Stimulus Bill Enables Businesses to Deduct PPP Expenses
With Congress in the final throes of its work for the year, this week President Trump signed into law a $1.4 trillion omnibus government funding bill and a $900 billion COVID-19 stimulus bill. The two measures contain a number of provisions important to the trucking industry, including the ability for businesses to deduct expenses using Paycheck Protection Program loans from their tax liability, which ATA heavily advocated for, as well as a number of tax extenders.
More drama ahead on Monday, as Democrats will push for the $2,000 individual payments that Trump wants. https://t.co/vzUj1rQb4P— Transport Topics (@TransportTopics) December 28, 2020
Unfortunately – although not entirely unexpected – the final package does not include the litigation liability protections we were seeking. Because bipartisan agreement could not be reached during last-minute negotiations on liability protections and financial assistance for states and local governments, both of those provisions fell out of the final package. However, Senate Leader Mitch McConnell made clear that liability protections will continue to be a top priority for Senate Republicans in negotiating any further COVID relief legislation.
Below is summary of key provisions included in the final package:
Paycheck Protection Program Extension and Expansion
The bill reauthorizes first and second draws from the Paycheck Protection Program, adding $284 billion to the popular small business lending program and extending it through March 31, 2021. The maximum loan size for any new PPP loan will be $2 million. The bill also allows businesses to deduct expenses associated with their forgiven PPP loans.
Hard-hit small businesses and non-profits will be eligible for a second PPP forgivable loan if they have 300 or fewer employees and can demonstrate a loss of 25% of gross receipts in any quarter during 2020 when compared to the same quarter in 2019.
Additional qualifying expenses for PPP loan forgiveness now include:
- Computing software to enable remote work for employees;
- Property damage from public unrest earlier this year;
- Supplier costs of essential goods or services in effect at the time the PPP loan was applied for; and
- Costs related to PPE and adaptive investments made to comply with local government mandates.
As mentioned above, tax deductions are included for expenses paid with proceeds of a forgiven PPP loan, effective as of the date of enactment of the CARES Act in March 2020, and applicable to all subsequent PPP loans moving forward.
COVID-19 Relief and Assistance
The legislation targets continued COVID relief efforts to support those most impacted by the virus. This includes an additional round of direct economic impact payments, providing a one-time $600 check for individuals making up to $75,000 per year, and $1,200 for couples making up to $150,000 per year. Additionally, the package includes enhanced unemployment benefits, greater resources for schools, child care and broadband and nearly $9 billion to accelerate the distribution of the COVID vaccine.
SBA Debt Relief Payment Extensions
This bill also provides $3.5 billion to resume debt relief payments of principal and interest on small business loans guaranteed by the SBA under the 7(a), 504 and microloan programs. All borrowers with qualifying loans approved by the SBA prior to the CARES Act will receive an additional three months of P&I, starting in February 2021. Going forward, those payments will be capped at $9,000 per borrower per month.
After the three-month period described above, borrowers considered to be underserved—namely the smallest or hardest-hit by the pandemic—will receive an additional five months of P&I payments, also capped at $9,000 per borrower per month. SBA payments of P&I on the first six months of newly approved loans will resume for all loans approved between February 1 and September 30, 2021, also capped at $9,000 per month.
- $10 billion in road and bridge funding to invest in our nation’s crumbling infrastructure
- $18 billion in transportation funding to provide relief to various passenger transportation sectors that are struggling due to depressed rates of ridership
- A provision that expands the time period in which FMCSA grant funds can be expended by states if they’ve faced a hardship because of COVID-19
- An extension of the CARES Act provision that allowed NHTSA to waive or postpone some requirements for states receiving highway safety grants, if needed, due to COVID-19. DOT has taken the position that the CARES Act language only applies to FY20, and the agency needs this extension to be able to grant similar relief to states in FY21.
Expiring Tax Provisions / “Tax Extenders”
The bill extends and expands the refundable Employee Retention Tax Credit that was established in March by the CARES Act. The extension of this tax credit, through July 1, 2021, will help keep additional U.S. workers on payroll and more small businesses and nonprofits across the country afloat.
- Increases the credit rate, from 50% to 70%;
- Raises the limit on per-employee creditable wages from $10,000 for the year to $10,000 for each quarter;
- Expands eligibility for the credit by reducing the required year-over-year decline in gross receipts from 50% to 20%; and
- Modifies the threshold for treatment as a ‘large employer’ by increasing the 100-employee delineation for determining the relevant qualified wage base to employers with 500 or fewer employees.
Other business tax credits of potential interest include the Work Opportunity Tax Credit (up to $9,600 per employee for hiring and retaining people for certain disadvantaged groups) and the employer tax credit for providing paid family and medical leave, which would be extended for five years.
The bill also provides a one-year extension for the following existing alternative fuel tax credits:
- Fuel cell motor vehicles (credit amount based on vehicle weight for medium- and heavy-duty vehicles);
- Alternative fuel refueling property (30% of the cost of the property, subject to certain caps); and
- Alternative fuel and alternative fuel mixtures ($0.50 per gallon).
The legislation includes a technical corrections package to the United States-Mexico-Canada Agreement, which restores NAFTA treatment to Foreign Trade Zones, allows for refunds of the Merchandise Processing Fee and reinstates the North American Development Bank’s status.
The legislation also includes the bipartisan Water Resources Development Act of 2020, which provides the authority to appropriate $2 billion in additional funds annually for harbor maintenance needs from the existing balance in the Harbor Maintenance Trust Fund. When combined with a previously enacted provision from the CARES Act, WRDA will provide for expenditures of approximately $3.5 billion to $4 billion in annual expenditures for port maintenance.
The package extends the authorization of the Diesel Emissions Reduction Act program, an EPA grant program to improve air quality by reducing diesel emissions, through Fiscal Year 2024 at $100 million annually.
Finally, the bill also provides USDA's Animal and Plant Health Inspection Service with up to $635 million through the end of FY22 to cover the funding shortfall in the Agriculture Quarantine Inspection program caused by the global COVID-19 pandemic.