PPP and Other SBA Loan Provisions in Consolidated Appropriations Act of 2021

The Consolidated Appropriations Act of 2021 — which includes a $900 billion COVID-19 stimulus package that extends unemployment benefits and provides additional assistance for small businesses — was signed into law December 27, 2020. The Act also contains several key provisions regarding the Small Business Administration (SBA) and the paycheck protection program (PPP). Here is a summary:

Deductibility of PPP funded expenses: This provision overturns the IRS ruling that expenses funded with PPP loans were not deductible. Effective date is back to enactment of CARES Act.

EIDL advances: The $10,000 EIDL advance is excluded from income and no expenses are disallowed with respect to the income exclusion. In addition, EIDL advances no longer will reduce the amount of PPP loan forgiveness.

Income exclusion and expense deductions for payments made on Section 7(a) SBA loans: Section 1112 of the CARES Act provided that the SBA would pay up to six months of principal and interest on certain SBA loans. The new Act would provide, similar to PPP loans, that the principal paid by the SBA does not result in income forgiveness and no deductions are disallowed as a result of the income forgiveness.

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