Just before midnight on December 21st, Congress passed the $900 billion bi-partisan stimulus package. Bi-partisan doesn’t mean there isn’t controversy in this case, however. Many Congressional members on both sides of the aisle believe it “gives up” too much to the “other side.” Others think it doesn’t go far enough. Still others wonder why certain things unrelated to helping businesses or individuals seem to be “hidden” in a stimulus package.
Many of these elected officials seem to forget, however, that the original intent – at least for the taxpayers who put them in office – was to stimulate the economy and help with the dumpster-fire that has been 2020 – The Year of the Pandemic. Wes Craven couldn’t have written a better (or worse) horror story for our businesses and their employees than what’s happened this year.
Now, while this bill isn’t perfect – far from it – it includes many of the items that we (the Chamber, you and millions across the country) begged for in letters and calls to our Senators and Representatives. Things like help for 501(c)6 charitable organizations and Chambers of Commerce, assistance for event venues and theaters who were totally shut down for much of the year, a second round of PPP and EIDL loans/grants and forgiveness for those who were able to get a little money from both PPP and EIDL in the last round, and help for very small businesses with only 1-2 employees.
I’m not here to argue the politics of the bill, the cost, the extras…any of that. Nor am I arguing for or against some of the measures taken to try to protect citizens during the war on this virus. I just want to summarize the assistance for our local businesses and Chamber members who desperately need a hand-up after suffering through this year. It wasn’t their fault that they couldn’t open for weeks or months on end. It wasn’t bad management or business tactics that had them at half capacity (or less) when they could reopen. All of that is in the past (we hope), and they need a way to kickstart their businesses when many of them were down over 80% year over year.
Just for the record…of our elected officials in West TN…Congressman Kustoff and Senator Lamar Alexander voted yes. Senator Marsha Blackburn voted No.
Below, you’ll find a brief summary of some of the business-related items included. We hope to have a full summary later this week. (Copied from several sources who have a legal staff able to cut through the craziness of an over 5500 page bill including taxfoundation.org and investopedia.com.)
Small Business Relief
Under the broad caption of small business relief the bill provides $325 billion apportioned as follows:
- $284 billion for forgivable first and second PPP loans.
- $20 billion for new EIDL grants for businesses in low-income areas.
- $3.5 billion for continued SBA debt relief payments.
- $2 billion for enhanced SBA lending.
- $15 billion for live venues, independent movie theaters, cultural institutions.
Employee-side Payroll Tax Deferral
For those opting into the White House’s employee-side payroll tax deferral, the repayment deadline has been extended from April 2021 to December 31, 2021, lengthening the repayment period for those taxpayers.
Paycheck Protection Program (PPP)
Renewed funding of $284 billion for the Paycheck Protection Program (PPP) to provide forgivable loans to first- and second-time small business borrowers. The bill expands eligibility for nonprofits and includes set-asides for very small businesses and community-based lenders. Second-time loans are limited to businesses with fewer than 300 employees and at least a 25 percent drop in gross receipts in a 2020 quarter compared to the same quarter in 2019. The maximum loan size for second-time borrowers is $2 million. Businesses taking a PPP loan will now be able to take the Employee Retention Tax Credit (ERTC), when previously they were only allowed to opt into one or the other.
PPP loans can be used to pay qualifying expenses, which have been expanded to include expenses such as covered property damage, supplier costs, or worker protection expenditures in addition to employee wages or operating expenses like rent and utilities. When used for qualifying expenses, PPP loans are forgivable. The bill provides a simplified forgiveness application process for loans up to $150,000.
The bill also clarifies that businesses can deduct expenses paid with forgiven PPP loans. This clarification applies to old loans and to new loans and does not include guardrails or limitations. Typically, forgiven debt is considered taxable income. In the CARES Act, lawmakers specified that forgiven PPP loans would not count as taxable income. They also intended that expenses paid for with PPP loans would be deductible but did not specify so in law. Section 265 of the tax code generally prohibits firms from deducting expenses associated with income that is tax-free, so without specification, the Treasury Department ruled that expenses paid for with PPP loans were not deductible. This clarification results in a two-part subsidy to businesses comprised of deductions and tax-free loan forgiveness. Lawmakers intended this two-part subsidy when crafting the CARES Act, and the Joint Committee on Taxation scored the original provision as such. This clarification, a kind of technical correction, does not have a budget impact.
Economic Injury Disaster Loan Program & Small Business Administration (SBA) Debt Relief Payments
It also provides $20 billion for new EIDL grants (economic injury disaster loan program) for businesses in low-income communities, $43.5 billion for continued Small Business Administration (SBA) debt relief payments, and $2 billion for enhancements to SBA lending. An additional $15 billion of dedicated funding is set aside for live venues, independent movie theatres, and cultural institutions.
Employee Retention Tax Credit
Extension and expansion of the Employee Retention Tax Credit through July 1, 2021. The bill increases the refundable payroll tax credit from a maximum of $5,000 to $14,000 by changing the calculation from 50 percent of wages paid up to $10,000 to 70 percent of wages paid up to $10,000 for any quarter. The bill clarifies that businesses will now be able to take the Employee Retention Tax Credit and participate in the PPP.
Employer-side Social Security Payroll Tax Credits
Extension through March 2021 of the employer-side Social Security payroll tax credits to offset paid sick and family leave related to the coronavirus created in the Families First Coronavirus Response Act.
Deduction for Business Meals
Expansion of the deduction for business meals to 100 percent for 2021 and 2022. This will cost about $5 billion in federal revenue.
Extension of Unemployment Insurance Compensation Benefits
An 11-week extension of the unemployment insurance (UI) compensation benefits first provided in the CARES Act that are due to expire on December 26. This includes the Pandemic Unemployment Assistance (PUA) that extends UI benefits to workers who traditionally are ineligible, such as gig economy workers and independent contractors, and Federal Pandemic Unemployment Assistance (FPUA), which will provide an additional $300 per week supplement to state UI compensation.
Pandemic Emergency Unemployment Compensation (PEUC) originally providing an additional 13 weeks of UI benefits will also be extended for 11 weeks (for a combined maximum of 50 weeks) and will expire on March 14, 2021. Individuals receiving benefits beyond the standard 26-week period as of March 14th will continue receiving them through April 5th if they have not reached their maximum number of benefit weeks. Federal funding will be extended for states waiving their waiting week for benefits. Workers with at least $5,000 in self-employment income may be eligible for an additional $100 per week benefit as part of the Mixed Earner Unemployment Compensation to adjust for a lower UI base payment. $120 billion is allocated for the UI benefits in the bill.
Direct Payments
The package includes Economic Impact Payments (EIPs) of $600 for individuals making up to $75,000 per year. Married couples who file jointly and earn up to $150,000 per year will get $1,200. In addition, dependents 16 and under are eligible for $600. Payments should begin within two weeks of passage of the bill. Those whose bank information is already with the IRS should get paid first.
Amanda Love
Executive Director
Humboldt Chamber
