Senator Mitt Romney (R-Utah) will speak when bipartisan members of the Senate and House gather to announce the framework for fresh corona virus clearance legislation at a press conference on Capitol Hill on December 1, 2020.
Kevin Lemarque | Reuters
Senate Majority Leader Mitch McConnell, R-Ky. Hours after it was introduced on Tuesday, it destroyed the new Covid-19 rescue bill, making small businesses uncertain about their future.
The bipartisan MPs introduced a $ 908 billion aid package on Tuesday morning. The measure was dead in the water that afternoon when McConnell rejected it.
The measure would have set aside $ 288 billion in support for small businesses, including offering businesses a second tranche of credit through the Paycheck Protection Program – a forgivable loan program created by the CARES Act in the spring.
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Beneficiaries of PPP loans are generally eligible for loan repayment if at least 60% of the proceeds are used to cover wage costs. Those who do not meet the threshold may be eligible for partial forgiveness.
McConnell’s veto sends lawmakers back to the drawing board, where they have another opportunity to fine-tune business facilitation.
Tax experts say simply offering more PPP financing may not be enough for businesses in a cash situation.
“There will be a group of people who will be worried about further PPP funding,” said Megan Gorman, founding partner of Checkers Financial Management in San Francisco.
“They haven’t been given the guidance they need for the first round and they’re figuring out if they’ll be able to move on,” he said.
Constantly changing guidance
Senator Angus King (I-Maine) is holding a chart as Senate and House bipartisan members gather to announce the framework for fresh corona virus clearance legislation at a press conference on Capitol Hill on December 1, 2020.
Kevin Lemarque | Reuters
In addition to offering a second tranche of PPP loans, the proposal, which was repealed on Tuesday, would have ensured that grant recipients would not be taxed on the first tranche of forgivable loans and would offer a simplified forgiveness for loans under $ 150,000, MP said Josh. Gottheimer, DN.J., at a press conference on Capitol Hill on Tuesday morning.
He was among the legislators working on the proposal.
More than 5 million PPP loans – $ 525 billion in financing – were approved earlier this year.
The program encountered a number of difficulties during the year, including ongoing guidance from the Treasury and the Small Business Administration in the form of “frequently asked questions”.
The other contentious issue was whether small businesses could deduct the expenses covered by the loan.
The position of the Treasury and the IRS was that because the credit waiver is tax-free, borrowers cannot deduct expenses. On the other hand, lawmakers have proposed legislation that allows for descriptions.
The Treasury and the IRS said last month that owners who “reasonably believe” in forgiving their PPP loan cannot deduct the costs.
All of this has caused more confusion for businesses: If they can’t deduct expenses, they can increase their income on paper and increase their tax bills, tax experts said.
New framework lawmakers unveiled on Tuesday mention “deductibility,” but there are no details on how this would work for small businesses.
Cold feet from prospective borrowers
Although small businesses could benefit from funding, they are adept at using support, which becomes more complex and uncertain.
“They have been suffering from post-traumatic stress disorder since this first round,” said Tony Nitti, partner at CPA, RubinBrown’s tax group in Denver.
“If the problems are cleared from the first round, there will be more interest from borrowers,” he said. “If people go in knowing that forgiveness is common for loans under $ 150,000, a lot of people will see it.
“But no one wants to take over this process that we’ve been through again,” Nitti said.