Congress Passes Major Coronavirus Relief Package
Late yesterday (Monday, December 21, 2020), Congress passed an $892 billion coronavirus relief bill that is expected to be signed into law by President Donald Trump as soon as it reaches his desk. As might be expected, the package has a wide-array of funding contained in it. While details will become further refined as programs contained in the package are implemented in the coming days and weeks, HBA and AAM strongly suggest you consult with your tax and legal advisors as you prepare to move forward.
The summary below is intended to provide you with a “preview of coming attractions” as it were:
Congress incorporated a number of tax-related provisions in the year-end deal, including additional tax relief for Paycheck Protection Program (PPP) recipients who subsequently have their loan forgiven. In April, the IRS issued a controversial ruling that businesses were not eligible for tax deductions of business expenses paid for by a forgiven PPP loan.
By reversing this decision, Congress effectively allows business to receive two tax benefits on forgiven PPP loans:
- The forgiven debt is not treated as taxable income, and
- Business expenses paid for with the forgiven debt may be deducted, if otherwise allowed.
Affected businesses should consult with their tax advisor for further guidance.
The bill includes a robust rental relief component that allows landlords to request rental assistance on behalf of their tenants under certain circumstances. The bill includes $25 billion for rental assistance covering rent, utilities and arrears for up to 12 months with a possible three-month extension through an NAHB-supported flexible spending program similar to the Coronavirus Relief Fund called the Emergency Rental Assistance program.
Administered through the Treasury Department, funding will go directly to states or cities. This gives the states and localities flexibility in how the funding is delivered and will allow states that already have a rental assistance program to continue with their current structure. There are “guardrails” for funding that would require payment to go directly to the property or utility company.
Importantly, his legislation also extends the Centers for Disease Control and Prevention’s eviction moratorium until January 31, 2021.
Low-Income Housing Tax Credit
In a major victory for our HBA and AAM members who invest in multifamily properties, the legislation establishes a permanent minimum 4% credit floor for acquisition and bond-financed projects through the Low-Income Housing Tax Credit (LIHTC). The 4% credit floor will make more types of properties financially feasible and significantly increase unit production. It is estimated that this will allow multifamily developers nationwide to finance more than 125,000 additional affordable rental units over the next decade.
Employee Retention Tax Credit
The legislation expands the Employee Retention Tax Credit (ERTC), which was created in the CARES Act. Of particular note, the changes will allow businesses who received a PPP loan to also claim the ERTC with respect to wages that are not paid for with forgiven PPP loan proceeds. This change is retroactive to March 13, 2020, so businesses who received a PPP loan may wish to consult with their tax advisor to determine if they also qualify for the ERTC.
Paycheck Protection Program
The legislation provides a streamlined forgiveness process for borrowers who received $150,000 or less in PPP loan money. Those who qualify may submit a one-page forgiveness form online certifying their compliance with the program requirements. Those having loans of $150,000 to $2 million are not required to submit supporting documentation showing their expenses when applying for forgiveness (but should retain those records for up to four years).
Smaller, harder-hit businesses that have taken out a PPP loan will also have a chance to apply for a second PPP loan with a maximum amount of $2 million.
Finally, the bill allows 501(c)(6) organizations (that include state and local HBAs) to access PPP funds if they have 300 employees or fewer, do not receive more than 15% of their receipts from lobbying activities and lobbying activities do not comprise more than 15% of their activities.
Congress extended a number of key temporary tax provisions known as “tax extenders” that were set to expire on December 31, 2020. These provisions include: the $2,000 tax credit for building energy efficient homes and the credit for qualified energy-efficiency improvements on existing homes, both of which were extended through December 31, 2021.
Other Key Provisions
The legislation also includes other important provisions that:
- Extend pandemic unemployment benefits expiring at the end of December through March 14, 2021.
- Extend weekly enhanced federal unemployment payments (paid out on top of regular UI benefits) of $300 per week through March 14, 2021.
- Provide a direct payment of $600 to most Americans based on income levels on their 2019 Federal tax returns. An easy way to estimate what you might receive is to take the amount you received in Spring 2020 and divide it in half.
HBA and AAM will continue to provide information and insight as details become available.