Consolidated Appropriations Act, 2021 Impacts PPP, Unemployment, and Tax Credits
Late on Monday, Dec. 21, Congress passed the long-awaited stimulus as well as an omnibus spending bill as part of the Consolidated Appropriations Act, 2021. Most of the interest will be on the expansion of the Paycheck Protection Program (PPP), expanded unemployment, and direct payments to taxpayers. Additionally, there are a multitude of tax-related provisions hidden in the bill that are important for taxpayers and CPAs to understand going into 2021.
One of the most anticipated portions of the law involves the PPP. As part of this stimulus package, certain businesses can apply for a second round of funding. To qualify, businesses need to have less than 300 employees and demonstrate a loss in gross receipts of 25% or more. Additionally, the bill allows for more expenses to be included in forgiveness.
For companies that have already applied for PPP loans, one of the main questions has been the deductibility of expenses forgiven under the PPP program. Under the CARES Act, PPP forgiveness was not considered taxable. However, shortly after the CARES Act came out, the IRS issued Notice 2020-32, stating taxpayers who receive forgiveness cannot deduct covered costs. The Consolidated Appropriations Act fixes this issue and states “no deduction shall be denied, no tax attribute shall be reduced, and no basis increase shall be denied” for expenses paid with PPP proceeds. This is a welcome reprieve for taxpayers who received PPP loans.
The 5,593-page bill contains many other provisions including, but not limited to:
- Permanent extension of 179D Energy-Efficient Building Deduction
- One-year extension of 45L Energy-Efficient Home Tax Credit
- Extension of Work Opportunity Tax Credit (WOTC)
- Extension of New Market Tax Credit (NMTC)
- Extension of green energy investment tax credit and production tax credit
- Temporary allowance for deduction of business meals
- Extension and expansion of Employee Retention Tax Credit
These are just a few of the details in this expansive bill. McGuire Sponsel will continue to review and will present the webinar, “Stimulus and Tax Provisions included in the Consolidated Appropriations Act, 2021,” detailing the provisions for this bill. To register for Tuesday, December 29, click here. To register for Tuesday, January 5, click here.
If you have any questions about how this bill will affect you or your clients, feel free to reach out to your McGuire Sponsel representative.