The Restaurant Act, recently enacted as part of the American Rescue Plan, provides $28.6 billion in grants for the restaurant industry which is struggling to make it through the pandemic.  The bill aims to provide grants up to $5 million to individual restaurants and up to $10 million for restaurant groups.  Grant process will be managed by the Small Business Administration.

The bill provides that any restaurant, food truck, food cart, caterer, saloon, inn, tavern, bar, lounge, brewpub, tasting room, taproom, licensed facility or premises of a beverage alcohol producer where the public may taste, sample, or purchase products, or other similar place of business in which the public or patrons assemble for the primary purpose of being served food or drink that owns or operates 20 or fewer establishments is eligible to apply for a grant.

The Grant is calculated by subtracting the 2020 revenues of the entity from the 2019 revenue.  For those not in operation for the entirety of 2019, the entity can receive the difference between 12 X the average monthly revenue for 2019 and revenue of the eligible entity in 2020 or a formula determined by Treasury.  For those not in operation until 2020, the entity can receive a grant equal to the amount of expense incurred by the entity (which would be covered expenses by the grant) minus any revenues received.  The grant amount will be reduced by the Paycheck Protection Program (PPP) or Economic Injury Disaster Loan (EIDL) funds spent.

The Treasury is expected to implement the process within 15 days after the enactment.

The House-passed legislation, the “American Rescue Plan Act” (the “Bill”), is expected to be considered by the Senate this week.  The Bill includes provisions to provide financial relief to struggling families and ramp up vaccination distribution across the country.  Some of the major provisions included in the Bill are:

Child tax credit

The Bill will modify a refundable child tax credit for the tax year 2021, increasing the amount to $3,000 per child from $2,000.  The credit amount will be $3,600 for children under the age of 6.

Stimulus payments

The Bill includes the third stimulus payment, equal to $1,400 per person, to individuals with an AGI of $75,000 (or $150,000 for married couples) or less.

Unemployment insurance

The Bill extends unemployment programs through August 29, increasing federal payments from $300 per week to $400.

Child and dependent care credit

The Bill makes changes to the Section 21 child and dependent care credit, including making it refundable for 2021.

Family and sick leave credits

The credits for sick and family leave enacted by the Families First Coronavirus Response Act would be extended to September 30, 2021. It increases the limit on the credit for paid family leave to $12,000.

Employee retention credit

The Bill extends the employee retention credit through the end of 2021.  This credit allows eligible employers to claim a credit for paying qualified wages to employees.

Tax exempt EIDL grants

The Bill provides that EIDL grants received from the US SBA are not included in gross income and that this exclusion from gross income will not result in a denial of a deduction.

The FASB issued a proposed Accounting Standards Update that would reduce the complexity for certain private companies and not-for-profit entities when evaluating goodwill impairment triggering events.

Under the current guidance in Subtopic 350-20, Intangibles – Goodwill and Other – Goodwill, an entity is required to monitor and evaluate goodwill impairment triggering events as they occur throughout the year. Because of the uncertainty in the economic environment during the COVID-19 pandemic, some stakeholders expressed concerns about the value of evaluating a triggering event at an interim date when certain private companies and not-for-profit entities report goodwill only on an annual basis.

In response to the concerns expressed by stakeholders, the FASB issued a proposed ASU intended to provide an accounting alternative allowing private companies and not-for-profit entities that only report goodwill on an annual basis to perform the goodwill impairment triggering event evaluation on the annual reporting date only. This option would reduce cost and complexity for preparers and provide more relevant information for users.

This proposed ASU would be effective for annual reporting periods beginning after December 15, 2019 and applied on a prospective basis. The scope of this accounting alternative would be limited to goodwill that is accounted for in accordance with Subtopic 350-20.

Written by Kayla Kwak
Edited by Yejee Won

On February 8, 2021, the IRS announced that certain self-employed individuals who, due to COVID-19, are unable to work or telework for reasons relating to their own health or to care for a family member are eligible for sick and family leave tax credits under the Families first Coronavirus Response Act (FFCRA).

