Applies retroactively to effective date of CARES Act
Credit increased to 70% of qualified wages; cap on credit increased to $28,000. The CARES Act provided for a refundable payroll tax credit of 50% of certain “qualified wages”, capped at $5,000/employee (50% of up to $10,000 of qualified wages for all calendar quarters). The Act increases the credit cap from $5,000 for the year to $7,000 (70% of $10,000) for any calendar quarter.[3] Accordingly, the Act will increase the maximum amount of credit available in 2021 for each employee from $5,000 to $28,000.
PPP borrowers may receive the tax credit. The CARES Act denied the employee retention tax credit to any employer that receives a loan under PPP, and defined the term “employer” expansively, potentially causing acquiring corporations with employee retention tax credits to lose or recapture those tax credits if they acquired a target company that had received a PPP loan.[4] The Act permits an employer that receives a
Tuesday, December 29, 2020
Expenses Related to PPP Loan Forgiveness Are Deductible. The CARES Act included a loan forgiveness program under the Small Business Administration’s Paycheck Protection Program (the “PPP”). A PPP loan may be forgiven if its proceeds are used for “payroll costs” or certain other expenses. Under the CARES Act, the forgiveness of a PPP loan does not give rise to taxable cancellation of indebted income, or a loss of tax attributes. However, the IRS held that expenses that gave rise to PPP loan forgiveness were not deductible.
[1] The Act reverses this rule and permits taxpayers whose PPP loans are forgiven to deduct the expenses relating to their loans to the extent they would otherwise qualify as ordinary and necessary business expenses.
Many tax provisions appear in year-end coronavirus relief bill
By Alistair M. Nevius, J.D.
Updated:
The omnibus spending and coronavirus relief bill passed by Congress includes many tax provisions, including the extension of various expiring provisions, extensions and expansions of certain earlier pandemic tax relief provisions, and much more. The Consolidated Appropriations Act, 2021, H.R. 133, passed both houses of Congress on Dec. 21, and President Donald Trump signed the bill into law on Dec. 27.
Among its general tax provisions, the bill temporarily (through 2022) allows 100% deductibility of certain business meal expenses, extends the $300 charitable contribution deduction for nonitemizers, and enacts various disaster tax relief provisions.