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ASLA Successfully Lobbies Congress to Reverse Tax Liability for PPP Loans

Congress passed a behemoth $2.3 trillion spending package to fund the government through fiscal year 2021 and to provide COVID-19 related economic relief to individuals and businesses. This latest round of stimulus payments came at a critical time – just as cases of COVID-19 were spiking and businesses and workers continued to struggle.  

Political wrangling over direct payments to households concluded with a one-time $600 direct payment to individuals and $600 per child. The payments get phased out for individuals making more than $75,000 or couples making $150,000. The measure also extends federal unemployment insurance benefits, including Pandemic Unemployment Assistance and Pandemic Emergency Unemployment Compensation.

Of the $900 billion approved for COVID-19 relief, $284 billion is slated for the Paycheck Protection Program (PPP). To qualify for this latest round of PPP funding, business owners must prove: the business was operating before February 2020; has fewer than 300 employees; and that gross income must have fallen 25% or more from any quarter in 2019 to 2020. Thanks to advocacy efforts by many small business and organizations, including ASLA, the legislation clarifies that businesses can write off expenses paid for with forgiven PPP loans, overriding an Internal Revenue Service (IRS) directive that declared “no deduction is allowed under the Internal Revenue Code for an expense that is otherwise deductible if the payment of the expense results in forgiveness of a covered loan pursuant to section 1106(b) of the CARES Act.”  

In a letter to congressional leadership, ASLA CEO Torey Carter-Conneen wrote that “many [landscape architecture] firms accessed PPP loans with the understanding that the funds would not be treated as taxable income, as was clearly defined in the CARES Act. Unfortunately, IRS Notice 2020-32 … is leaving many landscape architecture firms and other businesses unfairly responsible for unanticipated tax liabilities.” After surveying their membership, the Boston Society of Landscape Architects weighed in with their congressional delegation also urging them to take action to reverse the directive.

As the COVID-19 pandemic continues to wreak economic havoc on landscape architects and their firms, ASLA will continue to work to provide tools, resources, and other forms of relief to its members. Reversing this unjust tax liability will certainly help create some economic relief for our small firms.

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