HowardSimon Consolidated Appropriates Act, 2021

President Donald Trump signed into law the $900 billion COVID-19 relief bill passed Dec. 21 by Congress. It will be some time before we have guidance on all of the features of this new legislation, but here are some highlights.

We will keep you updated as guidance is released!

PPP Impact

Among other things, the bill has significant impact on the PPP program. Many experts are advising clients to wait to submit their forgiveness application until guidance is issued. If you have not yet filed for forgiveness, please contact your accountant or advisor to discuss what strategy is best for your situation.

Simplified application

A new simplified forgiveness application for loans under $150,000 is being released.

PPP Expenditures Deduction

The new bill clarifies that forgiven PPP loans do not produce taxable income and eligible expenditures giving rise to forgiveness are tax deductible.

PPP2 Second Draw Loans

PPP2 loans will be available to first-time qualified borrowers and, for the first time, to businesses that previously received a PPP loan. Specifically, previous PPP recipients may apply for another loan of up to $2 million, provided they:

Have 300 or fewer employees.
Have used or will use the full amount of their first PPP loan.
Can show a 25% gross revenue decline in any 2020 quarter compared with the same quarter in 2019.

Emergency Paid Sick Leave (EPSL) and
Emergency Family and Medical Leave (EFMLA)

Below is an excerpt from HR Support Newsletter. Emergency Paid Sick Leave (EPSL) and Emergency Family and Medical Leave (EFMLA) will be extended, but it's an option, not a requirement. Here's what employers need to know:

Offering EPSL and EFMLA after December 31 will become optional for employers.
An employee will no longer be entitled by law to take EPSL or EFMLA, even if they have a qualifying reason.
Employers who choose to offer these paid leaves can still receive a tax credit if they follow the current EPSL and EFMLA rules, including job protection.
The extension of the tax credit will be available for leaves taken through March 31, 2021.
Employees will not get new hours to use-the unused portion of their original allotment that remains on January 1 is how much they will be able to use through March 31. For instance, if an employee who was entitled to 80 hours of EPSL between April 1 and December 31 used 40 of those hours in 2020, they'd have 40 hours left to use between January 1 and March 31, 2021.
There is a possible exception when an employee's EFMLA bank could reset if employers use the calendar year or another fixed FMLA tracking period that starts before March 31 and the DOL fails to readopt the regulations they wrote related to EFMLA. We expect the IRS, DOL, or both, to provide guidance soon that will clear up whether certain employers will need to offer additional hours. We will update the HR Support Center as information becomes available.

Employee Retention Credit

Has been extended to allow use until the end of 2nd quarter 2021.
The percentage of wages that is considered creditable against federal taxes has been increased from 50% to 70%.
The $10,000 limit of qualifying wages has been changed from all quarters to each quarter -- allowing a maximum of $7,000 per quarter as a credit now.
The employer's qualifying year to year drop in gross receipts has been dropped from 50% to 20% and may use prior quarter gross receipts may be used to determine.
Increases the threshold for determining if qualified wages are only for missed wages or for all wages from more than 100 employees to more than 500 employees.
Allows employers with PPP loans to qualify.