Consolidated Appropriations Act, 2021 (H.R. 133)

The Consolidated Appropriations Act (the Act) is an appropriations bill for the federal government, with provisions for coronavirus stimulus and relief for individuals, families, and businesses.  In the next 30-days or less, various agencies will be issuing guidance or regulations.  Be prepared to review how you may benefit from the COVID-19 relief measures and tax provisions under this Act.  Be proactive!

  • Take advantage of the unemployment assistance.
  • Leverage the new tax relief provisions.
  • Understand the modifications to the Paycheck Protection Program (PPP) forgiveness process.
  • Apply for 100% forgiveness of initial PPP loan from your Lender.
  • Plan to obtain PPP funding, either an initial or second draw loan if your business meets the eligibility requirements.  Part of your plan should be to identify an SBA-approved Lender.
  • Determine eligibility for business Emergency Economic Injury Disaster Loan (EIDL) funding.
  • Utilize the extended business Debt Relief Program, if applicable.

Here is a summary of some of the provisions related to individuals, families, and businesses:

Assistance to Individuals and Families

  1. Unemployment Insurance – Continued assistance to unemployed workers
    • Increases the number of weeks of unemployment benefits an individual may claim from 39 weeks to 50 weeks.
    • Restores the unemployment benefits weekly supplement to $300, starting December 26, 2020 and ending March 14, 2021.  This amount is 50% of the supplement provided under the CARES Act.
    • Extends emergency unemployment compensation, due to the pandemic, to March 14, 2021.  The Act also allows individuals receiving benefits as of March 14, 2021 to continue through April 5, 2021, as long as the individual has not reached the maximum benefit weeks.
    • Defines covered employees to include those workers who are unemployed, partially unemployed, or unable to work due to a COVID-19 related reason.
    • Confirms that self-employed workers, independent contractors, and freelancers shall be eligible for unemployment benefits.
  2. Additional Direct Payments for Individuals
    • Taxpayers will receive a $600 payment per taxpayer ($1,200 per married couple filing a joint federal tax return).
    • In addition, taxpayers will receive a $600 payment per child living in the household with a social security number (a dependent on the federal tax return).
    • The payment will begin to phase out for modified adjusted income (AGI) exceeding $75,000 for single individuals; $112,500 for heads of household; and $150,000 for married filing jointly.
    • Treasury will issue direct payments based on information on 2019 tax returns or Social Security, Railroad Retirement, and Veteran Administration information.
    • Direct payments will be mailed or sent via direct deposit (if the information is available).
  3. Extension of Time for Employees to Repay Deferred Payroll Taxes
    • Deferred employee social security taxes or railroad retirement tax repayment period will be extended through December 31, 2021 instead of the original April 31, 2021 date.
    • Penalties on deferred unpaid payroll taxes will begin to accrue on January 1, 2022 instead of the original May 1, 2021 date.
  4. Guidance Regarding Educator Expense Deduction
    • Effective March 12, 2020, personal protective equipment and other supplies used for COVID-19 prevention are treated as eligible expenses for purposes of the educator expense deduction on your federal income tax return.

