No Need to Stress or Rush
Although forgiveness for Paycheck Protection Program (PPP) loans is a foremost topic on the minds of all of you who received the loans, you should not stress over rushing to apply for forgiveness.
First things first, there is no stated deadline.
Since the start of the PPP program there have been 160 Interim Final Rules and Frequently Asked Questions guidance issued on top of the Cares Act law itself. The most recent issued a few weeks ago. The lenders who will be approving your forgiveness application are still implementing their systems to work the process.
More importantly, there is no defined deadline in the law or regulations issued by the SBA for borrowers submitting the forgiveness application. However, borrower payments will be required 10 months after the end of the covered period (the 8-week or 24-week period after you received the funds, depending on the date of your PPP loan). As you might imagine then, the 10-month anniversary after your covered period can therefore be considered as the practical due date.
A pair of gray areas.
There are numerous gray areas of the forgiveness rules. Two of the biggest areas of uncertainty remaining with PPP forgiveness – and what warrants not rushing to the application – are the following:
Deductibility of expenses:
Forgiven PPP loans are not taxable income, but the IRS declared that no tax deduction is allowed for an expense that is otherwise deductible if the payment of the expense results in forgiveness of a PPP-covered loan. The position is that allowing the deductibility of expenses paid with PPP funds would result in a double-dipping scenario.
Our national professional organization, the AICPA, is among hundreds of organizations that have urged Congress to allow full deductions for PPP-related business expenses. Given the severity of the pandemic’s impact on U.S. businesses, the AICPA believes Congress intended PPP expenses to be deductible. Lawmakers from both parties have voiced support for this position, but that has not yet translated into congressional action (their inaction is not a real shock).
Blanket forgiveness:
Most PPP loans were for $150,000 or less. Because the PPP loan forgiveness process is tedious and technical, members of Congress have proposed legislation that would allow for a much simpler process of streamlined forgiveness for loans under a certain amount. The commonly discussed threshold is loans of $150,000 and below, but that could change, and there’s a possibility that blanket forgiveness won’t ever be granted.
What now?
In an ideal scenario, if you received a PPP loan you won’t file for loan forgiveness until the questions surrounding tax deductibility and automatic forgiveness are resolved. Of course, we have no idea when that will be, which leads us to the next question, “What do you do now?”
Our team has followed the PPP program process and kept abreast of all the PPP rules, regulations, FAQs and congressional action since its inception. Over the next several weeks we will be contacting all of you that have received PPP loans to discuss your forgiveness plan. We will work with you to calculate the most accurate, favorable scenario for your business and accumulate the myriad of forms and reports you’ll need to have ready before submitting your application.
If you have questions in the meantime, do not hesitate to call us at (831)758-5966 and we will be happy to start your forgiveness process now.