Federal COVID-19 Relief Package

Congressional leaders have reached a deal on a bipartisan economic stimulus package, which was passed by both chambers late on December 21, 2020. Comments by President Trump expressing concern with the omnibus spending bill the relief package was attached to and asking for increased stimulus payments for individuals raise questions on the status of the bill.

The program includes numerous stimulus efforts aimed at businesses, including major expansions of both the Paycheck Protection Program and the Employee Retention Tax Credit, and consumers, including $600 payments to all qualifying individuals and dependents. Here’s what we know regarding these, and other elements of the bill (note that this is not an exhaustive summary of the 5593 page long document, but rather highlights of key elements most relevant to businesses and individuals in our area):

Note: Blog has been updated 12/22/2020 after Congressional approval of the bill.

COVID-19 Relief to Businesses

Expansion of the Paycheck Protection Program (PPP)

  • Expansion of the Paycheck Protection Program (PPP):
    • The Paycheck Protection Program is being expanded with another $275 billion. This can be utilized by businesses that did not apply for or receive a PPP loan initially or for businesses to access a second draw.
  • Creation of a Second Draw Loan Program:
    • Businesses that have already received PPP loans who have had severe revenue reduction will be able to apply for a second draw loan.
    • Second draw loans will have the same forgiveness policies as the first.
    • Second draw loans are limited to a maximum of $2 million.
    • To be eligible for a second draw, businesses must:
      • Have fewer than 300 employees
      • Have or will use the full amount of the first loan
      • Have a reduction of gross receipts of at least 25% in any quarter of 2020 compared to the same quarter in 2019.
    • Businesses in the Accommodation and Food Services (Defined as NAICS code 72) industry are eligible for a loan of 3.5 times average monthly payroll costs rather than 2.5 times.
  • Added 501(c)(6) organizations as eligible entities.
    • Includes 501(c)(6) and Destination Marketing organizations that do not receive more than 15% of revenue from lobbying or spend more than 15% of time on lobbying.
    • Eligible organizations must have 300 or fewer employees.
    • Professional sports organizations and organizations that promote or participate in political campaigns or activities are ineligible.
  • Eligible expenses are now deductible
    • Under the original Paycheck Protection Program, expenses that were eligible for forgiveness were not deductible. These expenses will now be deductible as normal business expenses for both the original loan and any second draw loans.
  • The following additional expenses were added as eligible expenses for forgiveness:
    • Payment for any software, cloud computing, and other human resources and accounting needs.
    • Costs related to property damage due to public disturbances that occurred during 2020 that are not covered by insurance
    • Expenditures to a supplier, pursuant to a contract, purchase order, or order for goods made prior to taking out the loan, that are essential to the recipient’s operations.
    • Personal protective equipment and investments made to comply with federal or State and local health and safety guidelines.
  • Simplified loan forgiveness for loans less than $150,000:
    • An updated application must be released within 24 days of the date of enactment of the law.
    • The application must not be more than one page long.
  • Removed forgiveness reduction for EIDL Advance recipients:
    • Recipients of the EIDL Advance Grant of up to $10,000 were originally required to deduct that from the amount of the PPP loan eligible for forgiveness. This has now been waived.
    • Borrowers who have already received forgiveness that deducted the amount received under an EIDL Advance will be made whole.

Expansion of Employee Retention Tax Credit:

