Fall Paycheck Protection Program Update

November 2, 2020

This is to provide a quick update regarding Paycheck Protection Program (PPP) loan forgiveness applications and the current status of legislation and guidance.

Timing of Forgiveness Applications

The forgiveness process has begun and some banks are now accepting forgiveness applications. Based on expected Congressional action before the end of the year, we are still recommending delaying your application for forgiveness, for the following reasons:

  • Additional Guidance – Guidance continues to evolve and additional clarification is expected relating to a number of areas that may be critical for a borrower’s loan forgiveness. These clarifications could also change how those items are reported on the application and will most likely result in revisions to the application itself.
  • Automatic Forgiveness – There is still the possibility of automatic forgiveness for loans below a certain dollar amount. Legislation has been proposed that would provide automatic forgiveness for loans of $150,000 or less.
  • Tax Consequences – The deductibility of the expenses paid with forgiven loan proceeds is also an area of Congressional discussion. As of today, expenses paid with forgiven loan proceeds are nondeductible, and the forgiven amount of the loan is not taken into income. Making those expenses deductible has been discussed, but will require Congressional action to make it happen. North Carolina has also stated those expenses will remain nondeductible for state purposes, regardless of federal action. Deferring the application process until 2021 may also defer the requirement to “add-back” those expenses, at least for federal purposes.
  • Extended Coverage – Loan repayment is not required until 10 months after the end of your covered period (the period that begins when you receive loan proceeds, and extends up to 24 weeks). Borrowers still have plenty of time before forgiveness applications are due.

Upcoming Legislation

While the upcoming election has taken a lot of focus recently, we expect action soon after the election, including clarification of some of the grey areas discussed above, the possibility of another round of PPP funding, and other possible relief provisions. We are closely monitoring these actions and will keep you informed as we move forward.

If you would like assistance with your PPP loan forgiveness application, please contact your professional at Carter, PC, if you have not already done so.