NOTE: This article was written prior to President Trump signing the bill.
Congress approved a $900 billion bill for additional COVID relief. Below are key takeaways pharmacy owners should be mindful of as they do last minute planning.
- Paycheck Protection Program (PPP) expenses are deductible, and forgivable proceeds are nontaxable – a much welcome relief for all borrowers.
- The bill confirms that the Economic Injury Disaster Loan (EIDL) grants and advancements are nontaxable, expenses paid with proceeds are deductible and do not decrease PPP forgiveness amount.
- SBA debt relief on existing (prior to pandemic) SBA 7(a) loans are nontaxable -another welcome relief for many pharmacies with these loans on the books.
- Nontaxable SBA debt relief will be expanded. Beginning February 2021, existing SBA 7(a) borrowers will have an additional three months of principal and interest paid by the SBA.
- The “rubber stamp” for loan forgiveness for PPP loans under $150,000 is included in the bill. In summary, you must certify on a one-page application that you meet the requirements and eligibility for loan forgiveness. Always keep documentation on file to support your application.
- PPP loans greater than $150,000, no change. A full application and documentation must be submitted to the lender.
- Another round of individual stimulus checks, or refundable credits, are included in the bill. The phase-out ranges are comparable to the prior limits in the CARES Act. The base amounts remain the same, $600 for individual filers, $1,200 for joint filers and an extra $600 per qualifying dependent child under 17 years old.
- A NEW Paycheck Protection Program 2.0 is included in the bill. The requirements for eligibility are less than 300 employees and the business must have a 25% drop in any quarter revenues in 2020 as compared to same quarter in 2019.
- The bill expands the Employer Retention Tax Credit (must have had a decline in revenue (50% in 2020 or 20% in 2021) to qualify) and allows those with PPP loans to claim the credit.
- The bill allows for expensing 100% for meals at a “restaurant” for tax years 2021 and 2022. Recent law only allows a 50% deduction. This is great for the struggling restaurant industry, however, as a pharmacy, always document the business purpose of the meal, including where, who was present, the amount and date, etc. The more detail in your tax log, the better.
- The Family First Coronavirus Response Act, which expanded paid sick and family leave as well as payroll credits, has been extended to March 31, 2021.
- The HHS Provider Relief Fund has been allocated an additional $3 billion dollars; it remains to be seen how this program will evolve, if at all, for pharmacies (must have patient care revenues to be eligible and prescriptions do not count as patient care revenue).
This list is not all-inclusive. There is still much to process — stay tuned and thank you for following Sykes & Company, P.A. for your pharmacy accounting, tax, and advisory needs.