Here is information we received today from the National Association of Manufacturers (NAM) summarizing the key points of the recent COVID relief bill. While the summaries are written from a manufacturing perspective, most of the provisions apply to all types of businesses. Thanks to the NAM for providing this summary.
Paycheck Protection Program
PPP reauthorized with $284 billion in new funding; program extended through March 31, 2021.
Deductibility of business expenses paid with PPP funds.
Reverses IRS guidance denying deductions for trade and business expenses (e.g. payroll) associated with forgiven PPP loans, which under the CARES Act are not considered as taxable income.
Businesses are granted flexibility to choose a “covered period” of any duration between 8 and 24 weeks to spend their loan funds.
New categories of expenses are added to the list of allowable uses of PPP funds, including worker protection (e.g., PPE), operational expenses, and supplier costs.
PPP second draw loans of up to $2 million for businesses experiencing severe revenue reductions.
Second draw eligibility is limited to PPP borrowers with fewer than 300 employees that experienced a quarterly revenue loss of more than 25% in 2020 as compared to the same quarter in 2019.
Simplified loan forgiveness application for loans of less than $150,000.
PPP eligibility for 501(c)(6) trade associations
501(c)(6) organizations and destination marketing organizations will be eligible for the PPP if they:
Have 300 or fewer employees, and
Meet the bill’s restrictions on lobbying activities:
Receive less than 15% of receipts from lobbying,
Have lobbying comprise less than 15% of their total activities, and
Spent less than $1 million on lobbying in their most recent tax year.
Professional sports leagues and organizations with the purpose of promoting or participating in a political campaign or other political activities are excluded from PPP eligibility.
PPP loan proceeds cannot be used to pay for lobbying activity (which would limit otherwise-allowable payroll expenses from being covered by the PPP to the extent they are used to compensate employees for engaging in lobbying).
Extension and Expansion of CARES Act’s Employee Retention Tax Credit
Extends and expands the CARES Act refundable payroll tax credit for “eligible employers” affected by COVID-19 through June 30, 2021.
The credit percentage is increased from 50% to 70%;
The amount of qualifying wages per employee is increased from $10,000 for the year to $10,000 per quarter;
The gross receipts test is changed from a 50% quarterly decline when compared to the prior year quarter to a 20% decline;
The full-time employee threshold is increased from 100 to 500;
Employers can claim the credit and participate in the Paycheck Protection Program but with restrictions to prevent double dipping;
Codifies IRS guidance whereby health plan expenses can be counted as qualified wages when employers pay no other wages (e.g. furloughed workers who continue to get healthcare); and
New employers are eligible for the credit.
Tax Extenders
The bill extends or makes permanent a number of expiring tax provisions. Of note for NAM members:
Permanent extension of excise tax relief for beer, wine and spirits.
Five-year extension of “CFC Look-Through”.
Allows American companies to redeploy capital from active foreign business operations among their foreign subsidiaries, without incurring additional tax costs. Extension ensures that manufacturers with global operations can compete on a level playing field.
Five-year extension of the Work Opportunity Tax Credit.
Extended Repayment Period for Payroll Tax Deferral
Workers who have deferred their share of the payroll tax (pursuant to the August executive order), will now have until December 2021 to pay back the tax – rather than the original April 2021 deadline. Interest and penalties will begin to accrue starting on January 1, 2022.
Energy Innovation:
The Energy Act features 37 major consensus provisions from the Senate’s American Energy Innovation Act (S. 2657) and the House’s Clean Economy Innovation and Jobs Act (H.R. 4447). It stands to become the first comprehensive modernization of our nation’s energy policies in 13 years. This bipartisan package will foster innovation across the board on a range of technologies that are critical to our energy and national security, our long-term economic competitiveness, and the protection of our environment.
The major package focuses on energy storage; advanced nuclear; carbon capture, utilization and storage; carbon removal; renewable energy; critical minerals and materials; fusion; industrial technologies; smart manufacturing; and grid modernization, among other areas. It reauthorizes popular, proven-effective programs like ARPA-E and Weatherization Assistance.
Climate Solutions:
The bill includes a breakthrough deal to phase down HFCs—potent GHGs commonly used in refrigeration systems, while preserving exclusions for essential uses without economic replacements. Joining the global effort to phase down HFCs means a full-half a degree in avoided warming and empowering American Manufacturers to lead on the global effort to tackle climate change.
The bill funds major new R&D programs to drive the breakthrough technologies of tomorrow. New programs included make a pragmatic down-payment on the technologies to reduce greenhouse gas emissions in the power sector, industry, and buildings—addressing climate change in a real way and on a scale never done before—while keeping American energy affordable and globally competitive.
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