Employers should be preparing now for raids by ICE (U.S. Immigration and Customs Enforcement.)
Inflation and Recession Ahead
The combination of Trump's policies of high tariffs together with mass deportation of undocumented immigrants, will create a vise effect, resulting in inflation, probably together with recession, and a general mess in the U.S. economy.
Prepare now for the Great Trump Tax Shift
The Trump proposal is estimated to raise another $524 billion. According to the Peterson Institute for International Economics, the additional cost for a middle-income household would be about $1,700.
New federal report for many small businesses carries big potential penalties
The Federal government will require a new report for small businesses, called the Beneficial Ownership Information Report under the Corporate Transparency Act, effective January 1, 2024.
Consolidated Appropriations Act makes more PPP loans available
The Consolidated Appropriations Act of 2021 expanded expenses qualifying for Paycheck Protection Plan (PPP) loans and made "second draw loans" available.
Some simplification for $50K or less PPP loans
The requirement to reduce debt forgiveness for reductions of full-time equivalent employees or reductions in salaries or wages has been waived for these borrowers.
More Paycheck Protection Program Loan guidance from SBA
The SBA has issued PPP loan forgiveness guidelines for owner employees, home office expenses, subleased space and related party rent expenses
Paycheck Protection Loan application deadline extended
President Trump signed legislation (S.4116) on July 4, 2020 extending the application deadline for Paycheck Protection Program (PPP) loans from June 30, 2020 to August 8, 2020.
Paycheck Protection Program loans were enacted as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act.)
Certain businesses can apply for up to $10 million. If certain requirements are met, the loan principal will be forgiven, tax free. At this time, expenses paid using the loan proceeds are not tax deductible.
At this time $130 billion of $660 billion allocated hasn’t been committed for loans, yet.
If you haven’t been approved for a PPP loan and would like to apply, see your banker.
SBA issues updated PPP loan rules and forms
The SBA has issued new forms and updated its Paycheck Protection Program loan “final rules” for the Paycheck Protection Program Flexibility Act of 2020, enacted on June 5, 2020.
One of the forms is a new one, simplified Form 3805EZ.
Here are URLs for the final rules and forms.
https://home.treasury.gov/system/files/136/PPP-IFR–Revisions-to-the-Third-and-Sixth-Interim-Final-Rules.pdf
https://home.treasury.gov/system/files/136/3245-0407-SBA-Form-3508-PPP-Forgiveness-Application.pdf
https://home.treasury.gov/system/files/136/PPP-Loan-Forgiveness-Application-Instructions_1_0.pdf
https://home.treasury.gov/system/files/136/PPP-Forgiveness-Application-3508EZ.pdf
https://home.treasury.gov/system/files/136/PPP-Loan-Forgiveness-Application-Form-EZ-Instructions.pdf
Under the Act, the “covered period” was extended from the eight-week period beginning on the date of the origination of a covered loan to 24 weeks. Borrowers that received PPP loans before June 5, 2020 may elect to use the original eight-week period.
The forgiveness requirement to use at least 75% of loan proceeds for payroll costs was reduced to 60%.
The forms reflect that a pro-rated forgiveness can apply if there is a reduction of the employee count by the end of the covered period.
The maximum payroll costs, including salary, wages and tips, eligible for the forgiveness for an employee is $46,154 with the 24-week covered period and $15,385 with the eight-week covered period.
The owner compensation replacement is calculated based on 2019 net profit. The amounts are 2.5/12 of 2019 net profit, up to $20,833, for a 24-week covered period and 8/52 of 2019 net profit, up to $15,385, for an eight-week covered period. Amounts for which a credit is claimed for qualified sick leave equivalent amount and qualified family leave equivalent amount aren’t eligible for forgiveness.
Remember up to 25% of loan proceeds used to pay otherwise tax deductible interest on mortgage obligations or personal property incurred before February 15, 2020, otherwise tax deductible rent payments on lease agreements in force before February 15, 2020 and otherwise tax deductible utility payments under service agreements dated before February 15, 2020 is eligible for forgiveness under the eight-week covered period scenario. Up to 40% of loan proceeds used to pay the same expenses is eligible for forgiveness under the 24-week covered period scenario.
Many more borrowers should be able to qualify for exclusion of their PPP loans under the new rules.
Paycheck Protection Program Loan relief passed by Congress
The Senate passed the Paycheck Protection Program Flexibility Act of 2020 (H.R. 7010), which was previously passed by the House of Representatives on June 3, 2020. President Trump is expected to sign the legislation.
Here is a URL for the text of H.R. 7010. https://www.congress.gov/bill/116th-congress/house-bill/7010/text
The legislation relaxes the requirements to qualify for forgiveness of Paycheck Protection Program (PPP) loans.
Here is a summary of key points:
- The time in which businesses that receive a PPP loan may count their expenses that qualify for loan forgiveness is extended from 8 to 24 weeks, and the period ends no later than December 31, 2020.
- Businesses that received a PPP loan before the date of enactment may elect to keep an eight-week period to count expenses that qualify for loan forgiveness. (A borrower might want to make this election because it paid the required expenses and can apply for forgiveness sooner.)
- The portion of the loan proceeds used to pay payroll costs is decreased from 75% to 60%. Under the language in the Act, if the business doesn’t use at least 60% of the loan funds for payroll costs, the loan doesn’t qualify for forgiveness. Congress is expected to pass a technical correction later to permit a sliding scale forgiveness if the 60% threshold isn’t met. This means up to 40% of loan proceeds may be used to pay rent expenses, qualified mortgage interest and utilities and still qualify for full loan forgiveness.
- Borrowers may use the earlier of the date 24-weeks after receiving the loan or December 31, 2020 to meet the requirement to restore their workforce and wages to pre-pandemic levels required for full forgiveness.
- Two new exceptions allowing borrowers to achieve full PPP loan forgiveness even if they don’t fully restore their workforce were included in the legislation. (1) The borrower was unable to find qualified employees. (2) The borrower was unable to restore business operations to February 15, 2020 levels due to COVID-19 related operating restrictions.
- New borrowers have five years to repay the unforgiven portion of the loan instead of two. Those who received loans before the date of enactment may extend the repayment term of the unforgiven portion of their loans from two to five years, if the lender and borrower agree. The interest rate remains 1%.
- Under the CARES Act, businesses that received a PPP loan didn’t qualify for delayed payment of employer taxes. That prohibition is repealed under the Paycheck Protection Program Flexibility Act.
This legislation should enable many more PPP loan borrowers to qualify for loan forgiveness. The Small Business Administration will have to update the forms that it just issued to apply for loan forgiveness.