The Act is over 5,000 pages long and covers a wide variety of areas. Below is a summary of the key provisions included in the Act:
Paycheck Protection Program (PPP) Deductibility
- The Act clearly specifies that expenses, which cause PPP loan forgiveness, will be deductible, following through with Congress’ original intent. This supersedes guidance previously issued from the Internal Revenue Service regarding non-deductibility of PPP expenses. This provision applies to the original PPP loans, as well as PPP loans received under this new Act.
Please contact us on how this may impact your 2020 tax return and cash flow planning.
Paycheck Protection Program (as updated by the Act)
- Expands the eligible expenses of CARES Act PPP loan funds
- Simplifies the loan forgiveness application process for loans less than $150,000
- Repeals the CARES Act provision that requires PPP borrowers to deduct their EIDL Advance from their PPP loan forgiveness amount
- Allocates $284 billion to a second loan called a PPP second draw for smaller and harder hit businesses. To be eligible, businesses must:
- Employ no more than 300 employees,
- Have used or will use their full amount of their first PPP loan, and
- Demonstrate a 25% gross revenue decline in any quarter in 2020 compared to the same quarter in 2019.
- Second draw loans will be calculated for up to 2.5x average monthly payroll costs, but businesses in industries assigned to NAICS code 72 (Accommodations and Food Services) may receive loans of up to 3.5x average monthly payroll costs.
The Small Business Administration has 10 days to carry out the regulations in the Act. It is important for businesses who may be eligible for the PPP second draw loans to begin preparing for the application process. We learned from The CARES Act PPP that there was limited funding, which was quickly allocated to those businesses who applied early after the banks’ application portals were open.
- Direct payment checks of up to $600 per adult and child (similar income limitations as original direct payment stimulus)
- Enhanced unemployment insurance benefits of $300 per week:
- Independent contractors and gig workers are eligible
- Effective for 11 weeks, from December 26th through March 14th
- Extends the programs that expired on December 31, 2019 and those set to expire on December 31, 2020.
- Allows full deductibility of business meals provided by a restaurant, paid or incurred in 2021 and 2022
- Provides tax credits to support employers offering paid sick leave
Specific tax related provision updates will be covered in future updates.
Other Significant Funding
- $25 billion in emergency rental aid and an extension of the national eviction moratorium through January 31, 2021
- $45 billion in transportation funding, including $16 billion for airlines, $14 billion for transit systems, $10 billion for state highways, $2 billion each for airports and intercity buses, and $1 billion for Amtrak
- $82 billion for education providers, such as schools and colleges
- $10 billion for child care assistance
- $13 billion to Supplemental Nutrition Assistance Program and child nutrition benefits
- $7 billion to bolster broadband access to help Americans connect remotely during the pandemic
- $22 billion for health-related expenses incurred by state, local, Tribal, and territorial governments
- Additional funding for coronavirus vaccine distribution, testing, contact tracing, and health care workers
We will be offering two webinars summarizing the tax implications, economic stimulus programs, and further details regarding the Consolidated Appropriation Act, 2021. Webinars will be offered on December 29th and 30th. Specific times and registration information will be sent in a follow-up email. If you don’t receive an email, please call our office for registration information.
We will continue to review the Act and will provide specific details in our webinars and future updates.
If you have any questions regarding how this legislation may affect your business or personally, please call our office at 302-737-6200.