COVID-19, vaccines, and the recently signed stimulus bill will have a significant influence on 2021. Please enjoy our quarterly newsletter addressing these issues and more.
COMMERCIAL REAL ESTATE NEWS
Guide to Small Business COVID-19 Emergency Loans (Article courtesy of U.S. Chamber of Commerce)
As part of an end-of-year pandemic relief package, Congress has passed several changes to the Paycheck Protection Program (PPP) and created a “Second Draw” PPP for small businesses who have exhausted their initial loan. Other changes impact eligibility for initial PPP loans, the loan forgiveness process, and the tax treatment of PPP loans.
Which CRE Sectors Will Struggle and Which Will Thrive in 2021? (Article courtesy of Mortgage Professional America)
Well, it’s been a year. Commercial real estate and mortgage professionals should certainly be happier to see the end of 2020 than their residential counterparts. Industries have been ravaged, economies slowed, and whole sectors of commercial real estate have been rendered redundant by the pandemic. According to the MBA, commercial and multifamily lending has declined 34% year-over-year in 2020. But a vaccine is coming, and rollout is expected through Q1 and Q2 of next year. With the vaccine should come a return to some normalcy, but it may well be that certain changes the pandemic brought on or accelerated within CRE are here to stay.
The New Stimulus Bill’s Impact on Your Business Taxes
As with all tax issues, we recommend you discuss your tax situation and the new stimulus bill with your accountant or CPA. Below are several aspects of the bill you should be aware of in order to prepare for that conversation.
One of the most important tax provisions is that the bill specifies that expenses paid with forgiven PPP loans are tax-deductible. The original CARES Act excluded PPP loan forgiveness from gross income but did not specifically address whether expenses used to achieve loan forgiveness would be deductible. The IRS issued a notice in April 2020, and expanded on it in November 2020, basically stating that if the PPP loan does not count as taxable income, then expenses paid with PPP funds can be included in expenses for tax purposes. The new bill clarifies that “no deduction shall be denied, no tax attribute shall be reduced, and no basis increase shall be denied, by reason of the exclusion from gross income provided”.
There are several other provisions with tax implications, including:
Retroactively providing that employers who receive PPP loans may still qualify for the employee retention credit with respect to wages not paid with forgiven PPP proceeds
Extending the employee retention credit through June 30, 2021. It also expands the credit in several ways, including by increasing the credit rate from 50% to 70%, increasing the limit on per employee creditable wages to $10,000 for each quarter, and increasing the number of employees counted when determining the wage base from 100 to 500
Extending the time allotted for repayment of employee Social Security taxes deferred under a presidential memorandum through the end of 2021
Temporarily allowing a 100% business expense deduction for meals (rather than the current 50%) as long as the expense is for food or beverages provided by a restaurant. This provision is effective for expenses incurred after Dec. 31, 2020 and expires at the end of 2022
Extensions, in some cases permanently, of many of the tax breaks that had been scheduled to expire at the end of 2020
There are also many items specific to specific industries. Be sure to ask your tax preparer what items may apply to your business.