New Relief Package and Deductibility Update

Late in December 2020, Congressional leaders announced the next round of relief: the Consolidated Appropriations Act, 2021 (H.R.133). The long-awaited $900 billion relief package includes additional aid for small businesses and individuals impacted by the COVID-19 pandemic and addresses key PPP issues. Former President Donald Trump officially signed off on the stimulus package as of late Sunday, Dec. 27, 2020. Here’s where things stand, as of December 2020:
  • Expenses are now deductible. A huge win for businesses, this act overturns the previous IRS Notice 2020-32 and Rev. Rul. 2020-27, allowing businesses to deduct business expenses paid with PPP loans.
  • Additional stimulus payments. Individuals can expect to receive another direct payment check. As of right now, the payments are $600 per adult and child dependents. Payments would begin phasing out at incomes exceeding $75,000 ($150,000 for couples filing jointly) up to $99,000 ($198,000 for couples). However, the House plans to vote on a measure to increase stimulus checks to $2,000. 
  • More funding for Paycheck Protection Program loans. An additional $284 billion for forgivable Paycheck Protection Program loans will be available for businesses. (see below for details)
  • Extended unemployment insurance. Those receiving unemployment insurance that was set to expire at the end of the year will now get an extra $300 a week for an additional 11 weeks until March 14, 2021.
  • An expanded Employee Retention Tax Credit. Businesses can receive a 70 percent credit on up to $10,000 of wages per employee per quarter to help keep employees on the payroll, in addition to receiving PPP funds.
  • FFCRA extension. Certain employers are required to offer paid sick leave or expanded family and medical leave for specified reasons related to COVID-19 through March 31, 2021. Covered employers qualify for dollar-for-dollar reimbursement through payroll tax credits for all qualifying wages paid under the FFCRA. These can be claimed on quarterly Form 941 returns.
Other funding outlined in the package includes $25 billion in emergency rental assistance, an extension of the national eviction moratorium, $45 billion in transportation funding, $82 billion in funding for colleges and schools, $7 billion to augment broadband access, $10 billion to help with child care assistance, funding to support COVID-19 vaccine distribution, testing and contract tracing efforts, among much more.

PPP vs. PPP2

The second round of funding brings some important differences. PPP2 loans will be available to first-time qualified borrowers and to businesses that have already received a PPP loan. Previous PPP recipients who have 300 or fewer employees, have or will use all previous PPP funds, and can show a 25% decline in gross revenue (when comparing revenue in any quarter in 2020 to the comparable quarter in 2019) may apply for another loan of up to $2 million. New this round, Sec. 501(c)(6) business leagues, such as chambers of commerce, visitors’ bureaus, etc., and “destination marketing organizations,” are now eligible to apply. Borrowers will still have to spend no less than 60% of the funds on payroll over a covered period of either eight or 24 weeks to receive forgiveness. 
Eligible forgivable expenses have expanded. Expenses still include payroll, rent, covered mortgage interest, and utilities. Other expenses now include the following:
  • Covered worker protection and facility modification expenditures, including personal protective equipment, to comply with COVID-19 federal health and safety guidelines.
  • Expenditures to suppliers that are essential at the time of purchase to the recipient’s current operations.
  • Covered operating costs such as software, cloud computing services, and accounting needs.

Other Items Worth Noting

  • There is a simplified forgiveness application process for loans of $150,000 or less.
  • The requirement that PPP borrowers deduct the amount of any EIDL advance from their PPP forgiveness amount has been repealed.
  • The deduction for business meals jumps from 50% to 100%. This applies only to 2021 and 2022.

Our Recommendations

At this time, be patient as the legislation proceeds to presidential signature and as the SBA processes the updated rules from the new bill and distributes new forms. If you submitted your forgiveness application previously and had an EIDL advance deducted, you may want to work with your bank to get this forgiven. Lastly, talk to your accountant about tax planning as the year comes to a close and expenses are now deductible. 

How We Can Help

This year, the team at Corrigan Krause has happily helped both clients and non-clients navigate the Paycheck Protection Program and other funding opportunities. If you need help applying for funding or applying for forgiveness, please reach out to our COVID-19 crisis team at ckcrisisteam@corrigankrause.com.
Leave a Reply