COVID-19 Stimulus Bill
After a surprising delay, on Sunday, December 27 President Trump signed the $900 billion COVID relief bill which was part of the larger annual federal spending package. Below is a summary of the highlights included in the Stimulus portion of the bill.
Changes to the Original Paycheck Protection Program (“PPP”)
- Expenses paid with forgiven PPP funds are now deductible. This is a material, and welcome, change from existing IRS guidance.
- Borrowers are now able to choose their own covered period if it is at least 8 weeks and not longer than 24 weeks. This provides a slight change to the current loan forgiveness application and provides borrowers with more control over how to handle potential workforce reductions.
- Congress expanded the types of expenses for which PPP funds can be used. This applies to both new loans and existing loans for which a forgiveness application has not been filed. Qualified expenses now include certain operations expenditures, property damage costs not covered by insurance, certain supplier costs, and certain worker protection expenditures.
- EIDL Advances will no longer reduce PPP loan forgiveness. The SBA has indicated borrowers that already received forgiveness and had their EIDL Advance deducted from such forgiveness may be able to amend their forgiveness application. We expect further guidance to be issued on this.
- Forgiveness applications for loans under $150,000 will be simplified to a one-page certification. We expect further guidance to be issued for this.
Paycheck Protection Program (“PPP”) – Round 2
- Business with less than 300 employees who also saw a decrease in revenue of at least 25% in any quarter during 2020 when compared to the same quarter in 2019 may be eligible for a second PPP loan. Similar to the original PPP program, we expect the Treasury and SBA will issue additional guidance before applications become available.
Payroll Tax Issues
- Certain credits established with the first stimulus package (FFCRA) have been extended through March 31, 2021.
- Employee payroll tax deferral repayment has been extended from April 30, 2021 until December 31, 2021.
- Employee retention credit has been extended through July 1, 2021. The credit percentage is increased from 50% to 70% of qualified wages paid from January 2021 through June 2021. Effective January 1, 2021 business with a gross receipts reduction of at least 20% (decreased from 50%) will qualify for the credit. In addition, qualified wages have been increased from $10,000 per employee to $10,000 per quarter per employee.
- Eligible taxpayers will receive a second stimulus check for up to $600 per person. Individuals with up $75,000 in adjusted gross income ($150,000 for married couples filing joint) will receive the full payment.
- The IRS is required to stop sending checks on January 15. If you don’t receive your check you will need to claim all or part of the missing amount when you file your 2020 federal income tax return through the Recovery Rebate Credit.
- President Trump has called for increased payments. Monday, December 28, the House passed legislation which would increase these payments to $2,000 per person for qualified households. At the time of this article it is unclear whether the Senate will vote on the House-passed bill.
Federal Unemployment Insurance
- The package includes an additional $300 per week in federal unemployment benefits for 11 weeks. Due to the delay in signing, we expect people to see a lapse in these payments as states reprogram their computer systems to reflect this update.
The larger annual spending package also allows for 100% deduction for restaurant meals in 2021 and 2022 and included an extension to various expiring tax provisions, including 179D, the New Markets Credit, the Work Opportunity Credit and various energy credits, among others.