The most recent bill, known as the Coronavirus Response and Relief Supplemental Appropriations Act H.R. 133, was passed by Congress late on Monday, December 21st, 2020. The relief bill language includes financial provisions for both individuals and businesses.

There are several crucial components of the bill that employers and business owners need to understand in H.R. 133, specifically relate to:

  • Renewed funding for the Paycheck Protection Program (PPP)
  • Additional funding for Small Business Administration (SBA) Debt Relief Payments
  • Extension and expansion of the Employee Retention Tax Credit
  • Extension of employer-side social security payroll tax credits
  • Expansion of deductions for business meals
  • New funding for the Economic Injury Disaster Loan Program (EIDL)
  • Increased state allocations for the Low-Income Housing Tax Credit (LIHTC)
  • Extension and/or permanence of temporary tax extenders

Paycheck Protection Program (PPP)

The passing of H.R. 133 includes a provision that allocates $284 billion in funding for the Paycheck Protection Program (PPP), which provides forgivable loans to small businesses, now including nonprofits and churches. Businesses with less than 300 employees and a 25% drop in gross receipts for 2020 compared to the same quarter of the previous year are eligible for a second-time loan under the renewed PPP program, or PPP2 as some are referring to it.

There is an additional provision in the bill that enables businesses receiving a PPP loan to also take the Employee Retention Tax Credit (ERTC). In the previous relief bill, businesses were only allowed to receive either a PPP loan or an ERTC.

The new bill also has a point of clarification of expenses that businesses are able to deduct. The bill states that previous and new PPP loan funds that are used for qualifying expenses are deductible. Under Section 265 of the tax code, expenses paid with tax-free income are taxable. However, the new bill explicitly states that qualifying expenses paid with PPP funds are not taxable and can be deducted.

What are qualifying expenses for PPP loans?

PPP loans may be used by businesses to cover qualifying expenses. These expenses have been expanded in the recent relief bill and include property damage, supplier costs, worker protection expenditures, employee wages, and operating expenses (rent and utilities). When PPP funds are applied to these qualifying expenses, they are considered forgivable.

Small Business Administration (SBA) Debt Relief Payments

In addition to the additional funds for the EIDL program, the H.R. 133 bill allocated $43.5 billion in Small Business Administration (SBA) debt relief payments. A further $2 billion was earmarked specifically for enhancements to SBA lending. Live venues, independent movie theaters and cultural institutions have access to an additional fund of $15 billion that is available exclusively to these types of businesses.

Employee Retention Tax Credit Extension & Payroll Taxes

A section of H.R. 133 addresses the Employee Retention Tax Credit, extending it through July 1, 2021 and increasing the refundable payroll tax credit available to businesses. The previous maximum was $5,000, but the new bill increases the refundable payroll tax credit to $14,000 by allowing businesses to claim up to 70% of wages paid up to $10,000 for any quarter. The bill also allows businesses who received a PPP loan to take the Employee Retention Tax Credit as well.

Social Security Payroll Tax Credit Extension

The Families First Coronavirus Response Act created Social Security payroll tax credits for employers to accommodate for paid sick and family leave due to the coronavirus. These tax credits for employers have been extended through March 2021.

Business Meal Deductions

Under the new bill, businesses are now able to deduct up to 100% of business meals for 2021 and into 2022.

Economic Injury Disaster Loan (EIDL) Program Funding

According to H.R. 133, new grants under the Economic Injury Disaster Loan (EIDL) Program are available. The new bill allows $20 billion in funds for businesses in low-income areas that apply and qualify for a new EIDL grant.

Construction and the Low-Income Housing Tax Credit (LIHTC)

The Low-Income Housing Tax Credit (LIHTC) provides subsidies for the construction and rehabilitation of housing developments that meet certain criteria of tenant income. H.R. 133 increased state allocations for the LIHTC.

Tax Extenders Included in H.R. 133

At the end of 2020, 33 temporary tax provisions were slated to expire. However, in the language of H.R. 133, only one of the 33 extenders will lapse (FERC extender). The new bill provides terms for several tax extenders to become permanent, creates a five-year extension for several extenders, and a one-year extension for the rest of the provisions.

Have questions about the impact on your business? Contact your Extensis representative today or call us at 888.473.6398 with any questions.

The entire language of the bill can be viewed here.
Additional information from the Tax Foundation can be found here.