On December 21, Congress passed the Consolidated Appropriations Act (CAA) 2021 which included various underlying legislation. The CAA is a massive 5,500 page bill which covers stimulus, omnibus, extenders, and many other items. The price-tag for the bill is approximately $2.3 trillion dollars ($1.4 trillion spending and $900 billion stimulus). President Trump was expected to sign the bill, but it seems to be currently held up for last minute stimulus check and other funding provisions that he wants to have changed. The final legislative text of the bill has not been posted yet, so the items below are subject to change. Also, it is likely that subsequent guidance will be issued to further clarify the provisions.
Here are some of the components of the CAA (as we know it) for your reference:
Enhanced unemployment benefits through March 14, 2021, with $300 per week additional UI (11 weeks).
Additional federal benefits of $100 weekly to those who earned at least $5,000 a year in self-employment income but are disqualified from receiving PUA.
Stimulus checks of up to $600 per adult and child (subject to change if Trump gets his way). Caveat – adult dependents (above age 17) are excluded from the stimulus checks. Per a television interview, Treasury Secretary Steve Mnuchin said Americans can expect to begin receiving stimulus payments early next week (via direct deposit). For single taxpayers, there is an income limit of $75,000 or less with an income phase out and for married filing joint taxpayers, there is a limit of $150,000 or less with an income phase out. These payments are considered an advance in taxpayer’s credits.
Extension of the $300 above the line charitable deduction for individuals ($600 if married filing joint) that don’t itemize for 2021.
Improved Earned Income Tax Credit & Child Tax Credit which allows a lookback to 2019 income.
Mortgage debt forgiveness exclusion from income extended five years.
Rental assistance for families struggling to stay in their homes and an extension of the eviction moratorium. Assistance can be used for past-due rent and future rent payments. Also, funds can be used for utility and energy bills to avoid shutoffs.
Funding for colleges and schools ($82 Billion), including support for HVAC repair and replacement to mitigate virus transmission and reopen classrooms. Also, aid for child care assistance to help get parents back to work and keep child care providers open.
Large expansion of Pell Grants to reach 500,000 new recipients and ensure more than 1.5 million students will now receive the maximum benefit.
Extension and expansion of the Paycheck Protection Program (PPP) including:
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KEY POINT - Expenses paid for with any forgiven PPP funds under the CARES Act or CAA are DEDUCTIBLE, even if the loans were already forgiven. Also, a pass-through owner will be entitled to a basis step-up in their stock/partnership interest for the forgiven PPP loan amount.
- A second round of loans (second draw) for qualifying small businesses that have 300 or fewer employees, have used or will use the full amount of their first PPP loan funds, and can show a 25% gross revenue decline in any 2020 quarter compared with the same quarter in 2019.
- Re-opens the PPP for first time recipients, with an expansion of eligible entities including 501©(6)s, destination marketing organizations (DMOs), housing cooperatives, newspapers, broadcasters, and radio stations. Prohibits publicly traded companies from receiving PPP funds. Clarifies that a business must have been in operation on February 15, 2020.
- For the rounds mentioned above, the business may receive a loan of up to 2.5 times their average monthly payroll costs in the year prior to the loan or the calendar year 2019. The maximum loan amount will be $2 million as compared to $10 million under the CARES Act.
- Modifications to better serve the accommodation and restaurant industry (NAICS code 72). Businesses in this sector may receive a loan of up to 3.5 times their average monthly payroll costs in the year prior to the loan or the calendar year 2019. The maximum loan amount will be $2 million.
- The same waiver of affiliation rules that applied to the initial PPP loans will apply to the second PPP loans.
- In addition to payroll, rent, covered mortgage interest and utilizes, costs eligible for forgiveness now will include personal protective equipment to comply with COVID-19 federal health and safety guideline; expenditures to suppliers that are essential to the recipient’s current operations; and covered operating costs such as software and cloud computing services and accounting needs.
- The covered period for all first draw loans is extended to March 31, 2021 and is retractive to the start of the CARES Act. The CAA allows borrowers to select the end date of their covered period. All PPP loan proceeds must be used between 8 and 24 weeks.
- Forgiveness simplification for loans of $150,000 or less. The application will be not more than one page in length, listing the number of employees retained and the amount of the loan spent on payroll.
- EIDL Advances of $10,000 or less will not reduce the PPP loan forgiveness amount.
- No 1099 Reporting for PPP loan forgiveness.
Provides $15 billion Grant funds to shuttered live venue operators or promoters, theatrical promoters, theatrical producers, or live performing arts organizations, motion picture theatre operators, museum operators, or talent representatives that were fully operational on February 29, 2020. They must have had gross earned revenue during the first, second, third or, only with respect to an application submitted on or after January 1, 2021, fourth quarter in 2020 that demonstrates not less than a 25 percent reduction from the gross earned revenue of the business during the same quarter in 2019. Businesses that suffered a substantial loss of revenue may be given first priority/access to the grant funds.
Extends the Families First Coronavirus Response Act (FFCRA) Paid Leave Credits through March 31, 2021 (expanded sick leave and family leave). Eligible employers are required to keep providing such leave to eligible employees.
Extended and improved Employee Retention Credit (ERC) through June 30, 2021. For calendar quarters beginning after December 31, 2020 the ERC is 70 percent of eligible wages of $10,000 per employee per quarter, which is a great enhancement. The prior CARES act rule capped the $10,000 per employee regardless of the number of quarters. The employer’s gross receipts for a 2020 calendar quarter must be less than 80 percent of the gross receipts for the same calendar quarter in 2019 or experienced a full or partial suspension of operations during the quarter due to a governmental order. The size of an employer has been increased to 500 employees instead of 100 employees. Employers who receive PPP loans may now qualify for the ERC in regard to wages that are not paid for with PPP forgiven funds.
100% deduction for business meal expenses provided by restaurants for 2021 and 2022.
Depreciation of certain residential rental property over a 30-year period for taxpayers who made the real property trade or business election for purposes of the Internal Revenue Code (IRC) Section 163(j) limitation.
Extension of the payback period to December 31, 2021 (previously April 30, 2021) for the deferred employee payroll taxes that were issued by President Trump’s executive order on August 8, 2020. Wages paid from September 1, 2020 through April 30, 2021 are now eligible.
Extension of the energy-efficient commercial building deduction.
Strengthened Low Income Housing Tax Credit.
Extension of the New Markets Credit and Work Opportunity Tax Credit.
Sweeping clean energy reforms, R&D enhancements, efficiency incentives, and extended clean energy tax credits.
Permanently lowers excise tax rates for beer, wine, and spirits makers.
