On December 27, 2020, President Trump signed the ‘‘Consolidated Appropriations Act, 2021,’’ funding government operations for another year and authorizing an additional $900 billion in emergency COVID-19 relief. The full language of the Consolidated Appropriations Act, 2021, can be found here.
Key provisions in the bill include:
The bill does not include funding relief for states and cities facing budget shortages; nor does it provide any liability shield for business protection from COVID-19-related lawsuits.
Additional information regarding the bill’s key benefits and programs is outlined below.
For employers with fewer than 500 employees, the bill also extends the EPSL and EFMLEA tax credits created by the FFCRA until March 31, 2021. These tax credits were previously set to expire on December 31, 2020.
Notably, the bill does not require employers to continue providing EPSL and EFMLEA benefits after December 31, 2020. The bill also does not create any additional paid benefits for employees who may have exhausted their 80 hours of EPSL or 12 weeks of EFMLEA leave under the FFCRA. Instead, the bill merely authorizes tax credits through March 31, 2021, which allows (but does not require) employers to extend FFCRA benefits to eligible employees to receive the corresponding tax benefit.
We expect that the U.S. Department of Labor will issue updated information addressing the impact of this bill on the FFCRA’s EPSL and EFMLEA benefits. Employers should review the DOL website for updated guidance on a regular basis. The DOL FAQ page on the FFCRA benefits can be found here.
California’s COVID-19 Supplemental Paid Sick Leave Law (CSPSL) and COVID-19 Food Sector Supplemental Paid Sick Leave Law (CFSSPSL), which mandate 80 hours of emergency paid sick leave for Californians employed by employers with 500 or more employees (and certain healthcare providers and first responders who exempted themselves from the FFCRA), was to be extended if the FFCRA’s benefits were extended. As the California paid sick leave benefits do not provide a corresponding tax credit, the federal extension of tax credits to March of 2021 does not appear to impact CSPSL or CFSSPSL. Employers should continue checking the DLSE website for updated information. The DLSE FAQ page for CSPSL can be found here. Employers also must review any applicable local city or county paid leave requirements.
The “Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act” portion of the bill authorizes approximately $284 billion in funding for the popular Paycheck Protection Program (PPP), which provides forgivable loans to business owners under the Small Business Administration (SBA) 7(a) loan program.
There are additional rules for businesses seeking a second PPP loan. Only companies with 300 or fewer employees are eligible, and the companies must be able to show a 25% gross revenue decline in any 2020 quarter compared with the same quarter in 2019.
The bill creates lending set-asides for very small businesses and has expanded PPP eligibility under certain conditions for 501(c)(6) non-profit corporations like chambers of commerce, travel bureaus, and destination marketing organizations. The PPP also expands eligibility for other non-profit organizations, such as churches, newspapers, broadcasters, and radio stations.
The bill also expands the existing list of covered expenses for which PPP funds may be used and forgiven to include:
“Covered worker protection expenditures” include costs for personal protective equipment for employees as well as property improvements such as drive-through windows, air ventilation systems, physical barriers such as sneeze guards, or an expansion of indoor, outdoor or combined business space.
As with previous rounds of PPP funding, borrower loan amounts will be based on a formula tied to payroll costs. The amount of loan forgiveness depends on whether the borrower can maintain its payroll during an eight-week period after loan origination, and full forgiveness requires that 60% of loan funds be used on payroll costs. The bill gives borrowers additional discretion in choosing the start and end dates of the loan’s eight-week covered period.
For borrowers with loans less than $150,000, the bill creates a simplified application process for loan forgiveness. The borrower need only submit a one-page certification sheet to the lender, attesting to the amount of the loan, the amount spent on payroll expenses and the number of employees retained due to the loan, and confirming that the borrower has maintained records establishing compliance with loan requirements.
The bill also specifically authorizes tax deduction of business expenses paid with forgiven (or forgivable) PPP funds, despite that the CARES Act also excluded forgiven PPP loan proceeds from taxable income. (This supersedes IRS guidance issued in April and November 2020 stating that business expenses paid with PPP funds should not be tax deductible.)
The Grants for Shuttered Venue Operators portion of the bill provides $15 billion in grants for live music and theater venues, museum operators, talent representatives, and other cultural institution operators shuttered due to pandemic safety requirements. The bill also provides $20 billion for the SBA’s Disaster Loan Program for grants to businesses in low-income communities, and $3.5 billion for continued SBA debt relief in low-income communities.
The legislation includes another round of tax rebates (stimulus payments) of $600 per person. The stimulus payments would provide $600 per adult and dependent child, meaning a family of four could receive $2,400, up to a certain income level.
Eligibility for stimulus payments remains based on adjusted gross income, but eligibility phases out more quickly for higher-earning taxpayers than it did in the last round of stimulus payments. Single taxpayers whose adjusted annual gross income is $75,000 or less will receive the full $600 benefit. Taxpayers with adjusted gross incomes above $75,000 will receive smaller amounts, with no payment to anyone earning $87,000 or above.
Individuals filing jointly with adjusted annual gross income of $150,000 or less will receive the full $1,200 benefit. Joint filers with adjusted gross incomes above $150,000 will receive smaller amounts, with no payment to any couple making $174,000 or above.
Like the prior round of stimulus payments, experts believe that taxpayers who utilize direct deposit for IRS refund payments will receive their payments first, perhaps as soon as the week of January 4, 2021. Experts estimate that taxpayers receiving paper checks will receive their payments during the weeks of January 11, 2021, or January 18, 2021.
The “Continued Assistance for Unemployed Workers Act of 2020” portion of the bill authorizes additional federal unemployment insurance benefits of $300 per week through March 14, 2021. These expanded benefits are in addition to any state unemployment benefits received by eligible workers and will be administered by the states’ unemployment insurance departments.
The bill increases the maximum number of weeks an individual may claim benefits through regular state unemployment plus the federal unemployment program from 39 weeks (authorized in the CARES Act) to 50 weeks. The bill also leaves intact unemployment compensation to workers who are not normally eligible for benefits, including:
The bill also amends the CARES Act to address circumstances in which a claimant refuses to return to work or accept an offer of suitable work without good cause. The bill requires state unemployment offices to institute mechanisms for employers to report workers who refuse suitable work without good cause, as well as to provide information and appeals rights for claimants who are denied benefits for this reason.
The bill also provides an extra benefit of $100 per week in “Mixed Earner Unemployment Compensation” for workers who previously earned both wage and self-employment income of at least $5,000 per year, but whose base unemployment benefit calculation did not take the worker’s self-employment wages into account.
The bill provides $25 billion in emergency assistance to renters, to be distributed by state and local governments. The funds are targeted to families impacted by COVID-19 that are struggling to pay rent, and can be used to pay past due rent, future rent payments, as well as to pay utility and energy bills and to prevent shut-offs. The bill also extends the federal rent moratorium previously set to expire on December 31, 2020) for another month to January 31, 2021.
Additional business tax provisions designed to provide relief to eligible employers include the establishment of a tax deduction for business meal expenses, dubbed the “three martini lunch” exemption. Also included is an extension and expansion of the refundable Employee Retention Tax Credit (ERTC) established in the CARES Act, allowing tax credits of up to $14,000 per employee for qualified wages or health plan expenses paid during a COVID-19 related shut-down or business disruption due to a government mandate, or by employers showing a significant decline in gross receipts.
For questions regarding COVID-19 regulations or other employment law issues, contact the employment attorneys at LightGabler.