The President has now signed the Coronavirus Response and Relief Supplemental Appropriations Act (The Act) as part of the Consolidated Appropriations Act, providing several new COVID-related relief programs. Amid funding for virus distributions, multiple relief causes, an extension of unemployment benefits, and $600 per person stimulus money, the bill provides $285 billion of funding and direction for a second round of Paycheck Protection Program (PPP) Loans, as well as various other economic relief measures, including the following:
EIDL Loans
Recipients who previously received EIDL loan advance amounts, but did not receive the full $10,000, can return for a second advance under similar payment criteria. EIDL loan recipients previously were required to reduce their PPP loan forgiveness by the amount of EIDL grant received. This is no longer the case. While you still cannot use the same expenses for EIDL grants and PPP forgiveness, borrowers will no longer be required to reduce their PPP forgiveness amounts by the EIDL loan
Employee Retention Credit (ERC)
The Employee retention credit has been extended through July 2021 and expanded for calendar quarters beginning after December 31, 2020, as follows:
- Employers who receive PPP loans can now be eligible for the ERC as well, provided that it only applies to wages that are not paid for with forgiven PPP proceeds. This provision is effective retroactively to the enactment date of the CARES Act.
- The ERC is expanded from a 50 percent refundable tax credit to 70 percent of eligible wages.
- The previous $10,000 annual wage limit per employee will now be a $10,000 quarterly limit. Thus, instead of a $5,000 credit per employee credit per year, it will be a credit of up to $7,000 per employee per quarter.
- Employers will be eligible for the ERC in 2021 if they have a 20% or greater decline in gross receipts. This is a lower bar to meet than the current 50% decline. Eligibility is determined for 2020 by comparing the 2020 gross receipts for a calendar quarter against the same calendar quarter for 2019. There is also a safe harbor allowing employers to use prior quarter gross receipts to determine eligibility.
- Employers can also become eligible if they were subject to a full or partial suspension of operations during the quarter due to a governmental order.
- For small employers (now defined as less than 500 employees, down from the previous 100 employees), wages paid to any employee during the quarter where the employer meets the gross receipts or suspension tests. By comparison, eligible wages for a large employer include only payments to employees in lieu of wages (i.e., employees not working).
Business Meal Deductions
For 2021 and 2022, the 50% deduction limitation on business meals is temporarily raised to 100%. Note, this provision only applies to food or beverages “provided by a restaurant” and isn’t retroactive to the 2020 tax year.
FFCRA Paid Leave Credits
Paid sick leave and expanded FMLA leave for which tax credits were provided in the CARES Act have been extended from their current expiration of December 2020 to March 2021. While the requirements to pay sick/FMLA leave for employers still expire on December 31st, if an employer chooses to pay benefits under these provisions, they will continue to receive a payroll tax credit through March 2021.
Other Items of Note
- The 7.5% floor for unreimbursed medical expenses is now permanently extended, rather than increasing to a 10% floor.
- Through 2021, individual taxpayers can now take a $300 charitable contribution deduction ($600 for a joint return) even if they are not itemizing deductions.
- Cash charitable contribution deductions previously limited to 60% of AGI were raised to 100% of AGI for 2020 by the CARES Act. That provision is now extended through 2021.
- The Section 179D energy-efficient commercial building deduction had been made permanent.
- The Section 45D New Markets Tax Credit, employer credit for paid family and medical leave, and the exclusion for certain employer payments of student loans are all extended through 2025.
- Extension of various energy-related tax credits (generally through December 31, 2021).
Payroll Protection Program
We addressed many of the provisions related to PPPS loans in a separate article, Paycheck Protection Program 2: The Sequel, though there are a couple of interactions with some of the other provisions as outlined above.
