Congress Passes $900B Stimulus; Here is a Summary of the COVID-19 Economic Relief Package

After long months of negotiations, Congress has agreed on a second stimulus package, currently under the Consolidated Appropriations Act of 2021. The full text of the Act is over 5,000 pages of text and was released on December 21, 2020. 

Updated on 12/28: President Trump signed the coronavirus relief package into law on December 27, days after he suggested he would block the bill if the stimulus checks weren’t raised to $2,000, from $600*. The Democratic-held House plans to vote on a measure to increase the payments, it is uncertain if the Senate will vote.

Lurie’s team has put together a summary of the current economic relief package in this article, and will update as new information becomes available. Please reach out to your Lurie advisor for questions.

Early highlights of the Act include:

Economic Relief for Businesses

  • Paycheck Protection Program – Round 2 called “Second Draw Loans.”
  • Tax treatment of PPP loans: Clarity that PPP loan forgiveness is not taxable, expenses associated with forgiven PPP loans are, in fact, tax deductible, and tax basis is increased for the tax-exempt income.
  • PPP Forgiveness: Expanded definition of Qualifying Expenses to include supplier costs, worker protection expenditures, and certain property damage. Expands definition of qualifying group health benefits to include group life/disability/ dental/vision insurance. These expenses are retroactive unless the loan has been forgiven. 
  • Additional funds added to the Economic Injury Disaster Loan (EIDL) fund.
  • EIDL advances are not taxable income.
  • Simplified forgiveness application process for PPP loans of $150,000 or less. Application will be one page and released within 24 days of President’s signature.
  • Employee Retention Credit has been expanded to employers with up to 500 employees and extended through July 1, 2021. Calculation revised to increase the credit. Businesses that receive PPP funds are now eligible to claim the Employee Retention Credit for wages that are not paid for with forgiven PPP funds.
  • Employee-side payroll tax deferral has been extended from ratable repayment period of January 1, 2021 to April 30, 2021 to ratable repayment period of January 1, 2021 to December 31, 2021.
  • FFCRA paid leave extended from December 31, 2020 to March 31, 2021.
  • Business meals from restaurants for all taxpayers are 100% deductible through 2022

Economic Relief for Individuals

  • *$600 direct rebates to individuals ($1,200 joint) with income phase-outs beginning at $75,000 for individuals ($150,000 joint).
    • Also $600 per qualifying child. (Does not include individuals claimed as a dependent on another tax return or nonresident aliens.)
  • Unemployment insurance compensation benefit supplement of $300 per week for weeks beginning after Dec 26, 2020 and ending on or before Mar 14, 2021. (Limitations apply for those with income as an independent contractor.) Also an extension of unemployment benefits for an additional 11 weeks (for a total of 50 weeks).
  • Employee-side payroll tax deferral has been extended from ratable repayment period of January 1, 2021 to April 30, 2021 to ratable repayment period of January 1, 2021 to December 31, 2021.
  • The federal eviction moratorium has been extended through Jan. 31, and puts $25 billion into a rental assistance fund, to help those in need for past due and future rent or utilities payments. 
  • Flexible Spending Account balances can be rolled from 2020 to 2021 and from 2021 to 2022.

Support for the Restaurant Industry

  • Business meals from restaurants for all taxpayers are 100% deductible through 2022.

Support for the Entertainment Industry

  • $15B in grants for shuttered venue operators. Grant amounts tied to lost revenue calculation and limited to a maximum of $10 million.
  • Grants will be distributed in three tranches based on the magnitude of the decrease in revenue.

Support for Other Industries

  • Additional provisions to support transportation, railroads, fisheries, airlines, daycare providers, and others.

Tax Provisions and Extenders

  • Work Opportunity Tax Credit is extended through 2025.
  • Exclusion from taxable income for loan forgiveness on principal residence through 2025.
  • Permanently lowers the floor on medical deductions from 10% of adjusted gross income to 7.5%.
  • The bill extended the ability to expense 100% of cash charitable contributions to public charities through 2021. 
  • Taxpayers who utilize the standard deduction can take a deduction from income for charitable contributions of $300 (single) or $600 (joint).

A Note About Tax Treatment by State

Each state has its own set of tax rules, and some states have rules that do not conform to the federal tax treatment. As an example, this means that some states may tax the forgiveness of PPP loans or disallow the deduction of expenses associated with forgiven PPP loans.

For More Information

This is just an overview of the Consolidated Appropriations Act of 2021 provisions – and not meant to replace guidance from your CPA or Lurie advisor. Our Economic Relief Team will continually update our website with guidance and resources. In the meantime, please contact your Lurie advisor with any specific questions. We are here to help.

Questions? Contact Us.

Disclaimer:

This article is for your general education, and does not create a client relationship or any service engagement between you and Lurie LLP. The content of this article is based on the best information available, but official guidance, rules, laws and/or updates may change and become out of date. Please contact your Lurie advisor before acting on any of the information contained in this article.

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