  • Overview of the Original Employee Retention Tax Credit:
    • Under the original program, employers who were fully or partially shut down in a quarter could claim a refundable tax credit of 50% of the wages paid to their employees that quarter, up to a maximum of $10,000 paid per calendar year. For businesses that were not shut down, they could claim the credit if they had a 50% loss of revenue in a quarter in 2020 compared to the same quarter in 2019. They could continue claiming that credit until their revenue rose to 80% or more of the previous year’s quarterly revenue. (An employee who made $8000 in Q2 and $8000 in Q3 would result of a credit of $4000 in Q2 and $1000 in Q3 as the maximum of $10,000 was reached.)
    • Employers with 100 or fewer employees could take this credit for all wages paid to employees. Employers with more than 100 employees could only take this credit for wages paid to employees who were not providing service.
    • Businesses taking advantage of the Paycheck Protection Program could not utilize the Employee Retention Tax Credit
  • Created ability to utilize Employee Retention Tax Credits and the Paycheck Protection Program
    • Businesses may be able to utilize both the Employee Retention Tax Credit and the Paycheck Protection Program.
  • Expansion of the Employee Retention Tax Credit program for 2021
    • The package extends the Employee Retention Tax Credit program until July 1, 2021.
    • The maximum applicable wages in 2021 has increased from $10,000 for all quarters to $10,000 for each quarter.
    • The tax credit has increased from 50% of wages to 70% of wages. (I.e. an employer who pays an employee $10,000 or more in Q1 and $10,000 or more in Q2 will receive a $7,000 credit for each of those two quarters, for a total of $14,000.)
  • Expansion of the Employee Retention Tax Credit Eligibility for 2021:
    • Under the new program, employers who are fully or partially shut down will continue to be automatically eligible. Employers who are not fully or partially shut down in a quarter will be able to claim the credit for each quarter where their revenue has been reduced by 20% compared to the same quarter in 2019.
      • Businesses not open in 2019 will be able to compare their revenue to revenue in the same quarter in 2020.
    • In the event that a business has not seen a 20% reduction in revenue in a quarter, but had seen one the previous quarter, they will be eligible to utilize the revenue comparison from the previous quarter. (I.e. A business that does not see a revenue reduction of 20% in Q2 2021 compared to Q2 2019 will still be able to claim the credit if they had a revenue reduction of 20% in Q1 2021 compared to Q1 2019.
    • Businesses with 500 or fewer employees will now be able to claim the credit for all hours paid to employees, just as employees with 100 or fewer employees could in 2020.

Other Business Support Measures

  • Targeted Grants Toward Specific Industries:
    • $82 billion to schools and universities.
    • $45 billion for transportation industries including $16 billion for airline and contractor payroll and $2 billion for airports.
    • $15 billion targeted towards entertainment venues, movie theaters, and museums.
    • $13 billion to farmers and agriculture sector.
    • $10 billion to childcare providers.
    • $7 billion in additional broadband funding.
    • $4 billion targeted towards substance abuse.
  • Economic Injury Disaster Loan (EIDL) Advance program expansion:
    • $20 billion in additional grant availability to applicants in low-income communities. The EIDL Advance originally allowed an advance grant of $1,000 per employee up to $10,000 to be paid out to EIDL loan applicants.
      • Eligible applicants in low income communities will now receive $10,000 regardless of the number of employees. Applicants who received less than $10,000 originally will receive the difference.
    • EIDL Advance program grants are no longer deductible from the amount of PPP loan funding eligible for forgiveness.
  • Establishment of the Emergency Capital Investment Program (ECIP):
    • This $9 billion program will provide low-cost, long-term capital investments to Minority Depositary Institutions (MDIs) and Community Development Financial Institutions (CDFIs)
    • An additional $3 billion will be added to the CDFI Fund to provide grants and other financial assistance to CDFIs.
  • Debt Relief Program Extended
    • Funding is provided to continue principal & interest payments on loans guaranteed by the Small Business Administration
  • Extension of the FFCRA
    • The ability of employers to utilize tax credits to pay for sick and family leave required under the Families First Coronavirus Response Act has been extended to March 31, 2020.

COVID-19 Relief to Individuals

  • New round of stimulus checks:
    • $600 to individuals making up to $75,000 per year and $1,200 for couples making up to $150,000 per year, as well as a $600 payment for each child dependent.
      • For each $100 of additional income beyond these limits, stimulus checks will be reduced by $5.
    • This means a family of four earning less than the minimum limits will receive $2,400 in direct payments.
    • Advance payments will be made based on 2019 income. Those who receive an overpayment based on 2019 income relative to 2020 income will not need to repay the overpayment. Those who are owed more will receive the difference as a refundable tax credit on their 2020 tax return.
  • Unemployment Extension:
    • $300 per week of additional unemployment benefits provided for 10 weeks from December 26, 2020-March 14, 2021.
    • The Pandemic Unemployment Assistance program, which extends unemployment benefits to individuals who were otherwise not eligible for unemployment benefits, including the self employed and independent contractors, is extended with eligibility for new applicants extending to March 14, 2021 and payments extended to April 5, 2021.
    • An additional provision requires all states to implement a reporting mechanism for employers to notify the state when an individual refuses employment.
  • Rental Assistance & Eviction Moratorium Extension:
    • $25 billion is being allocated towards rental assistance.
    • The eviction moratorium is extended until January 31, 2021.
  • Increased Nutrition Benefits:
    • Eligibility remains the same for SNAP benefits, but the benefits will increase by 15% for 6 months.
    • Funding has been appropriated for the Commodity Supplemental Food Program, serving over 700,000 older Americans.

Public Health Funding

  • $28 billion towards purchasing and distribution of the COVID 19 vaccine.
  • $20 billion towards additional testing.