After an eight-month test of endurance, Congress passed, and President Trump signed into law, a $900 billion COVID-19 relief along with a $1.4 trillion government funding package. Here are the key takeaways:
The legislation, officially named the Consolidated Appropriations Act, 2021, authorizes a second round of economic-impact payments, following the checks Americans received in the spring and summer. Households will receive $600 for each adult and $600 for each dependent. As with the first round of payments, these new payments are based on income from 2019 and begin phasing out for individuals with adjusted gross incomes over $75,000 and married couples over $150,000. Treasury Secretary Steven Mnuchin said that the first electronic payments could reach bank accounts by the beginning of this week.
For more information on your economic-impact payments, visit the National Conference of State Legislatures’ (NCSL) website here.
Expanded Unemployment Benefits
$120 billion is being used to provide workers receiving unemployment benefits a $300 per week supplement from December 26, 2020 through March 14, 2021. This new legislation also extends the Pandemic Unemployment Assistance (PUA) program, with expanded coverage to the self-employed, gig workers, and others in nontraditional employment, and the Pandemic Emergency Unemployment Compensation (PEUC) program, which provides additional weeks of federally funded unemployment benefits to individuals who exhaust their regular state benefits.
The newly enacted legislation provides $25 billion of assistance to tenants in arrears on their rent. It also extends until the end of January 2021 a federal eviction prohibition, which the incoming Biden administration may extend again. The Treasury Department would be responsible for dispersing the rental assistance to states via a formula based on population. Landlords and building owners can apply on behalf of tenants meeting the eligibility requirements, generally those who make less than 80% of median income in their area, have at least one person in their households who has lost a job and can demonstrate they are at risk of losing their home.
The bill provides $82 billion for public and private K-12 schools, as well as colleges. Of that, the bulk would go to a $54.3 billion fund for public schools, while $22.7 billion would go to public and private higher education, with $1.7 billion set aside for historically Black as well as Tribal and Hispanic-serving colleges and universities. Specifically, the bill includes $11 million for the National Technical Institute for the Deaf, $20 million for Howard University and $11 million for Gallaudet University.
Small Business Benefits
The new legislation provides $325 billion in small business funds, to be allocated in the following specific manner:
- $284.5 billion for first and second forgivable Paycheck Protection Program (PPP) loans. (see below for specific qualifications.)
- $20 billion for new Economic Injury Disaster Loan Grants for businesses in low-income communities.
- $15 billion in funding for live venues, independent movie theaters, and cultural institutions.
- $3.5 billion for continued Small Business Administration debt relief payments.
- $2 billion for enhancements to Small Business Administration lending.
- $12 billion is being used for Community Development Financial Institutions and Monitory Depository Institutions that provide credit and financial services to low-income and minority communities.
Paycheck Protection Protection (PPP) Loans
The return of the PPP contains many similarities to the first round of the PPP but also has several important differences.
PPP loans will be available to first-time qualified borrowers and, for the first time, to businesses that previously received a PPP loan. Specifically, previous PPP recipients may apply for another loan of up to $2 million, provided they (1) have 300 or fewer employees; (2) have used or will use the full amount of their first PPP loan; and (3) can show a 25% gross revenue decline in any 2020 quarter compared with the same quarter in 2019.
Additionally, the new legislation expands PPP eligibility for 501 (C)(6) nonprofit organizations, such as radio stations, chambers of commerce, and visitors’ bureaus, provided the organizations have 300 or fewer employees and do not receive more than 15% if receipts from lobbying.
The new legislation will also permit PPP loans to first-time borrowers from the following groups:
- 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; and
- Accommodation and food services operations (those with North American Industry Classification System (NAICS) codes starting with 72) with fewer than 300 employees per physical location.
As with the first round of PPP loans, the costs eligible for loan forgiveness include payroll, rent, covered mortgage interest, and utilities. Unlike the first round of loans, this new legislation also makes the following potentially forgivable:
- 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; and
- Covered operating costs such as software and cloud computing services and accounting needs.
To be eligible for full loan forgiveness, PPP borrowers will have to spend no less than 60% of the funds on payroll over a covered period of either eight or 24 weeks. Businesses that receive PPP loans are able to take tax deductions for the expenses covered by the forgiven loans, with the maximum deduction amount being $2 million.
The new COVID-19 relief bill also creates a simplified application process for loans of $150,000 or less. Specifically, a borrower shall receive forgiveness if a borrower signs and submits to the lender a certification that is not more than one page in length, includes a description of the number of employees the borrower was able to retain because of the loan, the estimated total amount of the loan spent on payroll costs, and the total loan amount. The Small Business Association (SBA) must create the simplified application form within 24 days of the bill’s enactment and may not require additional materials unless necessary to substantiate revenue loss requirements or satisfy relevant statutory or regulatory requirements. Borrowers are required to retain relevant records related to employment for four years and other records for three years, as the SBA may review and audit these loans to check for fraud.
Finally, the new legislation allows borrowers that returned all or part of a previous PPP loan to reapply for the maximum amount available to them.
For more information specific to PPP loans, please visit the Journal of Accountancy’s website here.
In addition to the PPP Loans, the legislation extends a tax credit for struggling employers who keep workers on the payroll, and it would let recipients of certain tax credits to qualify based on their 2019 incomes.
The new legislation also temporarily extend tax breaks for renewable energy, including incentives for wind energy and carbon capture. It also includes a full deduction for business meals in 2021 and 2022.
Lower excise taxes on beer, wine and spirits that were set to expire December 31 will be permanently extended, and tax incentives for investing in low-income areas and hiring workers from disadvantaged groups would be extended for five years.
Other Key Takeaways:
- The bill includes $10 billion in grants for child-care providers and $250 million for the Head Start program.
- States will receive $22.4 billion for testing, tracing and Covid-19 mitigation programs. Of this, $2.5 billion would be sent as grants targeting rural areas and communities of color.
- States and federal agencies will receive funding for vaccine distribution, with $20 billion going to the Biomedical Advanced Research and Development Authority (BARDA), $9 billion to the Centers for Disease Control and Prevention (CDC), and $3 billion designation for the national stockpile of vaccines.
- The legislation provides $12 billion in support to small lenders focused on low-income and minority communities, buttressing minority-owned banks and firms known as community financial development institutions.
- Independent movie theaters, live entertainment venues and cultural institutions are designated $15 billion.
Over the past year, the attorneys at Azrael Franz have successfully helped Clients gain access to COVID-19 relief provided by the state and federal government. Please contact Azrael Franz for assistance.