2020 Year-End Tax Guide

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THE MARCUM 2020 YEAR-END TAX GUIDE

Paycheck Protection Program Updates

To combat the unparalleled economic effects of the coronavirus, Congress enacted three major legislative initiatives in March 2020. The most significant of these was the Coronavirus Aid, Relief, and Economic Security (CARES) Act, passed into law on March 27, 2020. The CARES Act laid the groundwork for the Paycheck Protection Program (PPP), which was allocated $669 billion to help keep 5.5 million small businesses afloat. This article reflects on the creation and subsequent expansion of the PPP program, dissects major concerns and provides an update on the loan forgiveness process.

CREATION OF THE PAYCHECK PROTECTION PROGRAM

The PPP allowed businesses to borrow up to $10 million under the Small Business Administration (SBA) 7(a) loan program. The most attractive aspect of the loan: forgiveness. If used strictly to cover payroll, mortgage interest, rent, and certain utilities during the covered period, and within the correct percentages, the loan could be forgiven. The CARES Act was hurried legislation and left many questions unanswered in its text. To assist lenders and borrowers, the SBA and Treasury have since issued numerous FAQs and interim regulations concerning the loan application and loan forgiveness application processes. Unfortunately, the frequent updates and course corrections have caused business owners confusion, frustration, and whiplash at the sheer speed and 180° turns. Further complicating the loan process, banks required different paperwork to be submitted along with the standard SBA loan application, and interpreted allowable expenses differently. Some banks gave their larger customers white-glove service while seemingly brushing off applicants for smaller loans. Internet-only alternative lenders, such as Lendio and Kabbage, grew in popularity for their ease of use.