The Consolidated Appropriations Act, 2021 (Act) was passed by Congress on December 21, 2020, and signed by President Donald Trump on December 27, 2020. The Act generally provides the annual funding for the federal government and contains several important rules giving further COVID-19 relief. The package extends some provisions of the original stimulus package that was passed in the spring, while adding new measures to help working families who have continued to suffer amid the pandemic. These include, among other things, revisions to the Paycheck Protection Program (PPP), expansion of the employee retention tax credit and changes to other employer-related tax provisions.
May employers were questioning whether Federal Emergency Paid Sick Leave (EPSL) and Emergency Family and Medical Leave (EFMLA) will be extended. The answer is yes, but it’s an option, not a requirement.
Here’s what employers need to know:
- Offering EPSL and EFMLA after December 31 will become optional for employers.
- An employee will no longer be entitled by law to take EPSL or EFMLA, even if they have a qualifying reason.
- Employers who choose to offer these paid leaves can still receive a tax credit if they follow the current EPSL and EFMLA rules, including job protection.
- The extension of the tax credit will be available for leaves taken through March 31, 2021.
- Employees will not get new hours to use—the unused portion of their original allotment that remains on January 1 is how much they will be able to use through March 31. For instance, if an employee who was entitled to 80 hours of EPSL between April 1 and December 31 used 40 of those hours in 2020, they’d have 40 hours left to use between January 1 and March 31, 2021.
- There is a possible exception when an employee’s EFMLA bank could reset if employers use the calendar year or another fixed FMLA tracking period that starts before March 31 and the DOL fails to readopt the regulations they wrote related to EFMLA. We expect the IRS, DOL, or both, to provide guidance soon that will clear up whether certain employers will need to offer additional hours.
Targeted Aid for Small Businesses & Paycheck Protection Program Changes
The Act set aside $285 billion for additional loans under the Paycheck Protection Program (PPP), renewing the program under the initial stimulus legislation. The revisions include stricter rules but expands the permitted and potentially forgivable uses of PPP loan proceeds.
- Change in covered period (borrowers are now allowed to select any covered period between 8 weeks after loan origination and 24 weeks after loan origination in length)
- Simplified Forgiveness Application
- Group Insurance Payments as Payroll Costs
- PPP Loan Cap at $2 million
- Publicly traded companies are not allowed to apply for PPP loans this round
Second PPP Loan Availability
The Act allows eligible entities to receive a second PPP loan, referred to as a “second draw.” To qualify, a prospective PPP borrower must:
- Employ not more than 300 employees; and
- Demonstrate at least a 25% reduction in gross receipts in any quarter of 2020 relative to the same 2019 quarter.
Special Rules for Restaurants
Special rules apply to entities that are assigned a NAICS code beginning with 72 (hotels and restaurants). These industries may borrow up to 3.5 times their average monthly payroll costs, however the loan amount is still capped at $2 million.
New permitted (and potentially forgivable) uses of PPP loan proceeds
*in addition to the payroll expenses and covered utilities and covered rent permitted under the CARES Act
- Covered operations expenditures
- Covered property damage costs
- Covered supplier costs
- Covered worker protection expenditures (e.g., expenditures for personal protective and other equipment needed to help a borrower comply with federal health and safety guidelines related to the COVID-19 pandemic during the period between March 1, 2020, and the date on which COVID-19 no longer qualifies for federal emergency status)
The new law also extends or revives several other benefits from previous coronavirus-related legislation, some of which are listed below. Some of the notable provisions include:
- Individual payments of $600 for people with incomes at or below $75,000 and $600 per dependent child, with payments phased out for higher incomes
- A $300 weekly supplemental unemployment benefit, through March 14, 2021
- Extends the Pandemic Unemployment Assistance (for gig workers, free lancers, independent contractors and the self-employed) and Pandemic Emergency Unemployment Compensation (for those who run out of state unemployment insurance benefits), through March 14, 2021
- Reopening and refunding of the Paycheck Protection Program (see your financial or tax advisor for additional information)
Associated HCM expects the SBA to issue further guidance in the coming days and will be closely monitoring any developments. Please continue to check our news room as more information becomes available.