On December 15, 2020, Congress introduced two bipartisan COVID-19 relief bills: the COVID-19 Emergency Relief Act of 2020 ($748 billion) and the State and Local Support and Small Business Protection Act of 2020 ($160 billion), that contain payroll-related provisions. Additional benefits to small businesses are included in the COVID-related Tax Relief Act of 2020, which was passed by Congress on December 21, 2020, and which is expected to be signed into law by the President today.
COVID-19 Emergency Relief Act of 2020
Paycheck Protection Program & Small Business Support – $300 billion to the Small Business Administration for funding to allow the hardest-hit small businesses to receive a second forgivable Paycheck Protection Program (PPP) loan. Details on when the PPP program would be accessible are pending.
Expenses paid with PPP loan funds are tax-deductible, consistent with Congressional intent in the CARES Act.
Eligibility would be limited to:
- Small businesses with 300 or fewer employees that have sustained a 25 percent revenue loss in any quarter of 2020.
- Small 501(c)(6) organizations that are not lobbying organizations and that have 150 employees or fewer, such as local chambers of commerce, economic development organizations, and tourism offices.
- Forgivable expenses are expanded to include:
- Supplier costs and investments in facility modifications and personal protective equipment to operate safely.
- Payments for any business software or cloud computing service that facilitates business operations.
- Property damage and vandalism or looting due to public disturbances that occurred during 2020 that were not covered by insurance.
- Operating or capital expenditures that are required to facilitate the adaptation of the business activities of an entity to comply with requirements established or guidance issued by the Department of Health and Human Services, the CDC, or OSHA during the period beginning on March 1, 2020.
- Business expenses paid for with the proceeds of PPP loans are tax-deductible, consistent with Congressional intent in the CARES Act.
- Economic Injury Disaster Loan grant advances.
- The loan forgiveness process is simplified for borrowers with PPP loans of $150,000 or less.
- Set-asides are included to ensure that smaller borrowers and underserved communities get the help they need, such as:
- for small businesses with 10 or fewer employees.
- for loans made by small community lenders, including Community Development Financial Institutions (CDFIs), credit unions, small community banks, Minority Depository Institutions (MDIs), and farm service lenders
- for the Minority Business Development Agency.
- Funding for independent live venue operators, including eligible independent movie theatres and museums, affected by COVID-19 stay-at-home orders.
- Extension of Section 1112 of the CARES Act, which provides payment of principal, interest, and associated fees on qualifying Small Business Administration (SBA) 7(a), 504 and microloans.
- Funding for SBA loan products to increase guarantees on SBA 7(a) loans and reduce fees on 7(a) and 504 loans; provide loan subsidies for 7(a) loans; re-purposing of $138 billion in unspent allocations to be reinvested in the PPP program.
- Employee payroll tax deferral extended due date to be repaid from April 30, 2021 until December 31, 2021.
- FFCRA credits extended credit provisions from December 31, 2020 through March 31, 2021.
- Employee retention credit extended through July 1, 2021. The credit percentage is increased from 50% to 70% of qualified wages paid from January to June 2021. Qualified wages increased from $10,000 per employee to $10,000 per quarter per employee. A 20% drop (reduced from 50%) in quarter-over-quarter receipts is required to make a quarter eligible.
- Full business meal deduction is permitted in 2021 and 2022.
- Stimulus payments up to $600 for individuals and $1,200 for a married couple filing jointly, plus $600 for each dependent child under the age of 17.
- Individuals may use their earned income from tax year 2019 to determine the Earned Income Tax Credit and the refundable portion of the Child Tax Credit (i.e., the Additional Child Tax Credit) in the 2020 tax year.
- The bill extends various expiring tax provisions including Section 179D, the New Markets Tax Credit, the Work Opportunity Credit, and various energy credits, among others.
Unemployment Assistance – Key Points
- Extension of all pandemic unemployment insurance programs by 16 weeks from their expiration at the end of December.
- Federal supplemental unemployment insurance benefits expanded by $300 per week for 16 weeks, from the end of December into April.
- The bill also provides for vaccine development and distribution, testing and tracing, supporting health care workers, and other health provisions.
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