PPP Loan Expenses Deductible At Last

Late yesterday, both houses of Congress passed The Consolidated Appropriations Act, 2021 to fund the federal government through the end of its September fiscal year.

Included in the 5,593 pages of that funding legislation was the COVID-related Tax Relief Act of 2020, a new round of COVID-19 provisions aimed at helping certain industries, individuals, and small businesses.

The final text of the legislation—which was released just before 2:00 p.m. on Monday—includes the following major provisions:

Benefits for Individuals:

• New direct cash payments of $600 each to most adult Americans and for their qualifying children. The payments will go to those with adjusted gross incomes of $75,000 or less ($150,000 or less for joint filers)
• State unemployment benefits will be eligible for a Federal enhancement of $300 per week through mid-March.
• The qualifications for receiving both the earned income credit and the child tax credit will be eased, allowing the option of reliance on 2019 income if 2020 income would provide a smaller benefit.

Benefits for Business Owners

• A new round of Payroll Protection Program (PPP) funding totaling $284 billion.
• The long-awaited passage of a “fix” to earlier PPP legislation which clarifies that expenses paid with forgiven PPP loans are fully deductible, greatly enhancing the impact.
• Many business tax credits scheduled to expire at the end of the year will be extended or made permanent including the employee retention credit.
• A 100% business expense deduction will be allowed for restaurant-provided business meals incurred in 2021 and 2022, replacing the current 50% deduction limit.

President Trump is expected to sign the two bills that comprise the Act before the Friday night expiration of the current appropriations stop-gap bill.

If you have any questions about the information above, please contact your E. Cohen advisor.