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Bipartisan Group's Outline Offers PPP Expense Deduction

Posted on Dec. 10, 2020

A new bipartisan outline would continue to help small businesses affected by the pandemic by allowing them to deduct expenses paid for with loans from the Paycheck Protection Program.

The Bipartisan Emergency COVID Relief Act of 2020, released by a group of Senate and House lawmakers December 9, sets out the deductibility of business expenses paid for with the proceeds of PPP loans. It builds on a framework announced last week that also intended to make PPP loan expenses tax deductible.

The outline also would allow businesses to receive a second round of loans if they can show a 30 percent revenue loss in any quarter of 2020. Business groups such as the U.S. Chamber of Commerce and the National Restaurant Association have been lobbying for months for PPP deductibility to be included in another relief package, but they also want to see the revenue loss percentage lowered.

Lawmakers initially suggested that businesses should experience a 50 percent revenue loss, which was later lowered to 35 percent. A relief package pitched by Senate Majority Leader Mitch McConnell, R-Ky., would drop the figure to 25 percent, as suggested by the business groups.

The lawmakers’ outline would also assist state, local, and tribal governments with $160 billion in funding and indicates good-faith negotiations regarding liability protections.

Despite finding support with Senate Minority Leader Charles E. Schumer, D-N.Y., and House Speaker Nancy Pelosi, D-Calif., the measure continues to be rejected by McConnell and several other Senate Republicans, who insist that states and localities don’t need further funding. McConnell also has made liability protections for small businesses a red line in negotiations despite opposition from Democrats.

Remote Worker Tax Relief

Although the relief bill offered by the bipartisan group didn’t mention relief for traveling workers who are taxed in multiple jurisdictions, Senate Majority Whip and Finance Committee member John Thune, R-S.D., said a solution should be found before the end of the year.

Thune didn’t say whether he would like the Remote and Mobile Worker Relief Act (S. 3995) included in a must-pass spending bill, but with time running out, the only way Congress can address the issue is by attaching it to a COVID-19 relief package.

The measure proposed by Thune and fellow Finance Committee member Sherrod Brown, D-Ohio, would clarify how remote workers should be taxed during the pandemic.

The measures would exempt workers from filing income tax returns in a state where they worked for 30 or fewer days. This would be extended to 90 days during the COVID-19 pandemic. Each state mandates different reporting requirements based on a worker’s stay, which is what lawmakers on Capitol Hill want to streamline. “Navigating different states’ requirements can make for a miserable tax season for mobile workers,” Thune said in floor remarks December 9.

Building on a previous version of a similar bill (S. 604), the new legislation also dictates that the taxing jurisdiction of an employee is that of the employer regardless of where the employee is located while working remotely during the pandemic. It also clarifies that no nexus or minimum contact is created by an employee working in a state for an out-of-state business during the pandemic.

But bills to help mobile workers haven’t found much success in Congress. Thune blamed states like New York, that have aggressive tax reporting requirements, for that. Schumer has often been blamed for not advancing the bill, and Thune pushed the minority leader to back it. “It would be wonderful to see the Democrat leader, who of course hails from New York, speak up to endorse remote and mobile worker relief,” Thune said.

Schumer has not been the only New Yorker to stand in the way of the measure. House Judiciary Committee Chair Jerrold Nadler, D-N.Y., has also lobbied against prior mobile worker bills, arguing that they would hurt New York’s revenue stream.

The House version of the Mobile Workforce State Income Tax Simplification Act of 2020 (H.R. 5674), introduced by Henry C. “Hank” Johnson Jr., D-Ga., hasn’t yet received a hearing in the Judiciary Committee.

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