Gavel to Gavel: Employer Tax Considerations Under the Relief Bill
A second round of COVID-19 relief includes many tax benefits for employers. First, while the bill did not extend the mandatory leave available through the Families First Coronavirus Response Act (which expired on December 31, 2020), the bill allows covered employers to voluntarily continue to provide this leave while claiming the FFCRA tax credit via March 31, 2021.
In addition, the legislation includes the following:
• Expenses paid with canceled Paycheck Protection Program loans are now fully deductible under regular tax rules, despite IRS guidelines to the contrary. Similar treatment is provided for other available debt relief.
• Several favorable changes to PPP lending rules that affect existing and new loans, including a simplified discount for loans under $ 150,000, additional eligible expenses for loan utilization and the ability to choose a period covered by the remission of eight to 24 weeks.
• Reopening of the PPP Loan Program (“PPP1”) for those who did not participate in or repay unused loans, with a smaller maximum loan available and the addition of organizations from section 501 (c) (6) of IRC and “destination marketing organizations” as eligible borrowers.
• Creation of a second cycle of PPP loans (“PPP2”) for those who have used or will fully use the PPP1 loan and who qualify according to the new eligibility rules. Eligible borrowers in the hospitality sector can borrow more than those in other sectors, but subject to the same maximum loan amount.
• Extension and extension of employee retention tax credits for certain wages paid, which mostly retroactively repeals the previous rule prohibiting employers who have taken out PPP loans from claiming these tax credits, meaning they should now be available to more employers in 2020 and the first half of 2021.
• Creation of a new SBA grant program for closed site operators.
• Creation of special rules for health and dependent care ASPs, including allowing unlimited carry forward of unused amounts from plan years 2020 and 2021 to the following plan year, and extending grace periods (if applicable) for the use of these amounts for the 2020 and 2021 plans at 12 months after the end of the plan years.
• Extended rules allowing employers to pay employee student loans on a tax-efficient basis under IRC Section 127 programs through 2025.
• Extension of the due date for the reimbursement of the deferral of employee social charges by presidential memorandum of August 2020 from April 30, 2021 to December 31, 2021.
• Modification of the existing rules to allow business meals provided by restaurants to be 100% deductible in 2021 and 2022.
James M. Scears and Paula M. Williams are attorneys at GableGotwals.