On Sunday, December 27th, the Coronavirus Response and Relief Supplemental Appropriations Act, 2021 was signed into law. Included in the Act are material changes to several programs and activities affecting those in healthcare including changes to aspects of the CARES Act Provider Relief Fund (PRF), the Payroll Protection Program (PPP), the 2021 Medicare Physician Fee Schedule, and out-of-network billing. This is the second in a series of articles that PYA will release breaking down the impact of the legislation on these key areas impacting our clients.
The most dramatic and long-anticipated provision in the CRRSAA was the restoration of deductibility of any expenses paid with PPP loan proceeds that are subsequently forgiven. The importance of this development cannot be overstated. For many taxpayers, adverse results were due to the expense addback, and the CRRSAA will remedy much of that. The CRRSAA states that (1) forgiveness of PPP funds is not included in the taxable income of the eligible recipient, and (2) no tax deduction will be denied by the exclusion of PPP funds from gross income.
In addition to this critical development, we have identified the following five key takeaways that deserve special attention:
- Continuing the Paycheck Protection Program and other Small Business Support.
The CRRSAA provides more than $284 billion to the U.S. Small Business Association (SBA) for first and second-round PPP forgivable small business loans. It also allocates $20 billion to provide Economic Injury Disaster Loan (EIDL) Grants to businesses in low-income communities. Shuttered live venues, independent movie theaters, and cultural institutions will have access to $15 billion in dedicated funding, while $12 billion will be set aside to help businesses in low-income and minority communities. The CRRSAA also expands the list of eligible expenses to include covered operations expenditures, covered property damage costs, covered supplier costs, and covered worker protection expenditures.
- Loan forgiveness simplification.
The CRRSAA provides a simplified loan forgiveness application process for eligible recipients of covered loans of up to $150,000. Eligible recipients will still be required to submit a certification to the lender which requires (1) a description of the number of employees the eligible recipient was able to retain because of the covered loan, (2) the estimated amount of the covered loan amount spent by the eligible recipient on payroll costs, and (3) the total loan value. This provision falls short of the automatic forgiveness that was being rumored, but the new process should be easier for most qualifying taxpayers. It is important to note that eligible recipients filing for forgiveness under the simplified process must still comply with documentation requirements and document retention periods.
- Additional 2020 Recovery Rebates.
The CRRSAA provides for $166 billion for economic impact payments of $600 for eligible individuals making up to $75,000 per year and $1,200 for married couples making up to $150,000 per year, as well as a $600 payment for each child dependent. It is important to note that these payments are advances on credits available to taxpayers on their 2020 tax filings, so if a taxpayer’s circumstances changed dramatically between 2019 and 2020, the amount of credit available to the taxpayer might also change.
- Expanded Unemployment Assistance.
The CRRSAA contains $120 billion to provide workers receiving unemployment benefits a $300 per week supplement from December 26 until March 14, 2021. This bill also extends the Pandemic Unemployment Assistance (PUA) program, with expanded coverage to the self-employed, gig workers, and others in nontraditional employment. It also expands coverage to the Pandemic Emergency Unemployment Compensation (PEUC) program, which provides additional weeks of federally funded unemployment benefits to individuals who exhaust their regular state benefits.
- Miscellaneous Provisions.
The CRRSAA provides an extension of payroll credits for paid sick and family leave and the employee retention credit. The CRRSAA also temporarily increased the allowable tax deduction for certain eligible business meals from 50% to 100%. Qualifying expenses are for food or beverages provided by a restaurant and incurred after December 31, 2020, and before the end of 2022.
We will continue to work through the nuances of this latest legislation, and any guidance that follows.
If you have questions about the PPP Loan modification or other tax aspects of the CRRSAA or would like guidance on other COVID-19 matters, visit PYA’s COVID-19 hub, or contact a PYA executive below at (800) 270-9629.