Benefits for individuals and businesses & more PPP clarifications
If it seems like we’ve been waiting months for new COVID-19 legislation, it’s because we have. Finally, on December 21, Congress voted to approve the Consolidated Appropriations Act of 2021 – COVID Relief Bill to avert a federal government shutdown. The stimulus package is aimed at directing hundreds of billions of dollars of aid to the American people and struggling businesses.
There is a lot contained in the nearly 5,600-page bill, including many big tax-related items. More will be shared in the coming days and weeks, but the following are some of the highlights you’ll want to know about now.
Help for Individuals
So many Americans have been hit hard by a coronavirus and are struggling with making ends meet. The following are designed to help provide them needed support while helping boost our economy:
- Unemployment Benefits Extended. The current federal unemployment program that increased benefits up to $300 per week will be extended through March 14 – that’s an additional 11 weeks of benefits. In addition, a separate unemployment benefits program, the Pandemic Unemployment Assistance that was established for contract and gig workers, will no longer expire at the end of the year. It too has been extended through March 14.
- Stimulus Checks on the Way. Stimulus checks will be sent to individuals as soon as next week according to Treasury Secretary Steven Mnuchin; exact details will likely be released over the coming days. These checks are for up to $600 per person including dependents. The benefits will be reduced for individuals that earned more than $75,000 in 2019 ($112,500 for heads of households) and couples making more than $150,000. Those making above these amounts will see their checks decrease by $5 for each $100 of AGI above the thresholds.
- Deferred Payroll Taxes Extended Further. There was a payroll deferral provision as part of the CARES Act passed earlier this year that will be extended from April 20, 2021, to December 31, 2021.
- Rental Assistance Available. A total of $25 billion has been allocated to an emergency federal rental assistance program. These funds will be distributed by state and local governments to help families impacted by COVID-19 who are struggling to pay rent. The funds are designated to help people pay past due rent, future rent and utility bills. Details around the assistance available will be released by state and local governments so exact details are not yet available.
To assist in the education and support of children, the legislation also contains the following provisions:
$82 billion for education providers like schools and colleges; including aid to help reopen classrooms safely
$10 billion to help with child care assistance
$13 billion in increased Supplemental Nutrition Assistance Program and child nutrition benefits
$7 billion to bolster broadband access to help Americans connect remotely during the pandemic
In addition, the bill provides funding to support coronavirus vaccine distribution, testing and contract tracing efforts, in addition to funding to support health care workers.
Small Business Relief
The single biggest expenditure in this legislation is for business relief, amounting to about $325 billion in total. It includes:
- $284 billion for another round of Paycheck Protection Program (PPP) funding
- An additional $20 billion for new EILD Grants for businesses in low-income communities
- $15 billion dedicated to funding for live venues, independent movie theaters and cultural institutions
A second round of PPP loans is also available. However, businesses that can apply are now limited to 300 employees, AND they must have had a decline in gross receipts by at least 25% for any quarter in 2020 as compared to the same quarter in 2019.
The PPP2 loan amount is based on 2-1/2 months of the average monthly payroll for 2019 or the previous 12 months before application. Loans cannot exceed $2 million and there are special rules for affiliated borrowers. Businesses using a NAICS code starting with 72, which include accommodations and food service business, are allowed up to 3-1/2 months of average payroll for the loan amount.
A few other additional items designed to help businesses contained in the bill include:
- Temporary allowance to fully deduct business meals through December 31, 2022
- Extension of a credit for paid sick and family leave through March 31, 2021
- A tax credit “to support employers offering paid sick leave”
Changes Made to Existing PPP Loans
Deductibility of expenses paid with PPP loan proceeds shall be not be denied. Lawmakers have resolved the dispute over whether businesses that received PPP loans, and had them forgiven, will be allowed to deduct the costs covered by those loans on their federal tax returns. Those costs will be deductible under the legislation.
Relief provides for the addition of eligible expenses, including covered operation expenditures, property damage costs, supplier costs and worker protection expenses. This will help those who were unable to spend all of the loan proceeds.
The legislation has also simplified the forgiveness process. Loans up to $150,000 are now allowed to file for forgiveness using the one-page forgiveness form. Loans from $150,000 to $2 million will also have simplified documentation requirements.
More to Come
Depending on which side of the aisle you listen to, this may not yet be the last of COVID-19-related assistance coming out of Congress. As this pandemic continues to impact so many small businesses and individuals, elected leaders continue to discuss ways to help others and bolster the U.S. economy.
As additional clarifications are released on this legislation or any new legislation, we’ll share what you need to know so you can make smarter, well-informed decisions for your future.
At Windham Brannon, we are dedicated to keeping you up to date with the latest Covid-19 activity in our Covid-19 Resource Center. Our team is working around the clock to ensure we stay up to date on the latest guidance and information to assist you and your business during this unique time. Please reach out directly to your WB team member with specific questions or for additional guidance