On December 27th, President Donald Trump signed the Consolidated Appropriations Act (“Act”), a $900 billion COVID-19 relief bill designed to provide additional aid and fund the government through September 2021. While the new legislation does not include the $2,000 individual stimulus checks the President requested, it does include $600 payments to Americans who earned less than $75,000 in the previous tax year and an additional $300 to extended weekly unemployment benefits.
The Act provides additional aid for small businesses, including a forgivable loan program similar to the original Paycheck Protection Program, PPP2. COVID-affected businesses that have not already taken a PPP loan may apply for forgivable loans under this Act, and severely distressed businesses may apply for second loans. The program was also expanded to allow additional types of businesses and certain non-profits to apply.
Effectively overruling the IRS’ position, the Act also provides that recipients of forgiven PPP loans may deduct expenses paid with the proceeds. This is very good news for companies that participated in the PPP.
The Act also enhanced the employee retention tax credit. Beginning January 1, 2021 through June 30, 2021, the refundable payroll tax credit increased from 50% to 70% and the limit on per-employee creditable wages increased from $10,000 per year to $10,000 per quarter. Also, retroactive to the effective date of the Cares Act, PPP borrowers that meet certain thresholds are now eligible to elect this credit but must exclude qualified wages from either payroll costs for PPP purposes or from calculation of the credit.
Another highlight for business owners is a temporary 100% tax deduction on business meals if they are provided by a restaurant. This is effective for expenses incurred after December 31, 2020 and expires at the end of 2022.
For more information on the Consolidated Appropriations Act and how it could affect you or your business, contact the Buckley Fine attorneys at 847-381-0011.