By: William Bricker, Jr., Linda Galler and Juliya Ismailov
On Monday, December 21, 2020, Congress approved a $900 billion COVID-19 relief package. The legislation also includes $1.4 trillion of funding to keep the federal government operating through the end of the fiscal year (ending September 30, 2021).
While Congress awaits President Trump’s decision whether to sign the bill as is, we summarize below a number of tax provisions in the bill:
An additional $284 billion for the Paycheck Protection Program (“PPP”) created in the CARES Act to provide forgivable loans to small business borrowers.
Business expenses paid out of proceeds of PPP loans can be deducted. This provision overrides guidance issued by the IRS earlier this year stating that expenses funded with PPP loans were not deductible.
The Employee Retention Tax Credit is expanded to provide relief for those who have run out of PPP funds or never qualified for them. The credit is increased from 50% to 70% of qualifying wages, with the limit on creditable wages increased from $10,000 per year to $10,000 per quarter. The bill also clarifies that businesses may take the Employee Retention Tax Credit and participate in the PPP.
An expansion of the business meals deduction from 50% of meal expenses to 100% for years 2021 and 2022 only.
An extension to 2021 of increased limits on both individual and corporate charitable deductions.
Other extensions of expiring tax provisions—some to coincide with expiration of TCJA provisions (such as the employer credit for paid family and medical leave and the employer exclusion of certain payments of student loans), and some extensions made permanent (such as the energy-efficient commercial buildings deduction and reduced excise tax rates for the alcohol industry).
Notably, the IRS received a budget increase in this round of government funding, almost half of which will be directed at enforcement.