After the initial passing of the CARES Act and subsequent extensions there were daily and sometimes hourly changes to report. In the past 6 weeks it has largely been quiet with few new or major noteworthy updates for organizations and businesses. However, there are a few quick updates to pass along:
HHS Provider Relief Fund Extended – Last Friday, HHS extended the due dates of its Provider Relief Funds. The Second Chance for General Distribution Portal, which is available to Medicare providers that received a first payment in April from the General Distribution and missed the June 3rd deadline for a secondary payment that would bring their funding up to 2% of annual revenues. Starting the week of August 10th, HHS will provide another opportunity for providers to receive the second payment with a deadline of August 28th. In addition, the Medicaid/CHIP funding for providers who did not receive funding as part of the General Distribution was similarly extended through August 28th. This funding is also 2% of annual revenue and is available for providers that bill Medicaid; including OPWDD funded agencies, EI providers, clinics, etc.
PPP Loan Updates – there have been limited updates since the last round of updates in June 2020 related to PPP loans. Many borrowers still have questions, such as with the amount of includable retirement contributions, eligibility of certain insurance benefits (dental and/or vision) and nonprofit unemployment contributions. There have been rumors of a large update coming for over a month now that may or may not potentially address these issues, but nothing new has come out since June 25th, 2020.
PPP Forgiveness Applications – many lenders have begun the process of informing borrowers that at some point in August 2020 they may begin to accept applications for forgiveness on PPP Loans; however, few banks at this point are actually accepting the applications.
Applications for forgiveness are due within 10 months after the end of a borrowers covered period. For nearly all borrowers, this would mean 24 weeks after the date of the loan origination, which for the earliest PPP loan recipients would be sometime in October 2020 when the covered period ends and therefore the application would be due by August 2021 the latest. While some borrowers may still chose to elect 8 weeks (and as a result their covered period would be complete) it is likely more beneficial for most borrowers to use the full 24 weeks in order to maximize your forgiveness potential.
Right now, the earliest “magic” date on the calendar would be August 10th, which is when the SBA has indicated they anticipate their portal being open for banks to submit loan forgiveness. The SBA has indicated that any further changes to the program would delay this further. It is also possible that the SBA may not be ready by this date and it could be pushed back.
For most borrowers, it is likely that time is on their side and there is no need to rush into a forgiveness application. Throughout the PPP process we have seen changes occur fairly frequently and many of them have been in the borrower’s favor and it is likely with more time, the process will become easier for borrowers. While many want to just get the forgiveness done and complete (understandably so) it is likely that patience by borrowers will be rewarded.
Additional Economic Stimulus – Both the Republicans (who debuted a bill last week) and Democrats (HEROES Act from May 2020) have shown interest in a second stimulus package; however, it appears the sides are far apart at this time as to what this package should cover for employers, businesses, nonprofit organizations, and individuals. Until the law is passed by both the House and Senate, these are nothing more than proposals and not law and should not be relied on or anticipated by taxpayers. That said, it is likely and hopeful that any deal will have
a. Expansion of Employer Tax Credits, including ability to claim if an employer obtained a PPP loan
b. Streamlined PPP forgiveness procedures
c. Tax Credits or PPP Eligibility for office personal protective equipment for employers
Interestingly, despite the initial outcry from drafters, neither the House nor Senate bills addressed the ability for PPP Loan Borrowers to deduct the expenses. The IRS ruled in April 2020 after the passage of the bill that since the income from the PPP Loan is tax exempt, the underlying expenses are nondeductible. Any change to this position will likely have to come from Congress.
As we enter the last part of the year and the earliest loans begin to reach the stage where applications for forgiveness are possible and advisable, we will begin to start assisting borrowers with this process. Right now, we have a very valuable asset in time, and using this time to our advantage will be of interest to all organizations.
Edward McWilliams, CPA
Ed is a Partner in the firm’s tax and business advisory practice focusing on providing services to middle market private companies across different industries as well as to early stage startups. Ed has over a decade of experience providing tax and business consulting services to these companies of different sizes and across different industries, bringing a broad and diverse knowledge base and strategic solutions to the many complex issues that businesses face.
Kenneth R. Cerini, CPA, CFP, FABFA
Ken is the Managing Partner of Cerini & Associates, LLP and is the executive responsible for the administration of our not-for-profit and educational provider practice groups. In addition to his extensive audit experience, Ken has been directly involved in providing consulting services for nonprofits and educational facilities of all sizes throughout New York State in such areas as cost reporting, financial analysis, Medicaid compliance, government audit representation, rate maximization, board training, budgeting and forecasting, and more.