News & Tech Tips

PPP Deadline Extension Signed Into Law

Kathleen Hargrove on April 1, 2021

The Paycheck Protection Program (PPP) application deadline formally changed from March 31 to May 31 this week when President Joe Biden signed the extension into law.

 

The U.S. Senate had voted 92-7 last week to approve the PPP Extension Act of 2021, H.R. 1799, sending the legislation to the president for his signature.

 

The additional 60 days provided by the bill will provide additional time to for businesses to complete existing PPP loan applications and file new ones. The bill also provides the SBA time to address significant loan application process challenges, including validation and error codes, delayed guidance, and changes to the PPP loan amount calculation for self-employed borrowers.

 

Patrick Kelley, associate administrator for the SBA’s Office of Capital Access, testified during a Senate Small Business Committee meeting Wednesday that 190,000 applications were still held up in the SBA’s PPP platform due to unresolved error codes related to validation checks instituted by the SBA to help prevent fraudulent applications from being funded.

 

The PPP Extension Act does not provide any additional funding for the current round of the PPP, which Congress provided with more than $290 billion to make forgivable loans to small businesses and not-for-profits. From the program’s opening on Jan. 11 through March 21, the SBA has approved more than 3.1 million loans totaling nearly $196 billion.

 

If you have any questions or need assistance with this, please contact your Whalen advisor.

 

 

SOURCE: Journal of Accountancy

Considering an SBA Loan? Act Now.

Kathleen Hargrove on March 22, 2021

If you have been considering an SBA loan (other than PPP) for your business, this is an ideal time to apply.

 

We have compiled some key SBA loan related provisions included in the Economic Aid Act to further assist you with making this decision:

 

 

Extension of the Debt Relief Program established under the CARES Act

 

  • All borrowers with qualifying loans approved by the SBA prior to the CARES Act will receive an additional three months of P&I, starting in February 2021. Going forward, those payments will be capped at $9,000 per borrower per month.

 

  • After the three-month period described above, borrowers considered to be underserved—namely the smallest or hardest-hit by the pandemic—will receive an additional five months of P&I payments, also capped at $9,000 per borrower per month. They include:

 

  • Borrowers with SBA microloans or 7(a) Community Advantage loans

 

  • Borrowers with any 7(a) or 504 loan in the hardest-hit sectors, as measured by the severity of sector-wide job losses since the start of the pandemic. They include food service and accommodation; arts, entertainment and recreation; education; and laundry and personal care services.

 

 

  • SBA payments of P&I on the first 6 months of newly approved loans will resume for all loans approved between February 1 and September 30, 2021, also capped at $9,000 per month.

 

 

Modifications to 7(a) Loan Programs

 

  • Increases to 90 percent the loan guarantee amount on 7(a) loans, including for Community Advantage loans, until October 1, 2021.

 

  • Increases the Express Loan amount from $350,000 to $1 million on January 1, 2021, and then reverts permanently to a lower amount of $500,000 on October 1, 2021.

 

  • The Express Loan guaranty amount for loans of $350,000 and less is temporarily increased from 50 percent to 75 percent, and for loans above $350,000 the guarantee remains at 50 percent. On October 1, 2021, the guarantee reverts to 50 percent for all Express Loans.

 

 

Temporary Fee Reductions

 

  • Waives lender and borrower fees for both the 7(a) and 504 loan programs.

 

 

 

For further assistance with submitting an application or if you have any questions, please work with your Whalen advisor.

New PPP Changes For Small Businesses

Kathleen Hargrove on February 23, 2021

The Biden Administration announced this week that it will institute a two-week period starting Wednesday, 2/24 during which only businesses with fewer than 20 employees will be able to apply for Paycheck Protection Program (PPP) loans.

 

The exclusive application window is one of several moves the White House said it is making to further target the PPP funds to the smallest businesses. The administration also will:

 

  • Change the PPP loan calculation formula to help sole proprietors, independent contractors, and self-employed individuals receive more financial support. In addition, $1 billion will be set aside for businesses in this category that don’t have employees and are located in low- and moderate-income areas. Details of the changes have not yet been released.

 

  • Eliminate a restriction preventing small business owners with prior nonfraud felony convictions from obtaining relief through the PPP.

 

  • Remove a rule preventing small business owners who are delinquent on federal student loan payments from securing a PPP loan.

 

  • Allow noncitizen small business owners who are lawful U.S. residents to use individual taxpayer identification numbers (ITINs) to apply for relief.

 

The administration said the 14-day exclusive application period is designed to help the 98% of small businesses that have fewer than 20 employees, noting that these businesses often struggle more than larger businesses to collect the necessary paperwork and secure a PPP loan through a lender.

