What’s in the COVID-19 Relief and Year-End Spending Legislation for Small Business?

By at 23 December, 2020, 12:25 pm


By Karen Kerrigan

Congress passed a big COVID-19 relief package with $325 billion of that dedicated to small business support and relief. The omnibus spending bill (that funds the federal government for the year) also included tax relief measures and other changes that will benefit many small businesses. Will President Trump sign the legislation? It was assumed that he would given Treasury Secretary Mnuchin was deeply involved in negotiations. Now, that is up in the air based on his latest Tweets.

Various committees in the Senate and House have developed summaries of the legislation, which highlight key provisions of interest to small business owners. In this “What’s in the Bill for Small Business” blog post, we link to those summaries and provide key details below.

The U.S. Chamber has also developed a solid guide that touches on the key measures, which can be accessed here.

Please keep checking back for updates as more information about the legislation and its implementation become available!

(Listen to my latest podcast here where I discuss the relief package.)

As you know, SBE Council had been fiercely fighting for clarity around the tax deductibility of forgiven expenses, and this has been included in the legislation. However, there will be a “revenue test” around the issue of whether revenues increased or decreased (which we assume will be during the loan period) – we are watching this closely, and advocating for a smart test that does not unduly or incorrectly penalize small business PPP loan recipients.

Expect rules and guidance to follow from the SBA and Treasury on several PPP and EIDL provisions that have been updated or modified. There are targeted measures for very small businesses, minority and low-income communities. The bottom-line is this: Contact your lender or a financial institution as soon as possible to see if they plan to, or will continue to, participate in this program. Use the summaries and information provided to begin organizing the paperwork and financial back-up you need to apply/qualify for the loans.

There will a “race” for these dollars. The more prepared you are now, the better your chance of securing financing. There is only $35 billion is set-aside for first time borrowers, with $15 billion of which is set aside for employers with 10 or fewer employees or for loans less than $250,000 for entities located in a low-income neighborhood.

The new PPP program runs through March 31, 2021 or until all the money is gone. The maximum loan amount for PPP second draws and new PPP loans is $2 million. The list of forgivable expenses has been expanded, and there is flexibility in selecting the 8-week window for forgiveness within a 24-week period from the origination of the loan.

A summary of Ways and Means Committee provisions in the year-end legislation is provided below, which includes (among other measures): 100% business meal deductibility (made permanent), the temporary lowering of the threshold of deductible unreimbursed medical expenses that exceed 7.5% of AGI instead of 10% is made permanent, reduced excise rates for small brewers and distillers is made permanent.

There is a five year extension of: the look-thru rule for related controlled foreign corporations, the New Markets Tax Credit, the Work Opportunity Tax Credit, the exclusion from gross income of discharge of qualified principal residence indebtedness, the 7-year recovery period for motorsports entertainment complexes, expensing rules for certain productions, empowerment zone tax incentives, the employer tax credit for paid family and medical leave, and the exclusion for certain employer payments of student loans. Also, a host of tax provisions (see below) were given a one-year extension. There were meaningful changes to the employee retention tax credit (ERTC), which extend and expand the CARES Act ERTC. Pandemic Unemployment Assistance (PUA), which covers “gig” and self-employed workers is extended and phased out to March 14 (after which no new applicants) through April 5, 2021.

Finally, “Return-to-Work” reporting requirements are included, which require states to designate a place for employers to report when someone turns down a job and must notify claimants of the requirement to accept suitable work.

A Summary from the House Small Business Committee (Republicans)

Access the pdf online copy of the summary here.

A Summary from the Senate Committee on Small Business & Entrepreneurship (Republicans)

Access a pdf of the summary here. A Section-by-Section summary covers additional details here.

A Summary from House Ways and Means Committee Republicans of Tax Provisions in the Omnibus Spending Bill:

Access the pdf copy online here.

Karen Kerrigan is president & CEO of the Small Business & Entrepreneurship Council.

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