The Paycheck Protection Program (PPP) began in April 2020 and was developed by Congress and the Small Business Administration (SBA) as a loan program with the purpose of aiding small businesses, in particular, allowing them to continue to meet payroll obligations. Funds were distributed through August 8, and it is Congress’ and the SBA’s intention that funds used on eligible expenses, as detailed by the plan, be forgiven. What constitutes a forgivable expense has evolved over the last several months as Congress and the SBA continue to develop the plan more fully. Below are up to date highlights regarding the program as of August 24, 2020. Darnall, Sikes and Frederick will continue to monitor changes and update this information regularly. If you have any questions regarding the program, please contact our office.
- Congress is reviewing several new stimulus packages that would that would impact PPP. Some of the proposed impacts include simplifying the forgiveness process by allowing for automatic forgiveness for loans up to a certain dollar amount, reducing the level of documentation required, and a second round of PPP loans for targeted businesses.
- There seems to be bipartisan support for the PPP aspects of these bills; however, there is disagreement on many other aspects. As a result, Congress has been unable to come to an agreement before their scheduled recess through Labor Day.
- Negotiations are expected to resume when Congress returns from their recess. Passing legislation with such a large impact will likely become more and more difficult as we move towards November and the Presidential election.
- The SBA has opened its portal to begin accepting loan forgiveness applications from banks; however, most bank are still not accepting applications. With pending legislation that could change the entire PPP process, banks are hesitant to utilize resources processing and reviewing applications that may not be needed or become superseded.
- The situation remains fluid as rules are still being changed and clarified often. For example, it was recently announced that vision and dental benefits paid by the employer could be included with group health insurance as a forgivable expense.
- Some major parts of the program still need clarification. For example, questions still surround the full time equivalent calculation (when applying for forgiveness before the end of the covered period.) Another item in question is the tax deductibility of associated PPP expenses. Currently, forgiveness of PPP loans is excluded from income; however, the associated expenses are ineligible as deductions. The AICPA and other organizations are lobbying for this to be changed in favor of the taxpayer.
- A PPP recipient has ten months from the end of their covered period to file for forgiveness. Because the program and guidelines continue to evolve, we believe the best approach at this time is a patient one. Borrowers are encouraged to start gathering any documentation they may need so that they are ready once the process is more solidly outlined and banks begin accepting forgiveness applications.
Please contact our office in you have any questions or concerns!