Paycheck Protection Program Loan Forgiveness
On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). This package was a $2.3 trillion relief package, and it included a number of provisions designed to stimulate the economy and keep Americans employed. The most important and highly debated provision of this Act is the loans under the Paycheck Protection Program (PPP), which put forth $350 billion into a Small Business Administration (SBA) program for small businesses to obtain and to be administered by the banks.
Those funds have since been depleted. However, on April 21, 2020, the Senate passed an additional relief package of $484 billion, which includes another $320 billion in supplemental funding to the PPP. The House of Representatives has also passed the bill and it is expected to be signed by the President.
A key facet of the PPP is the possibility of the PPP loans being forgiven on a tax-free basis. The purpose of this article is to discuss this aspect of the bill. There are still many unanswered questions existing about the loan forgiveness calculation. More guidance is desperately needed by businesses and the banks as they will eventually be tasked with determining how much of the loans to forgive. However, because businesses are beginning to receive funds from the program, we have no choice but to interpret the rules that we do have to figure out what to do with the funds. This article represents a Q&A of the most frequent questions we are hearing about loan forgiveness.