Event Overview. The Paycheck Protection Program has become more complex. There are several key items that every organization with a PPP loan needs to be aware of that could compromise their financial condition. Our team reviewed the risk involved with the loan forgiveness process, discussed the tax impact of these loans (which are taxable as of today), discussed some confusion in the marketplace due to how each bank may be handling their loan forgiveness differently, and then reviewed some other tax considerations to generate operating cash for your business.
Topics We Covered:
- The Tax Impact. As of today, companies who received a loan are liable to pay a tax on that loan. As an example, a business that took out a $1M PPP loan will need to pay about $250,000 in taxes on that loan.
- Forgiveness Tracking. It can be easy to accidentally leave money on the table if the forgiveness tracking rules are not properly followed and documented, and the rules have changed slightly since they were initially announced. A 10% mistake on that $1M loan could be a $100,000 error.
- Loan Confusion. The initial loan documents were set up for an 8-week period. Then, the program was extended to 24 weeks. This is creating issues with how to time the forgiveness reporting, and some banks are auto generating PPP loan repayment requests because of the 8 to 24-week window change.
- The Impact of PPP on M&A Transactions. Open, unforgiven PPP loans are delaying or preventing mergers and acquisitions from occurring because they are unresolved liabilities.
There are two examples of additional tax strategies that can create operating cash:
- Net Operating Loss (NOL) Carrybacks. This is different than loss carryforwards. It can be used to file amended returns to get a refund to inject cash into 2021 operations.
- Research & Development Credits (R&D). These can be a rich source of cash for any business that has undergone process changes. We will discuss how this could apply to your company. R&D credits are not just for research focused businesses