Sen. Mitt Romney (R-Utah) speaks as bipartisan colleagues of the Senate and House gather to announce a framework for fresh coronavirus relief legislation at a news conference on Capitol Hill on Dec. 1, 2020.
Kevin Lemarque | Reuters
Senate Bulk Leader Mitch McConnell, R-Ky., quashed a new Covid-19 rescue bill hours after it was proposed on Tuesday, bar small businesses uncertain about their future.
Bipartisan lawmakers introduced a $908 billion relief package deal on Tuesday morning. The measure was dead in the water by that afternoon, when McConnell rejected it.
The measure would give birth to set aside $288 billion in aid for small businesses, including offering firms a second round of loans through the Paycheck Charge Program — a forgivable loan program established by the CARES Act this spring.
More from Smart Tax Planning:
Got a frightening letter from the IRS? How to deal
Five steps business owners can take to trim their taxes
Spend down these tax-advantaged dollars or displace them
Recipients of PPP loans are generally eligible for loan forgiveness if they use at least 60% of the proceeds to cover payroll prices. Those who fall short of the threshold may be eligible for partial forgiveness.
McConnell’s veto sends lawmakers back to the monochrome board, where they may have another opportunity to fine-tune business relief.
Merely offering more PPP scratching might not be enough for cash-strapped businesses, tax professionals said.
“You’re going to have a group of people who will be worried helter-skelter taking more PPP funding,” said Megan Gorman, founding partner of Chequers Financial Management in San Francisco.
“They haven’t gotten the control they need for the first round, and they’re figuring out whether they’ll be able to make it through,” she said.
Constantly changing counselling
Sen. Angus King (I-Maine) holds a chart as bipartisan members of the Senate and House gather to announce a framework for unusual coronavirus relief legislation at a news conference on Capitol Hill on Dec. 1, 2020.
Kevin Lemarque | Reuters
Aside from present a second draw for PPP loans, the proposal that was quashed on Tuesday would have ensured recipients of aid won’t be taxed on the pre-eminent round of forgivable loans, and it offers simplified forgiveness for loans under $150,000, said Rep. Josh Gottheimer, D-N.J., on Tuesday morning at a host conference on Capitol Hill.
He was among the lawmakers working on the proposal.
More than 5 million PPP loans — $525 billion in endowing — were approved earlier this year.
The program has run into its share of difficulties over the course of the year, incorporating the steady rollout of guidance from Treasury and the Small Business Administration in the form of “frequently asked questions.”
Another bone of contention has been whether limited businesses can deduct expenses that are covered by the loan.
The position at the Treasury and IRS has been that since forgiveness of the advance is tax-free, borrowers can’t deduct expenses. On the other hand, lawmakers have proposed legislation that will permit the write-offs.
Moneys and the IRS said last month that business owners who “Cold feet from prospective borrowers
Even still small businesses could use the funding, they’re skittish about taking aid that will result in more convolution and uncertainty.
“They’re going to have post-traumatic stress disorder from that first round,” said Tony Nitti, CPA, a husband in RubinBrown’s tax services group in Denver.
“If they clean up the problems from the first round, there will be diverse interest from borrowers,” he said. “If people go into it knowing there’s blanket forgiveness for loans under $150,000, you’re succeeding to see a lot of people sign up for this.
“But nobody wants to go through this process that we went through again,” Nitti explained.