Stimulus Bill, DC Environment, and Market Update

Event Detail
  • Date
  • October 15, 2020
  • 2 – 2:30 p.m. CT
  • Location
  • Virtual
Woman Gesturing by Laptop
  • Rick Krueger
  • Principal

Omar Nashashibi of the Franklin Partnership discusses the status of stimulus bills, DC environment and impact on stimulus post election, and extenders status. We will also be joined by CLA Chief Wealth Advisory Officer, Clayton Bland and CLA principal, Brian Ream, as we host a discussion around the market and economic outlook and wealth advisory strategies.


In case you missed our recent webinar: CLA Wealth Advisory Connection — Market and Economic Update, you can watch the recording here. Also, be sure to check out our upcoming webinar: Prepare to Serve Your Clients for Year-End. Space is limited - Register today. 

In case you missed it:

The material presented here is intended to be educational in nature and should not be construed as financial advice. Such advice should be the result of a discussion with both your tax advisor and your financial advisor based on your individual circumstances.The purpose of this presentation is purely educational and informational. It is not intended to promote any product or service and should not be relied on for accounting, legal, tax, or investment advice. The views expressed are those of CLA Wealth Advisors and intended for a broad audience. They are subject to change at any time and do not take your individual circumstances into account. Past performance does not imply or guarantee future results. Investing entails risks, including possible loss of principal. Diversification cannot assure a profit or guarantee against a loss. Investing involves other forms of risk that are not described here. For that reason, you should contact an investment professional before acting on any information in this presentation. See our full disclaimer here:

Questions and Answers:

How should the PPP forgiveness process be handled when the death of a borrower occurs prior to forgiveness?

We have not seen anything on this topic. I would assume someone that has POA could file for forgiveness on behalf of a deceased borrower assuming the borrower was alive during the covered period.

I bought a business in July (prior to the writing of the October 2 guidance) from an owner that had a PPP. The previous owner is still listed as the guarantor. I now have a buyer for the business and am worried that without the PPP forgiven, the new deal could be delayed or spurred.

I would suggest that you work with the original borrower to process the forgiveness application as soon as possible. You will need to comply with the new October 2nd guidance for the next transaction, which will require the forgiveness application to be submitted and escrows to be used if you do not want to have to obtain SBA approval. I would definitely involve legal counsel to get appropriate PPP related reps and warranties in the purchase and sale agreement.

As a seasonal summer employer who received a PPP in the spring, our bank filed the form 1502 before we were able to adjust our loan amount to the allowed seasonal amount. Would you expect that to be corrected in a future relief bill and we can go back to that loan for an adjustment or would it be more likely to receive a second loan? Or would both be possible?

None of the PPP2 legislation that has been proposed has addressed the “fix” to your situation. As discussed on the Livestream, PPP2 is still on the table and has support, but the timing is uncertain. The terms of PPP2 that have been proposed require a participant to be able to demonstrate economic impact in the form of a reduction of revenues of 35% or more when comparing either Q1 or Q2 2020 to the same period in 2019. You would need to meet that criteria in order to participate in PPP2 if passed.

When applying for PPP forgiveness, what does a self-employed individual with no payroll provide as documentation with their 3508S application? In this scenario, no dollars were transferred to a personal bank account as “owner compensation.”

Self-employed individuals have forgiveness determined based on 2019 income levels, so we believe you will need to provide your schedule C from your 2019 return to support your forgiveness application.

Will there be a second SBA decision to have a more modified forgiveness for PPP loans that are under $150k and over $50k? Or is the decision for the less than $50k forgiveness protocol probably all there will be?

While we don’t know the answer with certainty, our current expectation is that if another round of PPP gets approved, it will likely include some level of streamlined forgiveness for loans of $150,000 and under. The last bill from the House included this two-tiered system that provided streamlined forgiveness at both the $50k and under level, and the $50k+ to $150k level. The process for the larger loan group was a bit different than the $50k and under level but was still streamlined compared to existing 3508EZ and 3508 requirements. We are keeping our fingers crossed; PPP2 seems to have bi-partisan support and the streamlined forgiveness under $150k has support from Congress and the banks as well.

If a mortgage loan was rewritten and interest was paid during the borrower's window, but the original schedule for an interest payment was a week beyond the 24-week period, is the interest paid an eligible PPP expense?

The rules related to nonpayroll costs allow amounts incurred during the covered period but paid in the normal payment cycle immediately following the covered period to be included. For mortgage interest, the rules are also clear that pre-payments are not allowed. Assuming interest is paid in arrears, I would think a prorated amount of the interest paid one week beyond the 24-week period would be includable. For instance, let’s say your 24-week period ended September 24 and you paid interest on 10/1 for the 9/1 – 9/30 period. You should be able to prorate the interest for the period from 9/1 – 9/24 and include it in the costs eligible for forgiveness if the payment is made as scheduled on 10/1.

If a for profit business received a PPP loan, but plans to switch to a nonprofit after first of the year, is there any tax benefit to get the loan forgiveness after switching to a nonprofit status? Or, would any state tax or expense deductibility issues remain the same because the for profit business received the stimulus benefit?

I can’t provide a definitive answer on this without some extensive research on for profit to nonprofit conversions. However, my gut is telling me that if you deducted the eligible expenses in 2020 and then switched to a nonprofit and got forgiveness in 2021, somehow the entity would be required to pay the tax in 2021 on what ultimately ended up being non-deductible expenses. I’m not sure if this would flow through as UBTI or some other method of being taxable in 2021, but I can’t see the IRS letting a change in taxable status get a borrower out of this tax obligation.

For more information:
Heather Kloster
Marketing Project Management Director

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