Passage of Second Covid-19 Relief Bill
President Trump has signed the second COVID-19 relief legislation coined the Consolidated Appropriations Act, 2021 (CAA2021) that is now effective.
The new legislation also brings notable relief for businesses with PPP loans that now legislates approved tax deductibility on qualifying expenses covered from round one of PPP loan proceeds. This is a Holiday Gift from Trump for businesses with PPP loan proceed tax planning. This legislation supersedes IRS Rev. Rul. 2020-27 whereby taxpayers could not deduct expenses covered with PPP loan proceeds.
Key tax provisions in the second COVID-19 relief bill include:
- A second round on taxpayer relief payments of $600 for individuals earning up to $75,000 per year and; $1,200 for married couples earning up to $150,000 per year; $600 additional payment for each dependent.
- Small businesses relief with a Round Two of PPP business loans;
- $300 per week unemployment aid for qualifying individuals until the middle of March 2021.
To support the restaurant industry, the new relief bill also allows a 100% business expense deduction for business meals provided from a restaurant. This legislation is only effective for expenses incurred after Dec. 31, 2020, until December 31, 2022.
The bill also modifies the above the line charitable deduction for 2020 from increasing from $300 to $600 for married filing jointly tax payers, and extends the charitable deduction to the 2021 tax year.
The new relief bill also provides a second round of PPP loans to both newly qualified applicants and, also for businesses that participated in the initial round of PPP loan proceeds. Prior PPP applicants can now apply for a second PPP loan with the following parameters. A) the business has 300 or fewer employees B) the business has extinguished or plan to extinguish all initial PPP proceeds; and C) the business demonstrates a 25% sales volume reduction in any 2020 quarter compared to that quarter in 2019. Second Round expenses include payroll, rent, mortgage interest, and utilities on PPP proceeds. As in round one of business PPP proceeds, qualifying loan applicants can obtain a round two PPP loan up to 2.5x average monthly payroll costs.
The bill simplifies forgiveness for all PPP loans of less than $150,000. Also relief is now available for expenses paid with PPP loans as tax-deductible, bringing a holiday benefit to businesses tax planning with 2020 PPP proceeds.
This is not to be construed as tax, or legal advice. Please contact your trusted advisor to discuss any specifics of this legislation or tax provisions for your business or individual tax planning, before making any decisions with regards to the provisions in this Covid-19 relief bill.