Congress passed the Consolidated Appropriations Act, 2021, a $900 billion coronavirus relief package, on December 21, 2020. The Act is currently with President Trump and awaits his signature. The legislation includes several provisions that will affect employers, PPP loan recipients, and businesses in need of additional relief funds.
Families First Coronavirus Response Act (FFCRA)
While the Act doesn’t extend the paid sick and family leave requirements under the FFCRA, it does extend the credits for paid sick and family leave the FFCRA established. The refundable payroll tax credits will now be available through March 31, 2021. So, after December 31, 2020, employers are not required to provide paid leave under the FFCRA; however, the credit is available to employers paying voluntarily after the end of the year and through the end of March 2021. It’s important for employers to understand state and local laws as well. Some jurisdictions may choose to extend certain paid sick and family leave requirements outside the bounds of current federal FFCRA requirements.
The Act extends the Pandemic Emergency Unemployment Compensation (PEUC) program by 11 weeks. The program for employees who have exhausted their state benefits was originally set to expire in December. From December 26, 2020, until March 14, 2021, federal supplemental unemployment insurance benefit payments of $300 per week will also be available.
Repayment of Certain Payroll Taxes Deferred
A deferral of certain payroll tax obligations was granted under President Trump’s August 8th memorandum. The Act extends the deadline for repayment of those amounts (employee shares of social security taxes or the railroad retirement tax equivalent) deferred from September 1, 2020, through December 31, 2020, to December 31, 2021.
Return-to-Work Reporting Requirements
If President Trump signs the bill, all states will have 30 days following enactment to develop a reporting system by which employers in their state may report to them instances when an individual refuses to return to work, or when, without good cause, an individual does not accept an offer of suitable work. Each state must subsequently post their return-to-work laws, which will include notice of a claimant’s rights to refuse work and a definition of what constitutes suitable work. Employers must make a solid effort to stay on top of related developments, especially over the next 30 days, in order to comply with their respective state’s chosen method, program, and reporting requirements.
Paycheck Protection Program
The Act makes business expenses paid for with PPP funds tax deductible, which corrects the program’s deviation from its intended purpose as a tax-free program. For loan borrowers of $150,000 or less, the Act has also established a simplified forgiveness process. Only a single-page summary of the loan and your certification are required for the purpose of applying for forgiveness. Also, the Act has redefined the covered period, allowing recipients to choose a period anywhere between 8 and 24 weeks following loan origination.
The forgivable amount of your PPP loan will no longer be reduced by the amount of an EIDL loan or grant. Eligible payroll costs now include employer-provided group insurance benefits, including group life, disability, vision, and dental insurance. Forgivable expenses, for original borrowers yet to apply for forgiveness and borrowers through the next wave of the PPP, have been expanded to include a number of additions, including:
- payment for software, cloud-computing, human resources, and accounting services to facilitate business operations;
- payments due to otherwise uncovered property damages from public disturbances in 2020;
- supplier costs related to goods essential to operations during your covered period or, if related to perishable goods, both before or during your covered period;
- capital expenditures made to adapt and comply with federal (or equivalent state or local) health and safety guidelines related to COVID-19 starting on March 1, 2020, and ending when the end of the national emergency is declared, including personal protective equipment (PPE).
The Act makes a second PPP loan opportunity possible for employers with fewer than 300 employees and a 25% loss in revenue in any 2020 calendar quarter in comparison to the corresponding 2019 calendar quarter.
The Act also makes a loan opportunity available for employers that did not receive an original PPP loan. Eligibility through this new loan opportunity has been expanded to include certain 501(c)6 organizations, such as local chambers of commerce, economic development organizations, and tourism offices, as long as:
- the organization employs 300 or fewer employees;
- no more than 15% of the organization’s revenue comes from lobbying;
- lobbying activities do not comprise more than 15% of the organization’s total activities; and
- during the most recent tax year that ended prior to February 15, 2020, the organization’s lobbying activity costs did not exceed $1 million.
In general, the maximum loan amount will be based on the lesser of $2 million OR 2.5X the average total monthly payroll during the year prior to your loan date (or calendar year 2019). The maximum for seasonal employers may be calculated based on 2.5X their average total monthly payroll during the 12-week period assessed between February 15, 2019, and February 15, 2020. For new entities, the maximum may be calculated based on 2.5X the sum of their average monthly payroll costs since they have existed, and, for those in the accommodations and food service industry, the maximum may be based on 3.5X their average monthly payroll costs. No loan, however, may exceed $2 million.
To receive full loan forgiveness through the next wave of the PPP, the 60/40 payroll to non-payroll ratio applies, as it did for the original program.
The Act allocates additional funds for Emergency Economic Injury Disaster Loan (EIDL) Grants of up to $10,000 for businesses in low-income communities and extends the covered period through December 31, 2021. Additionally, a program for grants has been established for shuttered venue operators, such as those for live venues, theatrical productions, live performing arts, museums, and motion picture theatres. If a grant is received by a shuttered venue operator, however, that grant makes the business ineligible for a loan through the new wave of the PPP.
Employee Retention Tax Credit
The Act extends the Employee Retention Tax Credit through July 1, 2021. Employers with fewer than 500 employees are eligible, as are employers not in existence for all or part of 2019. Additionally, recipients of PPP loans through the upcoming second wave of the program are eligible to take the credit, as long as wages aren’t also claimed as a forgivable PPP cost. The Act also increases the maximum refundable payroll tax credit per quarter to up to $10,000 per employee. The credit rate will increase to 70% of qualified wages, as opposed to 50%, and the required decrease in year-over-year gross receipts will be reduced to 20% from 50%.
The Act includes provisions to help employers administer health and dependent care flexible spending accounts (FSAs), including provisions that expand carryover, grace period, and the rules for election changes.
Beginning January 1, 2021, and through December 31, 2022, the Act also makes business meals 100% tax deductible.
At Commonwealth Payroll & HR, we understand that employers have a lot to take in right now. We can help you answer questions relating to legislative changes. We also offer a PPP Forgiveness Coach Program to assist with certain aspects of the PPP Loan Forgiveness Application and process. To learn more, to get answers to your questions, or to discuss how we can help with your PPP loan forgiveness strategy, contact us today.
For additional information on the FFCRA and PPP, also check out some of our recent articles:
*The information provided in this article does not, and is not intended to, constitute legal advice; instead, all information is for general informational purposes only. Information in this article may not constitute the most up-to-date legal or other information. This article contains links to other third-party websites provided only for the convenience of the reader.