Federal Stimulus and COVID-19 Relief

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On December 21, 2020 Congress passed an annual spending bill containing $900 billion in COVID-19 pandemic relief and stimulus measures.  President Trump signed this bill into law on December 27, 2020.  In addition to approving a budget to keep the federal government operating through September 30, 2021, the bill is intended to provide relief for individuals and certain businesses and funding for vaccine distribution, food assistance, education, and childcare.  While the bill contains many provisions on a wide range of topics, we wanted to highlight and summarize the following, which are most important to our clients and contacts:

  • Expenses paid with Paycheck Protection Program (“PPP”) Loan proceeds that qualify for PPP forgiveness are tax deductible. The forgiveness of a PPP Loan is not included in the gross income of the borrower.
  • A second round of PPP Loans are available with additional qualifications.
    • To qualify, a borrower must:
      • Not employ more than 300 employees; and
      • Have experienced a drop in gross receipts of 25% or more in a quarter of 2020 compared to the same quarter in 2019
    • The amount of the second PPP Loan is limited to the lesser of:
      • 2.5 times the average monthly payroll costs for any 12-week period between February 15, 2019 and February 15, 2020; or
      • $2,000,000.
    • For entities beginning with NAICS Code 72 (Accommodation and Food Services Sector), the amount of the second PPP Loan is limited to the lesser of:
      • 3.5 times the average monthly payroll costs for either of the following measurement periods elected by the borrower:
        • Measurement Periods: the year before the date of the second PPP Loan or the calendar year 2019; or
        • $2,000,000.
    • The PPP was expanded to certain Internal Revenue Code 501(c)(6) entities, destination marketers, housing cooperatives, and news broadcasters, which have their own specific qualification requirements.
  • In the PPP, non-payroll costs have been expanded to include new categories such as:
    • Covered operations expenditures: a payment for any business software or cloud computing service that facilitates business operations and back office processes.
    • Covered property damage cost: a cost related to property damage and vandalism or looting due to public disturbances that occurred during 2020 that was not covered by insurance or other compensation.
    • Covered supplier cost: an expenditure made by an entity to a supplier of goods for the supply of goods that are essential to the operations of the entity at the time at which the expenditure is made and meet certain other criteria.
    • Covered worker protection expenditure: an operating or a capital expenditure to adapt the business to compliance with Department of Health and Human Services, the Centers for Disease Control, or the Occupational Safety and Health Administration guidelines or similar state guidelines related to combatting COVID-19.
  • Simplified PPP Loan Forgiveness Applications for PPP Loans of not more than $150,000.
  • The SBA is required to disclose its audit policies and procedures and provide reports regarding the its audits and reviews of PPP Loans.
  • The creation of a grant program, separate from the PPP, for certain live venue operators or promoters, theatrical producers, live performing arts organization operators, museum operators, motion picture or movie theatre operators, and talent representatives.
  • Rent and utility assistance funding to be administered by state and local governments.
  • Extension of the $300 per individual, above-the-line charitable deduction to 2021.
  • Full business meal expense deductions for 2021 and 2022.
  • Extension and expansion of the Employee Retention Tax Credit through July 1, 2021.
  • Extension of the Sick Leave and Family Leave Credits from the Families First Coronavirus Response Act until March 31, 2021.
  • Direct payments to individuals of $600 and $600 per child. These payments are phased out for individuals making more than $75,000 or couples making $150,000.
  • Extension of federal unemployment insurance benefits for 10 weeks through mid-March, with a $300 supplement payment each week (previously unemployment recipients received $600 per week which expired in July 2020).

There is much more in the bill that the Sands Anderson team is analyzing on behalf of our clients.  As we have seen throughout this past year, legislation of this size and complexity will generate many questions and additional federal guidance.  Our attorneys at Sands Anderson stand ready to answer your questions and guide you through this hectic period.

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