The $900 billion, 5,000 + page COVID-19 Stimulus package is one of the largest bills in our nation’s history. As you can imagine, there are a lot of details to go through, and decipher, within those pages. While many items in the bill are not related to pandemic relief, we want to talk about changes to the Paycheck Protection Program (PPP) and tax provisions that may impact you the most.
As with the first stimulus bill, there are grey areas that will likely be cleared up. We are working to gain clarity and additional information where possible. While the bill has not yet been signed into law, in the current state it includes the following provisions.
Paycheck Protection Program (PPP) Changes
The PPP was given $284 billion to fund additional forgivable loans. These loans are not included in taxable income and you can deduct expenses that were paid with your forgiven PPP loan with no restrictions. Companies that were “hard hit” can qualify for a second round of PPP money. Currently, small companies and non-profits with 300 or fewer employees that can show a 25% loss of gross receipts during any quarter of 2020, when compared to 2019, which totals 2.5 times the average monthly payroll up to $2 million, are in this category and allowed to re-apply for PPP funds.
Additionally, new types of businesses are now eligible for PPP loans, including hospitals, local newspapers and broadcasters (TV and radio), local chambers of commerce, and other “promotion” organizations and 501(c)(6). There are some exceptions to this eligibility tied to how much money such organizations receive from lobbying.
The bill also included $20 billion for Economic Injury Disaster Load (EIDL) grants, $3.5 billion for SBA debt relief and $2 billion for enhancements to SBA lending.
Tax Provisions Included in the Stimulus Bill
This stimulus bill extends the Employee Retention Tax Credit (ERTC), which has been expanded through July 1, 2021, including some clarifications and additions to the original provision:
- Increased credit rate from 50% to 70%.
- Increases per-employee creditable wages to $10,000 per quarter.
- Makes it easier to get the credit by lowering the limit for declining YoY gross receipts from 50% to 20%.
- Changes the definition of “large employer” for determining the qualified wage based on 100. This applies to organizations with 500 or less employees.
$286 Billion in Direct Relief
The stimulus bill included $300 a week in Federal Pandemic Unemployment Compensation (FPUC). This additional unemployment funding ends on March 14, 2021. It also funded direct payments in the form of stimulus checks of $600 for individuals making up to $75,000 annually, or couples making up to $150,000 annually with an additional $600 per dependent child.
The size of the stimulus check is reduced for those with reported earnings over $75,000 and tops out at $99,000. So a family of four, that is eligible for the full stimulus amount, could receive $2,400. This depends upon them meeting all qualifying factors to receive the maximum allowed amount. Those who are eligible may see the funds in a couple of weeks, with those who have direct deposit on record with the IRS most likely to see funds first.
Keep in mind, that stimulus check payments are based on your most recently filed tax return. You can use this stimulus calculator to estimate what your household might qualify to receive.
Other Emergency Inclusions
Some less defined areas of the bill include what employers are required and permitted to do regarding emergency paid sick leave or emergency paid Family and Medical Act Leave under the Families First Coronavirus Response Act (FFCRA), which is set to expire on December 31st, 2020.
We are watching for guidance and information on this, and other areas of interest and will bring updated details as soon as possible. You can find the bill in its complete form here.
The material presented here is educational in nature and is not intended to be, nor should be relied upon, as legal or financial advice. Please consult with an attorney or financial professional for advice.