Updated December 28, 2020: President Trump signed the pandemic relief bill December 27, 2020.
Congress voted late Monday to approve a $900 billion pandemic relief package offering economic aid to individuals and businesses. The relief package was included in a larger bill – more than 5,000 pages in length – that also included federal government funding through September of next year and extension of certain, expiring tax provisions.
The pandemic relief portion was the major focus of debate throughout the weekend. The package extends unemployment benefits, including an extra $300 per week for 11 weeks, provides a relief stipend of $600 for individuals earning less than $75,000, and expands the Paycheck Protection Program (PPP) offering loans to small businesses.
The package does not include aid to state governments or additional liability protection for businesses, both of which were obstacles for many lawmakers’ approval. Also, the bill modifies the rules for the Federal Reserve to utilize its lending facilities in 2021.
Expansion of the Paycheck Protection Program (PPP)
- Allows for some businesses to apply for a second round of loan support, including full forgiveness of those proceeds as long as requirements are met and the business has used or will use the full amount of their first PPP loan
- Limits eligibility to businesses with 300 or fewer employees who suffered at least a 25% decline in revenue in the first, second, or third quarter as compared to the same quarter in 2019
- Institutes a cap on PPP loans at $2 million
- Provides that business expenses covered by forgiven PPP loan proceeds will also be tax deductible, reversing recent guidance from the Treasury Department (Revenue Ruling 2020-27)
- Simplifies loan forgiveness process on loans under $150,000
- Expands forgivable expenses (for example, supplier costs, cost of modifying facilities, protective equipment, certain software-related costs) and types of businesses eligible for PPP loans
- Repeals provision under CARES that required PPP borrowers to deduct the amount of Economic Injury Disaster Loan (EIDL) advance payments from their PPP forgiveness amount
Economic impact payments for individuals
- Individuals may receive relief payment of up to $600 if they earn less than $75,000* in annual income ($150,000 for couples who will receive $1,200). An additional $600 will be provided for each child in the household (under the age of 17)
Extension of emergency unemployment benefits
- Programs like the Pandemic Unemployment Assistance (PUA), due to expire at the end of the year, are extended to mid-March 2021
- The PUA provides unemployment benefits to those who typically are not eligible for unemployment benefits, such as self-employed individuals and independent contractors
- Supplemental federal unemployment insurance benefits of $300 per week, from December 26 through March 14, 2021 (the previous program under CARES provided an extra $600 a week and ended in the fall)
Additional fundingThe legislation also includes a variety of funding mechanisms for healthcare-related costs, vaccine development and distribution, COVID-19 testing, transportation (airports and mass transit, for example), childcare programs, rental assistance, agriculture and nutrition programs, broadband, and education. The bill also extends the moratorium on evictions through the end of January 2021.
Expiring tax provisions also addressedLawmakers used this process to address a number of tax provisions that were due to expire, for example:
- $300 above-the-line deduction for cash contributions to qualified charities extended through 2021; limit for 2021 increased to $600 for married couples filing a joint return
- The income limit on charitable contributions of cash to a public charity remains at 100% of AGI through 2021 (was scheduled to revert to 60% of AGI)
- The income threshold for deducting qualified medical expenses remains at 7.5% of adjusted gross income (AGI) versus increasing to 10% of AGI
- Business meals are 100% deductible (instead of 50%) through 2022
Next stepsThe bill, approved by both chambers of Congress, now advances to the President for signature.
*Amount of the payment is reduced by $5 for every $100 of income above the income threshold.324437
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This information is not meant as tax or legal advice. Please consult with the appropriate tax or legal professional regarding your particular circumstances before making any investment decisions. Putnam does not provide tax or legal advice.