Assistance to Businesses

  1. Clarification of Tax Treatment of Certain Loan Forgiveness and Other Business Financial Assistance under the CARES Act
    • Gross income reported on your federal income tax return shall not include PPP forgiveness loan amount, EIDL grants, and certain loan repayment assistance.
    • Federal income tax deductions will be allowed for expenses paid with the proceeds of a PPP loan that is forgiven, EIDL grants, and certain loan repayment assistance.
    • Repeals the requirement for PPP borrowers to deduct the amount of their EIDL advance from their PPP forgiveness amount.
    • Extends the loan forgiveness covered period for all PPP loans through March 31, 2021.  This applies to loans made before, on, or after the date of enactment.
  2. Clarification and Additional Allowable and Forgivable uses for PPP funds
    • Allowable operations expenditures shall include payment for any software, cloud computing, and other human resources and accounting needs.
    • Property damage costs related to property damage due to public disturbances that occurred during 2020 and not covered by insurance shall be an allowable expense.
    • Supplier costs pursuant to a contract, purchase order, or order for goods in effect prior to taking out the loan that are essential to the recipient’s operations at the time the expenditure was made shall be an allowable expense.
    • Worker protection expenditure for personal protective equipment and adaptive investments to comply with federal and state health and safety guidelines related to COVID-19 shall be an allowable expense.
    • Clarifies that group life, disability, vision, or dental insurance benefits are included in payroll costs.
  3. Creates a Simplified Application Process for PPP Loans under $150,000
    • A borrower shall receive forgiveness if borrower certifies and attests certain loan information to the lender.
  4. Creates PPP Second Draw Loans (PPP Second Draw)
    • Applies to entities with 300 or less employees that have exhausted the full amount of their first PPP loan and demonstrates at least 25% reduction in gross income in the first, second, and third quarters of 2020 relative to the same periods in 2019. Businesses with multiple locations may apply for a PPP loan for each physical location employing not more than 300 employees per location.
    • Eligible entities must be businesses, certain non-profit organizations, housing cooperatives, veterans’ organizations, tribal businesses, self-employed individuals, sole proprietors, independent contractors, and small agricultural co-operatives.
    • Loan applications are submitted to SBA-approved lending institutions. Loan amounts are up to 2.5 times the average monthly payroll costs in the one year prior to the loan or the calendar year. Exception: The Accommodation and Food Services industry may receive loans up to 3.5 times average monthly payroll costs. The maximum loan amount is $2 million.
    • Allows the borrower to elect a loan forgiveness covered period of 8 weeks or 24 weeks after loan origination.
    • Borrowers shall be eligible for loan forgiveness. The 60/40 cost allocation between payroll and non-payroll costs will continue to apply. Allowable non-payroll cost will include:
      1. mortgage, rent, and utility payments.
      2. operational expenditures, property damage costs, supplier costs, and worker protection expenditures as described in section 2 of this document.
    • Loan forgiveness amounts shall be reduced for borrowers reducing the number of employees retained and reducing employees’ salaries in excess of 25%.
  5. Clarifies that a business or organization not in operation on February 15, 2020 shall not be eligible for an initial PPP loan and a second draw PPP loan
  6. Expands PPP Loan Eligibility to Organizations
    • News Organizations. FCC license holders and newspapers with no more than 500 employees per physical location or the applicable SBA size standard may apply for a PPP loan. In addition, 511 public colleges and universities that have a public broadcasting station may apply for PPP loan if it certifies the loan proceeds will support locally focused or emergency information.
    • 501(c)(6) Organizations. To become eligible for a PPP loan, the organization shall not receive more than 15% of receipts from lobbying; lobbying activities do not comprise more than 15% of activities; cost of lobbying activities did not exceed $1 million in 2019; and the organization has 300 or less employees. Professional sports leagues or organizations with the purpose of promoting or participating in political activities are not eligible for the loan. No PPP proceeds may be used for lobbying activities.
    • Destination Marketing Organizations. To become eligible for a PPP loan, the organization shall not receive more than 15% of receipts from lobbying; lobbying activities do not comprise more than 15% of activities; the organization has 300 or less employees; and the organization is registered as a 501(c), a quasi-government entity, or a political subdivision of a state or local government. No PPP proceeds may be used for lobbying activities.
  7. Emergency Economic Injury Disaster Loan (EIDL) administered by SBA
    • Extends covered period for EIDL grants through December 31, 2021.
    • Extends time for SBA to approve and disburse EIDL grants from 3 to 21 days.
    • Provides special funding for small businesses located in low-income communities, have suffered an economic loss of 30%, and have fewer than 300 employees. The Act also allows these entities to receive a grant amount equal to the difference between original amount received under the CARES Act and $10,000. Eligible EIDL applicants in low-income communities that did not secure grants under the CARES Act because of lack of funding will be entitled to a $10,000 grant.
  8. Extension of the Debt Relief Program administered by SBA
    • Borrowers with small business loans guaranteed by SBA under the 7(a), 504 and microloan programs prior to CARES Act will receive an additional three months of principal and interest SBA payments, starting in February 2021 and will be capped at $9,000 per borrower.
    • After the three months described above, small borrowers or those hardest hit by the pandemic will receive an additional five months of principal and interest SBA payments capped at $9,000 per borrower.
    • For SBA loans approved between February 1 and September 30, 2021, SBA payments of principal and interest will be made for the first six months of the newly approved loans capped at $9,000 per borrower.
    • If SBA appropriations provided for debt relief are insufficient to fund the SBA payments reference above, SBA has the authority to adjust the number of months.
  9. Extends and Expands Federal Tax Deductions, Credits, and Incentives

