After several rounds of discussion, congressional leaders reached a deal on a new COVID-related stimulus bill. The bill passed both houses of Congress on Monday, Dec. 21 and was signed into law by the President Trump on Sunday, Dec 27. The stimulus package, which totals nearly $900 billion, provides aid for workers and businesses and includes expansions and revisions of existing COVID relief programs.
Paid Leave
Congress did not extend the mandatory paid leave provisions of the Families First Coronavirus Response Act (FFCRA), but did extend tax credits for employers who voluntarily choose to provide COVID-related paid leave to employees. This means that after December 31, 2020, employers will no longer be required to provide employees paid leave for COVID-related reasons. Employers that choose to provide paid leave for COVID-related reasons after that time will still be able to claim a tax credit, as they currently do under the FFCRA, for any paid leave the employer provides through March 31, 2020. Although the current bill does not extend the FFCRA’s mandatory paid leave provisions, some congressional leaders have indicated a desire to do so. We will continue to monitor developments and provide updates on any future legislation.
Unemployment
The stimulus bill also provides unemployment relief for individuals who are out of work. The bill provides an additional $300 per week in supplemental unemployment benefits through March 14, 2021, to anyone receiving unemployment benefits. The supplement is not retroactive.
The bill also extends two programs created under the CARES Act that were set to expire on Dec. 31. Specifically, the stimulus bill extends (i) the Pandemic Unemployment Assistance (PUA) program, which provides unemployment benefits coverage to the self-employed, gig workers, and others who would not normally qualify for employment, and (ii) the Pandemic Emergency Unemployment Compensation (PEUC) program, which provides additional weeks of federally funded unemployment benefits to individuals who exhaust their regular state benefits. With these extensions, the bill will allow individuals to receive a maximum of 50 weeks of benefits.
PPP Loans
The bill includes an additional $284 billion for the popular Paycheck Protection Program (PPP) loans. Importantly, the bill clarified that any amount of PPP loan forgiveness will not count as gross income for employers. This provision is retroactive to when the CARES Act was enacted and applies to second draw PPP loans as well.
A portion of PPP funds have been set aside for “very small” businesses, and for lending through community-based lenders and minority depository institutions. We anticipate guidance on which businesses will qualify as “very small,” and what, if any, additional evidence these businesses will need to support their applications. The stimulus bill also expanded eligibility for the program to nonprofit organizations, including churches and faith-based organizations, and news outlets.
There are several other important changes to this round of PPP loan funding. Businesses that apply for this round of PPP must demonstrate a reduction in gross receipts of no less than 25 percent during the first, second, third, or — for applications submitted on or after January 1, 2021— fourth quarter in 2020, relative to the same quarter in 2019. The bill limits eligibility for this round of PPP loans to business with 300 or fewer employees — rather than 500 or fewer employees — and caps the total loan amount at $2 million. Despite some new limitations, the stimulus bill expands the qualifying expenses for which employers may use PPP loan funds. Specifically, employers may now use PPP loan funds for:
- Payment for software, cloud computing, and other human resources and accounting needs.
- Covered property damages costs, including costs for property damage due to public disturbances that occurred during 2020 that are not covered by insurance.
- Covered supplier costs for expenditures supplied according to a contract, purchase order, or order for good in effect before taking out the loan that are essential the recipient’s operations when the expenditure was made (supplier costs of perishable goods can be made before or during the life of the loan).
- Covered worker protection expenditures for personal protective equipment and help for compliance with state or federal health and safety guidelines for the period between March 1, 2020, and the end of the national emergency declaration.
Employers who received a first draw PPP loan that has not yet been forgiven may use their PPP loan funds to cover these expanded qualifying expenses. Second draw PPP loan recipients are eligible for loan forgiveness equal to the sum of their payroll costs and expanded allowable expenses so long as at least 60 percent of loan funds are used for payroll costs.
Other Loan and Relief Programs
The bill also expands other aid programs, including an additional $20 billion in funding for the Economic Injury Disaster Loan program, providing grants through the Small Business Administration. There is also targeted relief for certain industries, including $15 billion for independent movie theaters, entertainment venues, music clubs, and cultural institutions. We anticipate more guidance on how these funds will be distributed. Additionally, the bill includes a tax break for corporate meal expenses intended to aid the restaurant industry. Under the new legislation, corporations will be able deduct the full value of any meal expenses.
