Congress Passes $900 Billion Coronavirus Relief Bill
The $900 billion coronavirus relief bill extends and modifies many provisions of the CARES Act, providing support and economic relief to help individuals and businesses through the continuing pandemic
Paycheck Protection Program (PPP): The bill provides additional funding of $284 billion for PPP to provide forgivable loans to first and second-time borrowers. Second-time loans are limited to businesses with fewer than 300 employees and at least a 25% decline in gross receipts in a 2020 quarter compared to the same quarter in 2019. The maximum loan for a second-time borrower is $2 million. To be eligible, a business must have used the full amount of the first PPP loan. Unlike the first round, businesses accepting a PPP loan will now be eligible to take the Employee Retention Tax Credit.
PPP loans can be used to pay qualifying expenses, which have been expanded to include covered property damage, supplier costs, or worker protection expenditures in addition to employee wages, rent and utilities. The bill provides a simplified forgiveness application process for loans up to $150,000
THE BILL CLARIFIES THAT BUSINESSES MAY NOW DEDUCT EXPENSES PAID WITH FORGIVEN PPP LOANS. Prior to this bill, the Treasury Department issued rulings that expenses paid with PPP loans would not be deductible. This clarification applies to old loans and new loans.
Employee Retention Tax Credit: The Employee Retention Tax Credit is extended through July 1, 2021. In addition, the credit is increased from a maximum of 50% of wages paid up to $10,000 to 70% of wages paid up to $10,000 for any quarter. Businesses are now eligible to utilize this tax credit and participate in the PPP.
Low-Income Housing Tax Credit (LIHTC): The bill increases allocations to states for the LIHTC, subsidizing the construction and rehabilitation of housing developments that have strict income limits for eligible tenants and housing costs.
Business Meal Deduction: The bill increases deductions for business meals to 100% for 2021 and 2022.
Social Security Payroll Tax Credits: The bill extends employer-side Social Security payroll tax credits through March 2021 to offset paid sick and family leave related to the coronavirus.
Tax Extenders: The bill extends or makes permanent certain temporary provisions in the tax code, including:
- CFC Look Through Rules: The bill extends the look through rules for 5 years to permit U.S. multinationals to bring back dollars trapped overseas in order to keep U.S. companies competitive abroad.
- New Markets Tax Credit: The bill extends this credit for an additional 5 years at 2020 levels.
- Work Opportunity Tax Credit: The bill extends this credit for additional 5 years.
- Health Coverage Tax Credit: The bill extends this credit for one year.
Stimulus Checks: The bill provides for a second round of direct payments to individuals up to $600 per individual and qualified child. Adult dependents are not eligible. The payments are structured similarly to the Recovery Rebates under the CARES Act, as they will be advanced tax credits based on 2019 income. The payments begin to phase out in value beginning at $75,000 for single filers, $112,500 for heads of household, and $150,000 for married couples filing jointly. The payments phase out entirely at $87,000 for single filers with no qualifying dependents and $174,000 for those married filing jointly with no qualifying dependents. Children will be eligible for the same benefit amount as eligible adults.
Extension of Unemployment Insurance (UI) Compensation Benefits: The bill provides for an 11-week extension of UI benefits provided in the CARES Act that are due to expire on December 26. This includes the Pandemic Unemployment Assistance (PUA) that extends UI benefits to workers who traditionally are ineligible, such as gig economy workers and independent contractors, and Federal Pandemic Unemployment Assistance (FPUA), which will provide an additional $300 per week supplement to state UI compensation.
Pandemic Emergency Unemployment Compensation (PEUC) originally providing an additional 13 weeks of UI benefits will also be extended for 11 weeks (for a combined maximum of 50 weeks) and will expire on March 14, 2021. Individuals receiving benefits beyond the standard 26-week period as of March 14th will continue receiving them through April 5th if they have not reached their maximum number of benefit weeks.
Workers with at least $5,000 in self-employment income may be eligible for an additional $100 per week benefit as part of the Mixed Earner Unemployment Compensation to adjust for a lower UI base payment.
Child Tax Credit (CTC) & Earned Income Tax Credit (EITC): The bill adjusts calculations for the 2020 tax year with respect to the CTC and EITC, as the pandemic has caused many individuals who rely on these credits to have earned lower income due to job loss or underemployment. The provision permits taxpayers to use 2019 income to determine an individual’s credit eligibility for the 2020 tax year.
Charitable Contribution: The above the line charitable contribution is extended through 2021 at $300 for individuals and $600 for married filing jointly.
Payroll Tax Deferral: For individuals opting into employee-side payroll tax deferral, the repayment deadline is extended from April 2021 to December 2021, lengthening the repayment period.
Flexible Savings Accounts (FSA): FSA balances can be rolled into 2021 and 2021 balances can be rolled into 2022.