Congress passed and sent to President Trump for signature a major stimulus bill, the Consolidated Appropriations Act, 2021. The president is expected to quickly sign the $900 billion bill into law.
Included in the bill is the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act (“the Act”), which allocates $325 billion to business relief, including $284 billion for another round of Paycheck Protection Program (PPP) loans.
Eligibility requirements for both first-time and repeat PPP borrowers include:
- Fewer than 300 eligible employees, on an affiliated company basis.
- A revenue decrease of at least 25% during one of the first three quarters of 2020, or during Q4 2020 (if applying after January 1, 2021). The decrease is determined by comparing gross receipts in a quarter to the same quarter in the prior year.
- Specifically excluded are public companies, lobbying entities, entities with China-based ownership and venue operators receiving aid under the venue grant section of the Act.
The maximum loan amount an eligible company can receive is the lesser of $2 million or 2.5 times monthly payroll costs incurred during the one-year period before the loan is made, or during calendar year 2019 (3.5 times monthly payroll if the entity’s NAICS code is 72). The Act maintains the 60% payroll (40% non-payroll) expense requirement of the PPP Flexibility Act.
The legislation also makes the following improvements that can be retroactively applied to all PPP loans:
- Tax deductibility of all qualified expenses paid with PPP funds is allowed.
- PPP allowable and forgivable expenses are expanded to include operating expenses, property damage costs (caused by acts of civil unrest), supplier costs and worker protection costs (both operating and capital costs).
- Borrowers can now choose any 8- to 24-week period as their loan forgiveness covered period.
- Economic Injury Disaster Loan (EIDL) grants will no longer reduce PPP forgiveness.
- A simplified forgiveness application for PPP loans of less than $150,000 will be limited to borrower certifications.
- Forgiven PPP loan funds will be considered tax-exempt income and will increase owners’ basis in pass-through entities.
In addition to the PPP updates, the bill also modifies or extends other individual and business-friendly provisions, including:
- Extends the employee retention tax credit into 2021; increases the credit to 70 percent (from 50 percent) of qualifying wages; and increases the limit on creditable wages to $10,000 per quarter (instead of per year).
- Allows small employers that received PPP loans to use the employee retention tax credit to cover other wages.
- In 2021 and 2022, allows a 100% deduction for the cost of business meals.
- Extends the deadline by which employers who deferred employees’ payroll taxes need to increase their employees’ withholding and pay the taxes owed. The deferred taxes must now be paid by the end of 2021 (originally due on April 30, 2021).
- Extends CARES Act charitable giving incentives (charitable deductions up to 100% of AGI and $300 above-the-line charity deductions) into 2021.
- Extends retirement plan distribution relief into 2021.
- Makes permanent the IRC Section 179D energy-efficient building deduction.
As Grassi tax advisors analyze this massive piece of legislation, we will keep you informed of all relevant changes. If you have any questions, please reach out to your Grassi advisor or contact or Crisis Response & Recovery hotline at 212.223.6216 or firstname.lastname@example.org.