President Signs Second Round of COVID-19 Stimulus Relief

President Donald Trump on Dec. 27 signed into law a $2.3 trillion bill that includes $900 billion in pandemic relief. The stimulus package includes deductibility of expenses paid for by Paycheck Protection Program (PPP) loans, an extension of unemployment benefits and direct payments to Americans. The bill was passed by both houses of Congress on Dec. 21.

Here are some of the key areas addressed by this legislation to spur the economy.

Deductibility of PPP Loan-Funded Expenses

One of the biggest points of relief deals with the tax impact of forgiven PPP loan funds. Earlier this year, the Treasury Department ruled that expenses paid with these funds could not be deducted from tax returns—even if they would otherwise be deductible under normal circumstances. Since the loan funds are tax-free income, the Treasury considered tax deductions of these expenses as double dipping. This unexpected tax burden was a huge shock to organizations that relied PPP loans just to survive.

After extensive lobbying efforts (and bipartisan agreement in Congress to overturn the Treasury’s ruling), the new relief package corrects this unintended consequence. Typically-deductible expenses like payroll costs will remain deductible on 2020 returns, even if they were paid for by forgiven PPP loan funds. The COVID-19 relief bill clarifies that “no deduction shall be denied, no tax attribute shall be reduced, and no basis increase shall be denied, by reason of the exclusion from gross income provided.” We will continue to monitor additional guidance as it’s released.

Direct Stimulus Checks

The package calls for direct payments of $600 to individuals earning up to $75,000/year. Eligible families will also get an additional $600 per dependent child, although the specifics on this provision are unclear.

A New Round of PPP Loans… With Changes

The stimulus legislation will reopen applications for PPP loans with the intent to help smaller organizations. It sets aside $12 billion for minority-owned and extremely small businesses. Another $15 billion is earmarked for entertainment venues such as music halls and independently-owned movie theaters. The program will also be expanded to cover local print and broadcast media outlets and more nonprofit organizations.

Extended Unemployment Benefits

Those who have filed for unemployment will receive an extra $300/week for 11 weeks. (An earlier federal supplement of $600/week ran out in July.) The package also extends two critical programs:

• The Pandemic Unemployment Assistance (PUA) program: Provides unemployment benefits to self-employed workers, gig workers and independent contractors
• The Pandemic Emergency Unemployment Compensation program: Provides up to 13 weeks of additional unemployment benefits to individuals who have already exhausted state or federal unemployment compensation

Most borrowers can still receive a loan up to 2.5 times of average monthly payroll costs; for those in the hotel and restaurant industry (NAICS codes beginning with 72) that figure is 3.5 times those costs. However, the maximum loan amount has been reduced to $2 million (from the previous $10 million) for all borrowers.

Other qualifying entities now include chambers of commerce, radio stations and additional nonprofit organizations.

Additionally, the program is now open to organizations that previously received a PPP loan. These applicants must have 300 or fewer employees and meet the following qualifications:

• Show a 25% gross revenue decline in any quarter of 2020 (compared with the same quarter the previous year)
• Have used or will use the full amount of their first PPP loan

In addition to costs previously eligible for PPP loan forgiveness, the program has added the following:

• Covered worker protection and facility modification expenditures (including personal protective equipment) per COVID-19 health and safety guidelines
• Payments to suppliers that are critically important to current operations
• Operating costs for software and cloud computing services and accounting services

Finally, the new bill simplifies forgiveness applications for loans under $150,000. It also doesn’t require the deduction of an Economic Industry Disaster Loan (EIDL) advance from PPP forgiveness amounts.

A Stay on Evictions

The Centers for Disease Control and Prevention (CDD) moratorium halting evictions for failure to pay rent will be extended through January. This order, set to expire on Dec. 31, stops such evictions for tenants making under $99,000/year ($198,000/year for couples).

Additional provisions in the stimulus package include paid sick leave tax credits, money for coronavirus testing and vaccine purchases, funding for schools and child care, an increase in Supplemental Nutrition Assistance Program (SNAP) benefits, and more. It’s also tied to a federal government funding bill required to avoid a government shutdown.

With over 5,000 pages in the new legislation, however, it will take time to understand all the details.

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