    Below are some of the provisions, but are not limited to:
    • Expansion of the Employee Retention Payroll Tax Credit enacted as part of the CARES Act through June 30, 2021.  The total amount of the tax credit available expanded from a cap at $10,000 per employee per year to a cap at $10,000 per employee per quarter.  The credit offset increased from an amount equal to 50% of employee wages to 70% of employee wages.  The credit allowed shall not exceed applicable employment taxes for the quarter; and if the amount of the credit exceeds the amount due for any calendar quarter, such excess shall be treated as an overpayment that shall be refunded.
    • Extension of the Paid Sick and Family Leave Credit.  The refundable payroll tax credits for paid sick and family leave, enacted in the Families First Coronavirus Response Act, are extended through March 31, 2021.
    • Additional funding for the administration of the New Markets Tax Credit Program.
    • Additional funding for the administration of the Work Opportunity Tax Credit.
    • Extension of Enterprise Zone Tax Incentives from December 31, 2020 to December 31, 2025.
    • Extension of the Investment Tax Credit and Production Tax Credit for certain renewable energy sources.
    • Extension of Film and Television Production Tax Credits 
  10. Grants for Shuttered Venue Operators
    • SBA will make grants to eligible live venue operators or promoters, theatrical producers, live performing arts organization operators, museum operators, motion picture theatre operators, or talent representatives who demonstrate a 25% reduction in revenues.
    • Grant funds shall be used for payroll costs, rent, utilities, and personal protective equipment.

The Act was signed by President Trump and became public law on December 27, 2020.  As stated before, the SBA, IRS, and various agencies will be issuing guidance or regulations for the provisions in the 5,500-page bill.  

Paycheck Protection Program Resources

SBA – Paycheck Protection Program as Amended

PPP — IFR — Paycheck Protection Program as Amended by Economic Aid Act (1.6.2021).pdf (sba.gov)

SBA – Paycheck Protection Program Guidance on Accessing Capital for Minority, Underserved, Veteran and Women-Owned Business Concerns

Microsoft Word – Guidance on Accessing Capital for Minority Underserved Veteran and Women Owned Business Concerns .docx (sba.gov)

SBA – Paycheck Protection Program Second Draw Loans

PPP — IFR — Second Draw Loans (1.6.2021).pdf (sba.gov)

Contact Information

Gwendolyn S. Evans, CMI
Office: 214.706.9181 | Mobile: 972.765.6390
Email: Gwen.Evans@ryanwestllc.com
Web: ryanwestllc.com

About RyanWest, LLC

 An exceptional tax services firm with experience and expertise to enhance your bottom line through discovery, evaluation, strategic planning, and defense.  We stay on top of changes in policy, tax laws, and codes to keep your business compliant.  Our team supports your ability to meet the challenges of a dynamic regulatory climate, with the goal of mitigating future risk and delivering shareholding value.

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion by Gwendolyn S. Evans and RyanWest, LLP to the reader.  The reader should contact Gwendolyn S. Evans or other tax professional prior to taking any action based upon this information.  Gwendolyn S. Evans and RyanWest, LLC assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.