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House to Vote on Bill Expanding Benefits of PPP

Posted on May 21, 2020

The House is scheduled to vote the week of May 25 on legislation to extend the loan forgiveness period of the Paycheck Protection Program (PPP) and allow businesses that take loans under the program to defer payroll taxes.

House Speaker Nancy Pelosi, D-Calif., said at a press conference May 20 that the House will take up a bipartisan measure that would expand the program to capture more businesses. Pelosi said the House wants to approve the measure quickly and send it to the Senate.

The Paycheck Protection Program Flexibility Act (H.R. 6886) was announced May 11 by Reps. Chip Roy, R-Texas, and Dean Phillips, D-Minn. It would extend the PPP loan forgiveness period to 24 weeks and eliminate the 25 percent cap on non-payroll expenses for the purpose of calculating forgiveness. It also would ensure full access to payroll tax deferment for businesses that take PPP loans.

The bill has the backing of several large business organizations, including the American Hotel and Lodging Association and the National Restaurant Association.

Under the PPP, created by the Coronavirus Aid, Relief, and Economic Security (CARES) Act (P.L. 116-136), the Small Business Administration provides loans to small businesses that can be forgiven on a tax-free basis as long as a specific portion is used for payroll costs during the covered period, which is eight weeks from the receipt of the loan.

Despite the House’s urgency, the Senate isn’t expected to take up the measure until June, after its Memorial Day recess — a delay that irked some senators, including Sen. Cory Gardner, R-Colo.

Others were doubtful that the bill would be considered as a stand-alone measure. Sen. Marco Rubio, R-Fla., one of the PPP’s architects, said he supports extending the loan forgiveness period but is concerned that other provisions could be attached to the bill.

The measure could open the door to further changes and make costs associated with the PPP tax deductible. Such a provision would have the backing of several Senate Finance Committee members who have complained that the IRS misinterpreted their intent when releasing guidance (Notice 2020-32, 2020-21 IRB 837) preventing companies from deducting those costs.

The House included a provision providing for the deductibility of PPP loan costs in the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act (H.R. 6800), which it passed May 15. However, the Senate isn’t expected to take that bill up in its current form.

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