An open letter from Raymond B.Borsella, CPA, CFF, CGMA

Recent Congressional developments and banks involved in the PPP program have released proposals and suggestions concerning the process and timing of applying for PPP loan forgiveness, It appears that:
1. Banks are recommending postponing forgiveness application until Congressional proposals have been finalized.
2. It appears Congress is looking to streamline the process by-
          a) Treating loans of $150,000 or less as grants requiring only good faith attestations to be filed by borrowers
               that they complied with the requirements. Support documentation should be created and saved in case of selection for audit.
          b) Loans over $150,000 to $2 million: Borrowers  will not have to submit payroll and other qualified support
              paperwork. Instead borrowers will need to certify that records exist and keep them for 3 years.
What this does is reduce the record submission process and creates less rigid compilation and reporting on prescribed bank/government forms, to the institutions and the back and forth issues that can come from that. This is a burden relief.
What now still looms large, is for us to press for DEDUCTIBILITY of expenses paid with those proceeds, to keep the touted government promise of the loans being “not taxable”.  The government used businesses as a preexisting, in place mechanism for immediate and efficient dispensing of funds, thus bypassing the government involvement and processing delays that surely would have occurred. That was an enormous benefit, in a crisis setting requiring immediate resolution.  For businesses, that was a reasonable thing to go along with as long as there was no financial risk and an opportunity to help save the economy. Subsequently, the IRS has ruled that under existing IRS Code and regulations, those proceeds will be treated as not deductible without Congressional intervention. Therefore, without the deduction, the taxpayer will likely absorbed a tax based on their tax rates. I assume businesses would have not been as willing to be involved under those circumstances.
Reach out to your elected representatives. There is some Congressional support for this but they need to be pushed to make it happen.
Raymond B. Borsella, CPA, CFF, CGMA
Raymond. Borsella & Co. CPA

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