Certain self-employed individuals can claim refundable sick and family leave tax credits to offset their federal income tax using the new IRS Form 7202. To be eligible for the Form 7202, self-employed individuals must meet following requirements:

• Individuals must regularly carry on any trade or business that are qualified as self-employment income.
• Individuals must be eligible to receive qualified sick or family leave wages under the Emergency Paid Sick Leave Act as if the taxpayer was an employee.
• Taxpayers must maintain appropriate documentation establishing their eligibility for the credits.

Eligible self-employed individuals will claim the tax credits on their 2020 Form 1040 for leave taken between April 1, 2020, and December 31, 2020, and on their 2021 Form 1040 for leave taken between January 1, 2021, and March 31, 2021. Maximum amount of credit an eligible self-employed individual can take is limited to $5,110 per year.

Written by Sean Jeong
Edited by Kevin Jang

According to Notice 2014-21 published by Internal Revenue Service (“IRS”), cryptocurrency such as bitcoin is treated as property for federal tax purposes. Therefore, general tax principles applicable to property transactions apply to transactions using cryptocurrency.

As cryptocurrency is treated as property, transactions using cryptocurrency can generate capital gain or loss. Here are some examples of taxable cryptocurrency events: (1) selling cryptocurrency for cash, (2) paying for goods or services with cryptocurrency (3) buying one cryptocurrency with another cryptocurrency (4) receiving mined cryptocurrency, and (5) being paid in cryptocurrency.

In order to calculate your taxable gain or loss from cryptocurrency, you have to determine your basis for cryptocurrency and fair market value of the property or service you received. The basis is the amount you spent to acquire the virtual currency, including fees, commissions, and other acquisition costs. For example, you bought one bitcoin at $10,000. After 11 month, you sold the same bitcoin to purchase a car at fair market value of $12,000. In this case, you must report your capital gain of $2,000 on form 8949 with your basis of $10,000, proceeds of $12,000. Those amounts will show on Form 1040 schedule D.

In order to decide which units of cryptocurrency are deemed sold, exchanged, or otherwise disposed of, you can use two methods. The first method is to identify a specific unit of virtual currency either by documenting the specific unit’s unique digital identifier such as private key and public key, or by records showing transactions information for all units of cryptocurrency. This information must show (1) the date and time each unit was acquired, (2) your basis and the fair market value of each unit at the time it was acquired, (3) the date and time each unit was sold, exchanged, or otherwise disposed of, and (4) the fair market value of each unit when sold, exchanged, or disposed of, and the amount of money or the value of property received for each unit. The second method is on a first in, first out (“FIFO”) basis. The units are deemed to have been sold, exchanged, or disposed of in chronological order.

Starting in 2020, people who have transactions using cryptocurrency will receive either 1099-K or 1099-B. If you receive 1099-K, the amount simply represents the gross proceeds from your reportable transactions but not the amount of taxes owed. Therefore, you will need to report those amounts on form 8949 with your basis to calculate correct capital gain or loss. On form 1099-B, every information you need to report your capital gain or loss will be given.

Written by Jay Jang

Edited by Kevin Jang

As the President Trump signs the Consolidated Appropriations Act, 2021 (the “Act”), employers are expected to receive additional benefits from the employee retention tax credit enacted under the CARES Act. The credit was designed to provide a refundable tax credit for companies that continue paying their employees. Here are some of the highlights of the key changes included in the bill:

• The Act extends the availability of the credit to companies who received PPP loans. The Act allows employers who received PPP loans to remain eligible for the employee retention credit with respect to wages that are not counted as forgiven payroll costs under the PPP.
• The Act extends the availability of the credit to the first two quarters of 2021.
• The amount of credit is 50% of the qualified wages paid to the employee, plus the cost to continue providing health benefits to the employee paid between March 12, 2020 and December 31, 2020. Effective January 1, 2021, the credit amount is increased to 70% of qualified wages, which is amended to include the cost to continue providing health benefits. Therefore, whereas the credit was capped at $5,000 ($10,000 in qualified wages X 50%), effective January 1, 2021, the credit cap is increased to $7,000 ($10,000 in qualified wages X 70%).
• The Act lowers the bar on reduction in gross receipts from 50% reduction in gross receipts to 20% reduction.

