More COVID-19 Relief for New Jersey and Pennsylvania Businesses
Update: On December 27, 2020, President Trump signed into law the Consolidated Appropriations Act, 2021 (H.R. 133).
Earlier today, Congress approved and released in bill form, The Emergency Coronavirus Relief Act of 2020 (the Act), which provides $900B in long-awaited economic stimulus and relief to both businesses and individuals. The news is a welcome relief for many companies struggling to cope with the sharp increase in infections, more restrictive operating guidelines, and continued financial challenges. While the Act’s specific language has yet to be released by Congress, critical aspects of the legislation have been widely promoted. These include additional funding for the Paycheck Protection Program (PPP), a new tax deduction for business meals, extension of the Employee Retention Tax Credit, and new funding to help schools cover HVAC and other air quality upgrades. Unfortunately, both corporate liability protections and additional aid to state and local governments were not included.
To help clients, prospects, and others, we have provided a summary of key provisions of the pandemic relief package below.
- PPP Expansion – The eligibility criteria for PPP loans have been expanded to allow broader access to non-profit organizations, to include 501(c)(6) organizations, small businesses, and independent restaurants. Also, funds have been allocated to very small businesses and community-based lenders, and minority-owned banks. Finally, there is language that ensures churches and other religious institutions can receive PPP loans.
- PPP Expense Deductibility – In late November, the IRS issued Revenue Ruling 2020-27, which asserted that loan expenses could not be deducted for borrowers who received forgiveness. This was the second time the IRS asserted this position despite prior Congressional action, which indicated the opposite. To resolve the concern, the Act directly maintains that forgiven loan expenses will be deductible.
- PPP Simplified Forgiveness Application – PPP loans under $150,000 will be able to use a new simplified one-page application for forgiveness. SBA cannot request additional materials unless necessary to substantiate revenue loss requirements or satisfy relevant statutory or regulatory requirements. Borrowers are required to maintain records substantiating forgiveness for three years. Also, businesses that received PPP loans will not have to reduce the PPP loan by any EIDL grant they received when applying for forgiveness.
- EIDL Expansion – There is $20B allocated to the Economic Injury Disaster Loan (EIDL) program to fund targeted grant programs.
- Rental Assistance – Many businesses have struggled to pay their overhead, which includes rent. There is $25B allocated to rental assistance and an eviction moratorium extension.
- Relief for Movie Theatres – Since the pandemic started, movie theatres have remained mostly at reduced capacity or closed to comply with local government orders. AMC recently warned investors it could entirely run out of money in 2021. To help both movie theaters and cultural institutions, the Act provides $15B in aid, loans, and grants.
- 100% Meal Expense Deduction – This valuable deduction had been available to business owners for years until it was limited in the Tax Cuts and Jobs Act of 2017. This has been changed, and businesses will claim a 100% deduction for qualifying expenses starting 2021. The deduction was brought back to drive new foot traffic to struggling restaurants.
- School Funding – There will be $82B set aside to help colleges, universities, and other schools reduce the risk of COVID-19 infections (new HVAC systems, etc.) to ensure classrooms can reopen. It is important to note that $2.75B has been set aside expressly for private K-12 schools.
- Transportation Funding – The Act also includes $45B in targeted transportation funding, including additional funds for airline employees, highway maintenance and construction, inter-city buses, airports, and Amtrak.
Klatzkin’s team of professionals are closely monitoring developments regarding the bill’s progress. If it becomes law, we will work as quickly as possible to provide additional details.
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The second round of economic relief is welcome news to businesses in Mercer County, New Jersey and, Bucks County, Pennsylvania. The expansion of lending programs, deductibility of PPP expenses, and targeted relief is the good news many need at the end of a very trying year. If you have questions about the information outlined above or need assistance with a PPP forgiveness, tax, or accounting issue, Klatzkin can help. For additional information, click here to contact us. We look forward to speaking with you soon.
©2020 Klatzkin & Company LLP. The above represents our best understanding and interpretation of the material covered as of this post’s date and should not be construed as accounting, tax, or financial advice. Please consult your tax advisor concerning your specific situation.