Rep. Dan Meuser. R-Penn., Provides insight into what the stimulus agreement will include and when it is likely to be voted on.
Congress approved a $ 900 billion round of coronavirus relief, which will allow small business owners to apply for another loan through the popular Paycheck Protection Program, with some important differences.
A major change that loan recipients are likely to benefit from is that loan dollars can be tax-deductible.
Lawmakers have changed the language to ensure that beneficiaries who have had their loans forgiven can claim tax incentives on deductible expenses – even if they have been paid with government help, marking a major turnaround in the initial round.
It is hoped that further guidance may emerge on the subject, including whether tax incentives can also be claimed at the state level.
PPP BORROWERS ARE TO EARN TAX DEDUCTIONS
Tax deductibility became a controversial topic after the IRS issued guidelines in the spring preventing business owners who had their PPP loans forgiven from applying for tax incentives, since the loans themselves were tax exempt. This guidance was based on existing legislation, which generally aims to prevent people from receiving a “double tax benefit”.
US Treasury Secretary Steven Mnuchin supported the IRS decision, saying it was “basically tax 101” at the time.
“Money from PPP is not taxable,” Mnuchin told FOX Business in May. “So, if the money that is coming in is not taxable, you cannot double it, you cannot say that you will have deductions for workers you did not pay.”
If PPP subsidies were taxable, deductions would be viable, added Mnuchin.
Others, however, said that eliminating the beneficiaries’ ability to claim these deductions makes the loan less valuable to the beneficiary.
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In addition to the tax deductible expense perspective, here is a look at some of the other terms that should accompany the new round of PPP loans.
Loans can be distributed up to a maximum amount of $ 2 million. To obtain forgiveness, at least 60% of the money must be applied to payroll expenses, while the rest can go to rent, mortgage and utilities.
Qualified candidates must have fewer than 300 employees and must be able to show a 25% drop in revenue between the last quarter of last year and the same period in 2020.
The loans are expected to be available by the end of March.
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