월요일 저녁, 미국 상원과 하원에서 Consolidated Appropriations Act, 2021이라는 이름의 코로나 판데믹을 극복하기 위한 법안을 통과시켰다. 총 9천억 달러 규모의 이 법안은 PPP 대출의 2차 라운드 및 PPP 관련 비용의 세무상 공제에 대한 내용을 포함하여 여러가지 경제 활성화를 위한 규정을 다루고 있다. 이 법안은 트럼프 대통령의 서명만을 남겨두고 있어 곧 입법화가 될 것으로 예상된다.

2차 PPP

이 법안은 처음 대출하는 업체 및 기존에 PPP 대출을 받았던 업체에게 2차 PPP대출을 허용한다. 기존에 PPP를 받았던 업체들의 경우에는 직원의 숫자가 300명 미만이고, 1차 PPP대출에 받은 돈을 다 소진하였고, 2020년도 분기 중 한 분기가 2019년도 동분기 대비 25% 이상의 매출이 감소한 경우에 최대 2백만불까지의 2차 대출이 허용된다.

1차 PPP를 받지 않은 업체들의 경우에는 다음과 같은 요건을 충족하는 경우 2차 PPP 대출을 받을 수 있다:

• 직원의 숫자가 500명 미만이고 다른 SBA 7(a) 대출을 받을 수 있는 업체
• 개인사업자, 외부 용역자, 및 자영업자
• 교회를 포함한 비영리 단체
• 각 로케이션별로 직원의 숫자가 300명 미만인 음식 및 서비스 업체

1차 PPP와 마찬가지로 PPP대출의 금액은 전년도의 월 평균 급여의 2.5배로 산정되게 되지만, 최고 금액은 2백만불로 제한이 된다. 마찬가지로 상환금액을 탕감받기 위해서는 대출금의 60% 이상을 8주 혹은 24주의 기간안에 사용이 되어야 하며, 탕감을 받는데 고려되는 비용은 급여, 렌트, 모기지 이자비용, 및 유틸리티가 있다. 또한, 2차 PPP의 탕감에는 개인보호장비 구매 및 시설 변경 등 연방정부의 COVID-19 지침에 준수하기 위해 들어간 비용들도 포함이 될 것으로 보인다.

PPP 비용의 세무상 공제

이 법안이 통과되게 되면, PPP loan의 탕감신청을 하는데 고려되는 비용들도 세무상 공제가 되게 된다. 이 내용은 IRS가 앞서 발표하였던 PPP 관련 비용의 세무상 공제를 금지하는 규정을 대체하게 된다.

보다 간단해진 탕감 신청 및 기타

이 법안이 입법화 되게 되면 $150,000 미만의 PPP 대출의 탕감 신청이 보다 간단해 지게 된다. $150,000 미만의 PPP대출을 갖고 있는 업체들의 경우 관련된 대출금을 PPP의 목적에 맞게 사용하였다는 확인만 하면 탕감이 될 것으로 보인다.

또한, 기존에는 PPP 탕감시에 경제적 손실 재난 대출로 선급받은 금액 (EIDL Advance)은 제외 되었으나 이 법안은 이와 같은 제한을 폐지한다.

Monday night, the U.S. Senate and House of Representatives passed Consolidated Appropriations Act, 2021 (the “Bill”). This $900 billion COVID-19 relief bill provides, among other things, second round of Paycheck Protection Program (“PPP”) loans and clarifies tax deductibility for PPP expenses. The Bill is on its way to President Trump, who is expected to sign it into law.

Second round of PPP Loans

The Bill provides second round of PPP(“PPP2”). PPP2 loans are available to first-time qualified borrowers and to businesses that previously received a PPP loan. Previous PPP recipients may apply for another loan of up to $2 million, provided they have 300 or fewer employees, have used or will use the full amount of their first PPP loan, and can show a 25% gross revenue decline in any 2020 quarter compared with the same quarter in 2019.

