A new pandemic relief bill was recently passed by the House and Senate and signed into law by the President on December 27, 2020. The $900 billion COVID-19 relief package was part of a $2.4 trillion Consolidated Appropriations Act bill signed by President Trump.
As a follow up to the CARES Act, which was the largest federal stimulus package, the new bill will help fund several expiring CARES Act aid programs to help individuals, businesses and schools. While the bill does not allocate aid for state and local governments or provide for business liability protections, Congress expressed that this is a starting point and future bills will be introduced. Below we discuss the major provisions included in the relief package.
$600 individual stimulus payments
The criteria for the stimulus payments is similar to the first round, with full payments given to those making up to $75,000 for individuals and $150,000 for married filing jointly. Phaseouts equaling $5 for every $100 of Adjusted Gross Income (AGI) beginning at $75,000 for individuals and $150,000 for married filers. Individuals making $87,000 or more and $174,000 for those married filing jointly would not receive a payout. An additional $600 will be provided for each dependent child under the age of 17. This appears to still make college students ineligible for the stimulus payments if they are claimed as dependents.
The House has indicated they will be introducing a bill to potentially increase stimulus payments to as much as $2,000. Stay tuned on if and when the bill moves to the next level.
$284 billion for another round of PPP loans and small business funding
The package extends the Paycheck Protection Program (PPP), expanding eligibility for local newspapers, broadcasters and not-for-profit organizations. The extension allocates another $20 billion to small business grants and $15 billion to live event and cultural venues.
Highlights of the next round of PPP loans:
- A second round of PPP loans are available for businesses that experienced 25% or more reduction of gross receipts in any 2020 calendar quarter compared to the same quarter of 2019. Companies with 300 or less employees will qualify.
- Expanded eligible non-payroll costs to include:
- Worker protection equipment
- Similar to the first round, the loan amount will equal 2.5x average monthly payroll costs, except for the restaurant and hospitality industries, which can apply for 3.5x average monthly payroll costs
- Economic Injury Disaster Loan (EIDL) advances/grants are no longer subtracted from loan forgiveness amount and are no longer treated as taxable income
- PPP loans up to $150,000 will be forgiven with a new one-page form including the loan amount, number of employees retained and payroll percentage.
Deductible expenses for payment of covered costs
The Act allows business owners to deduct expenses paid with forgiven PPP loan funding. This would give small business a much-needed tax break, overriding an IRS decision so businesses can claim 100% of deductions on rent, wages and more. The deduction applies to all PPP loans, regardless of if the loan has already been forgiven.
Extension of credits for paid sick leave
Families First Coronavirus Response Act (FFCRA) paid sick leave and family leave tax credits are extended through March 31.
$30 billion for vaccine distribution
With the vaccine ready for distribution, the aid package directs $30 billion for procurement and distribution throughout the country.
$300 weekly federal unemployment assistance
An expansion of federal unemployment assistance was included, providing an additional $300 per week for those on unemployment. This amount is down from the $600 passed by the CARES Act and would span for 11 weeks, from the end of December through mid-March. This relief is not retroactive.
Extension of rental assistance and eviction moratoriums
The bill allocates $25 billion in emergency rental assistance for those who lost their source of income due to COVID-19. It also extends the eviction protection another month to January 31.
Additional school funding
$82 billion is laid out for K-12 schools and colleges for heating and cooling system upgrades to fight against virus transmission. An additional $10 billion is allocated for childcare assistance.
These funding categories are just a few of the provisions included in the stimulus bill. There are many smaller provisions, including a new “three martini” tax deduction for business meal expenses, a U.S. Postal Service grant and more.
Our advisors are closely following COVID-19 relief efforts and will continue to publish insights to keep you informed. Visit our COVID-19 Resource Center for more resources. To discuss your situation and recovery options, contact an Anders advisor below.