COVID-19 Update 12/2/2020

Deductibility of PPP-Funded Expenses

In guidance issued on November 18th, the IRS reiterated its position that taxpayers cannot claim a deduction for any otherwise deductible expense if the payment of the expense results in forgiveness of a Paycheck Protection Program (PPP) loan because the income associated with the forgiveness is excluded from gross income under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136. The guidance came in the form of revenue ruling (Rev. Rul. 2020-27). 

The ruling discusses two situations in which a taxpayer receives a PPP loan in 2020 and pays expenses, including payroll, mortgage interest, and rent, that are eligible expenses under Section 1106(a) of the CARES Act. In one situation, the taxpayer applies for forgiveness of the PPP loan (and knew the amount of expenses that qualifies) in November 2020 but has not been informed by the lender at the end of 2020 whether the loan will be forgiven. In the second situation, the taxpayer has not applied for loan forgiveness by the end of 2020 but knew the amount of expenses that qualifies.

The IRS says in both situations, the taxpayer has a reasonable expectation of reimbursement (in the form of loan forgiveness) at the end of 2020; therefore, deduction of the expenses is inappropriate.

CDC Changes Quarantine Guidelines

The Centers for Disease Control & Prevention (CDC) has issued new guidelines which allow for a reduced quarantine period for close contacts of a COVID-19 positive individual. 

The guidance now indicates that these timeframes are acceptable alternatives to the recommended 14-day quarantine period if no symptoms are reported:  a seven-day quarantine for those who have received a negative test for COVID-19 and a 10-day quarantine for those who have received no test result.  More info can be found here. 

As a reminder, in late October the CDC also updated its definition of what constitutes “close contact” with a COVID-19 patient.  The current definition includes multiple, brief exposures (spent six feet or closer to an infected person) that add up to a total of 15 minutes. Previously, the CDC defined a close contact as 15 minutes of continuous exposure to an infected individual.

COVID-19 Test at Home

The State of Minnesota and Vault Medical Services have teamed up to offer at-home COVID-19 saliva testing for everyone who lives in Minnesota, with or without symptoms, at no cost.

This saliva test is just as accurate as the nasal swab test. It checks whether you have COVID-19 right now and can spread it to others. It is not an antibody test that looks for whether you have had COVID-19 in the past.

For more information and to order, go here. 

It might not be a bad idea to order a test(s) to have on hand in the event you or a family member starts experiencing symptoms that may be COVID-19.

Congressional Gridlock Continues

Despite widespread calls for additional economic relief legislation, the U.S. Congress remains deadlocked on further action. Just this week, a bipartisan group of senators has proposed yet another compromise bill that would provide nearly $1 trillion in relief funding.

Included among the provisions are: renewal of the Paycheck Protection Program; extension of unemployment benefits and rental assistance programs; assistance for school systems and state & local governments; help for airlines and other transportation systems; and money for vaccine development and distribution.

But passage is far from guaranteed. The current congressional lame-duck session is about to end and partisan tensions remain high. Nonetheless, some key legislators claim that a deal may be cut by this weekend and could be voted on next week. If anything actually happens that could potentially impact the automotive industry, we’ll let you know!

Note: This content and analysis is for informational purposes only and should not be construed as legal advice. Please consult your legal and financial advisors for detailed information before taking any action.