Following months of on-again, off-again negotiations among representatives of both parties, both chambers of Congress, the U.S. Treasury Department and the White House, it appears that another stimulus bill is on the horizon. We are hesitant to predict anything in the world of COVID stimulus, not only because of the uncertainty that surrounds the politics of COVID, but also because we don't want to jinx the process. Nevertheless, because we are closer than we have been in months to seeing a new stimulus bill, including a legislative re-assessment of the Paycheck Protection Program (PPP), we want to focus your attention on the key PPP and small business provisions likely to be enacted into law — based on the framework summary of the Bipartisan Emergency COVID Relief Act of 2020 shared on December 9.

  • Deduction for Expenses That Result in PPP Loan Forgiveness.  Expenses paid for with the proceeds of PPP loans would be tax deductible even though PPP forgiveness is already not taxable income. As we discussed in this article and in this article, there is bipartisan support to reverse IRS rulings on this subject.
  • Second PPP Loan. Funding is provided to allow the hardest-hit small businesses to receive a second forgivable PPP loan. Eligibility would be limited to small businesses with 300 or fewer employees that have sustained a 30 percent revenue loss in any quarter of 2020. Restaurants, hotels and travel industry participants have lobbied hard for additional relief given the impact of the pandemic on their businesses.
  • Additional Non-Profits Eligible for PPP.  Organizations described in Section 501(c)(6) of the Internal Revenue Code (but excluding lobbying organizations) will now be eligible for PPP loans if they have 150 or fewer employees. This provision will benefit many local chambers of commerce, economic development organizations and tourism offices.
  • Expansion of PPP Forgiveness. PPP forgivable expenses would be expanded to include supplier costs and investments in facility modifications and personal protective equipment to operate safely. At this time, it is unclear whether this expansion applies to all PPP loans (including those for which forgiveness may already be in process) or only for new PPP loans made after enactment.
  • Simplified Forgiveness Process.  The PPP loan forgiveness process would be simplified for borrowers with PPP loans of $150,000 or less. Lenders have been pushing for such simplification and the IRS has already provided some relief for PPP loans under $50,000.
  • Special Help for Smaller Borrowers and Underserved Communities.  New PPP funds would be dedicated for smaller borrowers and underserved communities, generally focused on (1) businesses with 10 or fewer employees and (2) loans made by small community lenders, including Community Development Financial Institutions (CDFIs), credit unions, small community banks, Minority Depository Institutions (MDIs) and farm service lenders; and for the Minority Business Development Agency.
  • Special Relief for Live Venue Operators. Funding would be expanded for independent live venue operators affected by COVID-19 stay-at-home orders, providing a badly-needed shot in the arm for the performing arts community. But it is unclear whether those organizations would be entitled to participate if they have already received a PPP loan.
  • Extension of Certain Loan Programs.  New funding is provided to extend Section 1112 of the CARES Act, which provides payment of principal, interest and associated fees on qualifying Small Business Administration (SBA) 7(a), 504 and microloans.
  • Increased Funds for Certain Loan Programs.  Funding would be added for SBA loan products to increase guarantees on SBA 7(a) loans and reduce fees on 7(a) and 504 loans; provide loan subsidies for 7(a) loans; and provide Economic Injury Disaster Loan grant advances.

The bipartisan agreement is still working its way through the legislative process and it's anyone's guess what the final bill will look like, but we'll keep you apprised.

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