By Robert Jackson, CPA
December 22, 2020
Late last night the Senate overwhelmingly passed the long-awaited Covid-19 stimulus and funding package, preceded by a similar response in the House. The White House has indicated that the President will sign it.
The package, which originally began as a funding bill, provides much needed relief to the American people. Included in the stimulus bill are many technical corrections and extenders for tax provisions. Below are just some of the key provisions that will have the greatest financial impact on our clients –
- Full PPP deductibility – expenses related to forgiveness of PPP loans are now deductible (previously the IRS took the position that expenses related to PPP loan forgiveness would not be deductible) for both initial PPP loans as well as “Second draw” PPP loans.
- “Second draw” of PPP loans – with expanded rules on who can borrow and what the funds can be used for. NOTE that in general – you have to have 300 or fewer employees and had at least a 25% reduction in gross receipts for a quarter in 2020 as compared to the same quarter in 2019. The max loan amount for this second round would be the lesser of 2.5 times average payroll cost or $2,000,000.
- For restaurants and others that provide accommodation services (NAICS 72 Entities) the max loan for this second round would be the lesser of 3.5 times average payroll cost or $2,000,000.
- Simplified forgiveness filing procedures for loans of $150,000 or less.
- Grants are also available for live venues, independent movie theaters and cultural institutions that have been shut down, referred to as the shuttered venue operator grant.
- A new round of EIDL (Emergency Injury Disaster Loan) grants.
- The Employee Retention Credit would also be extended for the 1st and 2nd quarters of 2021, and the provisions would be modified, including expanding the amount and eligibility. In addition, the prohibition on taking the Employee Retention Credit for those borrowers who received a PPP loan is removed – hence PPP loan borrowers can now also take the Employee Retention Credit. Borrowers will be able to apply for back credits.
- Extension of credits for Sick and Family Medical Leave under the FFCRA through March 31st, 2021 (previously the credits were set to expire as of December 31, 2020).
- A second round of Stimulus Checks (with income limitations similar to the recovery rebates of the CARES Act sent to Americans earlier this year).
- 100% deduction for food and beverages at a restaurant for business meals, paid or incurred between 1/1/2021 and 12/31/2022.
- Extension of the special 100% qualified (cash) charitable contribution allowance through 2021 (previously this was only allowed in 2020).
As previously noted, the items mentioned above are only some of the provisions to watch out for. The text of the 5,500 page bill was only just released yesterday – so there are still many details to analyze.
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