Any business or nonprofit organization eligible and wishing to apply for Paycheck Protection Program (PPP) loans – many of which are forgivable – has until March 31 to apply.
That’s the deadline, which wasn’t changed with the American Rescue Plan Act (ARPA), signed into law March 11, 2021 by President Joe Biden. The PPP is one of two interesting developments among many, in the latest COVID-19 relief bill. One is that the PPP, the focal point of previous COVID-19 relief packages, has a much smaller profile in the latest legislation; the other is that three tax increases totaling $60 billion were tucked into the bill.
These two subjects are lesser known in the discussion surrounding the latest congressionally-passed COVID-19 relief bill than such issues as direct payments to Americans and unemployment insurance extensions. But they’re important subjects nevertheless.
PPP in the latest congressional action amounted to $7.5 billion, barely a blip on the total PPP loans of more than $700 billion. With more than $100 billion still remaining to be lent from previous relief legislation, the imperative was lacking to add tens of billions more to the PPP pot.
The PPP for many businesses was the equivalent of a rope thrown to someone being pulled under by quicksand. Government-ordered business shutdowns and lockdowns, and people deciding to say home to avoid contracting the virus, led to an unprecedented, self-imposed economic stoppage: Businesses with dammed-up revenue streams would have had to shut down completely and lay off who-knows-how-many millions of employees.
The PPP enabled many businesses to remain viable, albeit at an expanded cost to the nation’s annual deficits and ever-mounting national debt, on which every taxpayer pays interest.
Through March 14, 2021, nearly eight million PPP loans had been approved, through almost 5,000 lenders. More than $181 billion has been lent just since the beginning of 2021. In Tennessee, these numbers break down to more than 49,000 total loans. The amount lent to Tennessee businesses and nonprofits tops $2.7 billion.
With money still remaining to parcel out, nonprofit organization participation in the PPP program was expanded in the latest bill with a category called “additional covered nonprofit entity,” the definition of which touches on a number of legal code sections and requires consultation with a tax expert.
The bill’s tax increases were included to keep its cost within budget-limitation parameters, though that concept may seem odd considering the legislation’s $1.9 trillion price tag. Nevertheless, the tax hikes were a means by which to keep the Democrats’ bill in line with spending requirements. Had it not, it would have opened the door to Republican challenges.
The three tax increases
Will double the number of employees making more than $1 million at publicly traded companies whose compensation can’t be written off by their companies. This legislation – assuming something doesn’t happen between now and then - takes effect in 2027.
Restructures how multinational corporations compute their taxes.
Extends a limit on the amount the owner of an unincorporated business can reduce their tax liability by taking deductions against their non-business income.
(More discussion on these will occur here in future columns).
If you’re interested in a PPP loan, you have only a few days to make your move. Talk to your accountant or tax advisor to see if it’s the right time, and the right thing, for your business or nonprofit.
This article first appeared in KnoxNews.