Alert: COVID Relief Package (Dec 2020)

Fred Whitaker, Cummins & White LLP

Fred Whitaker, Managing Partner

President Trump has signed into law a spending and stimulus bill to help with the continued impacts of the COVID-19 epidemic. There is relief for both individuals and businesses.

Relief for Individuals:

  • $600 one-time direct payment per adult and qualifying minor (under 17 years old) per household that makes $150,000 in income ($75,000 for single filers or $112,500 for heads of household) or less based on 2019 tax returns.
  • Unemployment will be extended by an additional 11 weeks until March 5, 2021, and each recipient’s weekly check will be boosted by $300.
  • Flexible Savings Account balances can be rolled over into 2021 and 2022.
  • For those who opted into the employee-side payroll tax deferral that was enacted by the White House, the repayment period has been extended from April 2021 until December 2021.

Relief for Businesses

Paycheck Protection Program (PPP) expansion and updates

  • Businesses may qualify for a second PPP loan if they satisfy the following requirements:
    • The business has fewer than 300 employees (500 for restaurants designated with NAICS code 72).
    • The business has had a 25% or greater drop in gross receipts from the same quarter in 2019
    • The business was in operation no later than February 15, 2020.
    • Loan amounts will be calculated as 2.5 times the average monthly payroll costs of the business.
    • The maximum loan amount for a second loan is $2 million
  • In order to be eligible for total loan forgiveness, at least 60% of the loan proceeds must be used for eligible payroll costs (generally wages, bonuses, tips, and healthcare costs up to $100,000 on an annualized basis per employee)
  • The remaining 40% may be used for business mortgage interest costs, rent, and utilities. The bill has also expanded eligible costs to include qualifying property damage related to social unrest, supplier costs that are essential to the business, and costs related to personal protective equipment and related modifications to a business necessitated by governmental health regulations, such as air filters, constructing outdoor dining, etc.
  • The business has 24 weeks to expend such funds in order to be eligible for forgiveness.
  • 501(c)(6) organizations such as chambers of commerce, real-estate boards, and boards of trade are now eligible for PPP loans.
  • The bill clarifies that expenses paid with PPP loan proceeds are eligible to be deducted, meaning that the forgiveness of the loan is tax-free. This also applies to first-time PPP borrowers.

Economic Injury Disaster Loans (EIDL) Grants

  •  $43.5 billion has been allocated to the Small Business Administration’s Economic Injury Disaster Loan program.
  • Live venue operators or promoters, theatrical producers, live performing arts organization operators, relevant museum operators, motion picture theatre operators, and talent representatives are eligible for grants if they have been shuttered by governmental regulations.
  • They may qualify for up to 45% of their 2019 gross revenue in grant funds, up to $10 million, as long as the operator intends to re-open the venue when allowed to do so.

Employee Retention Tax Credit (ERTC)

  • The ERTC has been expanded to allow for PPP recipients to also qualify for the ERTC and applies retroactively to employer taxes already paid. Previously, a business was eligible for either PPP or ERTC, but not both.
  • The ERTC allows for a refundable credit up to 70% of wages paid per employee, per affected quarter up to $7,000 per quarter, if the business was fully or partially shuttered OR had a drop in gross receipts of 20% relative to the same quarter in 2019.
  • We recommend working with your CPA to determine eligibility for this credit and amending prior 941 tax returns to receive this credit.

Other Changes

  • Business meals in 2021 and 2022 will be 100% deductible
  • Taxpayers who take the standard deduction can also qualify for a $600 above the line deduction for charitable contributions.
  • K-12 educators may deduct up to $250 for PPE expenses.
  • The mandatory emergency paid sick-leave credit (FFCRA) was not extended, however, if a business continues to offer paid sick leave voluntarily, the employer may continue to use this credit for sick leave used by employees until March 31, 2021.

If you have questions regarding these Coronavirus Stimulus/Relief Updates, please contact me at fwhitaker@cwlawyers.com so that I may offer further guidance.