On Dec. 21, Congress passed the long awaited $900 billion COVID stimulus deal. The legislation called, the Consolidated Appropriations Act, 2021, is expected to be quickly signed by President Trump. It is intended to help families and small businesses that are continuing to be adversely impacted by the COVID-19 pandemic.
This bill is a record breaker at nearly 5,600 pages. Considering the rush to get this approved, many questions are surely going to arise, and more details will continue to be released. The information contained below is not intended to be all-inclusive and should serve, as a general guide to some of the aspects of the bill we feel are most important.
As more information becomes available, we will update you with additional communication.
The bill includes $284 billion allocated to the Small Business Administration (SBA) for the Paycheck Protection Program (PPP), and includes some important changes to this loan program. Below are details on this newest round of PPP Funding:
Who is eligible for the Consolidated Appropriations Act, 2021:
- Second Time Borrowers (PPP2)
- Business with 300 or fewer employees and
- That can show a 25 percent gross revenue decline in any quarter in 2020 compared to same quarter in 2019 and
- Have used or will use the full amount of their first PPP loan.
- First Time Borrowers
- Generally, businesses with 500 or fewer employees that are eligible for other SBA 7(a) loans
- Sole proprietors, independent contractors and eligible self-employed individuals
- Any business with fewer than 300 employees per physical location that has a NAICS code starting with 72 (accommodation and food services)
- Nonprofits, including churches
- Adds 501(c)(6) business leagues and destination marketing organizations
- 300 or fewer employees
- Chamber of commerce, economic development, tourism
- Subject to lobbying threshold (15 percent of receipts, no more than $1 million of cost)
How much can you borrow under the Consolidated Appropriations Act, 2021:
- Maximum loan amount is $2 million
- Loan amount = 2.5 times average total monthly payroll costs
- PPP borrowers with NAICS codes starting with 72 (hotels and restaurants) can get up to 3.5 times their average monthly payroll costs
Deductible expenses eligible for loan forgiveness under the Consolidated Appropriations Act, 2021:
- Same as PPP 1
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- Payroll costs
- Covered mortgage interest
- Rent
- Utility payments
- Covered worker protection expenditures and facility modification costs
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- Personal Protective Equipment (PPE)
- Costs to comply with COVID-19 federal health and safety guidelines
- Covered supplier costs
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- Expenses to a supplier that are essential to current operations
- Covered operating cost – software or cloud computing services
- Payroll costs should be at least 60%
New and improved elements of the Consolidated Appropriations Act, 2021:
- Expenses paid for with PPP proceeds will be expressly tax-deductible
- This applies to ALL PPP loans, including PPP loans obtained earlier in 2020 through the first round
- Includes a simplified forgiveness application for loan made for $150,000 or less
- Repeals the requirement that PPP borrowers deduct the amount of any EIDL advance from their PPP forgiveness amount
Other key provisions in the Consolidated Appropriations Act, 2021
- Additional 2020 recovery rebates for individuals (Stimulus Checks)
- $600 for individuals / $1,200 for married couples
- Phases out by 5% of the excess over AGI thresholds.
- Single phase-out is $75,000 – $87,000
- MFJ phase-out is $150,000 – $174,000
- $600 per qualifying child phases out at same rate as parent(s)
- If single, and at AGI of $80,000, parent payment is $350 and child payment is $350 for a total of $700.
- An additional $20 billion has been allocated to provide Economic Injury Disaster (EIDL) Grants to businesses in low-income communities
- $15 billion allocated to shuttered live venues, independent movie theaters and cultural institutions
- Itemized deduction for medical expenses to be subjected to a floor reduction to 7.5% is made permanent
- Temporary allowance of full deduction for business meals
- Effective for expenses after 12/31/20 and before 01/01/2023
- For food and beverages provided by a restaurant ONLY
- Certain charitable contributions are deductible by non-itemizers
- $300 individuals / $600 married couples – above the line deduction for 2020 has been extended to 2021
- Modification of limitations on charitable contributions
- 100% of AGI limit extended from 2020 to 2021
- Extension of unemployment benefits for 11 additional weeks including $300 per week Federal supplement for those receiving unemployment benefits from Dec. 26, 2020 to March 14, 2021
- Flexible Savings Account (FSA) balances can be rolled from the 2020 tax year into 2021, and 2021 balances can be rolled into 2022
- Extends and expands the Employee Retention Tax Credit through July 1, 2021
Robin Baum, CPA is only the 3rd Managing Partner in Zinner & Co.'s 80+ year history. She has extensive knowledge of the various aspects of financial reporting, income and estate tax planning and preparation. She has been involved in financial analysis for start-up businesses and advises on issues regarding business profitability and succession planning.
