LATEST ON STIMULUS BILL AND PPP AS OF FEBRUARY 28 2021

STIMULUS BILL

The House of Representatives passed President Biden’s $1.9 trillion stimulus package. The bill now moves to the Senate where Democrats hold a slim majority 50/50 with Vice-President Harris as the tie breaking vote. The fact that the majority is so close in the Senate will most likely lead to some amendments to the House version.

The major provisions, as I’ve read so far (I have not seen the actual bill passed by the House) are as follows:

Democrats are pushing to have the bill become law by March 14th. This is the date that current federal unemployment benefits are set to expire.

Direct stimulus payments of $1,400 for individuals earning less than $75,000, phasing out between $75,000 and$100,000. For couples, these figures would be less than $150,000, phasing out between $150,000 and $200,000. It is to be based on either 2019 or 2020 income and would include adult dependents (including college students and disabled adults).

The House package extends federal unemployment benefits until August 29, 2021 and increases the weekly amount from the current $300, to $400.

The child tax credit which is currently $2,000 for children under the age of 17 would be increased to $3,000 and would be available for children under the age of 18. There would be a higher credit for children under the age of 6 ($3,600). One more change to this credit is the credit would be fully refundable. Currently the credit is 70% refundable. If a family has a child eligible for the current $2,000 credit but has no income tax liability, they will only receive $1,400 (70% of the $2,000 credit). If the family had an income tax liability of $500, they would be allowed a $1,900 credit ($500 vs. income tax and $1,400 refundable). If the tax liability were $600 or more, then this family would receive the full $2,000 credit. Under the new House bill the family would receive the full $3,000 (or $3,600) regardless of whether or not they had an income tax liability.

The item causing the most controversy is the provision that raises the federal minimum wage from its current level of $7.25 an hour to $15 an hour by 2025. Senate parliamentarian Elizabeth MacDonough ruled that Democrats could not include this provision under budget reconciliation. If it would have been allowed, the Democrats could have passed the provision with a simple majority, meaning no Republican votes would be necessary.

Currently the positions of each side are Democrats feel that raising the minimum wage is necessary to help families, while Republican leaders believe the raise to $15 per hour will hurt small businesses and cost jobs. The Senate version of the Stimulus bill will likely contain a raise to either $10 or $11 an hour. I expect we will be hearing more about this from both sides of the political aisle in the coming days.

There are also provisions in the bill that cover the following items:

• Assistance for struggling families to help with rent, mortgages, utilities, property taxes and homelessness.
• Employer incentives to offer paid sick and family leave.
• Increased subsidies of premiums for individuals and families covered by Obamacare.
• Economic Injury Disaster Loans to small businesses and grants for bars and restaurants.
• Money for state and local governments.

I will cover some of these provisions once the final version of the bill becomes law. This writing is just to give you an idea of what is currently going on.

LATEST ON PPP

Guidance is expected to come as early as Monday March 1st on provisions aimed at assisting the smallest businesses eligible for PPP.  The overall changes that were made last week and require guidance are as follows:

14-day period that began Wednesday February 24th and extends to March 9th and allows only businesses with fewer than 20 employees to apply.

Sole proprietors, independent contractors and self-employed individuals will receive higher loans as their maximum will be based on their gross income instead of their net income. Guidance is required on whether borrowers who have already received loans are able to apply for additional funds. In addition, lenders will need to update their systems to comply with these changes.

Elimination of restriction that borrowers with a felony arrest or conviction in the last year, other than one related to financial assistance fraud, are eligible for a PPP loan. No business with a 20 percent or more owner that has an arrest or conviction for a felony related to financial assistance fraud within the last five years is eligible for a PPP loan.

Under the original rules of PPP, businesses with individuals of at least 20% ownership that are currently delinquent or have defaulted on student loans within the last seven years were not eligible for PPP loans. This restriction is eliminated.

Access to the program will be granted for non-citizen business owners that have Individual Taxpayer Identification Numbers (ITINs) instead of social security numbers. This would include Green Card holders and those here on a visa.lat

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Hang in there and stay safe,

Jeff Skolnick, CPA, M.S. Taxation