Second round of PPP loans are available to following first-time borrowers from the following groups:

• businesses with 500 or fewer employees that are eligible for other SBA 7(a) loans.
• Sole proprietors, independent contractors, and eligible self-employed individuals.
• Not-for-profits, including churches.
• Accommodation and food services operations (those with NAICS codes starting with 72) with fewer than 300 employees per physical location.

As with PPP1, borrowers may receive a loan amount up to 2.5 times their average monthly payroll costs in the year prior to the loan or the calendar year, but the maximum loan amount has been limited to $2 million.

To be eligible for full loan forgiveness, PPP borrowers will have to spend no less than 60% of the funds on payroll over a covered period of either eight or 24 weeks — the same parameters PPP1 had when it stopped accepting applications in August. The costs eligible for loan forgiveness in PPP2 include payroll, rent, covered mortgage interest, and utilities. PPP2 also makes the following potentially forgivable:

• Covered worker protection and facility modification expenditures, including personal protective equipment, to comply with COVID-19 federal health and safety guidelines.
• Expenditures to suppliers that are essential at the time of purchase to the recipient’s current operations.
• Covered operating costs such as software and cloud computing services and accounting needs.

Tax Deductibility of PPP Expenses

The bill also specifies that business expenses paid with forgiven PPP loans are tax-deductible. This supersedes IRS guidance released earlier in 2020 that such expenses could not be deducted.

Simplified Application and Other Terms of Note

The Bill creates a simplified forgiveness application process for loans of $150,000 or less. These borrowers will receive forgiveness upon submission of one-page certification form to be developed by the SBA.

The Bill also repeals the requirement that PPP borrowers deduct the amount of any EIDL advance from their PPP forgiveness amount.

Financial Statement Impact of PPP Loan

The Paycheck Protection Program (“PPP”) was established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) and it provides loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses. The loans and accrued interest may be partially or fully forgivable, if the borrower uses the proceeds for qualifying expenses such as payroll, employee benefits, mortgages interest, rent, and utilities. The amount of loan forgiveness may be reduced if the borrower terminates employees or reduces salaries during the covered period. The unforgiven portion of the PPP loan is payable over two years with an option of extension to five years at an interest rate of 1%, with a deferral period of up to ten months.

AICPA issued Technical Question and Answer (TQA) 3200.18 (the “TQC”) in accordance with US GAAP which addresses non-governmental accounting for forgivable loans received under the PPP. According to the TQA, non-governmental entities may account for PPP loans under FASB ASC Topic, 470, Debt, or as a government grant under FASB ASC Topic 958-605, Not-for-Profit Entities, when certain circumstances are met.

The entities, that are not governmental nor nonprofit, can treat the PPP loan as either 1) debt or 2) government grants.

• Loan (ASC Topic 470-50) – if an enterprise elects to treat the PPP loan as a debt, it can be derecognized only upon formal forgiveness of the debt by the lender (SBA) or repayment of the debt. The amount of loan forgiveness received can then be recorded as gain on extinguishment of debt.

• Grant (ASC Topic 958-605) – if an enterprise expects to meet the forgiveness eligibility requirements and concludes that it can be forgiven, in substance, then PPP loan can be treated as grant.

Additionally, subsequent to the passage of the CARES Act, the IRS clarified in Notice 2020-32 that (i) 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 the PPP loan, and that (ii) the income associated with the forgiveness is excluded from gross income for purposes of the Code pursuant to section 1106(i) of the CARES Act. This precludes to deduct business expenses funded with PPP loan proceeds that are ultimately forgiven, thereby preventing taxpayer from claiming a double tax benefit on the qualifying expenses for PPP loans.

Therefore, while forgiveness loan amount is excluded from gross income, the PPP loan amounts used for qualifying expenses are nondeductible for federal tax purposes. Nontaxable forgiveness loan amount and the nondeductible qualifying expenses are permanent differences which are not subject to the tax provision. If borrower have nontaxable forgiveness loan amount and nondeductible expenses in the same period for tax purposes, there is no impact on the tax provision. However, if borrower uses the proceeds for qualifying expenses which are not deductible in 2020 and receive forgiveness which are excludable from income in 2021, then unfavorable tax treatment will have occurred in 2020.

