In the first real action from Congress since March on Coronavirus stimulus, a new law has been passed as of Monday December 28th and includes direct payments, more PPP money, an eviction moratorium and more. So we’re doing this special post to break it down for you. Our breakdown mostly focuses on provisions related to small businesses and nonprofits (the entire bill is 5,330 pages and includes items not related to the stimulus as well). It is also important to talk to your accountant about all tax provisions and seek specific guidance for your situation if you have questions about these programs.
Direct Stimulus Checks
Like with the CARES Act, this new legislation includes funding for direct payments to individuals. However, this time the payments will be $600/person instead of $1,200. However, dependents will also receive $600 (not including adult dependents) so a family of 4 could be eligible for up to $2,400. There will be caps on income like last time with decreased payments for those who make $75-100k/year and no payments for those making $100k or more per person (for those married or filing jointly, you get the full amount if income is $150k or less). Families with members of mixed immigration status with a valid Social Security number for one spouse are also eligible for the payments.
Evictions
The law extends the CDC eviction moratorium, which was set to expire December 31, by one month-to January 31. Congress has hinted that they want to punt any further extension to the Biden presidency, so hopefully we’ll see further action on this down the road. Check out our blog post on the CDC eviction moratorium for more information on how that is structured.
$25 billion in direct rent relief funding is also included. This funding would allow eligible renters to receive assistance with rent and utility payments, and bills that have accumulated since the start of the pandemic, by applying with entities that state and local grantees chose to administer the program. Assistance will be prioritized for renter households whose incomes do not exceed 50 percent of local area median income as well as renter households who are currently unemployed and have been unemployed for 90 or more days. Financial assistance provided under this portion of the bill will be non-taxable for households receiving such assistance.
Unemployment Benefits
The bill reinstates the federal enhanced unemployment payments at $300/wk for 11 weeks set to begin December 27th and go through mid-march (however the bill was delayed in signing, so ti is unclear if it will be 10 weeks or 11 weeks and the bill does not explicitly provide for retroactive payments).
The Pandemic Unemployment Assistance Program for self-employed and independent contractors was also extended, as well as the Pandemic Emergency Unemployment Compensation program, which provides an additional 13 weeks of payments to those who exhaust their regular state benefits. Both of the extended programs would close to new applicants in mid-March and then phase out in early April for existing claimants. Payment of retroactive Pandemic Unemployment Assistance for those who had already exhausted the prior maximum is limited to weeks of unemployment after December 1, 2020.
A new benefit includes that workers with at least $5,000 in self-employment income may be eligible for an additional $100 per week benefit as part of the Mixed Earner Unemployment Compensation to adjust for a lower regular unemployment payment (so this is for individuals who have a W-2 job and are collecting unemployment for that but also make at least $5,000 through their own side business and that business has lost income). This would expire at the same time as the Unemployment Compensation Program.
Paycheck Protection Program
Everyone’s favorite (ha!) Paycheck Protection Program (PPP) also gets a facelift under the new law. Applications for PPP fund will re-open (they last closed in August) and the new bill includes expanded eligibility to local newspapers, broadcasters and nonprofits. Under the new terms, businesses must have fewer than 300 employees and prove a revenue reduction of 25%, among other things, to qualify. Most borrowers can receive up to 2.5 times their average monthly payroll cost based on one year prior to the loan. But those in the restaurant industry can get up to 3.5 times their average payroll cost.
Businesses that already received a PPP loan will be eligible to get a second one under the new terms, and borrowers who received less than $150,000 in PPP loans during the first round will now only have to submit a one-page application to receive funds and also for forgiveness but all of the same rules apply. The maximum amount per “second draw” loan is $2 million.
Like the first round, 60% must be spent on payroll and alike expenses to qualify for forgiveness, however, they have expanded eligible expenses to include covered worker protection and facility modification expenditures, including personal protective equipment, to comply with COVID-19 federal health and safety guidelines, expenditures to suppliers that are essential at the time of purchase to the recipient’s current operations, covered operating costs such as software and cloud computing services and accounting needs.
The bill also contains language that says that businesses may deduct expenses on their 2020 taxes paid for with PPP funds, even if those loans were forgiven.
Economic Injury Disaster Loans and Other Support
$40 billion is allocated to an extended SBA Emergency Economic Injury Disaster Loan (EIDL) grant period that now runs through 2021. Additionally, $20 billion is set aside for a new targeted EIDL SBA 7(b) loan program created for certain small businesses that: (1) are located in a low income community, (2) have suffered an economic loss of 30%, and (3) have fewer than 300 employees. Advances under the program are to be $10,000 or the difference between a previous advance and $10,000. These are only advances not loans.
EIDL advances will also be considered tax deductible and also no longer have to be deducted from your PPP forgiveness.
There is also $15 billion in GRANTS for performance venues, independent movie theaters and other cultural institutions which have been severely impacted by the restrictions imposed to stop the spread of the coronavirus. These funds can be used for payroll costs, rent, utilities, and PPE. The initial grant will be $10 million per eligible business. During the first 14 days of the program, grants will be awarded to those who have had 90% or more revenue loss, then those who have experienced 70% will be eligible the next two weeks, and then other businesses will be eligible after that first month. Applicable businesses should act on this QUICKLY.
CHECK THE SBA FUNDING WEBSITE FOR WHEN APPLICATIONS FOR ALL THESE PROGRAMS (INCLUDING PPP) BECOME AVAILABLE AND ACT FAST. Find it: Here.
For farmers, there is $13 billion set for farmers and agriculture, including additional funds for the Coronavirus Food Assistance Program.
And finally, the bill also provides funding for loans carried out through community development financial institutions (“CDFIs”), minority-depository institutions (“MDIs”), and SBA 504 and microlenders.
Paid Sick Leave
The law provides a tax credit to support employers offering paid sick leave, based on the framework of the Families First Coronavirus Response Act, enacted in March. The law details that eligible employers may continue to provide the paid sick leave and family leave through March 31, 2021. Employers that “opt in” to the paid leave will continue to be eligible for the corresponding tax credit. However, the number of eligible hours for each employee in each category is not reset and Families First is NOT renewed.
Families First requires many employers to provide workers with two weeks of sick leave related to COVID-19 at full pay, and up to 12 weeks of family and medical leave to care for family members at two-thirds pay. Check out our blog post on Families First for more information.
Additional Provisions
In relation to tax incentives-language in the bill would boost the tax deductibility of business meals for two years and also extend and enhance the employee retention tax credit, a payroll tax credit aimed at encouraging businesses to hold on to their workers.
The bill also includes additional funding for nutrition assistance, education, transportation, testing, vaccine distribution, surprise medical bills, childcare, and more.
DISCLAIMER: This blog post is meant for informational purposes only and does not constitute a full explanation of the bill, specific legal advice or create an attorney-client relationship. Readers should discuss their specific situation with an attorney.