By Attorney Kelly Jesson
After a lot of delay on both sides of Congress and the President, we have a new COVID-19 stimulus law. The President signed the “Consolidated Appropriations Act, 2021” on December 27, which contains a lot of government funding measures in addition to the COVID relief/stimulus provisions. Below are some highlights – what we think individuals and business owners would like to know:
Foreclosure, Evictions, and Student Loans
There are no provisions in the new law extending foreclosure forbearance or student loan forbearance. However, the President and government agencies have taken matters into their own hands since the first CARES Act was originally passed, frequently extending these deadlines. Currently, student loan deferment is scheduled to expire on January 31, 2021. FHA borrowers through February 28, 2021, can request forbearance of up to 12 months of mortgage payments.
The new law does extend the eviction moratorium (for tenants with less than $99,000 annual income) through January 31, 2021, but again this can be extended by the government at any time. Lots of money was appropriated to the states for rental assistance programs.
Pandemic unemployment assistance will continue for up to an additional eleven weeks if eligible, through March 14, 2021. If eligible as of that date, a worker who has not yet received the maximum amount of benefits may continue to receive benefits through April 5, 2021. Eligibility requirements did not change.
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.
Federal Pandemic Unemployment Compensation (the extra payments of $600 per week) will be reduced to $300 per week but will continue for up to an additional eleven weeks if eligible, through March 14, 2021. Eligibility requirements did not change.
Many eligible individuals (eligibility requirements did not change in this new law) will receive another tax rebate in the following amounts:
• $600 ($1,200 in the case of eligible individuals filing a joint return), plus
• $600 for each qualifying child
• But the credit shall be reduced by 5 percent of so much of the taxpayer’s adjusted gross income as exceeds:
• $150,000 in the case of a joint return,
• $112,500 in the case of a head of household, and
• $75,000 in the case of a taxpayer not described above.
This means that a married couple filing jointly with no children will not receive any credit if their income is $174,000.
Paycheck Protection Program (“PPP”)
Lots of exciting news here! Congress has allocated funds to a “second draw PPP loan program.” The available loan amount is the same, and the business must have been in business on February 15, 2020 (like before) to be eligible, but the second draw is only available to businesses with not more than 300 employees (first round was 500). Like before, there are special rules for seasonal businesses and those with more than one location. At least 60% of the loan must be spent on payroll, like before, to be forgiven; however, Congress did broaden the types of permissible expenditures.
Forgivable business expenses now include covered operations expenditures (payment for any business software or cloud computing service that facilitates business operations, product or service delivery, the processing, payment, or tracking of payroll expenses, human resources, sales and billing functions, or accounting or tracking of supplies, inventory, records and expenses), covered property damage costs (related to property damage and vandalism or looting due to public disturbances that occurred during 2020 that was not covered by insurance), covered supplier costs (essential to the operations of the entity and made pursuant to a contract that existed prior to the covered period or perishable items), and covered worker protection expenditures (related to making customers and employees safe from COVID-19). Additionally, the forgivable health insurance expense clause in the CARES Act was amended by the new law to include other type of insurance, such as group life, disability, vision, or dental insurance. If a business has already applied for and received forgiveness for its first PPP loan, it cannot go back and amend the application to include these new expenses. However, if a business has not had its first PPP loan forgiven yet, it can go back and calculate money spent on these new permissible expenditures and include these on its forgiveness application for the first round of PPP loan.
In order to qualify for a second draw PPP loan, the business must have suffered an at least 25% drop in gross receipts for a quarter in 2020 than the same quarter in 2019. If the business wasn’t in business in 2019, then it must have suffered a 25% drop from the first quarter of 2020 as compared to one of the other three quarters of 2020.
Any amounts forgiven under the PPP will no longer be included in the business’s gross income. The new stimulus law also created a simplified certification process for forgiveness of loans no greater than $150,000.
EIDL Emergency Grants
A business no longer has to pay back / deduct from the PPP forgiveness amount money it received as part of the emergency grant of up to $10,000. If you’ll recall, the SBA limited the grants to $1,000 per employee, and the money ran out at some point. The new law provides additional funding for these grants, and there is no language in the law limiting the grant to $1,000 per employee (although the maximum amount is still $10,000). To qualify, the business must: be located in a low-income community; have suffered an economic loss greater than 30%; and employ not more than 300 employees. In addition, the business must qualify as an eligible entity as defined in the CARES Act. If a qualifying business has already received a partial grant, it can apply for the remaining balance of the $10,000.
Recipients will enjoy an additional three months of payments paid by the SBA, and some qualifying businesses may receive eight months. The maximum amount of payments is still $9,000 per borrower per month.
The refundable payroll tax credits for paid sick and family leave, enacted in the Families First Coronavirus Response Act, have been extended through the end of March 2021. The CARES Act rules dealing with retirement distributions have been extended through April 30, 2021.
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Kelly Rains Jesson