PPP Forgiveness Update and Proposed Legislation

It has been close to a month since we have sent out substantive information to you relating to the PPP Loan program. While very little has come out relating to PPP loans and PPP loan forgiveness over that time, we did want to bring you up to speed on a few items.

When will banks begin accepting forgiveness applications? This question has been ever-present in our minds over the past month. While the question as to when your specific bank will begin accepting loan forgiveness applications is still present, the SBA did provide a notice to banks on July 23 which specified that banks will have a platform for forgiveness submissions available to them on August 10. Be on the lookout for communications from your specific bank relating to timing and processes for loan forgiveness application submissions as August 10 approaches. We will be ready to help you with loan forgiveness applications when the time has arrived.

What is the status of the PPP forgiveness taxability discussion? At this time, the answer to this question has not changed. Currently, the loan forgiveness will not be taxable, but the expenses from which the forgiveness is generated will not be deductible. A quick example of how this plays out is below. There continues to be a push from lawmakers to allow for the expenses to be deducted, but currently no laws have been passed. There were rumors that addressing taxability of PPP forgiveness would be part of the new Senate stimulus package (a preliminary version of the HEALS Act was released yesterday ), but taxability of PPP proceeds does not appear to be included with preliminary version. Whether it gets added to the HEALS Act as time goes on or is addressed in some other manor remains to be seen.

Will there be a second round of government stimulus, when will it be, and what will it look like? Lawmakers have continued to say additional forgivable loans for business are coming. As mentioned above, Senate republicans unveiled their proposed HEALS Act yesterday. The proposed HEALS Act would allow for a second draw of PPP funds capped at $2 million for employers with less than 300 employees that have experienced at least a 50% reduction in gross revenue. The program, as it currently is written, is set up very similarly to the current PPP forgivable loans. In addition to a second round of forgivable loans, the HEALS Act also covers stimulus checks to individuals, expansion of payroll tax credits, 100% deductibility of 2020 meals, and unemployment compensation restructuring.

Will PPP Loans less than a specific dollar threshold be granted automatic forgiveness? As recently as July 17, Treasury Secretary Steven Mnuchin has expressed support of automatic forgiveness for smaller PPP loans. This topic has been rumbling for weeks and we continue to wait to see if it will occur. This topic does not appear to be addressed in the HEALS Act.

We mention the HEALS Act in multiple places above. This Act has not passed the Senate, Congress, or been signed by the President, so it has a ways to go before becoming law. The Act as proposed appears to be facing a good deal of resistance. Lawmakers in Washington appear to be unified in their acknowledgement that they need pass something, but have a broad array of opinions on how to most appropriately allocate funds and the most appropriate amount of funds to allocate.