After months of political bickering, Congress has reached an agreement on an emergency coronavirus relief bill and the President has said he would sign it. Although not all the details are fully available yet, the following provides a good overview of the provisions affecting individual taxpayers and small businesses.
Stimulus Payments – Another round is included, but only $600 will be sent to each eligible adult this time, down from the $1,200 per adult authorized by the CARES Act in March. However, this time it also includes $600 per dependent child. Also eligible this time are so-called “mixed-status” households, for example where one of the spouses is a noncitizen, which were previously excluded from getting payments.
Maximum Payment Amounts:
- Each eligible adult: $600
- Married couple (both eligible) filing jointly: $1,200
- Each dependent child under age 17: $600
Payment Phase-out – The payment is phased out when the taxpayer’s AGI exceeds…
|CREDIT PHASE OUT THRESHOLD|
|Unmarried Taxpayers (as well as Married Filing Separately)||$75,000|
|Head of Household||$112,500|
|Married Taxpayers Filing Joint||$150,000|
At the time this article was published there was no specific date for these payments to be made, but since everyone agrees the need is urgent and the IRS has done this once before, it should be sometime in January. Treasury Secretary Mnuchin has indicated some direct deposit payments may be made as early as in the last week of December.
Unemployment Assistance – All Federal supplemental unemployment insurance benefits, which had already expired or would end on December 31, will be extended through March 14, 2021. However, the supplemental amount will only be $300 per week instead of the $600 that the CARES Act authorized.
Rental Assistance – The legislation establishes the $25 billion first-ever emergency federal rental assistance program to be distributed by state and local governments. These funds will be targeted to families impacted by COVID that are struggling to make the rent and may have past due rent compounding on itself. These families will be able to utilize this assistance for past due rent, future rent payments, as well as to pay utility and energy bills and prevent shutoffs. Each state will need to establish their own system for distributing the funds. Of the $25 billion, $800 million is reserved for Native American housing entities.
CDC Eviction Moratorium – The legislation also includes an extension of the existing CDC eviction moratorium through January 31, 2021.
Paycheck Protection Program (PPP) Loans & Small Business Support – The legislation includes $284 billion for first and second forgivable PPP loans. Unlike the prior loan program, this round will truly be limited to small businesses that incurred a loss of revenue. Eligibility is expected to be limited to:
- Businesses with 300 or fewer employees that have sustained a 25% revenue loss in any quarter of 2020 as compared with the same period in 2019.
- Small 501(c)(6) organizations that are not lobbying organizations and that have 150 employees or fewer, such as local chambers of commerce, economic development organizations, and tourism offices.
Forgivable Expenses – will be expanded to include:
- supplier costs,
- investments in facility modifications, and
- personal protective equipment needed to operate safely.
In a rebuttal to the IRS’s interpretation of the original PPP legislation, the business expenses paid for with the proceeds of forgiven PPP loans will be tax deductible, consistent with Congressional intent in the CARES Act.
The loan forgiveness process is simplified for borrowers with PPP loans of $150,000 or less.
Set-Asides – $41 billion is set aside to ensure that smaller borrowers and underserved communities get the help they need, such as:
- Small businesses with 10 or fewer employees,
- Small community lenders,
- Independent live venue operators, including eligible independent movie theaters and museums, affected by COVID-19 stay-at-home orders.
Earned Income Tax Credit & Child Tax Credit – These credits are, to some extent, based upon income and earned income (income from working). Because families may have had reduced income during 2020 that would adversely affect the amount of these credits, the legislation allows the 2019 incomes to be used to compute the credits for 2020.
OTHER ISSUES THAT DO NOT DIRECTLY IMPACT TAX RETURNS
School Funding – $82 billion of funding for states, K-12 schools, and institutions of higher education that have all been significantly impacted by the coronavirus pandemic. This is similar to the CARES Act emergency education relief funds.
Child Care – $10 billion in emergency funds for the child care sector through the Child Care and Development Block Grant funding program. These funds maintain the flexibility given to states through the CARES Act and can be used to provide child care assistance to families, and to help child care providers cover their increased operating costs during the pandemic. This emergency relief will help stabilize the child care market and allows states to expand child care assistance to essential workers and working families who are in great need of child care services. The bill also includes $250 million for Head Start providers to ensure they are able to continue to safely serve low-income children and families throughout the pandemic. This program is administered by the individual states.
Transportation: Provides funding for transit agencies, airlines and airline contractors, airports, state DOTs, the motorcoach industry, and Amtrak to keep the U.S. transpiration system functioning. Specifically: $15 billion for airline payroll support, $1 billion for airline contractor payrolls, $14 billion for transit, $10 billion for state highways, $2 billion for airports and airport concessionaires, $2 billion for the private motorcoach, school bus, and ferry industries, and $1 billion for Amtrak.
If you have any questions related to these issues, please give this office a call.