The PPP Loan Tax Surprise
If you got a PPP loan, there’s a good chance you will face a surprise tax bill. Our experts can help you figure out where you stand and what you can do.
THE 21 HATS CONVERSATION
Here’s the problem: If you get your PPP loan forgiven, it becomes taxable income. For many, that’s surprise No. 1. But it’s also possible you may not be able to deduct the expenses you paid with your loan. That’s surprise No. 2 -- and potentially a significant tax liability. Will this affect your company’s taxes? How bad is it likely to be? Can it hit you even if you aren’t going to show a profit? Is there a chance Congress will fix this? Play the video to hear Chris McKee, managing partner of Venturity Financial Partners, and Lou Mosca, chief operating officer of American Management Services offer answers. (If you still have questions after watching the video, reply to this email and we’ll try to get them answered.)
With federal stimulus stalled, states are trying to step in and help businesses: “The Colorado legislature held a special session last week to pass an economic aid package. Ohio is offering a new round of grants to restaurants, bars and other businesses affected by the pandemic. And in California, a new fund will use state money to backstop what could ultimately be hundreds of millions of dollars in private loans. Other states, led by both Republicans and Democrats, have announced or are considering similar measures.”
“But there is a limit to what states can do. The pandemic has ravaged budgets, driving up costs and eroding tax revenues. And unlike the federal government, most states cannot run budget deficits.”
“‘If we don’t help them get through this, will it ever come back?’ [Gov.] Polis asked. ‘Sure, but it means years of boarded-up stores and restaurants on Main Streets across America if Democrats and Republicans can’t come together now to act.’” READ MORE
The FTC has filed suit to break up Facebook, accusing it of buying up startups to stifle competition:“The FTC’s sweeping antitrust case seeks to force Facebook to unwind its acquisitions of WhatsApp and Instagram, two of its landmark deals. The states filed a separate and similar lawsuit, alleging a lack of competition has harmed consumers, including by weakening privacy protections. The lawsuits come weeks after the Justice Department brought a case alleging Google was illegally maintaining a monopoly in its search business. Collectively, the cases reflect U.S. concern about the power of dominant online platforms.”
“Facebook fired back by noting the FTC had previously approved the Instagram and WhatsApp transactions.”
“The lawsuits also say Facebook hobbled competitors by cutting off access to its platform for third-party app developers that wanted to offer services that encroached on Facebook’s core functions.” READ MORE
Here’s an example of what got Facebook to this point: “Facebook executives approached Ali Partovi, the creator of a popular app that used Facebook’s data, a decade ago with a threatening ultimatum. Sell your company to us or we will shut you down, according to legal filings. Partovi’s app, iLike, had built a predecessor to the ‘like’ button. Partovi refused the offer. Shortly after, Facebook discontinued features that iLike relied upon, pushing Partovi to sell his start-up to Myspace for a fraction of its previous value. Facebook then built its own ‘like’ button, modeled after iLike.” READ MORE
Corporate CEOs are backing a startup that will train Black job candidates: “The startup, called OneTen, aims to create one million jobs for Black Americans over the next 10 years and has so far recruited over 35 company backers and raised more than $100 million in seed funding. Merck CEO Ken Frazier, one of the startup’s founders, said the nonprofit organization will focus on helping Black Americans without four-year college degrees, but with high school diplomas and other certifications, find and retain ‘family-sustaining jobs,’ or those earning $40,000 or more depending on the region.Nonprofits, community colleges and credentialing organizations will provide training to help them be successful in business, and the CEOs who have joined the effort are committing to hiring these workers.”
“The initiative is an acknowledgment by the CEOs that the efforts they undertook in recent years haven’t made a meaningful difference for Black Americans, according to Mr. Frazier.”
“He said the killing of George Floyd, an unarmed Black man, in police custody in May and the ensuing protests prompted corporate leaders to re-examine their initiatives and join forces.” READ MORE
Here’s why Apple search might have a shot against Google search: “One of the bigger mistakes Microsoft made with the launch of Bing was to follow the same ad-based business model that Google was using. In this business model, search users enter what they are looking for, and based on that the search engine also shows relevant ads that might interest them. For such a business to be profitable, you need a very large number of users searching, as well as a large number of advertisers willing to sell to them, alongside millions of websites scanned by the previously mentioned search bots. All three are needed to display useful search results for the user and bring the right customer to the advertiser. ... The more searches are made, the more useful the results. The more useful the results, the better is the ad targeting. Bing struggled to get this virtuous cycle started, and never really got to the scale that Google enjoys with its search offering.”
“Apple has been focusing heavily on user privacy recently, including but not limited to publicly refusing to give secret access to its devices to the FBI.”
“It will be very much in line with this ‘privacy first’ position if Apple chooses not to make money from advertising, which involves exposing customer usage data to third parties.”
“Instead, it could simply sell more of its highly profitable devices and subscriptions to privacy-conscious customers.” READ MORE
A flamboyant L.A. developer of over-the-top mansions, Nile Niami, has placed a spec home in bankruptcy: “A company controlled by Mr. Niami filed for bankruptcy protection for a home the developer built in West Hollywood, records show. The property first came on the market for $55 million in early 2019, but the price was later reduced to $39.995 million. The property isn’t currently publicly listed for sale. The filing values the property at $30 million, and lists the company’s total liabilities at $59.244 million.”
“The West Hollywood home has a glass-bottomed pool which sits above an identical pool underneath, so swimmers can look up at others swimming above.”
“Mr. Niami had art custom designed for the home, including a 24-foot-tall gold giraffe sculpture that took about a year to make, he said last year.” READ MORE
THE 21 HATS PODCAST
Episode 42: The Great Covid Churn: This week, Paul Downs, William Vanderbloemen, and Laura Zander talk about William’s prediction that 2021 will be a year of employee turnover. His theory, which he says he’s already seeing in practice, is that pent-up forces that were blocked by the pandemic this year will be unleashed in 2021—especially as vaccines arrive and the economy improves. His advice: Make sure your best people feel appreciated. Or, as he puts it: “Better to keep a good employee —even if it costs you more than you think it should—than to have to call me.” Plus: we discuss whether, when the time comes, businesses should require employees to get vaccinated.
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