More Coronavirus Relief On The Way
Covid-19 Relief | Dec 30, 2020
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The Consolidated Appropriations Act, 2021 (Act) was signed into law on December 27, 2020. In addition to funding the federal government, the Act introduced several different COVID-19 relief measures.
Here are some key highlights:
Paycheck Protection Program Loan
The Act provided additional funding to the Paycheck Protection Program (PPP) and opened the program back up for new loans. In addition, borrowers who meet certain criteria can take an additional loan up to $2 million, termed a “second draw.”
In order to qualify for a second draw, an employer must:
- Employ 300 or fewer employees; and
- Can document at least a 25% revenue decline in any quarter of 2020 compared to the same quarter of 2019; and
- Must use the full disbursement of their first PPP loan on or before the disbursement of their second draw.
Second draw loan amounts are calculated on the same basis as the original PPP loans – up to 2.5 times the average monthly payroll costs in the one year prior to the loan, capped at $2 million.
But for businesses in the Accommodation and Food Services sector (NAICS code 72; typically hotels and restaurants), they can borrow up to 3.5 times their average monthly payroll costs.
PPP Loan Forgiveness
For a borrower to obtain full forgiveness, they still must use 60% of the loan on payroll costs. They can spend the remaining 40% on qualified business expenses during the covered period.
The Act expanded qualified, non-payroll business expenses to include the following:
- Operation expenditures for any software, cloud computing, and other human resources or accounting needs.
- Costs related to property damage caused by public disturbances in 2020 that are not covered by insurance.
- Costs to a supplier under a contract, purchase order, or order for goods in effect prior to taking out a loan that were essential to the borrower’s operations at the time the expenditure was made.
- Worker protection expenditures including payments for personal protective equipment (PPE) and other investments made to help a borrower comply with federal, state, and local health and safety guidelines.
Families First Coronavirus Response Act Paid Sick and Family Leave
For qualifying businesses, the Families First Coronavirus Response Act (FFCRA) introduced expanded FMLA and emergency paid sick leave for employees impacted by COVID-19. In turn, the FFCRA provided impacted employers with offsetting tax credits.
Originally, these tax credits were set to expire on December 31, 2020. The Act extends the tax credits through March 31, 2021.
However, it does not extend the mandate for employers to provide expanded FMLA and emergency paid sick leave for employees impacted by COVID-19.
For those employers that continue to offer the qualified FFCRA leave to their employees, the tax credits remain available until March 31, 2021.
Social Security Tax Deferral Repayment Deadline
On August 8th, President Trump signed a memorandum that allowed employers to defer withholding the employee’s share of Social Security tax. Originally, employees would have to repay the withheld tax between January and April 2021.
The Act extends the deadline for employees to repay the deferred tax to December 2021.
This relief package includes other measures that may be relevant to your business and/or employees – such as the ability for individuals to roll over unused FSA funds from 2020 to 2021 and from 2021 to 2022. You should consult with your legal and financial advisors about which relief provisions apply to you and how best to make the most of them.
Disclaimer: This is simply a summary of some provisions contained with the Consolidated Appropriations Act, 2021. This does not constitute legal advice. Always check with your own legal and/or financial advisors as to how this law and others may apply to you or your business.