The Consolidated Appropriations Act, 2021 was passed and signed into law on December 21, 2020. The legislation provides $325 billion in aid for small business struggling due to pandemic induced economic hardships. The bill provides more than $284 billion to the US Small Business Administration (SBA) https://www.sba.gov/ for first and second PPP forgivable small business loans and allocates $20 billion to provide Economic Injury Disaster Loan (EIDL) grants to businesses in low-income communities. In addition, shuttered live venues, independent movie theaters, and cultural institutions will have access to $15 billion in dedicated funding while $12 billion will be set aside to help business in low-income and minority communities.
The bill also extends the employee retention tax credit and several expiring tax provisions and temporarily allows a 100% business expense deduction for meals (rather than the current 50%) as long as the expense is for food or beverages provided by a restaurant. This provision is effective for expenses incurred after December 31, 2020, and expires at the end of 2022.
Important PPP Provisions in the Consolidated Appropriations Act, 2021:
- No PPP loan forgiven amount is included in gross income as debt forgiveness.
- No deduction is disallowed, no tax attribute reduced and no basis increased denied for the forgiven amounts. The amounts will be treated (for flow-through entities) as if there were municipal bond income and thus increase basis.
- The above rules apply to PPP loans from before the new act and to new PPP loans after the act, without regard to the date forgiven.
- There are no dollar limits – these rules apply to all loans
- The new law states that EIDL advances will not reduce the maximum amount of PPP loan forgiveness.
- Non-payroll costs are expanded to include other things such as computer costs, some inventory human resources and protective equipment.
- The law directs the SBA, within 24 days from December 27, 2020 to design a 1-page form for PPP loan forgiveness when the loan amount is less than $150,000. The new rules apply to pre-existing loans (even if forgiven) and new loans. The 1-page forgiveness application requires:
- A description of number of employees able to retain because of the loan
- The estimated amount of the loan spent on payroll costs
- The total loan amount.
- Attestation by the applicant to the accuracy and compliance
- The lender may not require additional documentation
To summarize, loans under $150,000 are not taxable, there is no requirement to reduce expenses and it appears that they are fully forgivable.
McCoy Accounting Advisors is here to help you navigate through the process. Keep in mind that we offer professional payroll services. It has been determined companies utilizing a professional payroll service are having an easier time with the forgiveness process. Contact us today to schedule a complimentary consultation.
Our preferred payroll partner is The Payroll Company: