Back in April 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Now, after months of debate, the second COVID-19 economic aid package, called the Consolidated Appropriations Act, 2021, is here. President Trump has not signed the new legislation into law just yet. But a broad outline of the new legislation is below:
Is the FFCRA still alive? Yes and no.
- The new legislation does not extend the paid sick leave and expanded (paid) FMLA requirements of the FFCRA, but it does provide an extension of the tax credit for Q1 of 2021 (through March 31, 2021) for FFCRA paid sick leave and expanded FMLA leave.
- This means FFCRA leave is no longer required in 2021, but if eligible employers (fewer than 500 employees) voluntarily provide these leave benefits during Q1 2021, you are eligible to take the dollar-for-dollar payroll tax credit for the leave.
- For employers who want to continue to provide this paid leave in 2021 and take advantage of the payroll tax credits, the same daily monetary limits and employee eligibility requirements (which we blogged about here and here) will continue to apply as if the entire FFCRA was extended through March 31, 2021.
- The takeaway: You don't have to provide FFCRA paid leave in 2021, but you may want to through the end of Q1. It's a "free" way for FFCRA employers to provide paid leave to employees suffering during the ongoing pandemic.
More unemployment benefits.
- The new legislation extends the CARES Act unemployment programs from December 2020 to March 2021 (11 weeks).
- This renews the Federal Pandemic Unemployment Compensation (FPUC) supplement to enhance state unemployment payments by $300 per week, rather than the previous $600/week.
The Paycheck Protection Program "round two."
- The new legislation includes a second round of PPP loans for certain eligible borrowers.
- These second draw PPP loans are limited to $2 million and target hard-hit businesses with 300 or fewer employees that have used or will use the full amount of the first PPP loan. Borrowers must show a 25% decline in revenue in the first, second, or third quarter in 2020.
- The new legislation also adds additional categories for nonpayroll costs eligible for use of the PPP loan proceeds, including operations expenses and worker protection equipment (subject to the overall limitation that 60 percent be used for payroll costs).
- Importantly, the new legislation makes expenses paid with PPP loans 100 percent deductible. This applies to all PPP loans, even if the loans were already forgiven prior to this new legislation. Please speak with your accountant regarding whether the deduction may apply to your business.
The Employee Retention Tax Credit is extended and expanded.
- The new legislation extends the CARES Act tax credit that encouraged businesses to keep employees on their payroll. Eligible businesses may now take advantage of the tax credit through July 1, 2021.
- The new legislation also expands this tax credit from a 50% refundable tax credit to 70%. And the $10,000 eligible wage limit per employee will be a quarterly limit (previously, this was an annual limit).
- Also, employers who receive PPP loans may still qualify for the tax credit with respect to wages that are not paid for with forgiven PPP proceeds. This provision is effective retroactively to the enactment date of the CARES Act.
The new legislation is complicated, and the tax issues are tricky. Counsel and tax advisers should be consulted regarding the details. If you still have questions about how the Consolidated Appropriations Act affects your business, we are here to help!
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