December 22, 2020

by

Gregory S. Dowell

It tooks months to get this point, but Congress finally seems to have coalesced around providing support to US businesses and American taxpayers.  The bill sits on President Trump's desk at this time, where it is hoped that it will be signed soon - before any politicians change their mind.  The bill is known as the Consolidated Appropriations Act, 2021, HR 133.  That unwieldly title may offer real relief to suffering taxpayers. 

A few of the highlights:

1. Quick additional relief for individuals - provides a refundable tax credit at $600 per taxpayer ($1,200 for married taxpayers filing jointly), in addition to $600 per qualifying child. The credit phases out starting at $75,000 of modified adjusted gross income ($112,500 for heads of household and $150,000 for married taxpayers filing jointly) at a rate of $5 per $100 of additional income.
2. Congress thankfully addressed and reversed the IRS' position that the expenses paid by a business with Paycheck Protection Loan proceeds were not deductible.  Congress failed to address this in the original CARES Act, and the IRS stepped in and with a heavy hand indicated that any such expenses paid with funds that were not claimed as income would be non-deductible.  Despite several Congressional leaders objecting, the IRS held tight to its position. Allowing said expenses to be deductible would apply to the original PPPL proceeds, as well as any additional PPPL proceeds a business might receive.   
3. Educator expenses - provides that the cost of personal protective equipment qualifies for the educator expense deduction.
4. Payroll tax credits - extends the refundable payroll tax credits for paid sick and family leave, through the end of March 2021.
5. Employee retention tax credit - extends the CARES Act employee retention tax credit (ERTC) through June 30, 2021. Among other changes, it increases the credit rate to 70%, and increases the limit on wages from $10,000 per year to $10,000 per quarter.   
6. Full deduction for business meals - for expenses incurred after 12-31-20, temporarily allows a 100% business expense deduction for meals as long as a restaurant provides the food or beverage.
7. Charitable contributions  - extends the provision that those who don't itemize may still deduct charitable contributions in 2021, at the rate of $300, or $600 for married couples filing jointly.