Another Stimulus Bill.. Eight Important Points to Understand

/ Freidel & Associates, LLC/

Overnight, Congress passed the fifth longest bill in the history of the country totaling over 5,500 pages. This Consolidated Appropriations Act (CAA) provided further clarification of PPP loan-related expenses, extensions of unemployment compensation, and rules for a secondary set of PPP loans, among many other things.

Key points to the law include:

  1. A change to the Payroll Protection Program will allow for loan-related business expenses to be fully deductible

  2. A short-term extension of the employee retention tax credit through July 1, 2021, with an increase in creditable wages

  3. A $600 per person economic stimulus check to American citizens under certain income thresholds

  4. “Round #2” of the PPP loan program for businesses that are struggling

  5. A simplified loan forgiveness plan for borrowers with PPP loans of $150,000 or less

  6. The charitable giving deduction and the earned income tax credit will be temporarily increased

  7. The federal pandemic unemployment compensation plan has been extended to April 5th, 2021

  8. There is a temporary allowance of full deduction for certain business meals paid or incurred before Jan 1st, 2023

Some highlights related to a few of these points are below:

#1 - The CAA has clarified that PPP loan-related expenses will be deductible, which overrules the stance taken by the IRS in Notice 2020-32. This matches up with original stipulated intent of the CARES Act, which was that the loan forgiveness would not be taxable (directly or indirectly).

#7 - The federal pandemic unemployment compensation plan has been extended from December 26th, 2020 to March 14th, 2021 with the final cut-off date on April 5th, 2021. Alongside the unemployment compensation extension, Congress reduced payout by $300 for new entrants into the system during the extended period. Hopefully, the reduction in unemployment compensation will encourage more applicants to return to work to return to more stable economy.

#8 - There is a new simplified forgiveness path for PPP loans under $150,000 to expedite the filing timeline for small businesses. To simplify the process applicants, will only need to submit a single page describing the number of employees that were retained due to the loan and the estimated costs spent upon payroll vs the total loan value. These simplified requirements should cut-down on filing and administrative costs for small local businesses.

We are still working through this monumental piece of legislation and will continue to provide additional updates as we learn more about the Consolidated Appropriations Act. Continue to check out our blog for the latest news for the Coronavirus Response!