The New COVID-19 Stimulus Bill: Small Business Hi-Light Points
January 4, 2021
COVID-19 Stimulus Bill: What It Means For Small Business
On December 27th, President Trump signed a $900 billion stimulus package to support American workers and businesses impacted by COVID-19.
This summary provides an overview of the business and tax relief measures contained in the stimulus package.
The omnibus spending bill – which is almost 5,600 pages long – contained many tax provisions that impact small businesses.
Specific tax provisions of interest to businesses include:
- Paid Sick and Family Leave Credits
- Extends the paid sick and family leave credits against employment taxes from the Families First Coronavirus Response Act (FFCRA) for three additional months to March 31, 2021.
- The bill does not extend the FFCRA’s mandate to provide paid sick leave or paid family and medical leave beyond December 31, 2020.
- Changes to the Employee Retention Tax Credit (ERTC)
- Repeals the provision denying the ERTC to employers receiving a PPP loan. Instead, mechanisms would be created to prevent the same wages from being used for both PPP loan forgiveness and the ERTC.
- Extends the ERTC to apply to wages paid before July 1, 2021 (instead of January 1, 2021).
- Increases the credit percentage from 50 percent to 70 percent of applicable wages.
- Increases the per-employee limitation on applicable wages from $10,000 total to $10,000 per calendar quarter. In combination with the increased credit percentage, this would increase the maximum credit per employee from $5,000 to $7,000 per quarter (up to $14,000 for the first two quarters in 2021).
- Makes the ERTC available if the business experienced a decline of at least 20 percent in gross receipts (instead of a 50 percent decline) as compared to the same calendar quarter in the prior year.
- Modifies the small employer definition of qualified wages to apply to employers that have 500 or fewer employees (instead of 100 of fewer employees).
- Creates a temporary employee retention credit of 40 percent of qualified wages up to $6,000 (maximum credit of $2,400 per eligible employee) for eligible employers affected by certain qualified disasters. This credit does not apply to COVID-related disasters.
- The bill also extends the Work Opportunity Tax Credit for five years.
Paycheck Protection Program and Other Small Business Assistance
In addition to the tax provisions, the COVID-19 relief portion of this legislation contains additional assistance for small businesses. Specifically, it contains the following provisions designed to assist small businesses:
- Creates a second loan from the Paycheck Protection Program, called a “PPP second draw” loan for smaller and harder-hit businesses, with a maximum amount of $2 million.
- Creates a simplified application process for loans under $150,000.
- Expands the expenses that can be covered by a PPP loan.
- Makes 501(c)6 organizations that do not lobby eligible for PPP loans.
- Makes the expenses covered by PPP loans tax deductible.
Details on these provisions can be found on this document provided by the Community Banker’s Association.
The COVID-19 relief provisions also make the following changes to unemployment insurance:
- Unemployed individuals get an additional $300 per week from December 26, 2020 to March 14, 2021.
- Extends and phases out Pandemic Unemployment Assistance (PUA), a temporary federal program covering self-employed and gig workers, to March 14, 2021 and extends benefits from 39 to 50 weeks with all benefits ending April 5, 2021.
- Extends and phases out Pandemic Emergency Unemployment Compensation (PEUC) which provides additional weeks when state unemployment runs out, to March 14, 2021 (after which no new applications) through April 5, 2021.
- Extends provisions to March 14, 2021, including interest-free loans to the states.
No federal money was provided to shore up the short falls in state unemployment funds.
View the bill in its entirety here. Treasury is expected to release further guidance in the upcoming weeks.
*The information provided in this email summary does not, and is not intended to, constitute legal advice.