After months of deadlock, both the House of Representatives and the Senate passed the Consolidated Appropriations Act, 2021 (the “Act”), which contains several stimulus provisions for both individuals and businesses. President Trump has indicated that he will sign the bill into law. Below is a high-level summary of the most impactful items. We will provide more in-depth analysis of the provisions once we digest the finer points.
Small Business Relief
Certain business may have an opportunity to obtain Paycheck Protection Program (“PPP”) second draw loans. To participate, businesses generally must have less than 300 employees and have experienced a decline in gross receipts of 25% or more in any quarter in 2020 as compared to the same quarter in 2019. The maximum loan amount for most businesses is the smaller of 2.5 months’ worth of payroll costs or $2,000,000. Entities in the NAICS code 72 may receive loans of up to lesser of 3.5 months’ worth of payroll costs or $2,000,000.
Borrowers who participated in the first round of PPP loans may be eligible to request an increase in the amount of their loans due to updated regulations.
From the CARES Act, we knew PPP borrowers could exclude the amount of the loan from taxable income. Subsequent to the passage of the CARES Act, however, the Treasury department ruled that any expenses paid for with PPP loan proceeds that were forgiven would not be deductible. The Act clarifies that any forgiven PPP loan is not included in taxable income and all expenditures paid with forgiven PPP loan proceeds are tax deductible, effective as of the date of enactment of the CARES Act.
Economic Injury Disaster Loans
The Economic Injury Disaster Loan (“EIDL”) program is extended through December 31, 2021 and, a targeted EIDL program will provide funds to small businesses which have suffered economic losses of greater than 30% and which are in low-income communities.
Grants for shuttered venue operators are available in an amount equal to a portion of 2019 gross income.
Businesses and their employees may continue to take advantage of the expanded sick leave and expanded FMLA leave and the corresponding payroll tax credits under the Families First Coronavirus Response Act through March 31, 2021.
The employee retention credit has been extended and expanded, providing tax credits to businesses that keep their employees on the payroll.
Business meals provided by a restaurant which are incurred in calendar years 2021 and 2022 will be fully deductible.
Individuals who have adjusted gross income (AGI) of less than $75,000 per year will receive cash payments of $600. Couples filing jointly will receive $1,200 if their AGI is less than $150,000. Parents will also receive $600 per qualifying child if their income is below the threshold.
Federal pandemic unemployment assistance is extended. For weeks of unemployment beginning after December 26, 2020 and ending on or before March 14, 2021, these benefits are payable at $300 per week. Benefits for self-employed individuals are also expanded.
We hope this legislation helps make your holidays a little brighter. Stay tuned to our website for additional updates and more in-depth analysis. We look forward to helping plan for your needs in 2021. Happy Holidays!