Tax & AccountingOctober 02, 2020

PPP2 Proposals in New House Democratic HEROES Bill

PPP2 Proposals in New House Democratic HEROES Bill

House Democrats have released a new comprehensive relief bill this week. This proposal is a slimmer version of the HEROES Act and include improvements to the Paycheck Protection Program (PPP).

Between April 3 and August 8 — the last day a company could have applied for a loan — more than 5 million PPP loans have been approved, accounting for $525 billion, according to the Small Business Administration.

Here’s what is included for PPP borrowers in the updated HEROES Act.

A second shot at funding

Firms that have suffered the most in the pandemic and already used up their PPP funding might get a second chance for money from the program.

House Democrats propose allowing second loans to small businesses with fewer than 200 employees that have experienced a 25% reduction in quarterly revenue year-over-year due to the pandemic.

The focus in the bill is on the smallest businesses: They’ve excluded publicly traded firms from eligibility for second loans, and they’ve put limits on businesses with more than one physical location.

Streamlined forgiveness

The proposal also calls for a simplified approach toward forgiveness of PPP loans that fall under $150,000.

Borrowers who took a loan under $50,000 only need to certify to the government that they’ve met the program’s requirements for forgiveness. They must also retain documentation to back that up in case they face an audit.

Meanwhile, firms that took $50,000 to $150,000 must submit certification to their lender through a simplified forgiveness application and retain documentation to prove they’re eligible to have the balance wiped in case of an audit.

Deductibility and PPP

Forgiveness — which is supposed to be tax-free under the PPP loan program — is the ultimate goal for borrowers, but most have not applied for it just yet.

Part of that is driven by the uncertainty on whether business owners can deduct business expenses covered by PPP proceeds. While the IRS has said that the forgiveness itself is tax-free, the business expenses aren’t deductible.

This new version of the HEROES bill addresses that issue and clarifies that expenses paid or incurred with forgiven PPP proceeds are still eligible for deductions.


The revised House bill is likely to be voted on and passed this week at the same time that House Democratic leadership and Administration representatives continue to negotiate a bill that will have bipartisan support and will be signed into law by the President. At this point, whether or not we will have a bill that is likely to become law remains uncertain.

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Mark Friedlich
Author at Tax & Accounting
Mark Friedlich, a CPA & tax lawyer, is the principal international & corporate indirect taxation analyst for Wolters Kluwer Tax & Accounting. He is a member of the U.S. Senate Finance Committee’s Chief Tax Counsel’s Advisory Board, advisor to 14 state taxing authorities, and a member of the American Bar Association’s Tax Section and AICPA’s Tax Section leadership teams. Prior to joining Wolters Kluwer he was a Managing Tax Partner at PricewaterhouseCoopers.