The following examples illustrate the varying financial reporting and tax consequences of the Notice 2020-32:

Example 1: 100% Certain about Full Forgiveness of PPP Loan

Assume that Company X received PPP loan $700,000 on June 1, 2020. As of December 31, 2020, the Company X expects to meet all the forgiveness eligibility requirements and concludes that the full forgiveness of $700,000 is probable.  In this case, Company X can elect to treat the PPP loan as grant, recognizing the gain on the income statement.

Following is the presentation on the financial statements and tax provision:

The non-deductible compensation expense and non-taxable grant income occurs in the same tax year. Thus, no tax impact.

Example 2: Uncertain about Full or Partial Forgiveness of PPP Loan

Assume that Company X received PPP loan $700,000 on June 1, 2020. As of December 31, 2020, the Company X is uncertain whether it will meet the forgiveness eligibility requirements. In this case, Company X must treat the PPP loan as a loan. Since the loan can only be written off from its balance sheet (i) when the loan is paid or (ii) when the entity is legally released from the liability, the Company X’s 2020 balance sheet would include a loan of $700,000.

Following is the presentation on the financial statements and tax provision:

The non-deductible compensation expense and PPP loan – dischargeable income occurs in the different tax year. Therefore, timing difference of tax effect occurs.

Example 3: Expect Partial Forgiveness of PPP Loan

Assume that Company X received PPP loan $700,000 on June 1, 2020. As of December 31, 2020, the Company X meets the partial forgiveness eligibility requirements and expect to receive partial forgiveness of $500,000. In this case, Company X may record as gain on the portion of a PPP loan that expect to be forgiven and the remainder as a loan.

Following is the presentation on the financial statements and tax provision:

The non-deductible compensation expense and grant income occurs in the same tax year. Thus, no tax impact on forgivable portion of loan $500,000. Unforgivable portion of loan will be remaining as a loan on Company X’s balance sheet.

As shown in above, depending on how the PPP loans is treated as either debt or grants, taxpayer may have some different impact on income tax provision. Thus, each entity is required to carefully review the circumstances and related regulations when determining proper accounting and tax treatment. Please consult with your service provider.

ASU 2018-15는 ASC 350-40 (내부사용목적 소프트웨어) 에 서비스 계약인 클라우드 컴퓨팅 약정에 대한 내용을 다루고 있다.

일반적으로, ASC 350-40-30에 따라 내부사용목적의 소프트웨어를 개발하는데 발생한 비용은 자산인식될 수 있다. 이 비용에는 소프트웨어 개발에 직접적인 관련이 있는 직원의 급여 및 출장 비용이 포함된다. ASU 2018-15에 따르면, 클라우드 컴퓨팅 약정에 내부사용목적 소프트웨어에 대한 라이센스가 포함된 경우 소프트웨어 라이센스는 ASC 350-40에 따라 처리되어야 하며, 이에 따라 회사는 자산화 할 비용과 비용 처리할 경비를 결정해야한다.

ASC 350-40에 따라 특정 개발 비용 (예를 들어, 교육 비용 및 특정 데이터 변환 비용) 은 자산화 할 수 없다. 따라서, 기업은 구현 활동과 관련된 프로젝트 단계 (예비 프로젝트 단계, 애플리케이션 개발 단계, 또는 사후 구현 단계) 를 결정해야한다. 애플리케이션 개발 단계에 발생한 비용은 비용의 성격에 따라 자산화되고, 약정 기간동안 감가 상각된다. 약정 기간에는 해약이 불가능한 기간과 기업이 약정을 유지할 것으로 합리적으로 확신하는 기간이 포함된다.

예비 프로젝트 및 사후 구현 단계에 발생한 비용은 구현 활동이 수행됨에 따라 비용 처리된다.

이는 기업이 클라우드 컴퓨팅 약정을 시행하기 위해 상당한 비용을 지출할 경우 영향이 있을 것으로 보인다.