The $900 billion COVID relief law contains several new key provisions that are helpful for custom integrators and their employees, including tax relief and a second opportunity for a Paycheck Protection Program (PPP) loan.
First the loan opportunity. Smaller and harder-hit businesses that have taken out a PPP loan will have a chance to apply for a second PPP loan with a maximum amount of $2 million. The new law put together by Congress and signed by President Trump on December 27 also provides a streamlined, simplified forgiveness process for PPP loans.
PPP borrowers who receive $150,000 or less in PPP loan money may submit a one-page forgiveness form online certifying their compliance with the program requirements; loans of $150,000 to $2 million are not required to submit supporting document showing their expenses when applying for forgiveness (but should retain those records for up to four years), according to a detailed analysis from the National Association of Home Builders (NAHB).
For the tax relief options, integrators should consult with their tax advisor, but there are several possible tax credit opportunities available.
In the initial CARES Act, dealers that took out PPP loan were not eligible to declare tax deductions on any business expenses paid using a forgiven PPP loan. In this new law, Congress is allowing businesses to receive two tax benefits on forgiven PPP loans. First, the forgiven debt is not treated as taxable income. Second, the business expenses paid for with the forgiven debt may be deducted if allowed.
Another provision of the new law expands the Employee Retention Tax Credit (ERTC), which was part of the original CARES Act. Businesses that received PPP loans can now also claim the ERTC tax credit for wages they paid to employees from money that did not come from a PPP loan.
COVID Relief Law’s ‘Tax Extenders’ Provisions
The new COVID relief law also extended several so-called “tax extenders” that were due to expire at the end of 2020. Among them are:
- The Section 25C tax credit of up to $500 for energy-efficiency improvements for certain products, such as smart thermostats
- The Mortgage Forgiveness Tax Relief that now eliminates any taxes homeowners might face because of renegotiating the terms of their home loan that resulted in forgiveness or cancellation of a portion of the outstanding loan balance.
- The Section 25D Tax Credit for Power Production Property that allows a tax credit for the installation of alternative energy equipment.
- Family & Medical Leave Tax Credits are now extended to March 31, 2021. So any employers offering COVID-related medical and sick leave can take a tax credit for that paid leave.
The COVID relief law also includes other important provisions that:
- Extend all pandemic unemployment benefits expiring at the end of December through March 14, 2021.
- Extend weekly enhanced federal unemployment payments (paid out on top of regular UI benefits) of $300 per week through March 14, 2021.
- Provide a direct payment of $600 to most Americans.