Consolidated Appropriations Act, 2021 – Update

As many of you are aware, Congress is in the midst of finalizing the Consolidated Appropriations Act, 2021. As of midnight, December 21, 2020, the package has passed the House by a vote of 359-53 and the Senate by a vote of 92-6. It is expected to be signed by President Trump in the coming days. There is still paperwork that needs to be completed on the massive bill (5,593 pages) that extends the government funding through September 2021 and a stimulus package all in one. President Trump signed a stopgap spending bill to keep the government open until December 28th. It is presumed he will sign the final bill before then.

Several Provisions you should be aware of when the law is enacted:

1) Section 276 – Clarification of Tax Treatment of Forgiveness of Covered loans (PPP) – Congress has overridden the IRS position and made deductions used to forgive PPP loans deductible in line with Senate Bill 3612, as mentioned in our previous contact on November 19th.

2) Section 333- Repeal of EIDL Advance Deduction. Deductions are also allowed against EIDL advances in line with section 276 above.

3) Section 203 – Extension of Federal Pandemic Unemployment Compensation of $300 per week through March 14, 2021.

4) Section 286 – Extension of Credits for Paid Sick and Family leave have been extended from December 31, 2020 to March 31, 2021.

5) Section 307 – Simplified Forgiveness Application – Loans up to $150,000. We will be looking out for the new application in the coming weeks (within 24 days of the bill’s signing).

6) Section 6428A – Additional 2020 Recovery rebates for individuals. The amount is $600 per individual, $1,200 per couple and $600 for children. It is available for individuals with adjusted gross income at or below $75,000 ($112,500 for head of household), and couples with adjusted gross income at or below $150,000. If they have children, they will receive an extra $600 per child (under 17 years old).

7) Extension of expiring credits

  • Section 101 – Medical expense adjusted gross income extended at 7.5% instead of 10%
  • Section 104 – Increase income limitation on lifetime learning credit
  • Section 113 – Extension of work opportunity tax credit to December 31, 2025
  • Section 114 – Exclusion from discharge of debt on qualified principal residence through January 1, 2026
  • Section 119 – Employer Credit for Paid Family and Medical leave extended to December 31, 2025
  • Section 120 – Exclusion for Certain Employer payments of Student Loans through January 1, 2026
  • Section 135 – Indian Employment Credit extended one year to December 31, 2021.

8) Section 207 – Extension and Modification of Employee Retention and Hiring Credit extended through July 1, 2021 (set to expire January 1, 2021).

9) Section 210 – Effective After December 31, 2020, 100% deduction for food or beverages provided by a restaurant, and paid or incurred before January 1, 2023.

10) Section 212 – Certain Charitable Deductions by non-itemized filers – Deduction of $300 above the line cash donations to qualified charities. Clarification that the amount is $600 in the case of a joint return (previously unclear at $300).

PPP Expansion and second round:

1) Section 304: Allowable use of PPP Loan includes:

  • Covered operations expenditures – Software of cloud computer services
  • Damage costs -Property damage, vandalism, or looting
  • Supplier costs -Expenditures made by an entity to a supplier of goods that are essential to operations, and made pursuant to a contract, in effect before the covered period, with respect to perishable goods
  • Covered worker protection expenditures – Operating or a capital expenditure to facilitate the adaptation of the business activities to comply with the Department of Health, CDC, or OSHA.

2) Section 311: Paycheck Protection Program Second Draw Loans – More restrictive

  • Small businesses only (less than 300 employees)
  • Minimum of 25% reduction from gross receipts of the entity during the same quarter in 2019.

If you have any additional questions, please do not hesitate to contact us.