On December 21, 2020, Congressional leaders released the text of the Consolidated Appropriations Act. The omnibus legislation encompasses a number of smaller acts, funding the government for the 2021 fiscal year, as well as providing relief for the escalating COVID-19 pandemic, economic stimulus, and tax relief. This 5,500 page piece of legislation contains several provisions that directly impact most taxpayers. Cooper Norman will vigilantly inform you as practical application of these provisions is brought to light.
In the meantime, below is a brief summary of what is known:
- A second round of PPP loans (PPP2 loans) will be available to first-time qualified borrowers and to businesses that previously received a PPP loan. Specifically, 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.
- Can show a 25% gross revenue decline in any 2020 quarter compared with the same quarter in 2019.
- Loan terms and conditions are very similar to the first round of PPP. PPP borrowers may receive a loan amount of up to 2.5 times their average monthly payroll costs in the year prior to the loan or the calendar year, the same as with PPP1, but the maximum loan amount has been cut from $10 million in the first round to the previously mentioned $2 million maximum. Hotels and restaurants can get up to 3.5 times their average monthly payroll costs, again subject to a $2 million maximum.
- Business expenses paid with forgiven PPP loans are tax-deductible. This supersedes IRS guidance that such expenses could not be deducted.
- Economic impact payments will be made of $600 for individuals making up to $75,000 per year and $1,200 for married couples making up to $150,000 per year. Additionally, a $600 payment for each child dependent will also be made.
- Workers receiving unemployment benefits will gain a $300 per week supplement from Dec. 26 until March 14, 2021.
- Emergency rental aid and an extension of the national eviction moratorium will be available through Jan. 31, 2021.
- The Bill extends the employee retention tax credit and several expiring tax provisions and temporarily allows a 100% business expense deduction for meals (rather than the current 50%) as long as the expense is for food or beverages provided by a restaurant. This provision is effective for expenses incurred after Dec. 31, 2020, and expires at the end of 2022.