Last week, Congress passed the Consolidation Appropriations Act of 2021. The Act was waiting for the President’s signature and as of today the bill has been signed thereby enacting the provisions we informed you of in a previously sent email that can be accessed here:
We will be giving a more in-depth analysis in the weeks to come, but as a reminder of the highlights of the bill, we have listed several items that will affect a large majority of taxpayers.
- The expenses that were paid with forgiven PPP loans will now be deductible.
- There will be a “second” round of PPP loans available to eligible businesses. The detailed guidelines for eligibility will be issued by the SBA in the coming weeks.
- Clarifies that gross income does not include forgiveness of Economic Injury Disaster Loans (“EIDL”) and the expenses paid with forgiven loans will be deductible.
- The employee retention tax credit has been modified and extended through June 30, 2021.
- Business meals provided by restaurants will be 100% deductible in 2021 and 2022.
Extension of Existing Laws:
- The Act extended or made permanent some existing tax provisions that were set to expire. The work opportunity tax credit, employer credit for paid family and medical leave, and the exclusion for certain employer payments of student loans are a few examples of what was extended.
- The Act extended the section 25D residential energy-efficient property credit for two years, and section 25C 10% credit for qualified nonbusiness energy property by one year.
- 10% early distribution penalty from retirement plans does not apply if the distribution is a “qualified disaster distribution” and the amount does not exceed $100,000 in total for all tax years. The distribution can be included in income over a three year period. This is a temporary provision beginning on the first day of the qualified disaster and ending 180 days after the date of enactment of the Act.
- Increased limit for loans from retirement plans. This is a temporary provision for loans made during the 180 day period beginning on the date of enactment of the Act.
- Corporations can deduct “qualified disaster relief contributions” up to 100% of taxable income. This is a temporary provision for contributions paid from January 1, 2020 and ending 60 days after the date of enactment of the Act.
- Individuals that have a “net disaster loss” will be able to deduct the loss as an addition to their standard deduction, subject to a $500 floor.
Look for future e-mails that will provide more details as it becomes available.