House Passes COVID-19 Relief Package
On December 20, 2020, after months of negotiations, Senate Majority Leader Mitch McConnell (R-KY) announced that the Senate had reached an agreement on a new $900 billion COVID-19 (coronavirus) relief package.
This relief package will be paired with an omnibus appropriations bill which will fund the government through September 30, 2021 and will provide relief to small businesses and individuals.
The negotiated bill includes a new appropriation of $248 billion to replenish the Paycheck Protection Program (PPP), makes permanent or extends several expiring tax provisions, authorizes a new round of $600 checks to many individuals as well as an extra $300 per week for individuals receiving unemployment. Furthermore, this bill appropriates additional money for the purchase and distribution of the coronavirus vaccine and additional money to provide the vaccines to individuals at no cost. The coronavirus relief package, however, does not include additional revenue for state and local governments, or liability protection for businesses, schools, healthcare providers, and non-profit organizations.
The bill extends and expands the PPP by allowing for a “second draw” for small businesses and non-profits with 300 or fewer employees that can demonstrate a loss of 25% of gross receipts in any quarter during 2020 when compared to the same quarter in 2019 totaling 2.5 times the average monthly payroll up to $2 million. Additionally, Congress chose to reverse IRS Notice 2020-32 and Revenue Ruling 2020-27, which required businesses that received a forgivable PPP loan to include the loan as taxable. This legislation allows recipients of PPP loans to deduct normal business expenses paid for with PPP loans from their taxes. TRALA has lobbied Congress and signed onto multiple letters this year to Secretary of the Treasury Steven Mnuchin encouraging him to allow PPP loan recipients to deduct business expenses paid for with PPP funds and to not make PPP loans taxable. The Secretary had opposed these provisions because he deemed them to be “double dipping.” Unfortunately, the coronavirus relief package did not extend the increased deductibility of interest at 50% of Earnings Before Interest Taxes Depreciation and Amortization (EBITDA) which was increased from 30% in the CARES Act earlier this year. Of important note is that the interest deductibility provision is set to revert to 30% of EBIT on January 1, 2022 unless Congress passes a law amending the provision. TRALA will be focused on educating both Congress and the new Biden Administration why maintaining interest deductibility of EBITDA and not EBIT is so critical throughout the next several months.
The House passed the bill this evening and the Senate is expected to pass the new relief package later tonight. After passing out of both chambers, the bill will be sent to President Donald Trump where he is expected to immediately sign the bill into law. The passage of this bill grants immediate relief to small businesses, individuals, and health care providers while also clearing the deck of several must pass pieces of legislation before the end of the year. TRALA is certain that another round of coronavirus legislation will likely be needed once the new President and Congress are sworn in. Additionally, the size and scope of that bill will be determined by the two special elections in Georgia, which will determine control of the United States Senate. If Republicans are able to hold the Senate, there will be a smaller more targeted bill, but if the Democrats win, the next coronavirus package will likely include several trillion dollars and an extensive list of policy riders.
You may view the entire bill just signed into law by clicking here.
You may view a section-by-section summary of the tax title by clicking here.
If you have any questions or concerns about the coronavirus relief package or the omnibus appropriations act, please contact Andrew Stasiowski at firstname.lastname@example.org or Jake Jacoby at email@example.com.