Summary of Changes from the Consolidated Appropriations Act 2021

On Monday, December 21, Congress released official text language for the massive, 5,593-page, Consolidated Appropriations Act, 2021 (CAA, 2021). The CAA, 2021 serves as a vehicle to provide pandemic relief as well as to fund government operations through the fiscal year.

The bill was quickly passed by both chambers and is expected to be signed into law by the President shortly.

The CAA, 2021 contains numerous provisions for business and individuals including a second direct payment to individual taxpayers which the bill refers to as “additional 2020 recovery rebates.” Some of the other provisions of the bill include, but are not limited to:

Paycheck Protection Program Changes (PPP)

    • Clarification of tax treatment of covered PPP loan forgiveness – COVIDTRA clarifies taxpayers whose PPP loans are forgiven are allowed deductions for otherwise deductible expenses paid with the proceeds of a PPP loan, and that the tax basis and other attributes of the borrower’s assets will not be reduced as a result of the loan forgiveness
    • Creates a second round of PPP loans for eligible business with the following requirements
      • No More than 300 employees
      • Have used the full amount of their first round of PPP funds
      • At least a 25 percent reduction in gross receipts comparing a 2020 quarter with the corresponding 2019 quarter
    • Reopens the original PPP by earmarking $35 billion for those who have not yet borrowed
    • For those borrowers who have not yet applied for forgiveness, now can spend proceeds on four new types of expenses
    • Creates new options for covered periods
    • Establishes simplified forgiveness procedures for borrowers with PPP loans of $150,000 or less
    • Repealing the provision that reduced PPP forgiveness by the amount of any EIDL advances
    • Allowing PPP loan recipients to claim the Employee Retention Credit
  • Amendments to CARES Act Economic Impact Payment rules
  • Temporary allowance of full business meals deductions in 2021 and 2022
  • Extending and expanding the CARES Act Employee Retention Credit and the FFCRA paid leave credits
  • Extending an additional $300 per week for individuals receiving unemployment benefits through March 14, 2021 (early April 2021 in some instances)

The CAA, 2021 also contains numerous tax extenders. These extenders include, but not limited to:

  • Reduction in Medical Expense Deduction Floor
  • Energy Efficient Commercial Buildings Deduction
  • Transition from Deduction for Qualified Tuition and Related Expenses to Increased Income Limitation on Lifetime Learning Credit
  • Extension and Phaseout of Energy Credit
  • Employer Credit for Paid Family and Medical Leave
  • Exclusion for Certain Employer Payments of Student Loans
  • Exclusion from Gross Income of Discharge of Qualified Principal Residence Indebtedness and Reduction in Maximum Indebtedness Limits
  • Treatment of Mortgage Insurance Premiums as Qualified Residence Interest
  • Employee Retention Tax Credit
  • Extension of certain deferred payroll taxes

To read the full text of the bill, click here.

Please feel free to contact your Thompson Greenspon tax advisor with any questions.

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