Business Highlights of COVID RELATED TAX RELIEF ACT OF 2020 (As passed by Congress with Veto Proof Majority)
[H.R. 133 Excerpt Summary]
Clarification of Tax Treatment of Paycheck Protection Program Loans. The provision clarifies that gross income does not include any amount that would otherwise arise from the forgiveness of a Paycheck Protection Program (PPP) loan and expenses will be deductible. Provision coordinated for tax basis effects of partners and S corporation shareholders.
Clarification of Tax Treatment of Certain Loan Forgiveness and Other Business Financial Assistance Under the Coronavirus Relief Legislation. The provision clarifies that gross income does not include forgiveness of certain loans, emergency EIDL grants, and certain loan repayment assistance, each as provided by the CARES Act. Like PPP funded deductions, they become deductible.
Simplified Forgiveness Applications for Covered Loans up to $150,000. One page certification (new form expected by January 14, 2021).
Paycheck Protection Program Second Draw Loans. If the business' gross receipts have declined by at least 25% in any quarter in 2020 compared with that same quarter in 2019, and the business employs less than 300 people, the business could be eligible for additional PPP funds. The maximum loan equals 2 1/2 months' worth of the average payroll for the last 12 months.
Repeal of EIDL Advance Deduction. EIDL grants are no longer a reduction of the amount of your PPP loan forgiveness. In effect, the EIDL amount does not need to be repaid.
Employee Retention Tax Credit Modifications. The provision extends and significantly expands the CARES Act employee retention tax credit (ERTC). It also contains technical corrections to the CARES Act. It includes that employers who receive Paycheck Protection Program (PPP) loans may still qualify for the ERTC with respect to wages that are not paid for with forgiven PPP proceeds.
Extension of credits for paid sick and family leave. The provision extends the refundable payroll tax credits for paid sick and family leave, enacted in the Families First Coronavirus Response Act, through the end of March 2021.
Energy Efficient Commercial Buildings Deduction. The provision makes permanent the deduction for energy efficiency improvements to building envelope, lighting, heating, cooling, ventilation, and hot water systems of commercial buildings. The provision updates the ASHRAE Reference Standard 90.1. The provision additionally indexes to inflation the amount of the $1.80-per-square-foot limitation. Rate indexed for inflation. In addition the Energy efficient homes credit provision extends, through 2021, the credit of up to $2,000 for qualified new energy efficient homes.
Depreciation of Certain Residential Rental Property Over 30-Year Period. The provision provides that the recovery period applicable to residential rental property placed in service before January 1, 2018, and held by an electing real property trade or business (as defined in section 163(j)(7)(B)) is 30 years. This provision applies only if the alternative depreciation system did not apply with respect to such property prior to January 1, 2018.
Temporary Allowance of Full Deduction for Business Meals. The provision provides a 100 percent deduction for business meals, food and beverage expenses, including any carry-out or delivery meals, provided by a restaurant that are paid or incurred in 2021 and 2022. Currently, the deduction is available for only 50 percent of such expenses.
Certain Provisions Related to Beer, Wine, and Distilled Spirits. The provision makes permanent the reduction of certain excise taxes and simplified record-keeping requirements related to the taxation of beer, wine, and distilled spirits. The provision also modifies certain requirements for in-bond transfers of bottled distilled spirits.
Employer Tax Credit for Paid Family and Medical Leave. The provision extends, through 2025, the employer credit for paid family and medical leave, which permits eligible employers to claim an elective general business credit based on eligible wages paid to qualifying employees with respect to family and medical leave. The credit is equal to 12.5 percent of eligible wages if the rate of payment is 50 percent of such wages, and is increased by 0.25 percentage points (but not above 25 percent) for each percentage point that the rate of payment exceeds 50 percent. The maximum amount of family and medical leave that may be taken into account with respect to any qualifying employee is 12 weeks per taxable year.
New Markets Tax Credit. The provision extends annual $5 billion allocations of the New Markets Tax Credit for years 2021 through 2025. The provision also extends through 2030 the carryover period for unused New Markets Tax Credits.
Empowerment Zone Tax Incentives. The provision extends, through 2025, tax benefits for certain businesses and employers operating in empowerment zones.
Extension and Phase-out of Energy Credit. The provision extends the current 26 percent investment tax credit for solar energy property, fiber-optic solar equipment, fuel cell property, and small wind energy property that begin construction by the end of 2022, and at a 22 percent rate for property that begin construction by the end of 2023, after which the credit is reduced to 10 or zero percent. The provision extends the 10 percent investment credit for microturbine property, geothermal heat pumps, and combined heat and power property that begins construction through 2023.
Extension of Energy Credit for Offshore Wind Facilities. The provision extends the investment tax credit for electing offshore wind facilities that begin construction through 2025. Additionally, offshore wind facilities that begin construction during 2017 to 2025 are not subject to the onshore-wind facilities phase-out rates and are eligible for the full credit amount.
Employee Retention Credit for Employers Affected by Qualified Disasters (Other Than COVID -19. The provision provides a tax credit for 40 percent of wages (up to $6,000 per employee) paid by a disaster-affected employer to a qualified employee. The credit applies to wages paid without regard to whether services associated with those wages were performed. Certain tax-exempt entities are provided the option to claim the credit against payroll taxes. Other disaster related tax relief provisions include: temporarily suspends limitations on the deduction for charitable contributions associated with qualified disaster relief; With respect to uncompensated losses arising in the disaster area, the provision eliminates the current law requirements that personal casualty losses must exceed 10 percent of adjusted gross income to qualify for deduction.
Source - Committee of Finance and HR 133
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