After months of political posturing, the U.S. Senate and House of Representatives finally passed a $900 billion COVID-19 relief bill (The Consolidated Appropriations Act, 2021) providing $300 billion in aid for small businesses. NADA has provided a preliminary analysis of the bill focused on items of most interest to dealers. Among other things, the new legislation:
- Clarifies full deductibility of expenses paid using proceeds from a forgiven Paycheck Protection Program (PPP) loan. Forgiven PPP loans are not included in taxable income and deductions are allowed for expenses paid using the proceeds of a forgiven PPP loan, which supersedes previous IRS guidance.
- Creates a second round of PPP loans, with some key changes including:
o Reducing the maximum loan amount from $10 million to $2 million;
o Lowering the maximum per applicant employee limit from 500 to 300; and
o Imposing a new requirement to demonstrate at least a 25% reduction in gross receipts in the first, second or third quarter of 2020 compared to the corresponding quarter in 2019.
Applicants must make a NEW certification that the loan is necessary to support operations, based on economic circumstances and market conditions that exist at the time they apply for the new loan.
- Extends and expands the Employee Retention Tax Credit (ERTC) to PPP loan recipients. The ERTC is extended through June 30, 2021 and is expanded as follows:
o Increases the credit rate from 50% to 70%;
o Raises per-employee creditable wages limit from $10,000/YEAR to $10,000/QUARTER;
o Reduces the year-over-year decline in gross receipts from 50% to 20%;
o Retroactively provides that employers who received PPP loans may still qualify for the ERTC for wages not paid with forgiven PPP loan proceeds.
- Extends paid leave credits in the Families First Coronavirus Response Act (FFCRA).
The bill extends the refundable payroll tax credits for paid sick and family leave enacted in FFCRA through March 31, 2021. It also coordinates the definitions of qualified wages within the paid sick leave, paid family and medical leave, and the exclusion of such leave from employer OASDI tax. The new law does NOT extend the entitlement of employees to obtain paid sick and family leave beyond December 31, 2020, but appears to empower employers to extend such benefits voluntarily.
- Temporarily provides 100% deduction for business meals. The bill the allowable deduction for business meal food and beverages provided by a restaurant in 2021 and 2022 from 50 to 100%.
- Permanently extends energy efficient commercial buildings deduction. The bill increases the deduction for buildings that exceed industry standards for energy efficiency in the year placed in service, updates efficiency standards and indexes the deduction for inflation.
- Extends certain credits related to alternative fuels. The bill extends, until December 31, 2021, the fuel cell motor vehicle credit and the alternative vehicle refueling property credit.
Dealers should consult their lawyers and accountants to evaluate how the new stimulus bill may impact their specific business planning options.