The Consolidated Appropriations Act, 2021 signed by President Trump is a $1.4 trillion spending package that includes government funding and a variety of COVID-19 relief to families, businesses and other stakeholders. In many ways, this legislation can be interpreted as an extension of or update to existing programs that were established by the FFCRA and CARES Act. In this article we've outlined what's likely to be most important for employers.
The Families First Coronavirus Response Act provided credits for paid sick and family leave. This bill extends the refundable payroll tax credits for paid sick and family leave through the end of March, 2021. It also modifies the tax credits so that they apply as if the corresponding employer mandates were extended through the end of March 2021. This provision is effective as if included in the FFCRA.
Payroll Tax Deferral Repayment
On August 8, 2020, the President of the United States issued a memorandum to allow employers to defer withholding employees’ share of social security taxes or the railroad retirement tax equivalent from September 1, 2020 through December 31, 2020, and required employers to increase withholding and pay the deferred amounts ratably from wages and compensation paid between January 1, 2021 and April 31, 2021. Repayment deadline is extended to December 31, 2021.
Employee Retention Tax Credit - 6 Month Expansion
The Employee Retention Credit is a refundable tax credit against certain employment taxes equal to 50% of the qualified wages an eligible employer pays to employees after March12, 2020 and before January 1, 2021. The new legislation increases the credit rate from 50% to 70% of qualified wages. It also expands eligibility for the credit by reducing the required year-over-year gross receipts to 20% from 50%.
- Credit will now expire on June 30, 2021
- Eligible for businesses with up to 500 employees
- Up to $10,000 per employee per quarter
- Will allow new employers who did not exist for all or part of 2019 to claim the credit
Second PPP Loan
The new legislation creates a second loan from the Paycheck Protection Program, for smaller and harder-hit businesses, with a maximum amount of $2 million for businesses under 300 people with a 25% loss in revenue. Here are some resources we've shared regarding the PPP loans this year:
- PPP Q&A from the SBA and US Treasury Department
- Attorneys Kevin Wicka and Jake Piorkowski Discuss CARES Act and PPP
- Significant Changes to PPP Signed into Law
- US Chamber of Commerce Guide to PPP Forgiveness Application
- PPP Loan Necessity Questionnaire for Larger Loans
- PPP Update for Employers Who Owe $50,000 or Less
Other PPP Details
- PPP Tax Treatment: Business expenses can be deducted for PPP paid expenses (IRS double-dip fix).
- PPP Simplified Forgiveness: New 1 page summary of the loan to be forgiven if under $150,000.
- EIDL Reduction: PPP forgiveness is not reduced by the amount of an EIDL payment reduction.
What Should Employers Consider Immediately?
We found a great article from JDSUPRA that provide more insight into the following important questions.
- Will your company continue to provide both paid sick leave and paid family leave to employees until March 31, 2021?
- Is your company able to provide these leaves equally to all eligible employees?
- How will your company provide notice regarding leave to employees?
- Are there currently any state or local jurisdictional orders or laws that provide more generous leave for employees?
Employers should still consider the DOL’s past guidance on the FFCRA while determining how to comply with the new legislation until additional information is released. Additionally, it is critical that employers update their existing FFCRA leave forms to take into consideration the changes. Since employees are not eligible to receive more leave than was provided through the FFCRA, employers must ensure they keep accurate records to reflect leave provided for all employees.