Guest Post: An Overview of Key Provisions in the Consolidated Appropriations Act of 2021

On Monday, December 21, 2020, Congress passed a $900 billion stimulus package, which was part of a $2.3 trillion package, including $1.4 trillion to fund the government through the end of the fiscal year. The Consolidated Appropriations Act (CAA) of 2021 was signed into law on December 27, 2020.

Listed below are a few of the key provisions from the CAA:

Tax Deductibility for Paycheck Protection Program (PPP) Expenses. The CAA specifies that business expenses paid with PPP loans that are forgiven are tax deductible. This overrides previous guidance issued by the IRS.
PPP Second Draw Loans. $284 billion has been provided for a second draw of PPP loans for qualifying borrowers. Borrowers can receive a loan amount of up to 2.5 times their average monthly payroll costs, up to a maximum of $2 million. In order to be eligible, borrowers must:
- Employ no more than 300 employees;
- Have used, or will use, the full amount of the borrower’s first PPP loan; and
- Demonstrate at least a 25% reduction in gross receipts in the first, second, or third quarter of 2020 relative to the same quarter in 2019.

The application process for PPP Second Draw loans is now open, so make sure to speak to your lender about it.

Expanded Eligible Expenses for PPP Loans. The CAA expanded on allowable non-payroll costs that are eligible for forgiveness. Allowable non-payroll expenses now include:
- Covered Expenditures for Operations
- Covered Property Damage Costs
- Covered Supplier Costs
- Covered Worker Protection Expenditures
Simplified Application for PPP Forgiveness Loans of $150,000 or Less. The CAA created a simplified forgiveness application process for loans of $150,000 or less. A borrower shall receive forgiveness if a borrower signs and submits to the lender a certification that is no more than one page in length. The SBA revised the forgiveness applications in mid-January 2021 to meet the new requirements under CAA.
Extension and Expansion of the Employee Retention Tax Credit. The CAA extended the Employee Retention Tax Credit until June 30, 2021. The credit has been expanded, providing a 70% tax credit on up to $10,000 of eligible wages per employee per quarter. The gross receipts decline requirement also changed to 20% from 50%. Furthermore, borrowers who took a PPP loan are now eligible to receive the Employee Retention Tax Credit.

As of January 24, 2021, the IRS has not issued any further guidance since the CAA was signed into law. They will update their FAQs page when they do have additional guidance. You can find their FAQs page here: FAQs: Employee Retention Credit under the CARES Act.

Additional information can also be found on the BSSF COVID-19 Resources page: Employee Retention Credit Resources. However, guidance still needs to be issued on taking the credit for 2021 and other areas of uncertainty.
Extension of the Families First Coronavirus Response Act (FFCRA) Credits. As of January 1, 2021, employers are not required to provide their employees with the paid sick or expanded family medical leave benefits of the FFCRA. However, the CAA extends the employer tax credits for paid sick leave and expanded family and medical leave that is voluntarily paid to employees through March 31, 2021.
Work Opportunity Tax Credit Extension. The Work Opportunity Tax Credit has been extended for five years.
Meals Deduction. Businesses are temporarily allowed a 100% business expense deduction for food and beverage provided by a restaurant. This is effective for expenses incurred after December 31, 2020 until the end of 2022.
Unemployment Benefits Extension. Unemployment benefits have been extended until March 14, 2021. Additional weekly payments of $300 will be given.

To learn more about the impact of the stimulus relief bill, you can view a recording of our recent webinar: Impact of the Stimulus Relief Bill from Consolidated Appropriations Act of 2021.

Contributed by Sherry Cracium-Bolin, CPA; Brown Shultz Sheridan & Fritz (BSSF)

Sherry Cracium-Bolin is a Principal and Shareholder at Brown Schultz Sheridan & Fritz (BSSF) with over 20 years of progressive public accounting experience. She assists small and mid-sized businesses through tax planning, management advisory services and compliance services. Recently, she has spoken on topics relating to the COVID-19 relief efforts, such as the Employee Retention Credit, payroll credits from the Families First Coronavirus Response Act and more.