Trump Signed the Relief Act: Key Provisions for BiggsKofford Clients

Trump Signed the Relief Act:

Key Provisions for BiggsKofford Clients

President Trump has finally signed the coronavirus relief package that was passed by Congress last week. Here are the important things our clients are likely interested in hearing:

1. Second Stimulus Payment

A second stimulus payment will be available, the details of which are as follows:

  • $600 for each individual filer
  • $1,200 for married or joint filers
  • $600 for any dependents age 16 and under

In order to qualify for the full second stimulus payment, you will need to have earned less than $75,000 (for individuals) or $150,000 (for married/joint filers) in 2019.

If your adjusted gross income is higher than those thresholds, then the stimulus payment is reduced by $5 for every $100 of adjusted gross income over those thresholds. As a result, a single tax filer would see no stimulus payment if their adjusted gross income is $87,000 or higher. A married couple would phase out completely with adjusted gross income of $174,000.

Given both the delay in the bill being signed as well as the holiday break, it will likely be several weeks. The first people to get payments will be those that have their direct deposit bank information on file with the IRS. Otherwise, check payments will likely take several months to arrive.

2. New PPP Loans and Rules

The new act the Paycheck Protection Program (PPP) by allocating an additional $285 billion for the program. Small businesses that obtained an initial PPP loan can qualify for a second round of loans.

Eligibility for a second PPP loan is stricter than before. A borrower must have fewer than 300 employees and demonstrate they experienced a 25% drop in gross receipts during the first, second, or third quarter in 2020 relative to that same quarter in 2019. The new act caps PPP loans at $2 million.

The new loan amounts are determined with the same formula that involves payroll costs multiplied by 2.5 (capped at $2 million this time). Although, restaurants and other hospitality businesses may multiply those costs by 3.5, making them eligible for slightly more funding

Forgiveness requirements for the new PPP loan are similar to the original version, with some flexibility and added qualified expenditures.

See a more detailed description of these new loan requirements HERE.

According to the law, the deadline for these new PPP loans is March 31, 2021. The SBA will likely release new application forms and instructions, which will become available through the same participating lenders.

3. Old PPP Loans

More flexible rules have been added to provide for forgiveness of the loans, including clear guidelines that forgiveness of a PPP loan is not taxable.

A few weeks ago, the government simplified forgiveness applications for businesses that got less than $50,000, requiring only a description of how much loan money was spent on payroll, and how many employees the recipient was able to retain as a result. The new bill ups that limit to $150,000. Affected businesses will not need to submit documentation supporting their claims, but should keep it on hand in case of an audit down the line.

4. Unemployment Benefits

The new relief act provides an additional $300 per week for all workers receiving unemployment benefits, through March 14, 2021 (and possibly longer). The act also extends the Pandemic Unemployment Assistance (PUA) program, with expanded coverage for independent contractors, self-employed individuals, and gig workers. The Pandemic Emergency Unemployment Compensation (PEUC) program was also extended to provide additional weeks of federally funded unemployment benefits to individuals who exhaust their regular state benefits.

In addition, the new act increases the maximum number of weeks an individual may claim regular state unemployment benefits plus the PEUC program, or through the PUA program, to 50 weeks.

5. Rental/Eviction Provisions

The new act provides for an extension of the eviction moratorium through January 31, 2021. There is also $25 billion for rental relief, to be used for future rent and utility payments and back rent owed or utility bills.

6. Student Loans

The new act does not include relief or further forbearance with respect to student loans. There has been some press about the possibility of President-Elect Biden canceling some amount of student loans by executive order when his term begins

7. EIDL Grants

The act added $20 billion for certain grants pursuant to the SBA’s Economic Disaster Injury Loan (EIDL) program. Eligible businesses, independent contractors, gig workers, and self-employed individuals are eligible for up to $10,000 in grants (not required to be repaid) if (1) they are located in a low-income community; (2) they suffered an economic loss of greater than 30% during an 8-week period between March 2, 2020, and December 17, 2021, relative to a comparable 8-week period immediately preceding March 2, 2020, or during 2019; (3) they employ not more than 300 people; (4) they are a qualifying business, such as a small business, private non-profit, sole proprietorship, or independent contractor; and (5) they were in operation by January 31, 2020.

8. Aid for Live Venues, Theaters, and Cultural Institutions

$15 billion in aid has been allocated for live venues, independent movie theaters, and cultural institutions.

The full text of the act is 5,593 pages long and contains many other provisions, but the ones I’ve detailed here are those that will have the greatest impact on the majority of Americans in the months ahead.

9. Numerous Tax Law Changes and Extensions

There were numerous general tax provisions in the new relief law. Below are some of the highlights. We will circulate a more comprehensive tax update in a future article.

  • Temporary allowance of full deduction for business meals: The bill temporarily allows a 100% business expense deduction for meals (rather than the current 50%) as long as the expense is for food or beverages provided by a restaurant. This provision is effective for expenses incurred after Dec. 31, 2020, and expires at the end of 2022.
  • Employee retention tax credit (ERTC) modifications. And provides that employers who receive PPP loans may still qualify for the ERTC with respect to wages that are not paid with forgiven PPP proceeds.
  • Allows taxpayers to roll over unused amounts in their health and dependent care flexible spending arrangements from 2020 to 2021 and from 2021 to 2022. This provision also permits employers to allow employees to make a 2021 midyear prospective change in contribution amounts.
  • Extends and modifies the $300 charitable deduction for nonitemizers for 2021 and increases the maximum amount that may be deducted to $600 for married couples filing jointly.
  • Educator deduction for protective equipment.
  • And most exciting… The American Samoa economic development credit has been extended for 1-year.

We continue to expect updates and clarifications will be announced frequently over the next few weeks as the details are hammered out. We will continue to update you as the situation develops. If you have questions about your specific circumstance, reach out to our PPP team!

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