Businesses will be able to deduct expenses paid for with loans from the Paycheck Protection Program, according to the most recent bipartisan relief bill.
The Bipartisan Emergency COVID Relief Act of 2020, released by a group of Senate and House lawmakers December 14, sets out the deductibility of business expenses paid for with the proceeds of PPP loans.
The group of lawmakers, led by Sens. Joe Manchin III, D-W.Va., and Susan M. Collins, R-Maine, introduced two bills, separating contentious provisions from those with overwhelming support.
Under the first bill, which is likely to garner bipartisan support in both chambers, unemployment assistance would be extended for 16 weeks with a $300-per-week boost. It would also create a second round of PPP loans for small businesses and include section 501(c)(6) organizations like business chambers. The measure would allow businesses to receive a second round of loans if they can show a 30 percent revenue loss in any quarter of 2020.
Despite opposition from Treasury, the bill would make PPP loan expenses tax deductible. This provision has the support of Republicans and Democrats in both chambers. Last week, 170 lawmakers — led by House Ways and Means Committee members George Holding, R-N.C., and Drew A. Ferguson IV, R-Ga., and Rep. Lizzie Fletcher, D-Texas — asked House leaders to include a fix to clarify that recipients of forgivable PPP loans can claim normal business expense deductions.
The second bill includes controversial provisions that have derailed past negotiations, such as liability protections for businesses. Manchin was the only Democrat to support such language. Similarly, Republicans stood firm against providing states with more aid.
The National Federation of Independent Business praised the bipartisan compromise, saying it would help small businesses avoid a surprise tax increase by restoring tax deductibility, but it urged both sides to find a solution to liability protections.
No Cash for Taxpayers
While Senate Majority Leader Mitch McConnell, R-Ky., continues to push for the inclusion of liability protections, a pair of senators want to see another round of stimulus checks included in the relief package. Sens. Bernie Sanders, I-Vt., and Josh Hawley, R-Mo., introduced an amendment last week that would be attached to a stimulus package providing qualifying taxpayers with a $1,200 payment similar to the one created by the Coronavirus Aid, Relief, and Economic Security Act (P.L. 116-136).
Finance Committee ranking member Ron Wyden, D-Ore., said in a December 14 statement that although he supports the bipartisan package, “I wanted to see relief checks for working folks, and will continue to push for them.”
Correction, December 15, 2020: Collins’ party affiliation has been corrected.