Getting the Maximum Value of Relief from PPP

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Getting the Maximum Value of Relief from PPP

ASCA advocacy bears fruit

As the world approaches different one-year anniversaries involving the coronavirus pandemic, on the ASCA advocacy front, we celebrate many discrete moments of importance and milestones from 2020.

On January 21, 2020, the first US patient was diagnosed with the coronavirus and on January 31, 2020, Alex M. Azar, secretary of the US Department of Health & Human Services declared the initial public health emergency. In March 2020, Congress acted quickly to pass the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Leading up to the CARES Act, ASCA was regularly communicating with the Trump administration and members of Congress about the persistent uncertainty of that time and necessity for federal financial support to minimize the potential negative impacts to providers and patients. This legislation included investments and new programs to stabilize the economy and respond to the pandemic, with many ASCs and millions of small businesses across the country relying on the Paycheck Protection Program (PPP).

The Santa Cruz Surgery Center, in Santa Cruz, California, is one of the many centers that relied on the PPP. Lisa Cooper, chief executive officer (CEO) of the center and a member of the Government Affairs Committee at ASCA, read the weekly Government Affairs Update and action alerts from ASCA’s government affairs staff to stay informed about the potential opportunities of PPP. “The PPP was a huge win for us, allowing us to keep staff on payroll and rehire staff once business picked up,” she says.

The design of the PPP program is relatively straightforward compared to other federal support programs: it was open to small businesses meeting certain criteria and if that business used a specified amount of the loan to pay its employees and cover other essential expenses, then the loan would be forgiven. Additionally, Congress included language specifying that forgiven loans would not count as taxable income.

While the implementation of PPP fell largely on the US Small Business Administration (SBA) through its various guidance documents, the Internal Revenue Service (IRS) also had a role to play because of the legislation’s provision regarding taxability. However, the agency’s initial guidance caught stakeholders and members of Congress off guard.

In that initial guidance, the IRS took the position that business expenses, which would otherwise be deductible, would not be deductible if the business received a PPP loan that was subsequently forgiven. This reflected the agency’s view that taxpayers should not be able to benefit twice by deducting expenses paid with tax-exempt funds. Members of Congress and leaders of jurisdiction committees, ASCA and other stakeholders immediately pointed out that the agency’s position was incorrect and that it was contrary to Congress’s intent.

Despite the response from Congress and stakeholders, the IRS did not relent and, instead, reaffirmed its position in a November guidance document. The timing of this second guidance document coincided with the restart of bipartisan work on an end-of-year package of legislation and allowed it to serve as a timely reference point in advocacy work on the issue.

On December 3, 2020, ASCA joined more than 500 groups in urging Congress to overturn the IRS’ position and ensure that PPP loan recipients would get the full benefits intended in the CARES Act. Ultimately, this issue was resolved by a provision in H.R. 133, the Consolidated Appropriations Act, 2021, which the president signed into law at the end of that month.

“Resolving this issue was one of the many wins for the ASC community included in the year-end-package,” Cooper says. “Resolving the tax issue clears up questions come tax time and provides certainty to the centers that relied on the PPP for support.”

The taxability of PPP proceeds was one of the many issues on the ASCA advocacy team’s docket for the year, and we are thankful for your support in getting a favorable resolution. ASCs and their patients still face many unique challenges due to the pandemic. To learn more about ASCA’s ongoing efforts and how you can contribute to ASCA’s advocacy program, write Steve Selde.

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