Last night, Congress passed the Consolidated Appropriations Act of 2021 (CAA). President Trump is expected to sign the $900 billion package into law when it reaches his desk in the next few days.
The bill provides funding for additional stimulus payments to individuals and child dependents, $300 of weekly supplemental unemployment benefits, rental assistance, health care related items and various transportation and education related funding,
For small business, CAA includes $325 billion of funding including $284 billion for the Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL). PPP loans will be available to first-time borrowers and allows eligible entities to receive a second PPP loan. CAA also overturns an IRS ruling and allows PPP related expenses to be tax deductible even if the loan is forgiven.
CAA includes the following key provisions:
- Direct payments of $600 per person (including dependents) for singles making less than $75,000 and couples making less than $150,000
- The $300 weekly federal unemployment supplement expires during March and includes coverage for the self-employed.
- Other individual provisions include emergency rental aid and an extension of the national eviction moratorium through January 31, 2021
- Funding for state and local transportation and airlines including airport related businesses.
- Other state and local provisions include funding for colleges, schools, childcare assistance, food assistance and broadband expansion.
- Key business provisions (other than PPP)
- $20 billion is allocated for additional EIDL grants
- Extension of the employee retention tax credit
- 100% (up from 50%) of business meals will be deductible for 2021 and 2022 provided the meals and beverages are provided by a restaurant.
A summary of the key PPP provisions contained in CAA are as follows:
Eligible first time PPP borrowers are:
- Businesses with 500 or fewer employees that are eligible for other SBA 7(a) loans
- Non-profit organizations including churches and 501(C)(6) organizations. 501(C)(6) organizations are eligible if they have 300 or fewer employees and limited lobbying activities.
- Hospitality and food service establishments with less than 300 employees per location.
Previous PPP borrowers are eligible if they:
- Used or will use the full amount of the initial PPP loan.
- Experienced a 25% decline in operating receipts during a 2020 calendar quarter compared to the same 2019 quarter.
- Have 300 or fewer employees
PPP provisions common to all borrowers:
- PPP related expenses shall be tax deductible and related tax attributes stay in-tact, even if the loan is forgiven. This overturns the current IRS position disallowing deductibility of those expenses and limiting tax attributes related to the loan.
- Allow borrowers that returned a previous PPP loan to reapply under the current rules.
- Maximum loan amount is $2 million and calculated based on 2.5 times monthly payroll; 3.5 times monthly payroll for hotels and restaurants.
- Allowable costs now include worker protection and facility modification expenses incurred to comply with health and safety guidelines and payments to suppliers essential for operations, including software and cloud computing costs.
- Borrowers may select a covered period that ends either eight or twenty-four weeks following receipt of the loan proceeds and spend at least 60% of the proceeds on payroll.
- EIDL advances no longer reduce the PPP forgiveness amount.
- For borrowers with loans under $150,000, the forgiveness application will be one page with borrower certifications. Payroll records must be retained for four years and other records for three years.
Cullari Carrico LLC remains committed to assisting our clients, friends and communities during these uncertain times and has a dedicated team in place that can assist with any questions you have related to this or other government programs. We invite you to contact us if you have questions or concerns.