Congress passed the Consolidated Appropriations Act of 2021 on Monday, December 21, 2020. President Trump sign the bill into law on Sunday, December 27, 2021.
We will have additional information on various details of the new law as it rolls out. The bill is 5,593 pages long, so a bit of an understatement to say that more details are coming. Just a bit of light reading.
However, this post is a starting point summary, and is a compilation from multiple sources, including our national organization MHI.
The bill includes:
- 25 billion in dedicated rental assistance;
- An extension for grantees to spend unused federal dollars, of which Texas still has about $2 billion left to spend;
- $600 direct stimulus check payments per qualifying individual (including children);
- $300 per week federal unemployment insurance enhancement for unemployed Americans; and
- $284 billion in forgivable Paycheck Protection Program (PPP) loans;
- Clarifying tax deductibility of PPP loan expenses; and
- Extension of the CDC eviction moratorium until January 31 (note: additional foreclosure and evictions moratorium extensions have also recently been announced for federally back loans through the FHFA until the end of February 2021).
The Emergency Rental Assistance section provides $25 Billion through the U.S. Treasury to States, U.S. Territories, tribes, and large cities in order to provide assistance to struggling renters. Grantees shall use funds to provide direct financial assistance or housing stability services to eligible households. Not less than 90 percent of funds shall be used for direct financial assistance, including rent, rental arrears, utilities and home energy costs, utilities and home energy costs arrears, and other expenses related to housing. Not more than 10 percent of funds shall be used for housing stability services, including case management and other services intended to keep households stably housed.
- Eligible households may receive up to 12 months of assistance, plus an additional 3 months if necessary, to ensure housing stability.
- Grantees can only commit to assistance in 3-month increments, after which point an eligible household must re-apply for funds.
- Grantees may not make commitments for prospective rent payments to an eligible household unless assistance has also been provided to reduce that household’s rental arrears.
- An application for rental assistance may be made directly to a grantee by either an eligible household or by a landlord on behalf of that eligible household.
- In general, grantees will provide funds directly to landlords and/or utility service providers.
- If a landlord does not wish to participate, the grantee may provide funds directly to the eligible household.
- Grantees shall prioritize consideration of applications for eligible households that are at or below 50 percent of the area median income, or where one or more members of the household has been unemployed for 90 days or longer
An “eligible household” is defined as a renter household that meets the following criteria:
- Qualifies for unemployment or has experienced a reduction in household income, incurred significant costs, or experienced a financial hardship related to COVID-19;
- Demonstrates a risk of experiencing homelessness or housing instability; and
- Has a household income at or below 80 percent of the area median.
In determining a household’s income for purposes of this section, grantees shall consider either the household’s total income for calendar year 2020 or the household’s monthly income at the time of application for assistance. For household incomes determined using the latter method, grantees must re-determine income eligibility every 3 months. A household receiving other forms of federal housing assistance shall not be eligible to receive assistance under this section.
Funds provided to an eligible grantee expire on December 31, 2021.
Rebates for Individuals
The provision provides a refundable tax credit in the amount of $600 per eligible family member. The credit is $600 per taxpayer ($1,200 for married filing jointly), in addition to $600 per qualifying child.
The credit phases out starting at $75,000 of modified adjusted gross income ($112,500 for heads of household and $150,000 for married filing jointly) at a rate of $5 per $100 of additional income.
The provision also provides for Treasury to issue advance payments based on the information on 2019 tax returns. Eligible taxpayers treated as providing returns through the non-filer portal in the first round of Economic Impact Payments, provided under the CARES Act, will also receive payments.
In general, taxpayers without an eligible social security number are not eligible for the payment. However, married taxpayers filing jointly where one spouse has a Social Security Number and one spouse does not are eligible for a payment of $600, in addition to $600 per child with a Social Security Number.
The payments are protected from bank garnishment or levy by private creditors or debt collectors.
Extension of certain deferred payroll taxes
On August 8, 2020, the President issued a memorandum to allow employers to defer withholding employees’ share of social security taxes from September 1, 2020 through December 31, 2020, and required employers to increase withholding and pay the deferred amounts ratably from wages and compensation paid between January 1, 2021 and April 31, 2021. Beginning on May 1, 2021, penalties and interest on deferred unpaid tax liability will begin to accrue.
