Sunday, January 3, 2021
On December 27, President Trump signed the Consolidated Appropriations Act, 2021." The legislation includes "over $900 billion fo coronavirus (COVID-19) relief programs, government funding of $1.4 trillion, and myriad tax provisions."
The legislation includes a tax provision that will allow recipients of Paycheck Protection Program (PPP) loans to deduct related costs. The CARES act will also be extended as well as expanded.
Tax measures that will result from the new legislation includes:
COVID-Related Tax Relief Act
- Extension time for repayment
- Additional 2020 Recovery Rebates
- Clarification that no deduction is denied, no tax attribute is reduced, and no basis increase is denied by reason of the exclusion from gross income from forgiveness of PPP loans
- Allowance of an election regarding the tax treatment of certain farming losses for 2018, 2019, and 2020
- and more
There will always be permanent extensions of temporary provisions and long-term extensions of temporary provisions. Also included will be short-term extensions of temporary provisions.
There are also numerous miscellaneous tax provisions that include:
- Modifications to the low-income housing tax credit rate, including a new minimum rate of 4% for certain buildings
- Depreciation of certain residential rental property over 30-year period, allowing for the use of 30-year ADS depreciation for residential real property placed in service prior to January 1, 2018, held by an electing real property trade or business in certain circumstances
- Expansion of current section 48 energy credit to include waste “energy recovery property”
- Extension of current section 48 energy credit for offshore wind facilities to January 1, 2026
- Minimum rate of interest for certain determinations related to life insurance contracts
- Retirement provisions
- Modification to minimum age for distributions during working retirement
- Temporary rule preventing partial plan termination
- Employee retention credit (ERC) and rehiring tax credit
- Clarifications and technical improvements to the CARES Act employee retention credit, including a clarification regarding the definition of “gross receipts,” a modification to the treatment of health plan expenses, and improved coordination with the PPP
- Extension of the ERC to July 1, 2021, and expansions including increase in the credit percentage from 50% to 70%, increased per employee limitation, and modifications to the definition of eligible employer
- Business meals deduction—a temporary allowance of a full deduction for business meals paid or incurred between December 31, 2020, and January 1, 2023
- Earned income tax credit and child tax credit—a temporary special rule for determination of earned income
- Charitable contributions
- Extension of the CARES Act non-itemizer charitable contribution deduction for certain contributions through 2021
- Extension of the CARES Act modification of donor percentage-of-income limitations for certain charitable contributions through 2021
- For corporations, a temporary suspension of limitations on the deduction for charitable contributions associated with qualified disaster relief made from January 2020 through late February 2021
- Health and dependent care flexible spending arrangements, temporary special rules for health and dependent care flexible spending accounts with unused balances
- Life insurance—reduce the required interest rates used to determine if a policy meets the definition of life insurance for federal tax purposes
Special thanks to Mark J. Bade (CPA, GCMA, St. Louis, Missouri) for bringing this article to my attention.