Politicians Being Politicians
In the last 15 months, we have had four major national tax law packages enacted with a fifth one right around the corner. Some of the laws were common sense and wise. And in most cases, the intentions were good. The implementation? Yeah, not so much.
I'll start with the original PPP loan package. They really didn't think this one through, which is why they went and revised the law. Twice. Then when any tax professional with a pulse started pointing out that hey, forgiveness of debt doesn't help if the related deductions aren't allowed, Congressional leaders cried that it wasn't what they meant. Except, legally it was. When they wrote the original law, nothing was mentioned about deductions associated with the creation of tax exempt income, and IRS was right to point out that the deductions wouldn't be allowed. Congressional intent only means something legally if they ever actually discussed it when writing the law. They didn't discuss it: it doesn't exist. Fast forward to December of 2020, and they finally rewrite the law to rectify the situation so that the deductions are allowable. Except there is still a problem of basis for S-corps and partnerships who haven't had PPP forgiveness yet (I could write another rant about lenders and SBA totally screwing this up as well).
So here are in March of 2021, and there is pending RETROACTIVE legislation in both Washington D.C., and in Sacramento. Mind you, the corporate deadline is just over a week away and the individual deadline a month away. In Washington, they are discussing finalizing a bill which would retroactively exempt about $10k of unemployment benefits as well as not require the repayment of advance premium credits for people obtaining health insurance through the marketplace who's income was above projections. Now any of you who have emailed me on a regularly basis may have noticed the time stamps on some of the emails. Could be any time day or night (and that is NOT an invitation to call after hours). People in my profession work long hard hours in a very compressed period of time. Having retroactive tax law changes IN THE MIDDLE OF FILING SEASON is not going to generate much goodwill from the tax professional community. Some affected returns have already been filed. How are they going to be handled? Do we have to amend? Will IRS adjust its computers to automatically correct those returns? Damned if I know.
But wait, there's more! In Sacramento, legislation is pending regarding California treatment of PPP loans and EIDL advances. See, the CA Assembly was actually a bit more clever than Congress when it wrote its law regarding how CA would treat PPP forgiveness, though admittedly that's not a high bar. CA wrote into the statute that PPP related deductions would not be allowed. So they get credit for at least thinking it through. Except then Congress went and adjusted its law and the politicians in Sacramento (being politicians) saw the public support for allowing those deductions and there is a bill to match what Congress did with CAA. As of right now, the bill is pending but likely at some point to be enacted So what do I do for all of my CA business clients with PPP loans? That's right, you're all getting an extension. Congratulations. You can thank your district's assembly person and state senator.
I would be remiss in not mentioning SBA here. Back when the first PPP rolled out, SBA implemented a lot of rules that quite frankly, it didn't have the authority to do. Now that PPP2 is here, they're moving the goal posts again by changing the calculation for sole proprietors from being based on net profit to gross receipts. If you already got your PPP and/or PPP2, you're out of luck. You can't get the difference. But if qualify for either one and haven't applied, now is the time to do so. Was SBA right to do this? Maybe? I think the bigger problem is finding a lender that knows what they are doing here.