The provision extends the repayment period through December 31, 2021.
Penalties and interest on deferred unpaid tax liability will not begin to accrue until January 1, 2022.
Clarification of tax treatment of Paycheck Protection Program loans
The bill clarifies that gross income does not include any amount that would otherwise arise from the forgiveness of a Paycheck Protection Program (PPP) loan.
This provision also clarifies that deductions are allowed for otherwise deductible expenses paid with the proceeds of a PPP loan that is forgiven, and that the tax basis and other attributes of the borrower’s assets will not be reduced as a result of the loan forgiveness.
The provision is effective as of the date of enactment of the CARES Act. The provision provides similar treatment for Second Draw PPP loans, effective for tax years ending after the date of enactment of the provision.
Clarification of tax treatment of certain loan forgiveness
The bill clarifies that gross income does not include forgiveness of certain loans, emergency EIDL grants, and certain loan repayment assistance, each as provided by the CARES Act.
The provision also clarifies that deductions are allowed for otherwise deductible expenses paid with the amounts not included in income from loan forgiveness, and that tax basis and other attributes will not be reduced as a result of those amounts being excluded from gross income.
The provision is effective for tax years ending after date of enactment of the CARES Act.
The provision provides similar treatment for Targeted EIDL advances and Grants for Shuttered Venue Operators, effective for tax years ending after the date of enactment of the provision.
Extension of credits for paid sick and family leave
The bill extends the refundable payroll tax credits for paid sick and family leave, enacted in the Families First Coronavirus Response Act, through the end of March 2021.
It also modifies the tax credits so that they apply as if the corresponding employer mandates were extended through the end of March 2021.
Additional Forgivable PPP loans
The bill provides $325 billion to provide additional assistance to the hardest-hit small businesses, nonprofits, and venues that are struggling to recover from the impact of the COVID-19 pandemic.
Paycheck Protection Program Second Draw Loans:
- Creates a second round of PPP loans for eligible businesses.
- Defines eligibility for the PPP second draw as small businesses that have no more than 300 employees and demonstrate at least a 25 percent reduction in gross revenues between comparable quarters in 2019 and 2020.
- Establishes a maximum loan size of 2.5X average monthly payroll costs, up to $2 million.
- Allows small businesses assigned to the industry NAICS code 72 (Accommodation and Food Services) to receive PPP second draw loans equal to 3.5X average monthly payroll costs in order to helps these businesses combat onerous State and local restrictions.
- Borrowers receive full loan forgiveness if they spend at least 60 percent of their PPP second draw loan on payroll costs over a time period of their choosing between 8 weeks and 24 weeks.
- Affirms the eligibility of churches and religious organizations and prohibits a future administration from making them ineligible.
- Includes set-asides to support first-time PPP borrowers with 10 or fewer employees, second-time PPP borrowers with 10 or fewer employees, first-time PPP borrowers who have been made newly eligible, and second-time returning PPP borrowers.
- Additionally, provides for a set-aside for loans made by community lenders.
Paycheck Protection Program Improvements:
- Expands PPP allowable and forgivable expenses to include supplier costs on existing contracts and purchase orders, including the cost for perishable goods at any time, costs relating to worker protective equipment and adaptive costs, and technology operations expenditures.
- Provides needed assurances to PPP lenders that no enforcement action could be taken against a lender who originated the loan in good faith, complied with all regulations, and relied in good faith on a borrower’s certification and documentation.
- Enhances borrower flexibility by allowing borrowers to select their loan forgiveness covered period between 8 weeks and 24 weeks.
- Simplifies the forgiveness application process for smaller loans up to $150,000 while increasing SBA’s ability to audit and review forgiven loans.
- Allows PPP borrowers to include additional group insurance payments when calculating their PPP payroll costs. This would cover insurance plans such as vision, dental, disability and life insurance.
- Allows borrowers who returned all or part of their PPP loan to reapply for the maximum amount applicable. It also allows lenders to recalculate borrower’s loan amounts due to changes in regulations