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New PPP loan legislation carries considerations for tax professionals

· 5 minute read

· 5 minute read

A new Thomson Reuters Institute webinar discusses the tax implications that the new PPP legislation will have for tax advisors.

The recently enacted fourth round of COVID-19-related legislative relief that was signed into law on December 27, 2020 looked to re-open and expand this critical relief effort for American small businesses.

Indeed, the new legislation included provisions to reopen the Paycheck Protection Program (PPP) to new qualifying borrowers of first draw PPP loans, certain borrowers of existing PPP loans to increase their first draw loan, and certain businesses of new second draw PPP loans.

This week, Thomson Reuters Institute sponsored a webinar, Ebb Tide: Tax & Compensation Implications Around PPP Loans, that offered critical guidance for business leaders who are navigating these uncertain times and explained what tax and compensation considerations business leaders should embrace over the weeks and months ahead in regards to these loans.

You can view the entire “Ebb Tide: Tax & Compensation Implications Around PPP Loans” webinar here.

As discussed during the webinar, among other things, the new PPP legislation:

      • clarifies that expenses paid with PPP loan proceeds are 100% deductible;
      • permits four additional eligible nonpayroll uses of PPP loan proceeds:
        1. certain covered operating expenses, including payments for software and cloud computing services that facilitate business processes;
        2. property damage caused by public unrest that were not covered by insurance;
        3. supplier costs made pursuant to a contract or order that was in effect prior to the date of disbursement of the PPP loan and the goods are essential to operations; and
        4. worker protection equipment required to comply with federal agency requirements.
      • allows for the selection of a covered period for those needing more than eight, but less than the full 24 weeks;
      • simplifies forgiveness application for any loan of less than $150,000;
      • expands eligibility for PPP loans to include most section 501(c)(6) organizations as well as housing cooperatives, newspapers, broadcasters, and radio stations; and
      • provides a second round of PPP loans targeted at “hard-hit” organizations that generally employ 300 or fewer employees and can show a 25% decline in revenue in the first, second, or third quarter in 2020 as compared to the same quarter in 2019.

For more information, you can access the white paper, Paycheck Protection Program Round Two: What You Need To Know , from BKD LLP here.

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