 

The White House statement also said that the administration would continue to work with lenders and other stakeholders to address PPP processing delays caused by anti-fraud validation checks that must be completed before loan guaranty approval is granted. The statement said the U.S. Small Business Administration (SBA) would continue to work with lenders to create streamlined processes to resolve issues as quickly as possible while still working to ensure taxpayer funds are spent wisely.

 

The administration also will make the following moves:

 

  • Update key areas of SBA websites to help more applicants find resources for understanding relief options and completing applications.

 

  • Continue to conduct stakeholder outreach to learn more about challenges and opportunities in the implementation of current emergency relief plans.

 

  • Launch a new initiative to increase communication with lenders. Specifically, the SBA will increase opportunities for lenders to provide recommendations and ask questions about the PPP. The goal is to drive resolution of open questions and concerns in a more streamlined way.

 

The application window for the current $284 billion iteration of PPP is scheduled to close March 31.

 

For any questions regarding this announcement or assistance with your PPP filing, please contact your Whalen advisor.

 

 

Source: Journal of Accountancy

PPP Loan…What Expenses Are Deductible?

Kathleen Hargrove on November 23, 2020

As previously communicated in Notice 2020-32, the IRS stated its position that business expenses paid with Paycheck Protection Program (PPP) funds that are forgiven cannot be deducted for federal tax purposes. However, it was unclear how the deduction limitation would be applied if a PPP loan was not forgiven until a subsequent tax year.

 

On Wednesday, the Treasury Department and IRS released guidance clarifying the tax treatment of expenses where a PPP loan has not been forgiven by the end of the year the loan was received.

 

In summary, IRS Revenue Ruling 2020-27 concludes:

 

A taxpayer that received a covered loan guaranteed under the PPP and paid or incurred certain otherwise deductible expenses listed in section 1106(b) of the CARES Act may not deduct those expenses in the taxable year in which the expenses were paid or incurred if, at the end of such taxable year, the taxpayer reasonably expects to receive forgiveness of the covered loan on the basis of the expenses it paid or accrued during the covered period, even if the taxpayer has not submitted an application for forgiveness of the covered loan by the end of such taxable year.

 

The ruling proves two scenarios as examples:

 

Scenario 1

 

A borrower pays expenses that qualify under the CARES Act as valid PPP expenditures. In that scenario, the borrower applies for forgiveness in November 2020 and satisfies all the requirements under the CARES Act to have the loan forgiven, but it doesn’t yet have an answer as to whether it will be forgiven.

 

Scenario 2

 

The borrower pays the same type of valid expenses with its PPP loan and satisfies the CARES Act requirements for the loan, but it has not submitted a forgiveness application before the end of 2020.

 

According to the ruling, the businesses in both scenarios can’t deduct expenses funded with PPP loans because they have a reasonable expectation of forgiveness.

 

In addition, Revenue Procedure 2020-51 was issued which provides a safe harbor for PPP borrowers whose loan forgiveness has been partially or fully denied and who wish to claim deductions for otherwise eligible payments on a return, amended return, or administrative adjustment request.

 

For more information on this, visit Treasury’s website that has links to the full ruling and procedure.

PPP Loan Forgiveness Relief for Small Borrowers

Kathleen Hargrove on October 9, 2020

The SBA and Treasury Department released additional guidance related to the Paycheck Protection Program (PPP) this week. The guidance covers a simplified forgiveness application process for loans of $50,000 or less, clarification of the deferral period for PPP loan payments, and procedures required for changes of ownership of an entity that has received PPP funds.

 

An interim final rule was issued that provides a simplified application to be used by recipients of PPP loan of $50,000 or less, and exempts these entities from and reductions in forgiveness based on reductions in full-time equivalents, and reductions in employee salary or wages. A Journal of Accountancy article detailing the changes can be found here.

 

Frequently asked question No. 52 was issued that clarifies that the Paycheck Protection Flexibility Act of 2020, P.L. 116-142,  extended the deferral period for loan payments to either (1) the date that SBA remits the borrower’s loan forgiveness amount to the lender or (2) if the borrower does not apply for loan forgiveness, 10 months after the end of the borrower’s loan forgiveness covered period. The extension of the deferral period automatically applies to all PPP loans. A Journal of Accountancy article detailing the FAQ can be found here.

 

In addition, SBA issued a procedural notice that describes when a change of ownership is considered to have occurred and the responsibilities a PPP borrower continues to hold regardless of any change in ownership. The guidance clarifies requirements and may help businesses that have been trying to go through the forgiveness process quickly because of an impending transfer of ownership. A Journal of Accountancy article detailing the procedures notice can be found here.

 

For any questions or for clarification on any of these updates, please contact your Whalen advisor for assistance.

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