News & Resources

Congress approves federal deductibility of PPP expenses and other tax incentives

Congress has reached agreement and passed another round of stimulus and President Trump is expected to sign the bill.
 
 Included in that bill are two pieces of very welcome news for Paycheck Protection Program Loan (“PPP”) recipients, as follows:
 
  • PPP loans forgiven are not taxable income but the expenses that give rise to forgiveness are tax deductible. So businesses get the best of both worlds, as Congress originally intended.
    • The bill language reads in part that “no deduction shall be denied or reduced, no tax attribute shall be reduced, and no basis increase shall be denied, by reason of the exclusion from gross income”
    • Keep in mind that states may or may not apply the same rule.
  • PPP loan recipients of $150,000 or less are granted automatic loan forgiveness.
    • Within 24 days, the SBA is expected to release guidance on a required one page certification that eligible recipients will need to complete.
A few other highlights of the bill that are tax related include, but are not limited to:
  • The federal work opportunity tax credit for hiring individuals in certain disadvantaged categories that was expiring on 12/31/20 is extended through 12/31/25.
  • For 2021, individuals who don’t itemize their deductions, and claim the standard deduction, are permitted a charitable deduction of up to $300 ($600 in the case of a joint return).
  • Business meals for food or beverages provided by a restaurant in 2021 and 2022 are deductible at 100% vs. 50%. The “provided by” reference could imply that the provision is limited to on site dining. 
In a very challenging year, the above is welcome news for those businesses who are impacted.
Tax