Both the U.S. Senate and House of Representatives passed a $900 billion pandemic relief bill, the Consolidated Appropriations Act, 2021, H.R. 133, on the night of December 21, 2020. The bill was signed by President Trump on Sunday, December 27, making it law.
The bill is nearly 5,600 pages and has many important provisions impacting individual and business taxpayers. Your trusted REDW tax advisors have provided a summary of the top provisions within the bill.
Top Takeaways from the Consolidated Appropriations Act, 2021:
- Congress has renewed economic impact payments of which individuals making $75,000 per year will receive $600 if filing single, $1,200 if filing married and an additional $600 per dependent child.
- A second round of Paycheck Protection Program (PPP) loans will be forthcoming. The bill allocates $284 billion to the U.S. Small Business Administration (SBA) and $20 billion to Economic Injury Disaster Loan (EIDL) grants.
- From December 25, 2020 to March 14, 2021, a supplemental $300 unemployment benefit will be granted weekly from $120 billion of funding.
- The national eviction moratorium has been extended through January 31, 2021.
- The bill extends the employee retention tax credit.
- The bill increases business expense deduction for meals from 50% to 100% for expenses incurred post December 31, 2020, extends the $300 charitable contribution for non-itemized deduction taxpayers, and enacts a number of disaster tax relief provisions.
Changes made to the Paycheck Protection Program (PPP)
Paycheck Protection Program loans will be funded for a second round through the bill. The PPP loan will be available to businesses that previously received a PPP loan, as well as to first-time borrowers. Second-time borrowers may apply for up to $2 million in loans as long as they have fewer than 300 employees, have or will have used the full amount of their first PPP loan, and can demonstrate a gross revenue decline of 25% in any quarter of 2020 compared to the same quarter of 2019. Costs eligible for PPP loan forgiveness include mortgage interest, utilities, payroll, and rent.
During 2020, the U.S. Treasury twice released guidance expanding the position that held a taxpayer could not deduct eligible expenses in its 2020 tax year if the PPP loan and the related expenses were forgiven (see Rev. Rul. 2020-27). However, accounting industry groups fought this interpretation by the Treasury. With the new stimulus bill, Congress has corrected the language and intends for expenses paid with PPP loans to now be tax deductible. Taxpayers may be able to file quick claims for refunds beginning in 2020 to reimburse any overpayment of estimated taxes against the PPP loan income.
There are many complex rules to the PPP loan program, both past and proposed. Please reach out to REDW Senior Tax Manager Daniel Foley for assistance to determine PPP eligible expenses, to obtain loan or loan forgiveness applications, or for questions on the stimulus bill or tax planning assistance.
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