Congress Approves $900 Billion COVID-19 Relief Bill
On Dec. 21, 2020, Congress passed a $900 billion COVID-19 relief bill, the Consolidated Appropriations Act, 2021. Key features are $600 stimulus payments to individuals, $300 in added extended weekly unemployment benefits and $325 billion in small business aid. The legislation now goes to President Donald Trump, who is expected to sign it. The COVID-19 relief is tied to a $1.4 trillion resolution to fund the federal government through September 2021.
The bill also ensures tax deductibility for business expenses paid with forgiven Paycheck Protection Program (PPP) loans, provides more PPP funding, makes loans available to certain groups for the first time and offers borrowers the opportunity to apply for a second loan.
Key provisions include:
- $325 billion for small businesses, including more than $284 billion to the U.S. Small Business Association (SBA) for first and second PPP loans and $20 billion for Economic Injury Disaster Loan (EIDL) grants to businesses in low-income communities. Live entertainment venues, independent movie theaters and cultural institutions will have access to $15 billion in dedicated funding. Businesses in low-income and minority communities will have $12 billion specifically set aside for them.
- $166 billion for Economic Impact Payments of $600 for individuals with adjusted gross income (AGI) at or below $75,000 per year and $1,200 for married couples with AGI at or below $150,000 per year, as well as $600 for each child dependent. For those with AGI above the thresholds, the stimulus payment will be reduced by $5 for each $100 of excess.
- $120 billion for people receiving unemployment benefits to receive an extra $300 per week from Dec. 26 until March 14, 2021. The bill also extends the Pandemic Unemployment Assistance (PUA) program and the Pandemic Emergency Unemployment Compensation (PEUC) program.
- $25 billion for emergency rental assistance and an extension of the national eviction moratorium through Jan. 31, 2021.
- $45 billion for transportation funding, including $16 billion for airlines, $14 billion for transit systems, $10 billion for state highways, $2 billion for airports, $2 billion for intercity buses and $1 billion for Amtrak.
- $82 billion for colleges and schools, including $10 billion for childcare assistance.
- $22 billion for health-related expenses incurred by state, local, Tribal and territorial governments.
- $13 billion for emergency food assistance, including a 15 percent increase for six months in Supplemental Nutrition Assistance Program (SNAP) benefits.
- $7 billion for broadband expansion.
The bill also extends the employee retention tax credit as well as several expiring tax provisions. It also allows a 100 percent business expense deduction for meals as long as the expense is for food or beverages provided by a restaurant from Dec. 31, 2020 to the end of 2022.
Paycheck Protection Program
The legislation also covers a new round of Paycheck Protection Program loans, or PPP2 loans. Loans will be available to first-time qualified borrowers as well as businesses that previously received a PPP loan.
Previous PPP recipients may apply for another loan of up to $2 million if they have 300 or fewer employees, have used or will use the full amount of their first loan and can show a 25 percent gross revenue decline in any 2020 quarter compared with the same quarter in 2019. Borrowers that returned all or part of a previous loan may reapply for the maximum amount available to them.
The PPP2 permits the following first-time borrowers:
- Sec. 501(c)(6) businesses, such as chambers of commerce and “destination marketing organizations” (as defined in the act), as long as they have 300 or fewer employees and do not receive more than 15 percent of receipts from lobbying.
- Businesses with 500 or fewer employees that are eligible for other SBA 7(a) loans.
- Sole proprietors, independent contractors and eligible self-employed individuals.
- Not-for-profits, including churches.
- Accommodation and food services operations with fewer than 300 employees per physical location.
Like the first PPP, payroll, rent, covered mortgage interest and utilities are eligible for forgiveness. Covered worker protection and facility modification expenditures to comply with COVID-19 federal health and safety guidelines, expenditures to suppliers that are essential to the recipient’s current operations and covered operating costs are also potentially forgivable.
As with the first round of PPP, borrowers will have to spend no less than 60 percent of the funds on payroll over a covered period of either eight or 24 weeks. Borrowers may receive up to 2.5 times their average monthly payroll costs in the year prior to the loan or the calendar year with a $2 million maximum. Hotels and restaurants may receive up to 3.5 times their average monthly payroll costs with a $2 million maximum.
The bill also creates a simplified forgiveness application process for loans of $150,000 or less. A borrower shall receive forgiveness if they sign and submit to the lender a certification not more than one page in length of the number of employees the borrower was able to retain because of the loan, the estimated total spent on payroll costs, and the total loan amount.
Additionally, the bill repeals the requirement that PPP borrowers deduct the amount of any EIDL advance from their PPP forgiveness. The bill also includes set-asides for first- and second-time PPP borrowers with 10 or fewer employees, first-time borrowers that have recently been made eligible, and loans made by community lenders.
The bill also specifies that business expenses paid with forgiven PPP loans are tax-deductible, superseding IRS guidance that such expenses could not be deducted and bringing the policy in line with what TSCPA, the AICPA and hundreds of other business associations have argued was Congress’s intent when it created the original PPP as part of the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136.
For more information, read the full Consolidated Appropriations Act, 2021.