act Stimulus

Ryan Kilpatrick

Dec 22, 2020

On Monday, December 21, 2020, Congress voted to approve a long-awaited stimulus related to the ongoing Covid-19 Coronavirus pandemic. The legislation is expected to be signed into law this week. The bill contains numerous provisions to help individuals and spur economic development. It provides further guidance on the tax treatment of existing PPP Loans, simplified forgiveness process for smaller PPP loans, expansion of the PPP Loan program, and direct payments to individuals. Following are additional details on these provisions.

PPP Loan Expenses Deductible

The bill clarifies that expenses paid with PPP loan proceeds will be tax-deductible. When originally passed in the CARES Act, any portion of a PPP loan forgiven is not counted as income. The IRS later issued their interpretation that any expenses paid with the loan proceeds would be non-deductible. This provision revives the original intent of the CARES Act treatment to make the forgiveness tax neutral. The forgiveness will not be treated as income and expenses paid with loan proceeds will be tax-deductible.

Simplified Forgiveness Process for Smaller Loans

In addition to this stimulus provision, there will be a simplified forgiveness process for all PPP loans of $150,000 or less.

Expanded Access to Paycheck Protection Program Loans

The legislation expands and extends the PPP loan program for certain borrowers. Two additional requirements must be met to be eligible for this second round of PPP loans. First, the borrower must have 300 or fewer employees. Second, the borrower must have incurred a 25% revenue decrease for any quarter in 2020 compared to the same period in 2019. Forgivable expenses will also be expanded to include supply costs, protective equipment, and facility modifications to operate safely.

Providing Covid Stimulus to Individuals

Individual taxpayers will receive a direct payment of $600 per person including dependents under the age of 17. For example, a taxpayer filing as single would be eligible for a $600 direct payment while a married couple with two children aged under 17 would be eligible for a $2,400 direct payment. The payments will be phased out starting at $75,000 for single filers and $150,000 for joint filers.

Other Notable Provisions

In addition, the bill provides an extension of federal unemployment benefits at $300 per week, continuation of the Employee Retention Credit, and modification to the deductibility of business meals.

Note this is only a summary of numerous provisions contained in the bill. We will continue to provide updates on the Covid-19 stimulus as information becomes available. Visit Our Thinking for more articles and updates for your business as you respond and move forward with recovery and resurgence from the Coronavirus Pandemic.