On December 27, 2020, President Donald Trump signed into law the Consolidated Appropriations Act of 2021 (The Act) that includes government funding and a pandemic aid package. The Act comes as the previous relief measures created by Families First Coronavirus Response (FFCRA), CARES, and presidential memos were set to expire at the end of 2020. The Act includes several forms of stimulus and support, including extensions and changes to the earlier COVID-related legislation. Below are some pertinent parts of The Act business should be aware of.
Extension of FFCRA Sick and Family Leave
In March 2020, the FFCRA required employers with fewer than 500 employees to provide specified paid sick leave to employees affected by COVID-19 and provided affected employers with a corresponding employment tax credit. Initially, these provisions were in effect through December 31, 2020.
Here are the updates from The Act:
- Extends payroll tax credit to employers offering the use o FFCRA Emergency Sick Leave and Family Leave through March 31, 2021.
- The extension is optional, not mandatory. The Employers do not have to offer the use of FFCRA Emergency Sick and Family Leave after December 31, 2020.
- If an employer does allow employees to use remaining FFCRA Sick and Family Leave through March 31, 2021, the employer may also claim the corresponding credit.
- The Act does not reset the FFCRA limits for 2021. This means if such amounts were exhausted for an employee in 2020, any leave payments to that employee in 2021 would not qualify for the tax credit.
Paycheck Protection Program Funding
The Act established a “PPP second draw,” extending the PPP and permitting certain small employers and industries to apply for a second forgivable PPP loan. The Act extends the covered period of all PPP loans through March 31, 2021.
Eligibility for a second draw is limited to small businesses with 300 or fewer employees that have sustained a 25 percent revenue loss between corresponding quarters of 2019 and 2020. Special rules apply to businesses that were not in operation for all or part of 2019. Applicable business must have used or will use the entire amount of their first PPP loan.
Check the Small Business Administration’s PPP website for additional information: https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program
Extension and Enhancement of Employee Retention Credit
Employee retention credits are extended through June 30, 2021, with additional enhancements.
- These changes are applicable to eligible wages paid after December 31, 2020.
- The percentage of applicable wages increased from 50 percent to 70 percent.
- Total applicable wages increased to $10,000 per calendar quarter instead of $10,000 total earnings through December 31, 2021.
- The qualifying wages threshold for “Large Employers” increased from 100 to 500 employees.
- Employers with 500 or fewer employees can claim an employee retention credit whether the wages are for employees who are performing services or not.
- Adds special rules for receiving a refund via 7200 by limiting the advance refund to employers with less than 500 employees and for amounts not to exceed 70 percent of the average quarterly wages paid in 2019.
- Employers are eligible for the credit of a decline in Gross receipts of less than 80 percent compared to the same period in the prior year. Note, CARES compared the same period in the prior year at a rate of 50 percent.
- Allows employers not in business in 2019 to determine eligibility based on the prior quarter.
- Removes the prohibition on employers receiving Paycheck Protection or other business interruption loans from claiming the ERC so that employers can take advantage of both options.
Expansion of Unemployment Insurance Benefits
The Act has restored Federal supplemental unemployment insurance benefits of $300 per week on top of state benefits paid after December 26, 2020, until March 14, 2021. This creates a combined maximum benefit period of 50 weeks, which was previously set at 39 weeks. It includes a three-week phase-out for benefits on claims that haven’t reached the 50-week cap.
The Act provides authority to states to waive overpayments made without fault on the part of the individual. Additionally, it limits retroactivity for additional $300 benefit to payments due after December 1, 2020.