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Key Provisions of the New Tax Relief Package

After numerous rounds of intense negotiations, on December 21, Congress unanimously approved more than $900 billion in relief funds for households and businesses, along with $1.4 trillion in extension for governmental operational support. The President signed the bill on December 27, 2020.

Below, we have highlighted the most significant provisions and extenders included in this emergency relief measure:

Most Significant Provisions Include:

  • Businesses with Paycheck Protection Program (PPP) loans are now allowed to deduct expenses paid with PPP funds.
  • Second funding of PPP is available to hardest-hit small businesses and nonprofit entities with an expanded list of forgivable expenses such as personal protective equipment and the cost of structural modifications for workplace safety.
  • Simplified PPP loan forgiveness procedures for PPP loans of $150,000 or less.
  • The qualified expenses that can be used for PPP loan forgiveness are also expanded to include software, cloud computing, human resource and accounting expenses, expenditures for worker protection such as masks and other personal protection equipment, etc. In addition, disability insurance and group term life insurance costs can also be included in the forgiveness calculation. The forgiveness amount is no longer required to be reduced by Economic Injury Disaster Loan (“EIDL”) advances.
  • The expanded employee retention credit program is extended through June 30, 2021.
  • Businesses with PPP loans are now eligible to claim employee retention credits under the Coronavirus Aid, Relief, and Economic Security (CARES) Act with respect to wages that are not paid for with forgiven PPP proceeds.
  • Businesses can deduct 100% of business meals “provided by a restaurant” in 2021 and 2022.
  • The Paid Family Leave and Sick Pay Credits are extended through March 31, 2021, and are available without the leave requirements.
  • Individual taxpayers who do not itemize in 2021 can claim a $600 charitable contribution deduction above-the-line (increased from $300 in 2020).
  • The increased taxable income limitation on corporate charitable deductions from 10% to 25% and contributions of food inventory from 15% to 25% are extended to 2021.
  • Additional direct payments to individual taxpayers and qualifying children at $600 per person. The payment would start phasing out at $75,000 of modified adjusted gross income for single taxpayers, $112,500 for head-of-household filers, and $150,000 for joint filers at a rate of $5 per $100 of income.
  • Additional flexibility for taxpayers to roll over unused amounts in their health and dependent care flexible spending arrangement.
  • $300 weekly federal unemployment insurance payments on top of state-level benefits for four months, through March 14, 2021.

Important Extenders:

  • Alternative fuel credits
  • Home and residential energy credits
  • The work opportunity tax credit (WOTC)
  • The new markets tax credit
  • Employer tax credit for paid family and medical leave
  • The look-through rule for related controlled foreign corporations
  • Seven-year cost recovery for motor-sports entertainment complexes

Individual Tax Provisions

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General Business Tax Provisions

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