On December 27, 2020, President Trump signed a $2.3 trillion Coronavirus relief and government funding bill, the Consolidated Appropriations Act of 2021, into law extending billions of dollars in relief aid to individuals and businesses across the country.

Doeren Mayhew’s CPAs and advisors have highlighted key provisions of the new legislation below.

Stimulus Provisions

Paycheck Protection Program (PPP) Second Draw Loans

Another round of PPP loans, referred to as second draw loans, have been authorized by the new legislation.

Businesses with 300 or fewer employees that have incurred at least a 25% reduction in gross receipts in the first, second or third quarters in 2020 compared to the same quarters in 2019, may request supplemental funding after they have fully exhausted their original PPP loan.

Eligible expenses have also been expanded to include:

  • Operations expenditures such as software, cloud computing, human resources and other facilities services
  • Property damage cost due to public disturbances not covered by insurance
  • Supplier costs related to essential operations in effect before any time during the covered period with respect to the applicable covered loan.
  • Worker protection expenditures, including payments for personal protective equipment and adaptive investments to help a borrower comply with federal, state and local health and safety guidelines related to COVID-19 during the period between March 1, 2020, and the end of the national emergency declaration

Direct Payments

The legislation provides a direct stimulus payment of $600 per individual or $1,200 per married couple. Families can claim the full $600 amount for each dependent child. These direct payments will begin to phase out for individuals who had adjusted gross income in 2019 in excess of $75,000, or $150,000 for joint filers. Similar to the economic impact payments provided by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), the payment is a credit against 2020 taxes.

As of Dec. 29, 2020, the House passed a bill to increase these stimulus payments to $2,000 instead of $600 at President Trump’s urging. It is still yet to be seen if this will pass the Senate.

Tax Relief

With the passing of the new legislation comes an extension and expansion of key tax relief brought about originally by the Families First Coronavirus Response Act (FFCRA) and the CARES Act, along with new provisions, including:

  • Payroll Tax Deferral: Employers have been able to defer their employer’s share of payroll taxes from Sep. 1, 2020, through Dec. 31, 2020, with a payback period through Apr. 31, 2021. Employers will now have until Dec. 31, 2021, to pay deferred taxes without penalty and interest.
  • Qualified Leave Tax Credit: The employer credit for paid sick and family leave, originally part of the FFCRA, is extended through Mar. 31, 2021, for employers with fewer than 500 employees.
  • Employee Retention Credit: Established by the CARES Act, the employee retention tax credit originally allowed eligible employers to claim 50% of up to $10,000 in qualified wages paid by employers before Jan. 1, 2021. This new legislation extends the credit to qualified wages paid before July 1, 2021, and increased the limit to 70% of qualified wages for each quarter. The credit is also now eligible for employers with up to 500 employees, instead of 100 employees.
  • PPP Loan Deductibility: The act expresses clarification to allow for the deduction of expenses related to a forgiven PPP loan.
  • Charitable Contributions: Limitation on charitable giving deductions set by the CARES Act will remain in place through 2021. This includes a 100% of contribution base limitation and a $300 above-the-line charitable contribution deduction for individuals. For corporations, it allows a 25% of qualified cash contribution deduction and a carry forward for five years of any qualifying contributions that exceed the 25% limit.
  • Business Meals Deductions: To aid a hard-hit dining industry, the legislation enacts a temporary restoration of the 100% meal deduction related to business in 2021 and 2022.
  • Disaster Tax: Taxpayers living in an area declared as a federal disaster zone in 2020 can continue to avoid early-withdrawal penalties for qualified disaster distributions, contribution of amounts withdrawn for home purchases and an increase in the amount of loans from qualified plans. An employee retention credit is also allowed for employers in affected areas, as well as special casualty loss rules for affected individuals.
  • Tax Extenders: Many tax breaks for individuals and businesses have been extended temporarily or permanently. Here is a list of some of the most popular credits extended through 2021 and 2025:

2021 Extensions

    • Residential Energy Efficient Property Credit
    • Alternative Fuel Excise Tax Credit
    • Energy Efficient New Homes Credit
    • Health Insurance Cost Credit
    • Renewable Electric-Power Credit

 2025 Extensions

    • Work Opportunity Credit
    • New Markets Tax Credit
    • Paid Family and Medical Leave Credit
    • Look-thru rule for related controlled foreign corporations

Taking Advantage of Relief

Doeren Mayhew’s tax advisors stand ready to help you take full advantage of the tax credits and deductions available to you, especially in these times of uncertainty. If you have questions about how the new legislation may impact you or your business, contact our tax advisors today.